September 28, Telecommunication Take a bottom-up approach

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1 Giovanni Dustin To subscribe to our Daily Focus, please contact us at Market Index Last Trade Chg (%) MoM YoY JCI 5, MSCI Indonesia MSCI EM 1, HANG SENG 27, KOSPI 2, FTSE 7, DJIA 26, NASDAQ 8, 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 12, Copper 6, Tin 18, JCI Index VS MSCI Emerging Markets (pt) 7,000 6,500 6,000 5,500 JCI MSCI EM 5, /17 06/17 11/17 04/18 09/18 (pt) 1,550 1,300 1, Telecommunication Take a bottom-up approach September data package survey: Recovery story continues to take shape Our data package survey for September shows that all operators Telekomunikasi Indonesia (TLKM/Buy/TP: IDR5,000), Indosat (ISAT/Buy/TP: IDR4,300), and XL Axiata (EXCL/Trading Buy/TP: IDR3,100) maintained their prices from August. Although we did not observe any data package pricing changes in our flagship package survey sample, we learned from our latest conversations with companies and channel checks that pricing dynamics continue to improve. Notably, operators have increased prices across various package offerings since July. This development shows that the 2H18 recovery story continues to take shape. Are data yield hikes sustainable in the long run? Data consumption growth remains robust as the migration to data continues. Even in the midst of falling legacy revenues (which can still be cushioned by increasing voice and SMS yields), as long as data consumption growth remains robust, operators should not see a structural urgency to increase data prices. In our view, the negative revenue growth in 1H18 was mainly due to number deactivations and confusion surrounding the registration; this is evidenced by the limited impact of falling data yield in the past. In other words, the quarters that preceded the registration demonstrated that falling yield can be offset by healthy data traffic growth. Due to the lack of structural urgency, we believe the current data yield hike is based on good faith among operators, in which the prepaid SIM registration plays a key part. Should the registration fail to have a meaningful impact in the long run, the increasing data yield trend could easily reverse. Sticking with the proven winner Considering the data yield recovery story that continues to take shape in 2H18 and the long-term growth potential, we believe the Indonesian telecommunication sector remains attractive. That said, uncertainties pertaining to global developments are likely to persist. Additionally, due to the aforementioned factors, we have doubts about the long-term sustainability of the data yield hike. Given the high uncertainties, we continue to prefer TLKM, which offers defensive characteristics (strong fundamentals, less risk) coupled with a rosy growth trajectory (high reward). Maintain Overweight; TLKM remains our preferred pick We reiterate our Overweight call on the telco sector. Due to uncertainties surrounding data yield hike sustainability, however, we advise a bottom-up approach rather than a top-down one. Telekomunikasi Indonesia (TLKM/Buy/TP: IDR5,000) remains our preferred pick within the telco space. The main risks to our call include 1) a short-lasting impact of SIM registration, which could lead to stronger-than-expected competition; 2) sudden, drastic changes to regulations; and 3) slower-than-expected data monetization.

