May 22, BSDE 1Q17 review: Earnings superiority to continue

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1 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 25, KOSPI 2, FTSE 7, DJIA 20, NASDAQ 6, Valuation 2017F P/E (x) P/B (x) ROE (%) JCI Key Rates Last Trade Chg (bps) MoM YoY BI 7-Day RR N/A 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 2, Rubber Nickel 9, Copper 5, Tin 20, JCI Index VS MSCI Emerging Markets (pt) 5,500 4,500 JCI MSCI EM (pt) 1, , /13 05/14 05/15 05/16 05/17 BSDE 1Q17 review: Earnings superiority to continue Bumi Serpong Damai (BSDE) delivered robust earnings in 1Q17, breaking its moderate performance it had displayed throughout For the quarter, the company s revenue, gross profit, operating profit, and net profit jumped 58.7%, 42.5%, 71%, and 183.3% YoY, respectively. Low base + perfect time to reap fruit of substantial land sales We would like to note that BSDE has a joint-venture (JV) with Mitsubishi Corporation to build c.19 ha residential projects in the BSD area, which will begin by early The JV would buy the land needed from BSDE, and the marketing sales would be recognized in BSDE s book. In 4Q16, BSDE sold IDR560bn worth of land plot to the JV. We believe it has partly been recognized into revenue during the quarter, while the rest would begin revenue recognition by 1Q17. BSDE sold additional land plot worth IDR840bn to the JV in 1Q17, which we predict would begin its recognition into revenue until end-2q17. Furthermore, we would like to note that 1Q16 earnings would serve as a low base as it has been the lowest earnings performance in the last three years, hence igniting BSDE s earnings jump last quarter. Key beneficiary of S&P upgrade; Maintain Buy and TP of IDR2,210 Given our view that recent S&P upgrade to Indonesian credit rating would give pressure to interest rates, we suspect BSDE would be one of the key beneficiary as it s within developers having the most sizable real estate assets in its book. Although LPKR is having the largest, we prefer BSDE as it owned more concrete performance of selling properties. We believe lower interest rate would lift assets pricing, hence would benefit developers by higher properties selling pricing as well in the near future. We maintain our Buy recommendation and TP of IDR2,210 for BSDE. BSDE is trading at an attractive valuation of 13.4x 17F P/E (vs. its 3-year average at 16.2x) and is within our top pick in the property sector. BSDE s 17F P/E range ( x ) /14 11/14 5/15 11/15 5/16 11/16 5/17 Source: Research +2 Std Dev +1 Std Dev Avg PER -1 Std Dev -2 Std Dev

