PT Metrodata Electronics (MTDL IJ) continues to be an increasingly interesting play on the growth in Indonesia’s digital economy and digitalisation, especially for banks and fintech.
The company’s distribution business saw strong growth in 2021, offsetting the slower growth in Solutions & Consulting, which was impacted by project delays but will rebound in 2022.
Management remains optimistic on the growth outlook for 2022, driven by strong momentum behind digitalisation and economic recovery driving ICT demand. Valuations are attractive given its exposure to growth segments.
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.
US equity markets dropped yet another day with the S&P and Nasdaq down 1.1% and 1.3% as risk-off sentiment continued to weigh on markets. Most sectors were in the red with Consumer Discretionary, Materials and IT down 1.3-1.9%. US 10Y Treasury yields eased 8bp to 1.77%. European markets closed mostly higher with the DAX and CAC up 0.7% and 0.3% while FTSE was down 0.1%. Brazil’s Bovespa closed 1% higher. In the Middle East, UAE’s ADX and Saudi TASI were up 0.8% and 0.3%. Asian markets have opened in the red – Shanghai, HSI, STI and Nikkei were down 0.8%, 0.6%, 0.1% and 1.4%. US IG CDS spreads were 1.6bp wider and HY CDS spreads were 7bp wider, EU Main CDS spreads were 0.1bp tighter and Crossover CDS spreads were 0.6bp tighter. Asia ex-Japan CDS spreads were 1.6bp wider.
Bank Mandiri stands out amongst the top 4 banks in that it has chosen to push its digital services through Livin’ rather than a stand-alone digital bank.
The bank has already made significant progress with Livin’ with 6m active users out of 30m customers and it is also developing wholesale digital banking through Kopra.
Bank Mandiri remains a core proxy for the recovery in Indonesian economic recovery with an increasing digital edge and valuations are attractive versus historical levels.
Short-term downfall creates an attractive investment opportunity
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US equity markets dropped again after with the S&P and Nasdaq down 1% and 1.2%. The latter is down 10% from its November 2021 high. Most sectors were in the red with Consumer Discretionary, Financials and IT down 1.4-1.8%. US 10Y Treasury yields eased 3bp to 1.85%. European markets closed higher with the DAX, CAC and FTSE up 0.2%, 0.6% and 0.4% respectively. Brazil’s Bovespa closed 1.3% higher. In the Middle East, UAE’s ADX and Saudi TASI were up 1.6% and 0.5%. Asian markets have opened broadly higher – HSI, STI and Nikkei were up 1.9%, 0.1% and 0.5% while Shanghai was down 0.2%. US IG CDS spreads were 0.6bp wider and HY CDS spreads were 3.5bp wider, EU Main CDS spreads were 0.1bp tighter and Crossover CDS spreads were 1.7bp tighter. Asia ex-Japan CDS spreads were 4.7bp tighter.
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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.
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PT Surya Citra Media Tbk (SCMA IJ) looks undervalued despite its increasing digital credentials through Vidio.com which continue to increase paying subscribers and MAUs
The company has a significant local content pipeline for 2022, especially for Vidio.com and valuations look attractive versus history plus there is now a market value for Vidio.com.
US equity markets were closed on Monday on account of Martin Luther King Jr. Day. US 10Y Treasury yields rose 14bp to 1.85% over increased expectations of a Fed rate hike in March. European markets closed higher on Monday with the DAX, CAC and FTSE up 0.3%, 0.8% and 0.9% respectively. Brazil’s Bovespa closed 0.5% lower. In the Middle East, UAE’s ADX was 0.15% lower while Saudi TASI was up 0.46%. Asian markets have opened broadly higher – Shanghai, STI and Nikkei are up 0.9%, 0.2% and 0.4% while HSI is down 0.1%. US IG and HY CDS spreads were unchanged, EU Main CDS spreads were 0.5bp wider and Crossover CDS spreads were 1.7bp wider. Asia ex-Japan CDS spreads widened 3.9bp.
For KoinWorks, an Indonesian digital lending company, the Covid-19 period has been a pivotal moment that has enabled it to surge forward in the right direction
KoinWorks’ main borrower are small and medium enterprises (SMEs) who have digital footprints, such as those who own online shops on Tokopedia and Shopee
Amid the pandemic, the company reached US$15 million in loan disbursements per month, and logged positive cash flow
US equity markets ended slightly higher on Friday with the S&P and Nasdaq up 0.1% and 0.6% respectively. Sectoral gains were led by Energy and IT, up 2.5% and 0.9% while losses were led by Real Estate and Financials, down 1.2% and 1%. US 10Y Treasury yields were up 9bp to 1.79%. European markets were lower on Friday with the DAX, CAC and FTSE down 0.9%, 0.8% and 0.3% respectively. Brazil’s Bovespa was up 1.3%. In the Middle East, UAE’s ADX was flat and Saudi TASI was up 0.3% on Sunday. Asian markets have opened broadly higher following – Shanghai, STI and Nikkei were up 0.6%, 0.1% and 0.8% while HSI was down 0.6%. US IG CDS spreads were 0.3bp wider and HY CDS spreads tighter 0.4bp. EU Main CDS spreads were 1.3bp wider and Crossover CDS spreads were 4.1bp wider. Asia ex-Japan CDS spreads widened 3.5bp.