2 Retail Improvement despite hurdles Administered price adjustments matter for consumers pockets Overweight (Maintain) September 27, 2018 PT. Trade Christine Natasya (ext. 233) In 2Q18, private consumption growth improved to 5.14% YoY (vs. 4.95% YoY in 1Q18 and 2Q17). Meanwhile, apparel, footwear and maintenance services, which we view as discretionary items, grew 3.86% in 2Q18, still hovering above the level of the past two years. Indeed, in the first two quarters of 2018, most of the retailers under our coverage delivered slightly better same-store sales growth (SSSG) compared to the 2017 full-year level. According to Bank Indonesia (BI), average January-July administered price inflation was 4.12%, lower than the end-2017 figure (8.7%). A downward trend appears to be continuing; administered price inflation was only 2.88% in June, despite rising airfares and intercity transportation (amid the annual exodus of people traveling home to celebrate Eidal-Fitr). Lower administered prices mean deeper pockets for consumers and hence better purchasing intention; this would account for the faster growth of discretionary spending. Moreover, as the 2019 presidential election approaches, the government is likely to maintain a populist stance, evidenced by its announcement that fuel and electricity prices will be frozen until the end of In our view, Indonesia s purchasing power actually remains strong, and it is rather the purchasing intention that is going down. Indeed, the current consumer confidence index is still trending up, despite the electricity tariff hike in And the freeze on fuel prices despite higher oil prices should at least support purchasing intention, in our view. Latest PPh22 (import tax) increase to have minimal impact According to the latest PMK, the government has raised the PPh22 (import tax) on 1,147 selected imported consumer goods to up to 10%. Finance Minister Sri Mulyani said she expects the new tariff to reduce imports by 2% YoY. The impact on imports should be more pronounced for smaller players. For bigger players (which have large cash flow capacity), the impact should be minimal, as it only affects working capital when buying inventories. In addition, companies that import goods might see a reduction in import taxes that have already been paid at the end of the fiscal year. Regardless, we note that the import tax scheme is not something new for retailers, as the government has already applied this scheme since The government even increased tariffs in mid In short, we believe the impact will be rather minimal for listed retailers. Expect improvement to continue We believe moderate improvement will continue throughout Our outlook is mainly premised on the following points: 1) Energy subsidies are still high in the budget draft (RAPBN) 2019, despite being slightly down compared to this year, and 2) commodity (coal and nickel) prices have improved, offsetting stagnant CPO prices. Reiterate Overweight stance Consumers should see their pockets deepen thanks to the government s populist stance as well as the tax cut for SMEs having gross revenue of less than IDR4.8bn. Moreover, the improvement in commodity prices should help sustain consumer confidence by bolstering disposable income in ex-java regions (commodities are one of the backbones of Indonesia s economy). The consumer confidence index has been on an uptrend since early 2016, particularly after commodity prices started picking up in mid We retain our Overweight stance. PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES & DISCLAIMERS IN APPENDIX 1 AT THE END OF REPORT.

