March 27, Market commentary. Banks - 1M19 review: In-line results, expected seasonality

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1 To subscribe to our Daily Focus, please contact us at Market Index Last Trade Chg (%) MoM YoY JCI MSCI Indonesia MSCI EM 1, HANG SENG 28, KOSPI 2, FTSE 7, DJIA 25, NASDAQ 7, Valuation 2018F P/E (x) P/B (x) ROE (%) JCI Key Rates Last Trade Chg (bps) MoM YoY BI 7-Day RR yr yr FX Last Trade Chg (%) MoM YoY USD/IDR 14, USD/KRW 1, USD/JPY USD/CNY Commodities Last Trade Chg (%) MoM YoY WTI Gold 1, Coal Palm Oil 2, Rubber Nickel 13, Copper 6, Tin 21, JCI Index VS MSCI Emerging Markets (pt) 7,000 6,000 5,000 JCI (pt) 1,550 1,300 1, , /1607/1601/1707/1701/1807/1801/19 Market commentary Hariyanto Wijaya CFA, CPA (Aust), CMT (hariyanto.wijaya@miraeasset.co.id) JCI rebounded +0.9% after panic selling on Monday by domestic investors faded. Foreign investors resumed buying by booking a net buy of IDR338bn. We expect JCI to trade higher today. Our bank analyst publishes 1M19 review report on bank sector. He thinks Indonesia bank sector booked inline operational results. Therefore, he reiterates his Overweight call on bank sector with BBCA and BBNI as top picks. US Indices rose on Tuesday as energy stocks jumped and financial sector recovered as US treasury yield stabilized above 15-month lows. US 10-year note yields were steady yesterday after reaching 15-month lows on Monday. WTI crude oil prices closed 1.9 percent higher as Russia said it's on track to meet its pledged output cuts of 228,000 barrels a day by month-end. Banks - 1M19 review: In-line results, expected seasonality Lee Young Jun (lee.youngjun@miraeasset.co.id) For January 2019, the overall banking industry recorded net interest income of IDR31.2tr (+2.6% YoY) and net profit of IDR13.4tr (+18.2% YoY). We keep our Overweight recommendation on the banking industry, as recent results have been in line with our expectations. Operational highlights for January 2019 Loan growth: In January, the banking industry s loan book saw MoM growth of -2.0% or +12.0% YoY to IDR5,186.6tr, as corporates (-3.0% MoM) once again showed reluctance to gear up their balances at the beginning of the year. We still maintain our loan growth target of 9-11% for 2019F. NIM: While IDR loan composition increased and yield spreads improved, NIM decreased by 22bps MoM and 27bps YoY. Although NIM remained squeezed, we think an uptrend is likely to start, given that yield spreads improved and consumer lending rates finally saw their seven-month downtrend come to an end. Asset quality: The non-performing loan (NPL) ratio inched up 19bps MoM but fell 30bps YoY. Based on the YoY change, we firmly believe Indonesian banks asset quality improvement remains on the right track although we think there is not much upside left. Maintain Overweight; Top picks are BBCA and BBNI All in all, we maintain our Overweight recommendation on the banking industry, given that: 1) NIM is likely to improve; 2) loan growth is expected to remain solid; and 3) dividends are right around the corner. Our top picks remain Bank Central Asia (BBCA/Trading Buy/IDR32,000) and Bank Negara Indonesia (BBNI/Buy/IDR11,450).

