INVESTOR DIGEST HIGHLIGHT ECONOMY. Equity Research 25 March 2015

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1 INVESTOR DIGEST Equity Research 25 March 2015 Economic Data Latest 2015F BI Rate (%), eop Inflation (YoY %) US$ 1 = Rp, period avg 12,912 13,200 HIGHLIGHT External debt update: stabilizing on the back of economic moderation Bank Tabungan Negara: new BoD and BoC members and 20% dividend payout ratio (BBTN; Rp1,165; Buy; TP:Rp1,300) Stock Market Data (24 Mar2015) JCI Index 5, % Trading T/O ( Rp bn ) 5,635.0 Market Cap ( Rp tn ) 5, ,122.8 Market Data Summary* 2015F 2016F EBITDA growth (%) EPS growth (%) EV/EBITDA (x) P/E (x) P/BV (x) Div. Yield (%) Earnings Yield (%) Net Gearing (%) ROE (%) * Aggregate of 70 companies in MS research universe, representing 56.7% of JCI s market capitalization ECONOMY External debt update: stabilizing on the back of economic moderation Jan15 external debt increased on the back of public debt Total external debt reached US$298.7bn (34% of GDP), marginally increasing to 10.1% yoy in Jan15 from 9.9% yoy in Dec14 due to public debt pick up (total public external debt reached US$136bn or 15% of GDP). We believe the increase on public debt was owing to larger foreign ownership on government s bond. Net foreign inflows to the bond market reached Rp39.5tn (US$3.1bn) in Jan15 and foreign ownership rose to 40.3% of total government bond outstanding. yet private external debt continued to ease. Although the private external debt amounted US$163bn in Jan15 - higher than the public external debt - its growth has persistently trimmed to 13.6% yoy from 16.1% yoy in Oct14. The slowdown was sourced from the same three sectors in the previous month. First, manufacturing sector. The debt demand likely eased on both domestic and export oriented manufacturing companies. The moderate economic condition followed by the rupiah depreciation has toned down the debt appetite on domestic market oriented companies (which are non-natural hedge). Meanwhile, the easing debt on export-oriented firms was due to the sluggish global condition. Second, financial sector. The sector s slower debt may have been triggered from easing FX loan. Banking FX loan has trimmed to around 5.0% in Jan15 from 7.0% in Jul14. Third, trading sector. Its debt trimmed on the back of plausible weak private consumption. Several indicators support this premise, for instance: car and motorcycle sales contracted -9.1% yoy and -18.1% yoy respectively in Jan15. Based on entity, private companies were the slowdown source. The external debt of private national and foreign companies went down to 16.4% yoy and 7.0% yoy in Jan15 from 17.6% yoy and 12.0% yoy in Dec14, respectively. Based on usage, the external debt for investment prevailed to ease (5.2% yoy in Jan15 vs. 13.8% yoy in Jan14). Only the construction sector recorded a strong external debt demand. Housing and building external debt remained robust, growing 57.1% yoy in Jan15 (drastic swing from % in Jun14) as a consequence of rising in-house developer financing to consumers. We believe developers' aggressive move on obtaining land bank has also caused its external debt to increase. Besides the Page 1 of 8

2 competitive cost of borrowing, property developers now prefer to acquire land bank using FX debt as it does not require fixed asset collateral. How is the external debt risk looking now? All in all, the current external debt condition is expected not to present a peril to this year s economic stability. The total external debt remains manageable at 34% of GDP, lower than the standard threshold of 40% of GDP. Moreover, Indonesia s debt level is still lesser compared to peer countries. Thailand and Mexico have higher external debt levels at 37% of GDP whereas Turkey and Malaysia have external debts at 58% and 64%, respectively. In context of structure, the share of Indonesia s long term external debt remains dominant at 71% of total. Maybe one of the risks that it is worth noting is Indonesia s export ability to fulfill FX liquidity need. As export performance has been sluggish, the country s external debt to export ratio has reached one of the highest levels among peer countries. Therefore, we believe BI s decision to launch macro prudential measures against FX external debt for nonbanking corporations could manage potential external risk (please see our macroscope: External debt update, February 24, 2015). Re-iterating our view: external debt demand will remain subdued, before picking up in 2H15. Private debt demand is expected to remain weak along 1Q15. We believe the pivot point will be in the 2H15, in-line from the realization of infrastructure investment. As we have written in our earlier report, there is a substantial financing gap for infrastructure financing; and external debt will play an essential role on filling the gap. As a consequence of the higher debt demand in 2H15, we expect its ratio rather than GDP to rise to 35% of GDP in 2015 which is still a manageable level. Aldian Taloputra ( ) Leo Rinaldy( ) aldian.taloputra@mandirisek.co.id leo.rinaldy@mandirisek.co.id CORPORATE Bank Tabungan Negara: new BoD and BoC members and 20% dividend payout ratio (BBTN; Rp1,165; Buy; TP:Rp1,300) BTN held an AGM yesterday and appointed the new BoD and BoC members. Of the seven BoD members, they replaced four of them with those from BNI, BRI and internal BTN. They replaced four of the former BoC members and maintained two of them The new Board of Directors President Director : Maryono Director : Irman Alvian Zahiruddin Director : Mansyur Syamsuri Nasution Director : Adi Setianto (former Director of Treasury & FI BNI) Director : Sis Apik Wijayanto (former BRI Banjarmasin Regional Office) Director : Sulis Soedoko (internal BTN) Director : Oni Febriyanto (internal BTN) The new Board of Commissioner President Commissioner : Sukardi Rinakit (political analyst) Independent Commissioner : Kamaruddin Sjam (Golkar politician) Independent Commissioner : Amanah Abdulkadir (maintained, Economic Officer of Asian Development Bank) Commissioner : Agung Kuswandono (maintained, Director General of Custom Office) Commissioner : Lucky Fathul Aziz (from OJK) Independent Commissioner : Catherinawati Hadiman (former Director of Bank CIMB Niaga) Independent Commissioner : Arie Coerniadi (formerly in NISP Sekuritas, KSEI, currently CFO of Sarana Global Indonesia) Page 2 of 8