3 Local flash BHIT: Charlton Group is the latest shareholder of MNC Investama (BHIT). PT MNC Investama Tbk (BHIT) has implemented additional capital without pre-emptive rights (PMTHEMTD) or private placement. BHIT's management in the disclosure of information on the Indonesia Stock Exchange (IDX) on Wednesday (26/9) said the private placement was conducted on September 24 by issuing 3.88 billion new shares with a nominal value of IDR 100 per share. The price of implementing a private placement is IDR 115 per share, above the market price. All shares were taken by Charlton Group Holdings Ltd, a company based in the British Virgin Islands (BVI) regarding investment. (Kontan) ENRG: Debt restructuring, Energi Mega Persada (ENRG) for rights issue. Still showing a total loan of around USD 260 million, PT Energi Mega Persada Tbk (ENRG) is restructuring its debt in One of the efforts taken is through the plan of Limited Public Offering III (PUT III) or rights issue. The results of the rights issue will later be used to repay a portion of the loan to the creditor. ENRG Investor Relations Herwin Hidayat said the rights issue plan had been approved by investors at the ENRG Extraordinary General Meeting of Shareholders (EGM), Wednesday (9/26). (Kontan) AMRT: Sumber Alfaria Trijaya (AMRT) is optimistic that its business is growing in the political year. PT Sumber Alfaria Trijaya Tbk (AMRT) said that its business would not be affected by political years. Instead of worrying, the company is actually optimistic that its business will grow in the political year because the products sold are the basic needs of the community. Ryan Alfons Kaloh, AMRT's Marketing Director said that consumer spending will not be affected by political years. Products such as food, cooking oil, detergent, instant noodles and so on are the needs that demand is always in any situation. (Kontan) ZINC: For the sake of performance boost, Kapuas Prima Coal (ZINC) will release bonds. PT Kapuas Prima Coal Tbk (ZINC) plans to raise funds. Of the total USD 120 million in funds needed, some will be fulfilled from the issuance of bonds. Director of Kapuas Prima Coal Hendra Wiliam said, the plan of the bonds will be issued in late November or early December 2018 with uptake targets of up to IDR 600 billion. He explained, the bond proceeds will be allocated to a number of strategic needs of the company. (Kontan) RIGS: This is the Indonesian Rig Tenders strategy (RIGS) to improve performance. PT Rig Tenders Indonesia Tbk (RIGS) is optimistic that the performance in the April 2018 to March 2019 period will be better than the previous year. In order to improve performance, the Director of RIGS, Mastura Binti Mansor delivered several company strategies during this year. First, RIGS continues to explore potential types of services. The current RIGS business area is for coal transportation, then also in the offshore business sector to support exploration, development and natural gas, as well as in other services such as catering services, ship management, crew management, and bunker services. Furthermore, Mastura said that RIGS also provides competitive services and prices to maintain and increase customer loyalty. (Kontan) RBMS: RBMS does PUT II to add FLPP and TOD home capital. PT Ristia Bintang Mahkotasejati Tbk (RBMS) conducted a Limited Public Offering II (LPO II) of 1,496,460,240 series B shares with a nominal value of IDR 200 on September 17, The targeted capital of the RBMS was IDR billion. RBMS President Director, Richard Wiriahardja said, the IIGF fund was planned to be used to increase home development capital through the Housing Finance Liquidity Facility (FLPP) and the development of transit oriented development (TOD) in Tangerang. "For FLPP and TOD expansion, IDR. 299 billion," (Kontan) 3