2 Macro update Siding with the doves Macro update PT. Economics Mangesti Diah Sulistiani (ext. 127) After an aggressive hawkish stance in 2018 (policy rate up 175bps), we expect Bank Indonesia (BI) to turn dovish. The prolonged low inflationary environment, coupled with easing pressures on the rupiah, should allow room for BI to side with the doves. We are expecting BI to cut its policy rate (seven-day reverse repurchase rate) by 50bps in 2019 and another 25bps in Low-price environment Given stubbornly low-price environment, inflation has never been top-of-mind when it comes to BI s monetary policy decision-making. We judge the government to be keeping inflation on a tight leash. Going forward, we believe inflation will remain range-bound within the central bank s target (i.e., 2.5%~ 4.5%), which is a comfortable level for BI to loosen its monetary policy. and easing pressures on the rupiah Recent developments in the US hint at relaxed pressures on the rupiah. The US Federal Reserve has officially announced in their last FOMC meeting that there will be no rate hikes this year. Furthermore, The US economy seems to be losing steam, thanks to the fading fiscal stimulus in The Fed also acknowledged the softening of the economy by cutting its growth outlooks from 2.3% to 2.1% in 2019 and from 2.0% to 1.9% in With rupiah heading towards a normalized level, we see higher probabilities of BI supporting the growth agenda of the nation. Our full-year average USD/IDR forecast for 2019 stands at IDR13,920 per USD. Strengthening Indonesia s external resilience In its recent monetary policy statement, BI stated that it will maintain current account deficit within a manageable range of 2.5% of GDP. The central bank expects balance of payment to have improved in 1Q19 evident by the trade surplus of USD0.3bn in February. We believe that measures to improve CAD (support exports, tourism, etc.) will be maintained in We expect BI to cut rates by 50bps in 2019 and another 25bps in 2020 The current macro backdrop remains favorable for BI to switch from tightening to loosening. We are looking at three rate cuts (75bps) over the next two years 50bps cut in 2019 and another 25bps in In terms of the timing, we think the first rate cut could come as early as May. Figure 1. FX rates and policy rates (USD/IDR) (%) 16,000 Policy rate (R) 10 15,000 USDIDR (L) 8 14,000 13,000 12, , ,000 1/14 8/14 3/15 10/15 5/16 12/16 7/17 2/18 9/18 2 Source: BI, Bloomberg, Research Analysts who prepared this report are registered as research analysts in Indonesia but not in any other jurisdiction, including the U.S. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

3 Local flash BBRI: BRI denies obtaining a loan of USD 700 million. President Director of PT Bank Rakyat Indonesia (Persero) Tbk (BBRI) Suprajarto denied that he had obtained loans from 30 international financial institutions worth USD 700 million. "There is none. Where is the information? Bilateral loans are common in the banking industry." Quoting Bloomberg, BRI is reported to have obtained three loan facilities with details, Tranche A worth USD 200 million with a loan term of 359 days, Tranche B worth USD 235 million with 3 years and Tranche C worth USD 265 million with a period of four years. (Kontan) KRAS: KPK: Krakatau Steel must fulfill LHKPN if you want to clean up. The Corruption Eradication Commission (KPK) hopes that PT Krakatau Steel can fulfill compliance in submitting the State Operator Assets Report (LHKPN) before March 31, KPK spokesperson Febri Diansyah said, if the red-plate company is committed to reforming it in the reporting seriousness is needed LHKPN officials. (Kontan) JSMR: Jasa Marga accelerates the construction of the Cengkareng-Batuceper- Kunciran toll road. PT Jasa Marga (Persero) Tbk, through its subsidiary PT Jasamarga Kunciran Cengkareng (JKC), obtained a Rp 4 trillion land bailout syndicated loan. This funding will be used for land acquisition of Cengkareng- Batuceper-Kunciran Toll Road for km and will become part of the Jakarta Outer Ring Road Phase 2 Toll Road Network (JORR2). The land bailout syndicated loan agreement for the Cengkareng-Batuceper-Kunciran Toll Road construction project itself was signed at the Jasa Marga Head Office, Jakarta, Tuesday (3/26). (Kontan) TLKM: Telkom prepares capital expenditure of 27% of revenue. PT Telekomunikasi Indonesia Tbk or Telkom prepares capital expenditure of around 27% of revenue in Telkom Finance Director Harry M Zen revealed that 45% of capital expenditure will be allocated for the development of mobile businesses. "The remaining 45% mobile related business," he said on Tuesday (3/26). Well, the mobile related business in question is to strengthen Telkomsel. Telkomsel itself has a record of its own capital expenditure. But, said Harry, some were recorded in Telkom (Kontan) ADHI: Adhi Karya denies that return on assets (ROA) and return on equity (ROE) decline. PT Adhi Karya (Persero) Tbk denies returns on assets (ROA) and return on equity (ROE) throughout Entus Asnawi, Finance Director of PT Adhi Karya (Persero) Tbk, ensured that the company's ROA and ROE did not decrease. Unfortunately he was reluctant to give details. Unfortunately, he is reluctant to explain how much the company's ROA and ROI throughout 2018 because he will only release their annual financial statements in the near future (Kontan) DYAN: DYAN won't add more hotels. PT Dyandra Media International Tbk (DYAN) will focus on one of the pillars of its business, the hotel sector. The matter is because it will focus on its main business, namely events and conventions which are also directions in the company's evaluation. Maryamto Sunu, DYAN's Corporate Secretary said that based on the evaluation conducted, it was decided that the hotel sector would exit the corporate business pillars so that the sector was restructured last year by selling its hotels. (Kontan) 3

