Premier Insight. Equity Indonesia Research Daily. Surya Semesta (SSIA IJ; Buy) Better earnings expected in 4Q February 2019.

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1 Premier Insight 21 February 2019 Equity Indonesia Research Daily JCI Index 6,600 6,550 6,500 6,450 6,400 6,350 6,300 Net buy (sell) in Rp bn 1, (500) (1,000) (1,500) JCI Index 22-Jan 23-Jan 24-Jan 25-Jan 28-Jan 29-Jan 30-Jan 31-Jan 1-Feb 4-Feb 6-Feb 7-Feb 8-Feb 11-Feb 12-Feb 13-Feb 14-Feb 15-Feb 18-Feb 19-Feb 20-Feb Foreign net buy (sell) Key Indexes 6-Feb 7-Feb 8-Feb 11-Feb 12-Feb 13-Feb 14-Feb 15-Feb 18-Feb 19-Feb 20-Feb 12,000 10,000 8,000 6,000 4,000 2,000-10% 5% 0% -5% -10% -15% -20% Index Closing 1 day 1 year YTD JCI 6, % -2.0% 5.1% LQ45 1, % -8.8% 3.7% DJI 25, % 4.7% 11.3% SET 1, % -8.6% 5.2% HSI 28, % -9.3% 10.3% NKY 21, % -2.5% 6.8% FTSE 7, % -0.7% 7.4% FSSTI 3, % -6.8% 6.8% EIDO % -10.9% 7.6% Commodity price Commodities Last price Ret 1 day Ret 1 year (in USD) Oil/barrel (WTI) % -8.0% CPO/tonne % -9.7% Soy/bushel % -14.9% Rubber/kg % -22.2% Nickel/tonne 12, % -5.4% Tins/tonne 21, % -0.9% Copper/tonne 6, % -8.8% Gold/try.oz (Spot) 1, % 1.1% Coal/tonne % -9.5% Corn/bushel % -0.3% Wheat/bushel* % -7.0% * : 1 month change Source : Bloomberg % net buy/market turnover Rp bn Surya Semesta (SSIA IJ; Buy) Better earnings expected in 4Q18 We forecast earnings of Rp11bn in FY18F (9M18: loss of Rp66bn). Likely to win Patimban toll road construction worth Rp1.2tn. Subang estate to start presales in early Maintain Buy with higher TP of Rp700 (from Rp630). Better than expected operational performance across all business lines. We forecast SSIA to book earnings of Rp11bn in FY18F, given stronger than expected marketing sales, new contract and better performance from hospitality business in 4Q18. SSIA is guiding for Revenue of Rp3.5tn, while indicating positive earnings turnaround due to immediate recognition of industrial land sales, which is SSIA s only high margin business. Throughout 2018, SSIA reported marketing sales of 8.3ha (FY17: 2.1ha), with ASP of US$120/sqm (-18% yoy), exceeding our FY18 marketing sales assumptions of 5ha. In addition, NRCA managed to book new contract of Rp2.7tn in FY18 (-4% yoy), also exceeding our FY18 assumption new contract of Rp2.5tn. In the other hand, SSIA s recorded better occupancy rate in all its hospitality facilities supported by Asian games and IMF World bank annual meeting in Bali. Huge contribution from Patimban toll road construction. Despite project tender delay, we believe SSIA will win the tender process in 2H19 given SSIA s right-to-match privilege as the project initiator with JSMR, PT Daya Mulia Turangga and PT Jasa Sarana. We expect NRCA to reach new contract of Rp3tn in FY19F (SSIA: Rp3.5tn), supported by building and infrastructure (Patimban toll road) project of Rp1.7tn and Rp1.3tn, respectively. In the other hand, we forecast SSIA to book 12ha industrial sales in FY19F (SSIA: 15ha), supported by 30ha inquiries from consumer goods, auto, and building material sector. Subang first phase development of 300ha. SSIA is planning to start the infrastructure development in Subang industrial estate by 2H19, along with the development of Patimban toll road access. The company expected 300ha first phase development with target presales of ±40ha in early 2020 with ASP USD90-100/sqm. According to the company, most of the inquiries for Subang industrial estate were from Japanese and auto related sector. Maintain Buy with higher TP of Rp700. We maintain our positive view on the counter given better than expected 2018 s operational performance. In addition, we also expect higher earnings forecast by 10% in FY19F as we increase NRCA contract assumption to Rp3tn in FY19F (from: Rp2.7tn) and Batiqa occupancy rate to 67% (from 65%). Given higher earnings outlook going forward, our RNAV calculation was increased to Rp700/share. SSIA currently trades at 58% discount to our RNAV estimate or FY19F P/B of 0.6x. Year To 31 Dec 2016A 2017A 2018F 2019F 2020F Revenue (RpBn) 3,797 3,274 3,649 3,921 4,292 EBITDA (RpBn) EBITDA Growth (%) (16.1) (35.2) (2.3) (13.8) 33.9 Net Profit (RpBn) 62 1, EPS (Rp) EPS Growth (%) (79.3) 1,786.4 (99.1) Net Gearing (%) PER (x) PBV (x) Dividend Yield (%) EV/EBITDA (x) Source: SSIA, IndoPremier Share Price Closing as of : 19-February-2019

