Daily Focus. Indonesia. Dec 5, Developers: Prepare your umbrella before it rains

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1 Indonesia Daily Focus Franky Rivan To subscribe to our Daily Focus, please contact us at Market Index Last Trade Chg (%) MoM YoY JCI 5, MSCI Indonesia MSCI EM HANG SENG 22, KOSPI 1, FTSE 6, DJIA 19, NASDAQ 5, Valuation 2016F P/E (x) P/B (x) ROE (%) JCI Key Rates Last Trade Chg (bps) MoM YoY BI 7-Day RR * 3yr yr *since introduced in Aug 2016 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 Rubber Nickel 11, Copper 5, Tin 21, JCI Index VS MSCI Emerging Markets (pt) JCI MSCI EM (pt) 5,500 4,500 1, , /13 09/14 06/15 02/16 11/16 Developers: Prepare your umbrella before it rains Interest rate hike rebound The year 2016 has been hard on Indonesia s property market. Developers marketing sales deteriorated, falling far below the target. Moreover, this happened in the midst of the enactment of government s more relaxed regulations aimed to prop up the property demand. The central bank has also lowered the benchmark rate seven times this year (Dec 2015 BI rate: 7.5% vs. Nov day reverse repo rate: 4.75%). This was aimed to bolster the economy as well as the demand in the property market. However, given the recent market development, especially after the victory of the US President-elect Donald Trump, we believe that the Indonesian central bank will have to reverse the trend next year by rising up the benchmark rate. Hence, we forecast BI s policy rate (7-day reverse repo rate) to reach 5.75% in 2017F. We also project the average USD/IDR FX rate to come to IDR13,500 in 2017F. Trampling the hard-earned demand According to a survey by Bank Indonesia, averagely 74.7% of Indonesian property buyers take out a mortgage credit to purchase property, while the other 8.8% and 16.4% use hard cash and cash installment, respectively. Having said that, we believe that the rebound in 2017 interest rate would dampen the property buyers willingness to purchase mortgages, which in turn will slow down the property demand. Our argument is supported by the similar condition in 2004~2005, in which Indonesia s benchmark interest rate increased 5.3%p to follow the hiking Fed s rate in the US. During this period, the property sector performed the worst within the index. The other interest-rate-sensitive sectors, such as the miscellaneous industry (c.90% comprised of automotive companies), also underperformed the JCI. Hence, factoring in the aforementioned interest rate hike scenario, we believe a similar impact should be anticipated in 2017F. Major interest rate cuts by the central bank in 2016 (%) Benchmark rate (L) CPI (YoY, R) (%) /11 6/12 12/12 6/13 12/13 6/14 12/14 6/15 12/15 6/16 Source: BPS, Daewoo Securities Research

2 Indonesia Macro Update November CPI: Rain on a parade A hike in MoM inflation in November Macro Update December 5, 2016 PT Daewoo Securities Indonesia Dang Maulida dangmaulida@dwsec-id.com Headline inflation for the month of November increased to 0.47% MoM from 0.14% MoM for October. The November monthly CPI figure was higher than estimated by both market (0.33% MoM) and Bank Indonesia or BI (a survey by BI mid last month indicated a November inflation of 0.39% MoM). Three of the biggest contributors to the consumer price index (CPI) hike in November include: 1) unprocessed foods, which prices increased by 1.66% MoM (vs.-0.21% MoM in October), 2) processed foods, drinks, cigarettes, and tobacco, which inched up by 0.25% MoM (vs.0.24% MoM October), and 3) housing, water, electricity, gas, and fuel components at 0.16% MoM (vs. 0.56% in October). We attribute the price increase in the three components to the higher intensity of rain last month. To illustrate, the rainfall index for West Java during November reached 312 mm/day, higher compared to its 30-year average of 270 mm/day ( ). Also, the rainfall index for South Sumatera hovered above 400 mm/day during the same period compared to its 30-year average of 300 mm/day 400 mm/day. The more intense rainfall negatively impacted regions with insufficient infrastructure and bad plantation irrigation system, which in turn led to crop disruption for strategic commodities, such as red chilies and onions. Annual headline inflation at 3.58% The annual headline inflation rate went up to 3.58% YoY in November, compared to 3.31% YoY in October. As in October, unprocessed foods ranked first, posting the highest index increase of 8.53% YoY in November vs. 7.11% YoY in October. November s CPI provides room for the worst-case scenario of possible further weakening of USD/IDR rate and extreme weather. Should those factors remain within the previous range this year in December, our calculation points to an annual inflation rate of below 4% this year (government s target: 4% YoY). On a separate note, both BI and market estimates for this year s inflation rate are in the range of 3,0%-3,3%. Inflation rate target in 2017 The Indonesian parliament had ratified the 2017 government budget, which stated an inflation assumption of 4% YoY. We view this figure as achievable and at the same time challenging, at least for the following reasons. First, next year s monetary stance of BI, which will also be influenced by that of the US, still remains to be seen. Should BI need to significantly reverse its current stance, this will be unfavorable for the CPI next year. Second, the government s revocation of electricity subsidy will result in the reduction of subsidy-receiving 900-VA customers from 3.8mn to only 497k in We believe that the subsidy lift may lead to a higher inflation rate if energy consumption level is not changed. While marked with several uncertainties, as in the past years, we believe that both the government and BI as the central bank will continue to strengthen the country s inflation control system in order to achieve its target. Analysts who prepared this report are registered as research analysts in Indonesia but not in any other jurisdiction. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