4 Technical analysis Tasrul Summary Jakarta Composite Index (JCI) Test Resistance at 6,492 Item Data Item Data Close (March 26, 2019) (+0.92%)Trading range 6,433-6,492 8Average index performance (%) 3.65 Target Period Daily 6,492 r-squared Weekly 6,513 Volatility (+/-, %) +0.47/ Monthly 6,610 Volatility (+/-, point) / Stop loss 6,395 Source: Research Figure 1. Daily, Short term trend Uptrend ^JKSE [ ^JKSE ] - Daily - 3/26/2019 Open: 6,441 High: 6,478 Low: 6,440 Close: Vol. 8,792,560,640 Prev. Avg. Price: 6,462.5 R-Squared: Period: 117 Std.Dev: 1.60 Volatility (+) : Volatility (-) : V-Ratio : 1.00 Chg.: 0.92% 6, , , , , , , , , , Optimization Trading System ^JKSE - Volume = 8,792,560,640.00, MA(Volume,10) = 11,009,463, ,009,463,296 8,792,560,640 Sep Oct Nov Dec 2019 Feb Mar Source: Research 4

5 Figure 2. Daily, Short term trend, MFI optimized & W%R optimized ^JKSE - MFI Smoothed = X` x`x` ^JKSE - Will%R Smoothed = ^JKSE [ ^JKSE ] - Daily - 3/26/2019 Open: 6,441 High: 6,478 Low: 6,440 Close: Vol. 8,792,560,640 Prev. Avg. Price: 6,462.5 R-Squared: Period: 117 Std.Dev: 1.60 Volatility (+) : Volatility (-) : V-Ratio : 1.04 Chg.: 0.92% 6, , , , Optimization Trading System ^JKSE - Volume = 8,792,560,640.00, MA(Volume,10) = 11,009,463, ,009,463,296 8,792,560,640 Sep Oct Nov Dec 2019 Feb Mar Source: Research 5

6 Figure 3. Weekly Trend Uptrend, MFI optimized & RSI optimized ^JKSE - MFI Smoothed = A ^JKSE - RSI Smoothed = ^JKSE [ ^JKSE ] - Weekly - 3/26/2019 Open: 6,474 High: 6,478 Low: 6,392 Close: Vol. 19,573,647,360 Prev. Avg. Price: 6,446.5 R-Squared: Period: 30 Std.Dev: 1.45 Volatility (+) : Volatility (-) : V-Ratio : 0.69 Chg.: -0.85% 6, , , , , , , , , Optimization Trading System ^JKSE - Volume = 19,573,647,360.00, MA(Volume,8) = 45,329,289, ,329,289,216 Jul Oct 2018 Apr Jul Oct 2019 Source: Research 19,573,647,360 Figure 4. Daily : 6,433 6,492 Figure 5. Weekly : 6,350 6,513 Figure 6. Monthly : 6,257 6,610 ^JKSE [ ^JKSE ] - Daily - 3/26/2019 Open: Prev. Avg. Price: 6,462.5 R-Squared: Period: 117 Std.Dev: 1.60 Volatility (+) : Volatility (-) : V-Ratio : 1.00 Chg.: 0.92% ^JKSE [ ^JKSE ] - Weekly - 3/26/2019 Open: Prev. Avg. Price: 6,446.5 R-Squared: Period: 30 Std.Dev: 1.45 Volatility (+) : ,513.0 Volatility (-) : V-Ratio : 0.69 Chg.: -0.85% x x x` ^JKSE [ ^JKSE ] - Monthly - 3/26/2019 Open: Prev. Avg. Price: 6,448.4 R-Squared: Period: 45 Std.Dev: 1.44 Volatility (+) : Volatility (-) : V-Ratio : ,609.6 Chg.: 0.41% 6, , , , , , ,350.0 ^JKSE - Volume = 8,792,560, ^JKSE - Volume = 19,573,647, ^JKSE - Volume = 172,314,656, ,314,656, ,792,560, Mar 15 19,573,647,360 Jul Oct 2019 Source: Research Source: Research Source: Research 6

