January 8, Coal: Lasting resilience

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1 Andy Wibowo Gunawan To subscribe to our Daily Focus, please contact us at Market Index Last Trade Chg (%) MoM YoY JCI 6, MSCI Indonesia MSCI EM 1, HANG SENG 30, 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 13, USD/KRW 1, USD/JPY USD/CNY Commodities Last Trade Chg (%) MoM YoY WTI Gold 1, Coal Palm Oil 2, Rubber Nickel 12, Copper 7, Tin 19, Coal: Lasting resilience We maintain our Overweight stance on the coal sector, as we leave our full-year 2018F coal price forecast unchanged at USD80.0/ton. However, we predict that 1H18 global coal price will soften from the current level at USD105/ton, given better weather in China during 1H, which could trigger a slowdown in China s coal demand. Out of the companies that we cover, our top pick remains Adaro Energy (ADRO/ Buy/TP IDR2,425) on the back of its eco-friendly coal products. Meanwhile, we see two short-term upside risks, which are higher global oil price and the delay in heavy equipment. In the. Coal prices to soften in 1H18; Upside risks linger We predict that 1H18 global coal price will soften from the current level at USD100/ton, given better weather in China, which could trigger a slowdown in China s coal demand. Meanwhile, we see two short-term upside risks, which are higher global oil price and also the backlog of mining equipment, which could be a constraint for coal production. China s mid-term coal demand remains solid In the medium term, we see that coal demand remains solid with additions of thermal power plant production capacity. In our view, China, being the biggest coal producer, will manage its production to maintain global coal price at reasonable level (>USD80.0/ton) as its coal regions contributed 19.9% to total GDP in Indonesia s brown coal is attractive to China Parallel with China s plan to tackle pollution issue and higher new investment thermal production capacity in China, we believe that Indonesia s brown coal (lignite) export will expand further in the longer term. Overweight on coal sector; ADRO remains our top pick Our top pick in the sector is Adaro Energy (ADRO/Buy/TP IDR2,425. For PTBA and ITMG the TP of IDR3,225 and IDR24,300, respectively. China s monthly brown coal import (mn tonnes) 11 Indonesia Total JCI Index VS MSCI Emerging Markets (pt) JCI MSCI EM 6,500 6,000 5,500 5,000 4,500 12/16 03/17 06/17 09/17 12/17 (pt) 1,250 1, /13 12/14 12/15 12/16