2 News & Analysis Corporates BDMN: Bank Danamon (BDMN IJ; Rp9,150; Hold) In-line FY18 results Net profit grew 7% to Rp4.1tn in FY18 (4Q: Rp1.07tn; flat qoq), matching our forecast albeit below consensus (Rp4.2tn). Excl. profits from disposed subsidiary (Adira Insurance), earnings also grew 7% to Rp3.9tn in FY18. Modest profit growth came from lower provisions (-6%) while core profit was flat as its modest asset growth was offset by lower NIM of 9.0% (- 30bps) and non-interest income (-6%), despite no opex growth. Loans grew 8% (or 12% if excl. micro) due to growth across all segments except micro (-66%), particularly mortgages (+29%). The bank s acquisition by MUFG should offer opportunity to target supplychain in auto industry. NPL and credit cost improved to 2.7%/2.5%, from 2.8%/2.8%, respectively, as also special mention loans to 9.8% (from 11%). We view investors should SELL into MUFG s generous offer price of Rp9,590, which was well above our fair value estimate for the bank. (Company). FREN: Smartfren (FREN IJ; Rp284; Not Rated) Public Expose Takeaway Management mentioned several telco players discussed possibity of consolidation to support efficiency in industry, but yet reached final conclusion (wait and see). FREN said it monitors spectrum (transfer) regulation draft progress. More clarity on spectrum transfer regulation would help to support decision making process from business perspective regarding possibility of consolidation, said by company s representative. The company mentioned positive response on its current "unlimited" (with fair usage limit) data package. Company considered this data package as promotion. Thus, the pricing might be change (to normal) in the future. FREN targets revenue to grow at least +10%YoY this year (vs. 9M18 +19%YoY). FREN s capex in 2019F is USD200mn (c. Rp2.8tn assuming forex rate of Rp14K/USD) for network expansion. It targets to increase total number of BTS to 20K from currently 17K. The company has managed to post stellar EBITDA growth in 9M18 at +84%YoY supported by top-line growth and margin expansion to 19% from 12% in 9M18. For this year, the company views EBITDA margin of c.20% is still reasonable, roughly similar to 9M18. Management hopes positive trend in EBITDA will help FREN to achieve bottom-line turnaround in the future (no specific timeline mentioned). As of 9M18, FREN still posted net loss of Rp2.5tn in 9M18, but improved than net loss ofrp2.8tn in 9M17. (IndoPremier, Detik) MYOR: Mayora (MYOR IJ; Rp2,650; Buy) is planning to build a new coffee factory in the Philippines. The company is prepared to invest around US$50mn US$75mn to build this new instant coffee factory this year. The production of this new factory is expected to account for 10%-15% of the company s total export to the Philippines. According to the company, MYOR has a market share of around 45% in the Philippines, with their instant coffee brands such as Kopiko Blanc, Kopiko Brown and Astig. (Bisnis Indonesia). Comment: MYOR is planning to build this new factory in order to avoid import duties on their products, as it is making their product prices less competitive in the country. The company is currently still in negotiation with the Philippines government in order to waive the import duty on their products, as they favor building factories in Indonesia. We maintain Buy on MYOR with a TP of Rp2,930. SILO: Siloam International Hospitals (SILO IJ; Rp3,500; Hold) booked a lower 2018 net profit of Rp26bn (-75% yoy) forming 132% of our estimate but only 33% of consensus. Net sales for 4Q18 recorded higher by 12% qoq, resulting in 2

