Indonesia

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Nickel Industries, West China Cement, China Hongqiao
• In the US, the March (preliminary) University of Michigan consumer sentiment fell to 57.9 (63.0 e / 64.7 p), declining for three consecutive months and reaching the lowest level since November 2022.
• Many consumers cited the high uncertainty around policy and other economic factors, as frequent gyrations in economic policies make it very difficult for consumers to plan for the future, according to Surveys of Consumers director Joanne Hsu.

• A call with Arwana Citramulia cleared up some lingering concerns from 2024, which was a year of reconfiguration of capacity to help differentiate and drive future growth and margins.
• The company has now fixed the gas price for its production, which is now set for five years, sustaining its cost advantage over Chinese imports, which now face anti-dumpoing measures.
• Arwana Citramulia is rapidly increasing its rectified capacity and increasing exposure to larger-sized tiles as well as raising prices, given that Chinese players face higher tariff-related costs. Valuations remain attractive.

• • At YE24, Criterium was estimated to hold 4.6 mmbbl 2P oil reserves, a slight increase from estimated YE23, as the reserves additions from the work-over program (especially the new GH sand) more tan offsets FY24 production of approximately 0.3 mmboe.
• • The after-tax NPV10 of the 2P reserves is US$60 mm.
• • The 2C contingent gas resources at Tungkal are estimated at 27.5 bcf, higher than the previous estimate of 20 bcf.

• Sido Muncul remains a standout consumer proxy in Indonesia through its Tolak Angin herbal brand playing into increased health consciousness and through its energy drinks exposure through Kuku Bima. 
• The company continues to expand its product range in herbal, reducing its reliance on Tolak Angin. F&B is seeing stronger growth, with pharmaceuticals also becoming a more important driver.
• Sido Muncul continues to expand its distribution locally across general trade and modern trade, with the international business outgrowing the local business and becoming more important. Valuation remains attractive.

• Output hits 2.04 million tons and exports 1.6 million tons in 2024  
• ANRPC anticipates Indo rubber production to slip by 9.8% in 2025  
• Chinese tire firms pitching tent in Indo may benefit from trade war

• Cisarua Mountain Dairy booked a strong finish to the year in terms of sales growth despite a high base driven by premium consumer foods, but with dairy showing recovery. 
• The company saw an improvement in gross margins in 4Q2024 driven by the stabilization of raw materials and product mix, but operating margins were impacted by higher promotional spending..
• Cimory will drive future growth by expanding across channels, especially general trade and with the launch of new products in both dairy and consumer food segments. Valuations remain attractive.

• Multi Bintang Indonesia (MLBI IJ)  delivered steady FY24 growth, with revenue and profits up 1.9% and 7.1% YoY, respectively. Q4 FY24, however, underperformed expectations with revenue/profits up 0.6%/1.7% YoY.
• Although Q4 typically represents >30% of overall annual revenue/profits, being the strongest season, its performance was disappointing compared to the strong 21%/35% YoY revenue/profit growth seen in Q3 2024.
• Multi Bintang Indonesia (MLBI IJ) represents tremendous value with a dividend yield of 9% (100% payout), ROEs exceeding 80%, and a cheap multiple of 11x FY24 PE. 

• Astra International recently released finely balanced set of FY2024 results, with weaker auto sales offset by stronger 2W and financial segment performance, with other segments also performing above expectations.
• Financial services growth was driven by stronger multifinance growth, whilst the heavy equipment division saw stronger growth from mining contracting and gold offsetting slower growth from coal mining.
• Astra continues investing in sustainable energy, nickel, and healthcare and looks for new opportunities. Valuations remain attractive on less than 6x forward PER and yield > 8%. 

• Vale Indonesia’s Q4/24 results came in -28% below expectations driven mainly by a revenue decline, as core costs fell, and other expenses and net financing income rose
• The revenue drop was from by a -7.1% decline in volume and -11.5% drop in the nickel matte price, while fuel efficiency improved and fuel costs dropped overall
• The P/B continued to slide in Q4/24 to 0.82, along with an ROE down to 1.0%, but even given the inexpensive multiple, weak nickel could weigh on the stock

• Indo Tambangraya Megah (ITMG IJ)  reported FY24 revenues of $2.3 billion and profits of $374 million, reflecting declines of 3% and 25%, respectively, consistent with expectations amid lower coal prices.
• The company will encounter higher costs in FY25 as the B40 biodiesel mandate takes effect. This is expected to put pressure on margins for all coal producers.
• Alongside declining coal prices, we anticipate profits will fall to $250-300 million. This positions the stock at an FY25 PE of 5- 6.5x with a 12-13% dividend yield.