3 Local flash GIAA: Garuda Indonesia offers 17,65 million new shares at IDR476 per share. PT Garuda Indonesia Tbk will offers new shares as part of state investment. Previously, it had received approval from Extraordinary General Meeting of Shareholders at December 12, The number of shares to be listed is 17,649,621 shares at IDR476. With this addition, the ownership of the Government on Garuda's shares increased from % to %. (Kontan) SRTG: Saratoga earned IDR34.53 billion from ADRO shares sale. PT Saratoga Investama Sedaya Tbk (SRTG) completed the sale of majority stake in PT Adaro Energy Tbk (ADRO) through the regular market. SRTG sell million of its shares to public. The share sale was conducted from 28 November 2016 to 2 December The share sale price is in the range of IDR1,615 to IDR1,695 per share. From the sale of shares, SRTG pocketed IDR34.5 billion. Now, the company's shareholding in ADRO reached 16.15%. (Kontan) TAXI: Managing Director and the whole of commissioner resigned. Director and President Commissioner of PT Express Transindo Utama Tbk (TAXI) as well as several commissioners and directors resigned. According to Handy Prawira, Corporate Secretary, Daniel Podiman resigned as Managing Director of the company and David Santoso also resigned as Director. Thus, the only remaining member of the Board of Directors Herwan Widodo and Shafruhan Sinungan while the Commissioner is no one left. (Iqplus) GPRA: Gapuraprima prepare capex of IDR370 billion in PT Perdana Gapuraprima Tbk (GPRA) allocated IDR370 billion as capital expenditures in The budget will be used for the construction of new projects and increase landbank. There are already several projects included the company's portfolio. GPRA Director Kelik Irwantono said capital spending plans, 30% for land acquisition, 40% for high rise building, and 30% for housing. The capex will come from internal cash and bank loans, with a portion of 70:30. (Kontan) WIKA: Pertamina picks Wijaya Karya for Balikpapan refinery project. PT Pertamina (Persero) assign PT Wijaya Karya (Persero) as executor of the project development as well as supporting construction (jetty) to increase the capacity of existing refinery (RDMP) Balikpapan refinery unit V. The one year contract has a value of IDR552 billion for project preparation by preparing land area of the refinery infrastructure development area of 75 hectares and construction of jetty. (Iqplus) RAJA: Rukun Raharja exploring PLTU Jawa-Bali USD550 million. PT Rukun Raharja Tbk (RAJA) is pre paring to boost expansion in the years ahead. RAJA will focus on working on the gas power plant (PLTG) project. The company plans to participate in the auction, such as Jawa Bali 4 Peaker project with potential project value of USD500 million to USD550 million. (Kontan) HERO: Hero will add 15 new stores in To boost revenue, PT Hero Supermarket Tbk plans to add 15 new stores in Independent Director Arief Istanto expect the plan to add new stores to boost sales. On the other hand, HERO is increasingly optimistic towards domestic consumption next year. In September 2016 financial statements, HERO posted net income worth IDR10.46 trillion, contracted by 4.5% from IDR10.96 trillion in the same period in the previous year. (Bisnis Indonesia) 3