4 Summary Technical analysis Tasrul Jakarta Composite Index (JCI) Test Resistance at 5,952 Item Data Item Data Close (Sept 27, 2018) (+0.953%)Trading range 5,881-5,952 Average index performance (%) 5.47 Target Period Daily 5,952 r-squared Weekly 5,989 Volatility (+/-, %) +0.47/ Monthly 6,074 Volatility (+/-, point) / Stop loss 5,766 Source: Research Figure 1. Daily, Long term trend Uptrend ^JKSE [ ^JKSE ] - Daily - 9/27/2018 Open: 5,871 High: 5,932 Low: 5,871 Close: 5,929 Vol. 5,994,692,608 Prev. Av g. Price: 5,910.5 R-Squared: Period: 756 Std.Dev : 1.46 Volatility (+) : Volatility (-) : V-Ratio : 0.93 Chg.: 0.953% 7, , , , , , , , , , Optimization Trading System ^JKSE - Volume = 5,994,692,608.00, EMA(Volume,29) = 6,477,118, Source: Research 6,477,118,464 5,994,692,608 May Jun Jul Aug Sep Oct Nov Dec 2018 Feb Mar Apr May Jun Jul Aug Sep Source: Research 4

5 Figure 2. Daily, Long term trend, MFI optimized & RSI optimized ^JKSE - MFI Smoothed = ^JKSE - RSI Smoothed = ^JKSE [ ^JKSE ] - Daily - 9/27/2018 Open: 5,871 High: 5,932 Low: 5,871 Close: 5,929 Vol. 5,994,692,608 Prev. Av g. Price: 5,910.5 R-Squared: Period: 756 Std.Dev : 1.46 Volatility (+) : Volatility (-) : V-Ratio : 0.93 Chg.: 0.95% 5, , , Optimization Trading System ^JKSE - Volume = 5,994,692,608.00, Exponential Mov ing Av erage(volume,29) = 6,477,118, Oct Nov Dec 2018 Feb Mar Apr May Jun Jul Aug Sep Source: Research 6,477,118,464 5,994,692,608 5

6 Figure 3. Weekly Trend Uptrend, MFI optimized,rsi optimized & Stochastic %D optimized ^JKSE - MFI Smoothed = ^JKSE - RSI Smoothed = ^JKSE - Stochastic %D = 67.42, MA = ^JKSE [ ^JKSE ] - Weekly - 9/27/2018 Open: 5,959 High: 5,959 Low: 5,851 Close: 5,929 Vol. 27,127,355,392 Prev. Av g. Price: 5,912.8 R-Squared: Period: 161 Std.Dev : 1.46 Volatility (+) : Volatility (-) : V-Ratio : 0.98 Chg.: -0.48% 7, , , , , , , Optimization Trading System ^JKSE - Volume = 27,127,355,392.00, EMA(Volume,25) = 30,105,753, ,105,753,600 27,127,355,392 Oct 2016 Apr Jul Oct 2017 Apr Jul Oct 2018 Apr Jul Source: Research Figure 4. Daily : 5,881 5,952 Figure 5. Weekly : 5,835 5,989 Figure 6. Monthly : 5,670 6,074 ^JKSE [ ^JKSE ] - Daily - 9/27/2018 Open: 5,871 Prev. Av g. Price: 5,910.5 ^JKSE [ ^JKSE ] - Weekly - 9/27/2018 Open: Prev. Av g. Price: 5,912.8 x ^JKSE [ ^JKSE ] - Monthly - 9/27/2018 Open: Prev. Av g. Price: 5,859.2 x R-Squared: R-Squared: R-Squared: Period: 756 Period: 161 Period: 113 Std.Dev : 1.46 Std.Dev : 1.46 Std.Dev : 1.55 Volatility (+) : Volatility (+) : Volatility (+) : Volatility (-) : Volatility (-) : Volatility (-) : V-Ratio : 0.93 V-Ratio : 0.98 V-Ratio : 1.14 Chg.: 0.95% Chg.: -0.48% 5,989.0 Chg.: -1.48% 5, , , , , , , , ,670.3 ^JKSE - Volume = 5,994,692, ^JKSE - Volume = 27,127,355, ^JKSE - Volume = 115,823,427, ,994,692,608 27,127,355, ,823,427, Aug Sep Jul Oct 2018 Jul 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) 15,000 (%, %p) 4 Absolute Relative 3.5 6,200 14, ,800 14, ,400 6/28 7/26 8/23 9/20 13, D 1W 1M 1Y Source: Bloomberg, Note: Relative to MSCI EM Index Source: Bloomberg, Chart 9. Foreigner s net purchase (EM) (USDmn) 2,000 1,500 1, , , Day 5 Days Chart 10. Energy price (D-3M=100) CPO WTI Coal -1,000-1, Korea Taiwan Indonesia ThailandPhilippines India 80 6/28 7/26 8/23 9/20 Note: The latest figure for India are Sep 26 th, 2018 Source: Bloomberg, Source: Bloomberg, Chart 11. Non-ferrous metal