2 Local flash MKNT: Targeted Communication Partners add 50,000 partner outlets. In the future, MKNT will focus on developing information technology and product distribution system. Through this system, managers of telecommunication outlets can order vouchers as per the desired data package and no longer depend on the inventory owned by the team who took to the field.proses that previously could take a whole day can be trimmed to 3 minutes. MKNT targeting the addition of partner outlets this year 50,000 outlets to 175,000 outlets. Currently, the number of MKNT partner outlets is around 125,000 outlets. (Kontan) AIMS: AIMS 'new AIMS tender offer controller. PT Aims Indo Investama (AII) is now the new controller of coal trading company PT Akbar Indo Makmur Stimec Tbk (AIMS). After the acquisition of AIMS, AII shall conduct a tender offer of a maximum of million shares or 22.95% of the total issued and fully paid shares. Based on the prospectus published Friday (5/1), the tender offer price is set at IDR 254 per share with nominal IDR 50 per share. So the total value of this tender offer of IDR billion. (Kontan) EXCL: Xl Axiata is set to spend IDR 7 trillion in PT XL Axiata Tbk (EXCL) is scheduling a number of expansions this year. One of a series of EXCL priority agendas is to strengthen the network by increasing the number of base transceiver stations (BTS) throughout Indonesia. Throughout 2018, the Malaysian telecommunications operator plans to add about 17,000 units of BTS. The addition of BTS in this year will be focused in areas outside Java. "It will be similar to last year, as many as 60% of BTS will be built outside Java," said GM Corporate Communication EXCL Tri Wahyuningsih, Friday (5/1). Earlier this year, EXCL management still finalized the business plan. Ayu ensures the business plan of this issuer will not be much different from last year. Throughout this year, EXCL estimates capital expenditure or capital expenditure (capex) will reach IDR 7 trillion. The amount is not much different from the value of capital expenditure last year. However Ayu mentioned that the amount of capital expenditure is not final yet. (Kontan) JSMR: JSMR targets Salatiga-Kartasura to operate Lebaran. PT Jasa Marga Tbk (JSMR) is optimistic that the Salatiga-Kartasura toll road can be traversed during Lebaran Until the beginning of January 2018, progress of construction of the Salatiga- Kartasura toll road project has reached 50.4%. While from the land acquisition sector, PT Solo Ngawi Jaya (SNJ) has managed to record 100% of all land that needs to be released. SNJ is a subsidiary of Jasa Marga who works on the 32km-long toll road construction. (Kontan) TMPO: Edwin Soeryadjaja & SCMA will buy Tempo shares. PT Tempo Inti Media Tbk (TMPO) will be arriving a number of new shareholders. The new shareholder will enter into a corporate action by offering preemptive rights (HMETD) rights issue alias. Two names of investors included Edwin Soeryadjaja and PT Surya Citra Media Tbk (SCMA). PT Tempo Inti Media Tbk (TMPO) held a rights issue by issuing a price of preemptive rights exercise (HMETD) alias rights issue. issued million new shares at an exercise price of IDR 300 per share. This means that the media issuer is aiming for a maximum of Rp billion from this rights issue. There are no standby buyers in the implementation of this rights issue. (Cash) PSSI: Pelita Samudera will transport palm oil. Post-listing on board of Indonesia Stock Exchange (IDX) on December 5, 2017, PT Pelita Samudera Shipping Tbk spur commodity transportation business. Originally, the company only served coal hauling services. Starting in 2018 they plan to expand services to transport palm oil. (Kontan) 2

3 Summary Technical analysis Tasrul Jakarta Composite Index (JCI) Limited Upside Item Data Item Data Close (Jan ) 6,353.7 (+0.976%)Trading range 6,305-6,377 Average index performance (%) Target Period Daily 6,377 r-squared Weekly 6,422 Volatility (+/-, %) / Monthly 6,509 Volatility (+/-, point) / Stop loss 6,195 Source: Research Figure 1. Daily trend Uptrend ^JKSE [ ^JKSE ] - Daily - 1/5/2018 Open: 6,279 High: 6,354 Low: 6,279 Close: 6,354 Vol. 7,491,359,232 Prev. Av g. Price: 6,328.7 R-Squared: Period: 276 Std.Dev : 1.95 Volatility (+) : Volatility (-) : V-Ratio : 1.00 Chg.: 0.976% 6, , , , , , , , , Optimization Trading System ^JKSE - Volume = 7,491,359,232.00, EMA(Volume,23) = 5,858,366, Dec 2017 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2018 Source: Research 7,491,359,232 5,858,366,976 3

4 Figure 2. Daily MFI optimized,rsi optimized, Stochastic %D optimized & Bollinger Band optimized ^JKSE - MFI Smoothed = ^JKSE - RSI Smoothed = ^JKSE - Stochastic %D = 40.65, MA = ^JKSE - Daily 1/5/2018 Open , Hi , Lo , Close (1.0%) BBTop(Av erage,23,1.95) = 6,381.80, BBBot(Av erage,23,1.95) = 5,903.48, SMA 6, ^JKSE [ ^JKSE ] - Daily - 1/5/2018 Open: 6,279 High: 6,354 Low: 6,279 Close: 6,354 Chg. 1.0% Vol. 7,491,359,232 Prev. Av g. Price: 6,328.7 R-Squared: Period: 276 Std.: 1.95 Volatility (+) : Volatility (-) : V-Ratio : 1.00 Optimization Trading System ^JKSE - Volume = 7,491,359,232.00, EMA(Volume,23) = 5,858,366, , , , , ,491,359,232 5,858,366,976 Aug Sep Oct Nov Dec 2018 Source: Research 4