2 5/16 6/16 7/16 8/16 9/16 10/16 11/16 12/16 1/17 2/17 3/17 4/17 5/17 Tambang Batubara Bukit Asam (PTBA IJ) Multiplier effect from S&P upgrading Mining Company Report (Maintain) Buy Target Price (12M, IDR) 17,850 Share Price (5/19/17, IDR) 10,800 Expected Return 65.3% Consensus OP (17F, IDRtr) 3.9 EPS Growth (17F, %) 16.9 P/E (17F, x) 10.6 Industry P/E (17F, x) 9.2 Benchmark P/E (17F, x) 16.6 Market Cap (IDRbn) 24,884.6 Shares Outstanding (mn) 2,304.1 Free Float (mn) Institutional Ownership (%) 69.7 Beta (Adjusted, 24M) Week Low (IDR) 6, Week High (IDR) 14,200 (%) 1M 6M 12M Absolute Relative (D-1yr=100) PT. Coal JCI Andy Wibowo Gunawan (ext: 243) PTBA Last Friday (May 19), Standard & Poor s (S&P) lifted Indonesia s credit rating to investment grade, which we predict will boost the country s foreign direct investment (FDI). We predict this will have a positive impact on the high voltage direct current (HVDC) transmission project of Indonesia s state-owned electricity company (Perusahaan Listrik Negara/PLN) as it is more likely to receive direct investments and loan facilities from foreign investors. Given this, we also expect to see the continuation of the Sumsel 9 and 10 mine-mouth power plant projects, which in turn will increase coal sales volume of Tambang Batubara Bukit Asam (PTBA) over the longer term. We, however, are not able to predict when these projects will be revived. All in all, we maintain our 12-month target price for PTBA at IDR17,850. Buy call. S&P rating upgrade in line with our expectation S&P has finally bestowed the long-awaited investment grade to Indonesia s credit rating, following the other two main rating agencies, Moody s and Fitch. This move was on the back of Indonesia s 1) reduced risk of budget deficits thanks to its focus on realistic budgeting and 2) successful tax amnesty program. The upgraded credit rating is in line with our expectation, which was backed by the preceding upgrade of outlook by Moody s and Fitch (please refer to our strategy report Unlocking Indonesia s potential growth ). All in all, in light of the recent S&P rating upgrade, we are highly optimistic on a boost to Indonesia s FDI. PLN s careful investment in HVDC project In January, PLN suspended its Sumatra-Java HVDC transmission project due to its unfeasibility. However, PLN and the Indonesian government have recently agreed to continue the project in April. We believe the company is being very careful with the project investment due to its high value (expected to amount to IDR33.4tr). Nevertheless, we are optimistic that many foreign investors will grant direct investments and loan facilities to this project. On a side note, HVDC is an electricity transmission using direct current for the bulk transmission of electrical power. The project is expected to transfer c.3,000 MW electricity from Sumatra to Java and vice versa. Projects revisited: Sumsel 9 & 10 mine-mouth power plants Given the suspension of PLN s HVDC transmission project, the Sumsel 9 and 10 minemouth power plant projects were also postponed in January. However, with the former now expected to continue again, there is a high chance that the latter will also move forward. On a side note, a mine-mouth power plant is a coal-fired electricity-generating plant built close to a coal mine. With a conveniently-located power plant, processes from coal extraction to combustion are done with lower transportation and operation costs. Good catalyst for share price; maintain TP of IDR17,850 We maintain our 12-month forward TP for PTBA at IDR17,850 (20.0% upside potential). We recommend Buy. PTBA is currently trading at 2017F and 2018F P/Es of 10.6x and 7.6x, respectively. We like PTBA on the back of its abundant coal reserves and higher chance to win thermal power plant projects (being a state-owned coal miner). Our short term downside risks are changes in regulations and lower global coal prices. 12/14 12/15 12/16 12/17F 12/18F 12/19F Revenue (IDRbn) 13,078 13,734 14,059 20,937 25,024 30,116 Gross Profit (IDRbn) 4,022 4,140 4,401 5,354 7,005 9,482 Operating Profit (IDRbn) 2,310 2,416 2,595 2,888 4,058 5,540 Net Profit (IDRbn) 2,016 2,036 2,006 2,345 3,255 4,394 EPS (IDR) ,018 1,413 1,907 BPS (IDR) 3,763 4,031 4,580 4,861 5,434 6,172 P/E (x) P/B (x) ROE (%) ROA (%) Note: NP refers to net profit attributable to controlling interests Source: Company data, Research estimates PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

3 Strategy Focus Perfect time to Buy Indonesia Strategy Focus PT. Strategy Taye Shim Giovanni Dustin S&P raised Indonesia's credit rating from BB+ to BBB- As we had anticipated, S&P Global Ratings on May 19 th raised Indonesia s credit rating to investable grade. The decision by S&P which raised Indonesia s sovereign rating from BB+ to BBB- with a stable outlook brought the credit rating agency in line with the mainstream, along with Moody s and Fitch. This is the first time since the Asian financial crisis that Indonesia s sovereign bonds have been rated investment grade by all three major credit rating agencies. S&P cited Indonesia s improved fiscal metrics in its decision. The agency stated that Indonesian authorities have taken effective expenditure and revenue measures to stabilize the country's public finances despite the terms of trade shock. In addition, the agency said it expects that net general government debt will stabilize near the current low levels while the budget deficit will gradually decline. We concur, as we see lower fiscal risk due to the resilient 1Q17 government revenue (+19% YoY), which should provide ample fiscal space going forward. We expect Indonesia s economy to flourish We expect S&P s upgrade to add further momentum to Indonesia s economic growth. In particular, we think the upgrade will have the following effects. It will likely 1) drive valuations higher on the back of lower cost of equity imposed on Indonesian assets; 2) open the doors to a wider investor base, leading to increased flows into the country (many foreign investors cited Indonesia's junk status as a key hurdle to investment commitment); 3) drive up the rupiah s value on the back of strong investment flows; and 4) improve the overall profitability of corporate Indonesia, supported by lower cost of funds. From a broader perspective, Indonesia s improved status (i.e., lower cost of funds and strengthening rupiah) should improve the country s current account balance and budget balance, catapulting the nation into a virtuous cycle. Time to Buy Indonesia We remain bullish on Indonesian equities. We expect S&P s rating upgrade to improve the macro backdrop of Indonesia, supporting further corporate earnings improvement. Furthermore, with local investors sitting on big piles of cash (unproductive assets), we think the S&P upgrade will pose risk to the upside. All in all, we believe this is a perfect time to Buy Indonesia. Indonesia finally rated investable grade by all three key rating agencies Source: 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.

