Indonesia

On 11 January 2023, Lippo Karawaci (LPKR) launched a cash tender offer for the USD 405 mn LPKRIJ 8.125% 25 and USD 417 mn LPKRIJ 6.75% 26. The early tender consideration for the 2025 and 2026 notes is USD 870 and USD 770 per USD 1,000 principal, respectively. The company will fund the tender offer with an IDR 6.0 tn (c. USD 380 mn) seven-year amortising secured credit facility by two local banks. The total tender amount will be up to the size of the credit facility (which is secured over land and some buildings).

We recommend to tender the USD LPKRIJ 2025 and 2026 notes. The amount of secured debt will increase significantly if the transaction is completed, and will likely account for the majority of LPKR’s total debt. The offering prices are somewhat in line with market prices. Hence, it is better to tender the notes, as the bonds may have lower recovery values.

• Semen Indonesia came through the worst of 2022 with flat sales, despite lower volumes, with profits rising by +18.9%, driven by cost savings, reduced debt, and use of DMO coal.
• 4Q2022 may see a slowdown given. the onset of the rainy season but the company is well-positioned to ride a recovery in 2023 with additional capacity from Semen Baturaja.
• Semen Indonesia (SMGR IJ) is well set up for a recovery in earnings for the next two years, with great synergies to come from Semen Baturaja. Valuations are well-below historic.

The Asia HY Trade Book for January 2023 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Lippo Karawaci
2. China SCE
3. China Jinmao Holdings
4. Guangzhou R&F Properties
5. Sunac China Holdings

and more…

• Init-6, East Ventures, 500 Southeast Asia, and a number of investors participated in this funding round for Imajin

• Founded by Chendy Jaya, Imajin is a platform that connected local manufacturers with potential customers.
• By July 2022, the startup has secured more than 400 local factory partners and 80 customers, including Japanese companies operating in Indonesia

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• China SCE
• China Vanke
• CIFI Holdings
• Lippo Karawaci

• Jardine Cycle & Carriage (JCNC SP)‘s is currently trading tight at a ~6% discount to NAV.
• The implied stub and JCNC/Astra International (ASII IJ) ratio are the highest outside the 2008 financial crisis.
• Key catalysts for JCNC’s outperformance, such as the SIMSCI Index inclusion, have passed.  JCNC is trading rich. Look to reverse the stub.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Lippo Karawaci
• MGM China Holdings
• Sino-Ocean Service

The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks. The Asia Monthly is intended to broaden investors’ understanding of the Asian USD high-yield market.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Anton Oilfield
• Japfa Comfeed Indonesia
• Sands China
• Times China

• The review period for the LQ45 Index ended on 30 December. The changes should be announced in the last week of January, becoming effective after the close on 31 January.
• Potential adds are Bumi Resources Minerals Tbk (BRMS IJ), Surya Esa Perkasa (ESSA IJ), Saratoga Investama Sedaya (SRTG IJ), Adaro Minerals (ADMR IJ) and Mitratel (MTEL IJ). 
• Potential deletions are PT Wijaya Karya (Persero) Tbk (WIKA IJ), Erajaya Swasembada (ERAA IJ), Media Nusantara Citra (MNCN IJ), Chandra Asri Petrochemical (TPIA IJ) and HM Sampoerna (HMSP IJ). 

• Bank Mandiri (BMRI IJ) is seeing significant rewards already being harvested from its digital strategy as it attracts low-cost fund through both its Livin’ app and its KOPRA platform.
• The bank’s 9M2022 results reflected the changing shape of its business, with lower costs and higher returns being generated through its move to higher-yielding assets and digital strategy.
• Bank Mandiri (BMRI IJ) remains a core holding among the Indonesian banks as a proxy for the overall economy with valuations attractive given rising and sustainable returns. 

• Bank Negara Indonesia (BBNI IJ) has been a perennial underdog in terms of valuations versus its peers but as its ROE and ROA converge with those peers it should rerate.
• The bank’s 3Q2022 reflected the changing shape of its loan portfolio towards higher-quality and lower-risk exposure in corporate loans and tier 1 clients’ value chain, KUR, and payroll loans. 
• BNI management is cautiously optimistic about the outlook for FY2023 in terms of loan growth and credit quality. Valuations remain attractive and ROEs may rise faster than consensus estimates. 

• Blibli (BELI IJ) is a very different animal from its listed peers given its omnichannel approach and its large 1P business plus a substantial private-public institutional B2B business. 
• The company’s IPO was a relative success, raising US$508m in fresh funds, and the share price is still above the IPO price after listing on 8th November.
• Blibli (BELI IJ) is still loss-making but has a strong backer in the Djarum Group. Its travel business could move to profitability quite rapidly and Ranch is there already.

• Indonesia-based banking and digital finance platform Akulaku has secured a US$200 million investment from Japanese megabank Mitsubishi UFJ Financial Group (MUFG).
• The investment will support its expansion of banking services across Southeast Asia, including underserved customers and markets.
• The company’s future growth plans align with MUFG’s, and their joint expansion into new territories, markets, and products will accelerate heading into 2023.