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The recent Allo Bank Indonesia Tbk PT (BBHI IJ) transaction exemplifies the rush to build digital banking capabilities in Indonesia with strong shareholder ecosystem now in place
Mainstream banks are not standing still on digital banking capabilities building internal capabilities and in some cases standalone digital banks presenting tough competition for newcomers.
From a consumer digital banking perspective we see blu, Bank Jago (ARTO IJ) , SeaBank, and Allo Bank (BBHI IJ) as having the greatest chance of success.
US equity markets ended lower with the S&P and Nasdaq down 1.4% and 2.5% respectively. Most sectors were in the red led by IT and Consumer Discretionary down 2.7% and 2.1%. US 10Y Treasury yields were up 1bp to 1.75%. European markets were mixed with the DAX and FTSE up 0.1% and 0.2% while CAC was down 0.5% respectively. Brazil’s Bovespa was down 0.2%. In the Middle East, UAE’s ADX was up 0.7% and Saudi TASI was up 1%. Asian markets have opened broadly lower following losses on Wall Street – Shanghai, HSI and Nikkei were down 0.7%, 0.9% and 1.9% while STI was up 0.4%. US IG CDS spreads were 1.2bp wider and HY CDS spreads also tightened 1.5bp. EU Main CDS spreads were 0.1bp wider and Crossover CDS spreads were 1.9bp tighter. Asia ex-Japan CDS spreads widened 2.2bp.
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.
Get the ball rolling, preparing for the next big thing
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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.
The price review period for the FTSE All-World/All-Cap March 2022 SAIR ended on 31 December. The changes are expected to be announced on 18 February and implemented on 18 March.
There are a few potential inclusions to the AW Index, a lot of inclusions to the AC Index, and a lot of migrations from the AC to the AW Index.
There are 20 stocks that have at least US$20m passive buying and over 2 days ADV to buy. That increases to 25 stocks that have at least US$10m to buy.
US equity markets ended lower on Friday, with the S&P and Nasdaq down 0.3% and 0.6% respectively. The indices ended 27% and 21% higher during the whole year 2021. US 10Y Treasury yields were flat at 1.51%. European markets were mixed with the DAX up 0.2% while CAC and FTSE were down 0.3% each. Brazil’s Bovespa was up 0.7%. In the Middle East, UAE’s ADX was up 0.5% and Saudi TASI ended 0.4% higher on Sunday. Asian markets have opened mixed – Shanghai and STI were up 0.6% and 0.3% while HSI and Nikkei were down 0.3% and 0.4% respectively. US IG CDS spreads tightened 0.2bp and HY CDS spreads tightened 1.7bp. EU Main CDS spreads were flat and Crossover CDS spreads were 0.2bp wider. Asia ex-Japan CDS spreads tightened 0.2bp.
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In this series under Smartkarma Originals, CrossASEAN insight providers AngusMackintosh and Jessica Irene seek to determine whether or not we are close to the end of the rainbow and to a period of outperformance for the property sector. Our end conclusions will be based on a series of company visits to the major listed property companies in Indonesia, conversations with local banks, property agents, and other relevant channel checks.
The fourth company that we explore is township developer Alam Sutera Realty (ASRI IJ), which provides an interesting exposure to a mix of landed housing, high-rise and low-rise condominiums through its Alam Sutera Township near Serpong and its Pasir Kemis township 15 km further out on the toll road.
Given the diminishing area of high-value land bank in Alam Sutera, the company has shifted emphasis towards selling low-rise condominiums and commercial lots for shop houses, which has been a success story.
Alam Sutera Realty (ASRI IJ) also has a contract with a Chinese developer, China Fortune Land Development (CFLD), to develop a total of 500 ha over a five year period in its Pasir Kamis Township. This has provided a fillip for the company during a quiet period of marketing sales and will continue to underpin earnings for the next 2 years.
The company stands to benefit from the completion of two new toll-roads, one soon to be completed to the south connecting directly to BSD City and longer term a new toll to Soekarno Hatta Airport to the north.
It will start to utilise new land bank in North Serpong in 2021, which will extend the development potential in the area significantly longer-term.