4 Local flash AISA: Tiga Pilar aiming for additional sales during Idul Fitri. Do not want to waste the opportunity, PT Tiga Pilar Sejahtera Tbk (AISA) will focus to take advantage of the momentum of the Idul Fitri. Therefore, the company also launch seasonal products for Lebaran moment. One of them: Wafer Stick Pio. The increase in sales ahead of Idul Fitri Day mainly from snack products. Plus the increase in Lebaran, AISA hopes, this year's sales could reach IDR7.6 trillion. The sales projection increased 11.7 percent compared to last year's target of IDR6.88 trillion. (Kontan) BBRI: BRI disburses IDR9.8 trillion loans to fisheries. PT Bank Rakyat Indonesia (Persero) Tbk said it will continue to commit to disburse credit to industry players, especially in the fishery sector. This is in line with the government that wants as much as 40% of credit for businesses (KUR) into the production sector including fisheries. Director of BRI, Donsuwan Simatupang said that by the end of March 2017, the company has distributed outstanding credit to fisheries sector reach IDR9.8 trillion. (Kontan) PPRO: PP Properti operates Avenue Lagoon mall end of year. PT PP Properti Tbk (PPRO) targets to operate the mall Lagoon Avenue Bekasi at the end of With the operation of the mall, the portfolio of recurring income will increase. Lagoon Avenue Bekasi has 21,367 m2 of Net Leaseble Area (NLA) and is part of the 28 hectare Grand Kamalaa Lagoon (GKL) integrated area project. To welcome the operation, PPRO held a road to soft opening of Lagoon Avenue on Sunday (21/5). (Kontan) CLEO: Sariguna will diversify its products. Bottled drinking water company PT Sariguna Primatirta Tbk (CLEO) will diversify its products on snacks. CLEO plan to introduce its newest product to the public in June. Operational Director of CLEO Eko Susilo said the preparation is almost finished and also have done the production and market test. The plan, in June products can be distributed to the public. (Kontan) MTLA: Metland will distribute IDR40.57 billion dividends. PT Metropolitan Land Tbk (Metland) posted a net profit of IDR billion last year. The company's profit is up 26.6% compared to the previous year. Of the total net profit of 2016, the company will distribute 15% of profit or IDR40.57 billion as cash dividends to shareholders. The dividend distribution is decided at the Annual General Meeting of Shareholders at Ciputra World 1, Jakarta, Friday (19/5). (Kontan) BRNA: Berlina will hold a private placement. Basic industrial and chemical company PT Berlina Tbk (BRNA) will issue new shares through private placement or additional capital without preemptive rights (non-hmetd). The new shares to be issued amounted to 10% of the total number of existing shares. As many as 22 million shares or equivalent to 2.25% for the program Management and Employee Stock Option Plan (MESOP). Meanwhile, million shares or 7.75% of the issued capital will be offered to investors who provide the best offer. (Kontan) MPMX: Mitra Pinasthika plans to add its partner. The intense competition in the fourwheeled business makes PT Mitra Pinasthika Mustika Tbk (MPMX) plan to add its partners. Currently, there are already Datsun and Nissan are the mainstay of their sales in the segment of four-wheeled vehicles. Agung Kusumo, Managing Director of PT Mitra Pinasthika Mustika Tbk, said that the company is still looking for the ideal partner to complete the portfolio in four wheels. "The addition of a definite brand this year and the acquisition of funds into this year's capex," said Agung. (Kontan) 4