5 Figure 3. Weekly Trend Uptrend, MFI optimized,w%r optimized, Stochastic %D & Bollinger Band optimized ^JKSE - MFI Smoothed = ^JKSE - Will%R Smoothed = ^JKSE - Stochastic %D = 68.68, MA = ^JKSE - Weekly 1/4/2018 Open , Hi , Lo , Close (-1.0%) BBTop(Av erage,18,1.86) = 6,268.09, BBBot(Av erage,18,1.86) = 5,765.00, 6, , ^JKSE [ ^JKSE ] - Weekly - 1/4/2018 Open: 6,366 High: 6,446 Low: 6,221 Close: 6,292 Vol. 16,104,583,168 Prev. Av g. Price: 6,319.6 R-Squared: Period: 123 Std.Dev : 1.98 Volatility (+) : Volatility (-) : V-Ratio : 1.16 Optimization Trading System Chg.: -1.00% ^JKSE - Volume = 16,104,583,168.00, EMA(Volume,22) = 27,370,305, , , , , , ,919.4 Oct 2016 Apr Jul Oct 2017 Apr Jul Oct ,370,305,536 16,104,583,168 Source: Research Figure 4. Daily : 6,305 6,377 Figure 5. Weekly : 6,269-6,422 Figure 6. Monthly : 6,187 6,509 ^JKSE [ ^JKSE ] - Daily - 1/5/2018 Open: 6,279 Prev. Av g. Price: 6,328.7 R-Squared: Period: 276 Std.Dev : 1.95 Volatility (+) : Volatility (-) : V-Ratio : 1.00 Chg.: 0.976% 6,376.8 ^JKSE [ ^JKSE ] - Weekly - 1/5/2018 Open: Prev. Av g. Price: 6,340.1 R-Squared: Period: 123 Std.Dev : 1.97 Volatility (+) : Volatility (-) : ,422.2 V-Ratio : 1.16 Chg.: % x ^JKSE [ ^JKSE ] - Monthly - 1/5/2018 Open: 6,366 Prev. Av g. Price: 6,340.1 R-Squared: Period: 30 Std.Dev : 2.05 Volatility (+) : Volatility (-) : V-Ratio : ,508.7 Chg.: -0.03% x 6, , , , , , ,186.9 ^JKSE - Volume = 7,491,359, ,491,359,232 ^JKSE - Volume = 23,595,941, ^JKSE - Volume = 23,595,941, ,595,941, Nov Dec 2018 Apr Jul Oct ,595,941,888 Source: Research Source: Research Source: Research 5

6 Chart 7. JCI Vs. USD/IDR (pt) JCI (L) USD/IDR (R) 6,400 6,300 6,200 6,100 6,000 5,900 5,800 5,700 5,600 10/9 11/6 12/4 1/1 (IDR) 13,800 13,700 13,600 13,500 13,400 13,300 13,200 13,100 Chart 8. JCI performance (absolute vs. relative) (%, %p) Note: Relative to MSCI EM Index Absolute Relative D 1W 1M 1Y Chart 9. Foreigner s net purchase (EM) Chart 10. Energy price (USDmn) 1,600 1,400 1,200 1, , , Note: The latest figure for India are January 5 th, Day 5 Days Korea Taiwan Indonesia Thailand Philippines India (D-3M=100) 135 CPO WTI Coal /9 11/6 12/4 1/1 Chart 11. Non-ferrous metal price Chart 12. Precious metal price (D-3M=100) Copper Nickel Tin (D-3M=100) Silver Gold Platinum /17 11/17 12/17 01/ /9 11/6 12/4 1/1 6