4 Summary Technical analysis Tasrul Jakarta Composite Index (JCI) Limited Upside Item Data Item Data Close (Dec 2, 2016) 5,245(+0.9%)Trading range 5,210-5,268 Average index performance (%) 5.29 Target Period Daily 5,268 r-squared Weekly 5,286 Volatility (+/-, %) Monthly 5,294 Volatility (+/-, point) 28.7Stop loss 5,099 Source: Figure 1. Daily trend - Uptrend ^JKSE-Daily12/2/2016Open , Hi , Lo , Close (0.9%)Upper Band= 5,646.07, Channel_prd= 5,444.14, Lower Band= 5,242.21, Upper Band= 5,776.63, Channel_prd 5, , , , ,268 5, , , , ,099.6 Optimization Trading System ^JKSE-Volume = 7,956,579,328.00, Avg.Volume = 9,368,160, Optimization Trading System Aug Sep Oct Nov Dec 2016 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Created with AmiBroker - advanced charting and technical analysis software. 9,368,160,256 7,956,579,328 Source: 4

5 Figure 2. Daily MFI optimized & W%R optimized ^JKSE- MFI Smoothed= ^JKSE- Will%RSmoothed= ^JKSE-Daily12/2/2016Open , Hi , Lo , Close (0.9%)VWAP= 5,099.60, VWAP= 5, ,268 5, , ,099.6 Optimization Trading System ^JKSE-Volume = 7,956,579,328.00, Avg.Volume = 9,368,160, Optimization Trading System Dec 2016 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Created with AmiBroker - advanced charting and technical analysis software. 9,368,160,256 7,956,579,328 Source: Figure 3. Daily, target : 5,268 Figure 4. Weekly, target : 5,286 Figure 5. Monthly,target : 5,294 ^ J K S E - D a i l y 1 2 / 2 / O p e n , H i , L o ^ J K S E - W e e k l y 1 2 / 2 / O p e n , H i , L o ^ J K S E - M o n th l y 1 2 /2 / O p e n , H i , x 5, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ^ J K S E - V o l u m e = 7, 9 5 6, 5 7 9, , A v g. V o l u m e = 9, 3 6 8, 1 6 0, ^ J K S E - V o l u m e = 5 5, 2 1 0, 1 5 6, , A v g. V o l u m e = 3 4, 1 7 2, 3 8 3, ^ J K S E - V o l u m e = 1 8, 9 1 1, 3 1 8, , A v g. V o l u m e = 1 1 4, 0 2 7, 4 8 7, , 3 6 8, 1 6 0, , 9 5 6, 5 7 9, O p ti m i z a ti o n T r a d i n g S y ste m N o v D e c Cr e a te d w ith A mib r o ke r - a d v a n c e d c h a r tin g a n d te c h n ic a l a n a ly s is s o f tw a r e. h ttp ://w w w.a mib r o ke r.c o m 5 5, 2 1 0, 1 5 6, , 1 7 2, 3 8 3, O p ti m i z a ti o n T r a d i n g S y ste m A p r J u l O c t Cr e a te d w ith A mib r o ke r - a d v a n c e d c h a r tin g a n d te c h n ic a l a n a ly s is s o f tw a r e. h ttp ://w w w.a mib r o ke r.c o m 1 1 4, 0 2 7, 4 8 7, O p ti m i z a ti o n T ra d i n g S y ste m , 9 1 1, 3 1 8, Cr e a te d w ith A mib r o ke r - a d v a n c e d c h a r tin g a n d te c h n ic a l a n a ly s is s o f tw a r e. h ttp ://w w w.a mib r o ke r.c o m Source: Source: Source: 5