5 Summary Technical analysis Tasrul Jakarta Composite Index (JCI) Test resistance level at 5,837 Item Data Item Data Close (May 19, 2017) 5,791.88(+2.6%)Trading range 5,773-5,837 Average index performance (%) 6.47 Target Period 85 - Daily 5,813 r-squared Weekly 5,875 Volatility (+/-, %) Monthly 6,031 Volatility (+/-, point) 25.6 Stop loss 5,730 Source: Research Figure 1. Daily trend - Uptrend ^JKSE [ ^JKSE ] - Daily - 5/19/2017 Open: 5,644 High: 5,825 Low: 5,630 Close: 5,792 Chg. 2.6% Prev. Avg. Price: 5,749 Volatility (+) : Volatility (-) : V-Ratio : 1.04 UpperBand: 5, LowerBand: 5, , , , , , , , , , , , , , Optimization Trading System ^JKSE - Volume = 7,357,840,896.00, Avg.Volume = 6,793,107, Optimization Trading System Feb Mar Apr May 8 15 Created w ith AmiBroker - advanced charting and technical analysis softw are. w w.amibroker.com 7,357,840,896 6,793,107,456 Source: Research 5

6 Figure 2. Daily MFI optimized, W%R optimized & RSI optimized ^JKSE - MFI Smoothed = ^JKSE - Will%R Smoothed = ^JKSE - RSI Smoothed = ^JKSE [ ^JKSE ] - Daily - 5/19/2017 Open: 5,644 High: 5,825 Low: 5,630 Close: 5,792 Chg. 2.6% Prev. Avg. Price: 5,749.1 Volatility (+) : Volatility (-) : V-Ratio : , , , , , ^JKSE - Volume = 7,357,840,896.00, Avg.Volume = 6,793,107, Optimization Trading System Feb Mar Apr May ,357,840,896 6,793,107,456 Created w ith AmiBroker - advanced charting and technical analysis softw are. w w.amibroker.com Source: Research Figure 3. Daily : 5,773 5,812 Figure 4. Weekly : 5,720-5,875 Figure 5. Monthly : 5,552 6,031 6

7 ^JKSE [ ^JKSE ] - Daily - 5/19/2017 Open: 5,644 High: 5,825 Prev. Avg. Price: 5,749.1 Volatility (+) : Volatility (-) : V-Ratio : ,811.6 ^JKSE [ ^JKSE ] - Weekly - 5/19/2017 Open: 5,690 High: 5,825 Prev. Avg. Price: 5,731.5 Volatility (+) : Volatility (-) : V-Ratio : ,874.7 ^JKSE [ ^JKSE ] - Monthly - 5/19/2017 Open: 5,704 High: Prev. Avg. Price: 5,731.5 Volatility (+) : Volatility (-) : V-Ratio : , ,968.3 x 5, , , , , , , , , , , , , ,551.5 ^JKSE - Volume = 7,357,840, ^JKSE - Volume = 31,987,998, ^JKSE - Volume = 88,696,578, ,357,840, May 8 15 Created w ith AmiBroker - advanced charting and technical analysis softw are. w w.amibroker.com 31,987,998, Apr Created w ith AmiBroker - advanced charting and technical analysis softw are. w w.amibroker.com 88,696,578, Created w ith AmiBroker - advanced charting and technical analysis softw are. w w.amibroker.com Source: Research Source: Research Source: Research 7

8 Chart 6. JCI Vs. USD/IDR (pt) JCI (L) USD/IDR (R) 6,000 5,800 5,600 5,400 5,200 5,000 4,800 2/20 3/20 4/17 5/15 Source: Bloomberg, (IDR) 13,700 13,500 13,300 13,100 Chart 7. JCI performance (absolute vs. relative) (%, %p) Note: Relative to MSCI EM Index Source: Bloomberg, Absolute D 1W 1M 1Y Relative -3.9 Chart 8. Foreigner s net purchase (EM) Chart 9. Energy price (USDmn) Korea Taiwan Indonesia Thailand Philippines India Note: The latest figure for India are May 18 th, 2017 Source: Bloomberg, 1 Day 5 Days (D-3M=100) 115 CPO WTI Coal /21 3/21 4/18 5/16 Source: Bloomberg, Chart 10. Non-ferrous metal price Chart 11. Precious metal price (D-3M=100) Copper Nickel Tin (D-3M=100) Silver Gold Platinum 80 2/20 3/20 4/17 5/15 Source: Bloomberg, 80 2/20 3/20 4/17 5/15 Source: Bloomberg, 8