price (D-3M=100) Copper Nickel Tin 110 Chart 12. Precious metal price (D-3M=100) Silver Gold Platinum /18 07/18 08/18 09/18 Source: Bloomberg, 80 06/18 07/18 08/18 09/18 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 5,929 6,707, FINANCIALS Bank Central Asia BBCA 24, , Bank Mandiri Persero BMRI 6, , Bank Rakyat Indonesia Persero BBRI 3, , Bank Negara Indonesia Persero BBNI 7, , Bank Tabungan Negara Persero BBTN 2,650 28, CONSUMER HM Sampoerna HMSP 3, , Gudang Garam GGRM 75, , Indofood CBP Sukses Makmur ICBP 8, , Indofood Sukses Makmur INDF 5,975 52, Kalbe Farma KLBF 1,355 63, Unilever Indonesia UNVR 47, , AGRICULTURAL Astra Agro Lestari AALI 12,175 23, PP London Sumatera Indonesia LSIP 1,260 8, Sawit Sumbermas Sarana SSMS 1,210 11, INFRASTRUCTURE XL Axiata EXCL 2,820 30, Jasa Marga JSMR 4,470 32, Perusahaan Gas Negara PGAS 2,180 52, Tower Bersama Infrastructure TBIG 5,600 25, Telekomunikasi Indonesia TLKM 3, , Soechi Lines SOCI N/A Garuda Indonesia GIAA 206 5, BASIC-INDUSTRIES Semen Indonesia SMGR 9,425 55, Charoen Pokphand Indonesia CPIN 5,000 81, Indocement Tunggal Prakarsa INTP 17,850 65, Japfa Comfeed Indonesia JPFA 2,030 23, MINING Indo Tambangraya Megah ITMG 25,700 29, Adaro Energy ADRO 1,825 58, Aneka Tambang ANTM , N/A Vale Indonesia INCO 3,700 36, N/A N/A Tambang Batubara Bukit Asam PTBA 4,160 47, TRADE United Tractors UNTR 32, , AKR Corporindo AKRA 3,640 14, Global Mediacom BMTR 410 5, N/A 0.9 N/A 5.3 N/A Matahari Department Store LPPF 6,900 20, Media Nusantara Citra MNCN , Matahari Putra Prima MPPA 188 1, N/A N/A Surya Citra Media SCMA 1,860 27, Siloam International Hospital SILO 3,000 4, PROPERTY Bumi Serpong Damai BSDE 1,155 22, Adhi Karya ADHI 1,390 4, Alam Sutera Realty ASRI 286 5, Ciputra Development CTRA , Lippo Karawaci LPKR 340 7, Pembangunan Perumahan PTPP 1,535 9, Pakuwon Jati PWON , Summarecon Agung SMRA 595 8, Wijaya Karya WIKA 1,360 12, Waskita Karya WSKT 1,695 23, 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, SMCB IJ , Mining 1, DSSA IJ , Basic-Industry INPP IJ 660 7, Miscellaneous Industry 1, SMBR IJ , Consumer Goods 2, MEDC IJ , Property & Construction RMBA IJ , Infrastructure 1, BSSR IJ , Finance 1, INTP IJ , Trade ULTJ IJ , Composite 5, CTRA IJ , Source: Bloomberg Top 5 leading movers Top 5 lagging movers Name Chg (%) Close Name Chg (%) Close HMSP IJ 3.0 3,840 BBCA IJ ,000 BBRI IJ 2.7 3,070 MAPA IJ ,510 UNVR IJ ,150 NIKL IJ ,110 GGRM IJ ,000 SRTG IJ ,900 TLKM IJ 1.1 3,580 BCAP IJ Source: Bloomberg Economic Calendar Time Currency Detail Forecast Previous 1:00am JPY Housing Starts y/y 0.4% -0.7% 28th-3rd GBP Nationwide HPI m/m -0.5% 2:45am EUR French Consumer Spending m/m 0.3% 0.1% 2:45am EUR French Prelim CPI m/m -0.1% 0.5% 3:00am CHF KOF Economic Barometer :55am EUR German Unemployment Change -9K -8K 4:00am EUR Spanish Flash CPI y/y 2.2% 2.2% 4:30am GBP Current Account -19.4B -17.7B 4:30am GBP Final GDP q/q 0.4% 0.4% 4:30am GBP Revised Business Investment q/q 0.5% 0.5% 5:00am EUR CPI Flash Estimate y/y 2.1% 2.0% 5:00am EUR Core CPI Flash Estimate y/y 1.1% 1.0% 5:00am EUR Italian Prelim CPI m/m -0.2% 0.4% 8:30am CAD GDP m/m 0.1% 0.0% 8:30am CAD RMPI m/m 0.8% 0.7% 8:30am CAD IPPI m/m 0.6% -0.2% 8:30am USD Core PCE Price Index m/m 0.1% 0.2% 8:30am USD Personal Spending m/m 0.3% 0.4% 8:30am USD Personal Income m/m 0.4% 0.3% 9:20am GBP MPC Member Ramsden Speaks 9:45am USD Chicago PMI :00am USD Revised UoM Consumer Sentiment :00am USD Revised UoM Inflation Expectations 2.8% Note: Time is based on Indonesian local time Source: Forex Factory 9

10 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