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Cikarang Listrindo
• Commerce Secretary Howard Lutnick said the Trump administration could announce some tariff relief for Mexican and Canadian goods as soon as today, after US President Donald Trump’s sweeping tariffs on Mexican and Canadian imports took effect yesterday.
• “Both the Mexicans and the Canadians were on the phone with me all day today trying to show that they’ll do better, and the president’s listening, because you know he’s very, very fair and very reasonable”, Mr Lutnicksaid in an interview with Fox Business yesterday.

Cikarang Listrindo (CL) is Indonesia’s oldest independent power producer, with 1,144 MW of capacity. The company has two natural gas-fired plants with a combined installed capacity of 864 MW, and a 280 MW coal-fired plant. It is the sole electricity provider to c. 2,700 tenants across five industrial estates in Cikarang. It was listed on the Indonesia Stock Exchange in June 2016. The Joso, Brasali and Sofyan families own over 80% of the company.

• Cikarang Listrindo (CL) has launched a roadshow to market a 144A/RegS senior unsecured notes offering of up to USD 350 mn.
• The proceeds will likely be used to refinance the company’s USD 500 mn 4.95% bonds due September 2026. We see fair value for the proposed notes at c.
• 150 bps above the relevant Treasury benchmark.

• Japfa Comfeed has reported strong FY 2024 results, with profitability surging to the best levels for the past four years, driven by stable poultry prices.
• The company generated good FCF, which we note positively was mostly used for debt repayment.
• Leverage was halved on the back of lower debt and higher earnings.

Perusahaan Listrik Negara (PLN) is a vertically integrated state-owned electricity utility responsible for generating, transmitting and distributing power in Indonesia. The company dominates Indonesia’s upstream power generation sector, and holds a monopolistic position in the country’s electricity transmission and distribution networks. It is the sole retail provider of electricity to end-consumers. PLN is 100% owned by the Indonesian government.

• Arwana Citramulia published a solid set of FY2024 results, with sales growth to +7.4% YoY, although FY2024 net profit was down slightly due to cost pressures and higher promotional spending.
• The company continues to see a favourable product mix shift towards higher-end tiles, especially its ARNA porcelain brand. New capacity coming on stream in 2025 will provide a further boost.
• The gas subsidy has yet to be confirmed for the ceramic industry, but expectations are that it will come through shortly. Arwana Citramulia valuations remain attractive, with higher growth ahead.

• BFI Finance Indonesia booked a strong finish to FY2024, as bookings increased by YoY and HoH, with the NPF ratio falling at the same time leading to higher revenues. 
• The company’s loan growth momentum has picked up considerably as indicated by management in the previous quarter, which should be reassuring for investors, with growth set to continue in 2025.
• BFI Finance Indonesia has yet to see a meaningful contribution from its collaboration with GoTo Gojek Tokopedia, which is a potential future growth driver. Valuations attractive on PBV to ROE. 

• We view Perusahaan Listrik Negara (PLN) as “Low Risk” on our LARA scale, primarily driven by the company’s strategic importance to Indonesia and SOE status (100% owned by the government).
• PLN controls a 62% share of Indonesia’s upstream power generation, and is also the country’s sole downstream electric utility.
• The company plays a critical role in ensuring affordable and reliable access to electricity for the population, as well as helping Indonesia transition to cleaner energy in the upstream sector (away from coal).

• In today’s Morning Views publication we comment on developments of the following high yield issuers: Cikarang Listrindo
• In the US, January new home sales fell 10.5% m-o-m to a three-month low of 657 k annualised units (680 k e / 734 k p). The decline reflects weather conditions (as several regions experienced record snowfall in January), as well as affordability concerns amid high prices and mortgage rates. Separately, building permits fell 0.6% (-0.7% p) in the same month.
• Atlanta Fed President Raphael Bostic said the US central bank should hold interest rates where they are and retain a “restrictive posture”. He added: “You can say that we are hitting our employment mandate, and now we have to get the price stability mandate under control.”