6 Chart 6. JCI Vs. USD/IDR Chart 7. JCI performance (absolute vs. relative) (pt) JCI (L) USD/IDR (R) 5,700 5,500 (IDR) 14,000 13,800 (%, %p) Absolute Relative ,300 5,100 4,900 4,700 4,500 13,600 13,400 13,200 13, ,300 9/5 10/3 10/31 11/28 12, D 1W 1M 1Y Source: Bloomberg, Note: Relative to MSCI EM Index Source: Bloomberg, Chart 8. Foreigner s net purchase (EM) (USDmn) Note: The latest figure for India are Dec, 1 st Source: Bloomberg, 1 Day 5 Days Korea Taiwan Indonesia Thailand Philippines India -473 Chart 9. Energy price ((D-3M=100) 170 CPO WTI Coal /16 9/16 10/16 10/16 11/16 11/16 11/16 Source: Bloomberg, Chart 10. Non-ferrous metal price Chart 11. Precious metal price ((D-3M=100) Copper Nickel Tin Silver Gold Platinum 90 9/16 9/16 10/16 10/16 10/16 11/16 11/16 Source: Bloomberg, 70 9/16 9/16 10/16 10/16 10/16 11/16 11/16 Source: Bloomberg, 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 FY16 FY17 FY16 FY17 FY16 FY17 Jakarta Composite Index JCI 5,246 5,628, FINANCIALS Bank Central Asia BBCA 14, , Bank Mandiri Persero BMRI 10, , Bank Rakyat Indonesia Persero BBRI 11, , Bank Negara Indonesia Persero BBNI 5,300 98, Bank Tabungan Negara Persero BBTN 1,670 17, CONSUMER HM Sampoerna HMSP 3, , Gudang Garam GGRM 66, , Indofood CBP Sukses Makmur ICBP 8, , Indofood Sukses Makmur INDF 7,450 65, Kalbe Farma KLBF 1,540 72, Unilever Indonesia UNVR 42, , AGRICULTURAL Astra Agro Lestari AALI 17,300 33, PP London Sumatera Indonesia LSIP 1,800 12, Sawit Sumbermas Sarana SSMS 1,375 13, INFRASTRUCTURE XL Axiata EXCL 2,260 24, Jasa Marga JSMR 4,260 29, Perusahaan Gas Negara PGAS 2,710 65, Tower Bersama Infrastructure TBIG 5,225 25, Telekomunikasi Indonesia TLKM 3, , Soechi Lines SOCI 392 2, N/A N/A N/A 10.9 N/A Garuda Indonesia GIAA 366 9, BASIC-INDUSTRIES Semen Indonesia SMGR 9,250 54, Charoen Pokphand Indonesia CPIN 3,130 51, Indocement Tunggal Prakarsa INTP 15,575 57, Japfa Comfeed Indonesia JPFA 1,575 17, MINING Indo Tambangraya Megah ITMG 16,975 19, Adaro Energy ADRO 1,665 53, Aneka Tambang ANTM , N/A Vale Indonesia INCO 3,380 33, Tambang Batubara Bukit Asam PTBA 12,300 28, TRADE United Tractors UNTR 22,975 85, AKR Corporindo AKRA 6,450 25, Global Mediacom BMTR 620 8, N/A N/A N/A N/A N/A N/A Matahari Department Store LPPF 14,950 43, Media Nusantara Citra MNCN 1,735 24, Matahari Putra Prima MPPA 1,715 9, Surya Citra Media SCMA 2,580 37, Siloam International Hospital SILO 10,750 12, PROPERTY Bumi Serpong Damai BSDE 1,810 34, Adhi Karya ADHI 1,895 6, Alam Sutera Realty ASRI 378 7, Ciputra Development CTRA 1,365 21, Lippo Karawaci LPKR , Pembangunan Perumahan PTPP 3,910 19, Pakuwon Jati PWON , Summarecon Agung SMRA 1,425 20, Wijaya Karya WIKA 2,450 21, Waskita Karya WSKT 2,510 34, MISCELLANEOUS Astra International ASII 7, , Source: Bloomberg, *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, BJBR IJ , Mining 1, MYRX IJ , Basic-Industry BJTM IJ 560 8, Miscellaneous Industry 1, KPIG IJ , Consumer Goods 2, TURI IJ , Property & Construction ITMG IJ , Infrastructure 1, LPPF IJ , Finance JRPT IJ , Trade AALI IJ , Composite 5, ADRO IJ , Source: Bloomberg Top 5 leading movers Top 5 lagging movers Name Chg (%) Close Name Chg (%) Close BBRI IJ ,300 KLBF IJ ,540 ASII IJ 2.0 7,850 INDF IJ ,450 TLKM IJ 1.3 3,910 TOWR IJ ,680 HMSP IJ 1.0 3,880 TBIG IJ ,225 BMRI IJ ,700 INCO IJ ,380 Source: Bloomberg Economic Calendar Time Currency Detail Forecast Previous 5:30am AUD AIG Services Index :00am AUD MI Inflation Gauge m/m 0.2% 7:00am NZD ANZ Commodity Prices m/m 0.7% 7:30am AUD Company Operating Profits q/q 6.9% 7:30am AUD ANZ Job Advertisements m/m 1.0% 8:45am CNY Caixin Services PMI :00pm JPY Consumer Confidence :15pm EUR Spanish Services PMI :45pm EUR Italian Services PMI :50pm EUR French Final Services PMI :55pm EUR German Final Services PMI :00pm EUR Final Services PMI :30pm EUR Sentix Investor Confidence :30pm GBP Services PMI :00pm EUR Retail Sales m/m -0.2% All Day EUR Eurogroup Meetings 8:30pm USD FOMC Member Dudley Speaks 9:45pm USD Final Services PMI :00pm USD ISM Non-Manufacturing PMI :00pm USD Labor Market Conditions Index m/m 0.7 Note: Time is based on Indonesian local time Source: Forex Factory 8

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