7 Chart 7. JCI Vs. USD/IDR Chart 8. JCI performance (absolute vs. relative) (pt) JCI (L) USD/IDR (R) 6,600 (IDR) 15,400 (%, %p) 20 Absolute Relative 6,200 15, ,800 5,400 12/26 1/23 2/20 3/20 14,600 14,200 13, D 1W 1M 1Y Source: Bloomberg, Note: Relative to MSCI EM Index Source: Bloomberg, Chart 9. Foreigner s net purchase (EM) (USDmn) 1,200 1, Note: The latest figure for India are March 25 th, 2019 Source: Bloomberg, 1 Day 5 Days Korea Taiwan Indonesia Thailand Philippines India 994 Chart 10. Energy price (D-3M=100) 140 CPO WTI Coal /26 1/23 2/20 3/20 Source: Bloomberg, Chart 11. Non-ferrous metal price (D-3M=100) Copper Nickel Tin 130 Chart 12. Precious metal price (D-3M=100) Silver Gold Platinum /18 01/19 02/19 03/19 Source: Bloomberg, 85 12/18 01/19 02/19 03/19 Source: Bloomberg, 7

8 Table. Key valuation metrics Company Name Ticker Price Market Cap Price Performance (%) P/E(X)* P/B(X)* ROE(%)* (IDR) (IDRbn) 1D 1W 1M 1Y FY18 FY19 FY18 FY19 FY18 FY19 Jakarta Composite Index JCI 7,382, FINANCIALS Bank Central Asia BBCA 27, , Bank Mandiri Persero BMRI 7, , Bank Rakyat Indonesia Persero BBRI 4, , Bank Negara Indonesia Persero BBNI 9, , Bank Tabungan Negara Persero BBTN 2,480 26, CONSUMER HM Sampoerna HMSP 3, , Gudang Garam GGRM 84, , Indofood CBP Sukses Makmur ICBP 9, , Indofood Sukses Makmur INDF 6,900 60, Kalbe Farma KLBF 1,520 71, Unilever Indonesia UNVR 48, , AGRICULTURAL Astra Agro Lestari AALI 11,300 21, PP London Sumatera Indonesia LSIP 1,080 7, Sawit Sumbermas Sarana SSMS 1,075 10, INFRASTRUCTURE XL Axiata EXCL 2,690 28, N/A Jasa Marga JSMR 5,400 39, Perusahaan Gas Negara PGAS 2,370 57, Tower Bersama Infrastructure TBIG 4,150 18, Telekomunikasi Indonesia TLKM 3, , Soechi Lines SOCI 156 1, N/A N/A N/A N/A N/A N/A Garuda Indonesia GIAA , N/A N/A BASIC-INDUSTRIES Semen Indonesia SMGR 13,875 82, Charoen Pokphand Indonesia CPIN 7, , Indocement Tunggal Prakarsa INTP 21,400 78, Japfa Comfeed Indonesia JPFA 2,150 25, MINING Indo Tambangraya Megah ITMG 23,975 27, Adaro Energy ADRO 1,365 43, Aneka Tambang ANTM , Vale Indonesia INCO 3,420 33, Tambang Batubara Bukit Asam PTBA 4,250 48, TRADE United Tractors UNTR 27, , AKR Corporindo AKRA 4,780 19, Global Mediacom BMTR 330 4, N/A N/A N/A N/A N/A N/A Matahari Department Store LPPF 3,930 11, Media Nusantara Citra MNCN , Matahari Putra Prima MPPA 272 2, N/A N/A N/A N/A N/A N/A Surya Citra Media SCMA 1,675 24, Siloam International Hospital SILO 3,500 5, PROPERTY Bumi Serpong Damai BSDE 1,485 28, Adhi Karya ADHI 1,545 5, Alam Sutera Relaty ASRI 312 6, Ciputra Development CTRA 1,035 19, Lippo Karawaci LPKR 294 6, Pembangunan Perumahan PTPP 2,010 12, Pakuwon Jati PWON , Summarecon Agung SMRA , Wijaya Karya WIKA 1,970 17, Waskita Karya WSKT 1,905 25, MISCELLANEOUS Astra International ASII 7, , Source: Bloomberg, *Note: Valuation metrics based on Bloomberg consensus estimates 8