Management is optimistic about marketing sales for 2019 and expects growth of +16% versus last year’s number, which already exceeded expectations.
Alam Sutera Realty (ASRI IJ) has less recurrent income than peers at around 10% of total revenue but has the potential to see better contributions from the Garuda Wisnu Kencana Cultural Centre (GWK) in Bali.
The new regulations on the booking of sales financed by mortgages introduced in August 2018 will benefit Alam Sutera Realty (ASRI IJ) from a cash flow perspective. Given that the company is consistently producing free cash flow, this is also a strong deleveraging story.
One of the biggest risks for the company is its US$ debt, which totals US$480m and is made up of two bonds expiring in 2020 and 2022.
From a valuation perspective, Alam Sutera Realty (ASRI IJ) looks very interesting, trading on 4.9x FY19E PER, at 0.67x PBV, and at a 71% discount to NAV. On all three measures, at 1 STD below its historical mean. Our target price of IDR600 takes a blended approach, based on the company trading at historical mean on all three measures implies upside of 91% from current levels. Catalysts include better marketing sales from its low-rise developments at its Alam Sutera township and further cluster sales there, a pick-up in sales and pricing at its Pasir Kemis township, a sale of its office inventory at The Tower, a pick up in recurrent income driven by improving tenant mix at GWK. Given that the company has high levels of US$ debt, a stable currency will also benefit the company. A more dovish outlook on interest rates will also be a positive, given a large and rising portion of buyers use a mortgage to buy its properties.
The last three years have been characterized by significant M&A activity in the upstream oil and gas industry. As the oil cycle recovered from the price bottom in January 2016, lower asset prices and corporate valuations created opportunities for the companies with a stronger balance sheet to grow inorganically while their weaker competitors were forced to downsize their portfolios. 2018, in particular, has seen a surge of corporate M&A which has been driving consolidation in the industry. This insight examines the trends that have shaped the M&A markets since 2016 with a closer view of 2018 and the outlook for 2019.
Exhibit 1: M&A volume compared to the E&P index and the oil price since 2016
Source: Energy Market Square, Capital IQ. Market value weighted index including independent E&P companies with market value greater than $300m as of 19 April 2018. Data as of 7 March 2019. The M&A volume in September 2018 includes the merger of Wintershall and DEA with an estimated value of $10bn.
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Indofood Agri Resources (IFAR SP) has announced PT Indofood Sukses Makmur Tbk, its controlling shareholder with 74.52%, has made a voluntary conditional cash offer of $0.28/share for all IFAR shares it does not own. The offer price, which is a 7.7% premium to last close, is not final. Any dividend declared will reduce the consideration under the proposal.
The Offer is conditional on PT Indofood holding 90% of shares out at the close of the offer. There is no other condition.
IFAR’s share price has increased 27% this month – evidently, there was some news leakage ahead of the announcement – positioning its discount to NAV at ~50%, around its narrowest inside a year, but on a look-through basis, the Offer price backs out just 0.4x P/B.
The Offer price represents a premium of approximately 21.5%, 26.3%, 29.0% and 23.1% over the VWAP for 1M, 3M, 6M and 12M. IFAR traded above the Offer price as recent as May last year. One wonders if the consideration is sufficient to achieve the 90% condition.
We have held a bullish/long position in Indonesia from 6,080 after the breakout above 6,000 resistance and continue to see the macro cycle in a positive light to challenge and clear the 2018 highs.
Bull energy is brewing once again for a bull breakout of the noted wedge that will open the way for the macro bull cycle to resume. Lower wedge support is our preferred buy zone to add to our long position with clear wedge breakout resistance and bull inflection point.
For those not long this offers an excellent risk to reward entry with a controlled stop.
Buy volumes remain healthy and supportive of the macro bull cycle.
In our latest Asian Tower Trends report, Chris Hoare looks at the listed telecom tower industry across the region. During 4Q18, we became more optimistic on the Asian tower space.
China: Last December, we upgraded what is by far the largest towerco globally, China Tower (788 HK), after it became clear the story was much better than disclosed at the time of the IPO (still a mystery as to why this happened),
The Indian tower business has been buffeted by rapid industry consolidation but we think it is now near a bottom, and recently raised Bharti Infratel (BHIN IN) to Neutral, and
Growth is improving in Indonesia with increased investment ex Java from the smaller operators. Protelindo (TOWR IJ) our preferred name, but Tower Bersama (TBIG IJ) has lagged badly recently and may be due some catch up.
With the 5G investment cycle a key theme for coming years, we are now more constructive on the telecom tower space in general.
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
This second part of the series explains how China chose commodity semiconductors (DRAM and NAND flash memory chips) as the best technology to pursue.
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