9 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 5,792 6,171, FINANCIALS Bank Central Asia BBCA 17, , Bank Mandiri Persero BMRI 12, , Bank Rakyat Indonesia Persero BBRI 14, , Bank Negara Indonesia Persero BBNI 6, , Bank Tabungan Negara Persero BBTN 2,530 26, CONSUMER HM Sampoerna HMSP 3, , Gudang Garam GGRM 76, , Indofood CBP Sukses Makmur ICBP 9, , Indofood Sukses Makmur INDF 8,650 75, Kalbe Farma KLBF 1,580 74, Unilever Indonesia UNVR 48, , AGRICULTURAL Astra Agro Lestari AALI 14,800 28, PP London Sumatera Indonesia LSIP 1,520 10, Sawit Sumbermas Sarana SSMS 1,690 16, INFRASTRUCTURE XL Axiata EXCL 3,060 32, Jasa Marga JSMR 5,000 36, Perusahaan Gas Negara PGAS 2,350 56, Tower Bersama Infrastructure TBIG 5,900 26, Telekomunikasi Indonesia TLKM 4, , Soechi Lines SOCI 336 2, N/A Garuda Indonesia GIAA 344 8, BASIC-INDUSTRIES Semen Indonesia SMGR 9,200 54, Charoen Pokphand Indonesia CPIN 2,990 49, Indocement Tunggal Prakarsa INTP 18,000 66, Japfa Comfeed Indonesia JPFA 1,200 13, MINING Indo Tambangraya Megah ITMG 15,750 17, Adaro Energy ADRO 1,465 46, Aneka Tambang ANTM , Vale Indonesia INCO 1,930 19, N/A Tambang Batubara Bukit Asam PTBA 10,800 24, TRADE United Tractors UNTR 24,150 90, AKR Corporindo AKRA 6,375 25, Global Mediacom BMTR 630 8, N/A 0.9 N/A 2.0 N/A Matahari Department Store LPPF 15,350 44, Media Nusantara Citra MNCN 1,770 25, Matahari Putra Prima MPPA 805 4, Surya Citra Media SCMA 2,860 41, Siloam International Hospital SILO 12,000 15, PROPERTY Bumi Serpong Damai BSDE 1,785 34, Adhi Karya ADHI 2,270 8, Alam Sutera Realty ASRI 326 6, Ciputra Development CTRA 1,185 21, Lippo Karawaci LPKR , Pembangunan Perumahan PTPP 3,000 18,

10 Pakuwon Jati PWON , Summarecon Agung SMRA 1,325 19, Wijaya Karya WIKA 2,300 20, Waskita Karya WSKT 2,270 30, MISCELLANEOUS Astra International ASII 8, , Source: Bloomberg, *Note: Valuation metrics based on Bloomberg consensus estimates Sector performance Top 10 market cap performance Name Index Chg (%) Ticker Price Market Cap (IDRbn) Chg (%) Agricultural 1, NIKL IJ , Mining 1, BNLI IJ , Basic-Industry PWON IJ , Miscellaneous Industry 1, SMBR IJ , Consumer Goods 2, BFIN IJ , Property & Construction SMRA IJ , Infrastructure 1, MAPI IJ , Finance TBIG IJ , Trade BRPT IJ , Composite 5, CTRA IJ , Source: Bloomberg Top 5 leading movers Top 5 lagging movers Name Chg (%) Close Name Chg (%) Close TLKM IJ 5.1 4,530 MNCN IJ ,770 BMRI IJ ,900 RMBA IJ BBCA IJ ,900 SSMS IJ ,690 ASII IJ 2.9 8,750 BSIM IJ BBRI IJ ,500 TOWR IJ ,660 Source: Bloomberg Economic Calendar Time Currency Detail Forecast Previous 6:01am GBP Rightmove HPI m/m 1.1% 6:50am JPY Trade Balance 0.17T Tentative EUR German Buba Monthly Report All Day EUR Eurogroup Meetings All Day CAD Bank Holiday 8:00pm CNY CB Leading Index m/m 0.9% 9:30pm AUD CB Leading Index m/m 0.4% 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 10

11 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