3 yoy increase of 12%, forming 98% market consensus but lower than our estimate, forming only 90%. UNTR: United Tractors (UNTR IJ; Rp26,000; Buy) reported Dec 18 operational performance with details as follow; UNTR booked heavy equipment sales of 376 units, up 17% mom and 17% yoy in Dec 18. Sales in FY18 reached 4,878 units, up 29% yoy, slightly above our forecast of 4,800 for FY18F (above). PAMA recorded OB removal volumes of 86.4mn bcm (+5.2% mom, +18% yoy) in Dec 18 which brings OB removal to 979mn bcm in FY18, up 22% yoy. Coal mining reached 11.3mn tons (-2.6% mom, +8.7% yoy) in Dec 18, bringing FY18 coal mining to 125mn tons (+11% yoy). PAMA s coal mining volumes came above our forecast (106%) while OB removal volumes came inline with our expectation (101%). Coal mining division posted coal sales volumes of 7.02mn tons, increased 10.8% yoy in FY18. (Company). Comment: With these relatively inline operational results, we maintain UNTR as our top-pick in the coal sector and reiterate our Buy recommendation with TP of Rp41,000. SMGR: Semen Indonesia (SMGR IJ; Rp12,900; Buy) reported cement sales volume of 2.15mt in 1M19 (-6% yoy), given the completion of some projects. The January s number was mainly supported by the sales in Sumatera, West Java and East Java. (Bisnis Indonesia). WIKA: Wijaya Karya (WIKA IJ; Rp1,730; Buy) appointed by PT Angkasa Pura (AP) I for construction work of Sultan Hasanudin Airport expansion. The construction is scheduled for completion in 2021 with total investment of Rp2.6tn. After the expansion, the existing terminal (51k sqm) will have passanger capacity of 15.5mn/year (vs. 7mn/year) and area of 145k sqm. (Investor Daily). Comment: We are positive towards the appointment, which will help support WIKA s contract achievement. Maintain Buy on WIKA with TP of Rp2,300 as one of our top pick in construction sector. Markets & Sector Plantation sector: State Owned Electricity Company (PT PLN) will use 100% bio-fuel (palm oil) in 4 diesel power generators with total capacity of 122MW. The four power generators are PLTD (diesel power generation) Kanaan, Bontang (10 MW), PLTD Batakan, Balikpapan (40 MW), PLTD Supa, Pare-Pare (62 MW) and PLTMG Jayapura (10 MW). (Investor Daily). Comment: We see consistent effort from government of Indonesia to improve domestic consumption of palm oil. We maintain our long-term positive view on palm oil plantation industry and reiterate our Buy ratings for AALI (TP: Rp16,000) and LSIP (TP: Rp1,650). Economics Tax revenue: Fiscal revenue was Rp108tn by Jan19, or 5% of 2019 s target (+6.2% yoy) as there was increase in both tax and non-tax revenues. Tax revenue grew by 11.5% and accounted for 97% of realised revenue, supported by OG income tax which grew by 38.2% yoy. Expenditure wise, fiscal spending has reached 6.2% of target (Rp153.8tn) in the same period, and rose 10.4% yoy. Additionally, DG Tax also just launched a series of tax and tax administration reform. Comment: Positive news for fiscal albeit very early in stage (only by Jan19) and driven by OG tax revenue, among others. Under current tax administration, there appears to be growing commitment to improve collection and incentive system in 3

4 line with higher enforcement, which should be positive for the budget. 4

5 Head Office PT INDO PREMIER SEKURITAS Wisma GKBI 7/F Suite 718 Jl. Jend. Sudirman No.28 Jakarta Indonesia p f INVESTMENT RATINGS BUY : Expected total return of 10% or more within a 12-month period HOLD : Expected total return between -10% and 10% within a 12-month period SELL : Expected total return of -10% or worse within a 12-month period ANALYSTS CERTIFICATION. The views expressed in this research report accurately reflect the analyst;s personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. DISCLAIMERS This reserch is based on information obtained from sources believed to be reliable, but we do not make any representation or warraty nor accept any responsibility or liability as to its accruracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, finacial situation and the particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this report.