9 Sector performance Top 10 market cap performance Name Index Chg (%) Ticker Price Market Cap (IDRbn) Chg (%) Agricultural 1, BTEK IJ 176 8, Mining 1, BBMD IJ , Basic-Industry BNLI IJ , Miscellaneous Industry 1, INPP IJ 830 9, Consumer Goods 2, AKRA IJ , Property & Construction PWON IJ , Infrastructure 1, EXCL IJ , Finance 1, BSDE IJ , Trade JSMR IJ , Composite TBIG IJ , Source: Bloomberg Top 5 leading movers Top 5 lagging movers Name Chg (%) Close Name Chg (%) Close BBRI IJ 1.5 4,060 FREN IJ BMRI IJ 2.1 7,375 GIAA IJ HMSP IJ 1.3 3,800 SMMA IJ ,750 TLKM IJ 1.3 3,820 TCPI IJ ,780 GGRM IJ ,200 MAPI IJ ,005 Source: Bloomberg Economic Calendar Time Currency Detail Forecast Previous 6:00am AUD RBA Assist Gov Kent Speaks 8:00am NZD RBNZ Rate Statement 8:00am NZD Official Cash Rate 1.75% 1.75% 3:00pm EUR ECB President Draghi Speaks 4:00pm CHF Credit Suisse Economic Expectations Tentative EUR German 10-y Bond Auction :00pm GBP CBI Realized Sales 5 0 7:30pm CAD Trade Balance -2.3B -4.6B 7:30pm USD Current Account -130B -125B 7:30pm USD Trade Balance -57.5B -59.8B 9:00pm CHF SNB Quarterly Bulletin 9:30pm AUD CB Leading Index m/m 0.1% 9:30pm USD Crude Oil Inventories -1.1M -9.6M Note: Time is based on Indonesian local time Source: Forex Factory Disclaimers This report is prepared strictly for private circulation only to clients of PT. It is purposed only to person having professional experience in matters relating to investments. The information contained in this report has been taken from sources which we deem reliable. No warranty (express or implied) is made to the accuracy or completeness of the information. All opinions and estimates included in this report constitute our judgments as of this date, without regards to its fairness, and are subject to change without notice. However, none of and/or its affiliated companies and/or their respective employees and/or agents makes any representation or warranty (express or implied) or accepts any responsibility or liability as to, or in relation to, the accuracy or completeness of the information and opinions contained in this report or as to any information contained in this report or any other such information or opinions remaining unchanged after the issue thereof. We expressly disclaim any responsibility or liability (express or implied) of, its affiliated companies and their respective employees and agents whatsoever and howsoever arising (including, without limitation for any claims, proceedings, action, suits, losses, expenses, damages or costs) which may be brought against or suffered by any person as a results of acting in reliance upon the whole or any part of the contents of this report and neither Mirae Asset Sekuritas Indonesia, its affiliated companies or their respective employees or agents accepts liability for any errors, omissions or misstatements, negligent or otherwise, in the report and any liability in respect of the report or any inaccuracy therein or omission there from which might otherwise arise is hereby expresses disclaimed. This document is not an offer to sell or a solicitation to buy any securities. This firms and its affiliates and their officers and employees may have a position, make markets, act as principal or engage in transaction in securities or related investments of any company mentioned herein, may perform services for or solicit business from any company mentioned herein, and may have acted upon or used any of the recommendations herein before they have been provided to you. PT