7 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 FY17 FY18 FY17 FY18 FY17 FY18 Jakarta Composite Index JCI 6,354 7,079, FINANCIALS Bank Central Asia BBCA 22, , Bank Mandiri Persero BMRI 7, , Bank Rakyat Indonesia Persero BBRI 3, , Bank Negara Indonesia Persero BBNI 9, , Bank Tabungan Negara Persero BBTN 3,440 36, CONSUMER HM Sampoerna HMSP 4, , Gudang Garam GGRM 84, , Indofood CBP Sukses Makmur ICBP 9, , Indofood Sukses Makmur INDF 7,675 67, Kalbe Farma KLBF 1,760 82, Unilever Indonesia UNVR 54, , AGRICULTURAL Astra Agro Lestari AALI 12,950 24, PP London Sumatera Indonesia LSIP 1,355 9, Sawit Sumbermas Sarana SSMS 1,445 13, INFRASTRUCTURE XL Axiata EXCL 3,010 32, Jasa Marga JSMR 6,500 47, Perusahaan Gas Negara PGAS 1,790 43, Tower Bersama Infrastructure TBIG 6,725 30, Telekomunikasi Indonesia TLKM 4, , Soechi Lines SOCI 250 1, N/A N/A Garuda Indonesia GIAA 310 8, BASIC-INDUSTRIES Semen Indonesia SMGR 10,900 64, Charoen Pokphand Indonesia CPIN 3,600 59, Indocement Tunggal Prakarsa INTP 23,225 85, Japfa Comfeed Indonesia JPFA 1,390 15, MINING Indo Tambangraya Megah ITMG 21,075 23, Adaro Energy ADRO 1,990 63, Aneka Tambang ANTM , Vale Indonesia INCO 3,170 31, N/A Tambang Batubara Bukit Asam PTBA 2,610 30, TRADE United Tractors UNTR 35, , AKR Corporindo AKRA 6,200 24, Global Mediacom BMTR 600 8, N/A N/A N/A N/A N/A N/A Matahari Department Store LPPF 11,500 33, Media Nusantara Citra MNCN 1,360 19, Matahari Putra Prima MPPA 440 2, N/A Surya Citra Media SCMA 2,500 36, Siloam International Hospital SILO 8,700 14, PROPERTY Bumi Serpong Damai BSDE 1,695 32, Adhi Karya ADHI 1,895 6, Alam Sutera Realty ASRI 358 7, Ciputra Development CTRA 1,130 20, Lippo Karawaci LPKR , Pembangunan Perumahan PTPP 2,680 16, Pakuwon Jati PWON , Summarecon Agung SMRA , Wijaya Karya WIKA 1,580 14, Waskita Karya WSKT 2,300 31, MISCELLANEOUS Astra International ASII 8, , *Note: Valuation metrics based on Bloomberg consensus estimates 7

8 Sector performance Top 10 market cap performance Name Index Chg (%) Ticker Price Market Cap (IDRbn) Chg (%) Agricultural 1, CMPP IJ 482 5, Mining 1, BSSR IJ , Basic-Industry HRUM IJ , Miscellaneous Industry 1, DOID IJ 785 6, Consumer Goods 2, TRAM IJ , Property & Construction BUMI IJ , Infrastructure 1, MEDC IJ , Finance 1, INAF IJ , Trade PTBA IJ , Composite 6, ITMG IJ , Source: Bloomberg Top 5 leading movers Top 5 lagging movers Name Chg (%) Close Name Chg (%) Close HMSP IJ 3.2 4,850 MABA IJ TLKM IJ 1.4 4,280 BBNI IJ ,300 UNTR IJ ,425 SMGR IJ ,900 BBRI IJ 1.1 3,590 NIKL IJ ,230 UNVR IJ ,000 MAYA IJ ,900 Source: Bloomberg Economic Calendar Time Currency Detail Forecast Previous 5:30am AUD AIG Construction Index 57.5 All Day JPY Bank Holiday 2:00pm EUR German Factory Orders m/m 0.1% 0.5% 3:15pm CHF CPI m/m -0.1% -0.1% 3:30pm GBP Halifax HPI m/m 0.2% 0.5% 4:30pm EUR Sentix Investor Confidence :00pm EUR Retail Sales m/m 1.4% -1.1% 10:30pm CAD BOC Business Outlook Survey 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