3 The previous Board of Director President Director : Maryono Director : Irman Alvian Zahiruddin Director : Mansyur Syamsuri Nasution Director : Hulmansyah Director : Rico Rizal Budidarmo Director : Sri Purwanto Director : Imam Nugroho Soeko The previous Board of Commissioner President Commissioner : Mardiasmo Commissioner : Sahala Lumban Gaol Commissioner : Herman Hidayat Commissioner : Agung Kuswandono Independent Commissioner : Amanah Abdulkadir Independent Commissioner : Maulana Ibrahim In addition, BTN declared a 20% dividend payout ratio for 2014 earnings, translating into around Rp21/share cash dividend (1.8% gross yield), to be paid in April. Comment: we believe the new management team will keep their focus to reduce the NPL level towards 3% by end of the year from 4% currently. Maintain Buy with TP of Rp1,300. Tjandra Lienandjaja ( ) tjandra.lienandjaja@mandirisek.co.id MARKET Market Recap Mar 24th 2015; JCI: 5, (+0.19%); USD/IDR: 12,912; Total Value: Rp8.12tn Indo market started the market in positive territory before finally close at 5,447 level (+0.19%). There was a new IPO of PT Mitra Keluarga Karyasehat Tbk ( MIKA IJ ), a company that operates hospital located in Greater Jakarta, Surabaya, and Tegal (Central Java), and also the sister company of Kalbe Farma (KLBF IJ). The stock performed well on its first day of trading as it went up 24.7% to Rp21,200 from its IPO price at Rp17,000. However, despite its stellar debut, we noticed there was a net foreign sell on the counter of Rp441.bn (US$34.15mn). Regular market transactions were recorded at Rp5.6tn (USD433.7mn) and foreign investors posted a net sell of Rp953.36bn (USD73.84mn). TOP TURNOVER: MIKA BBRI MPPA BBNI SRIL LPKR BBTN BSDE ADVANCING SECTOR: trade +0.88%, finance +0.57%, basic industry +0.2%, mining (flat), consumer goods (flat) DECLINING SECTOR: infra -0.53%, agri -0.32%, misc. industry -0.23%, construction (flat), manufacture (flat) The yield of 10-year government decreased to 7.243% (-1.43%) and Rupiah appreciated to Rp12,912 (+0.845%). Sales Team Page 3 of 8

4 FROM THE PRESS Cepu output to double in April 2015 Currently the output of the Banyu Urip Field in the Cepu Block is 40,000 barrels per day (bpd). Production is now expected to gradually increase to 80,000 bpd in April once approval from the Environment and Forestry Ministry for environmental impact analysis is cleared. Peak production of 165,000 bpd is expected to be achieved in October Additionally, Indonesia s yearto-date production is only 764,000 bpd, much lower than the state budget target of 825,000 bpd (Jakarta Post) Solusi Tunas Pratama to divest up to 30% of stake through private placement SUPR plans to divest up to 30% of stake belongs to Cahaya Anugerah Nusantara Holdings and Kharisma Indah Ekaprima through private placement. Deutsche Bank and JP Morgan have been appointed as the underwriter for the private placement. The transaction is expected to be completed by 2Q15. (Kontan) Page 4 of 8

5 Indices Currencies and ADRs Major Commodities Last Chg. (pts) Chg (%) Currency Last Chg. (pts) Chg. (%) Last Chg. (pts) Chg (%) JCI 5, Rp/US$ 12, Oil spot (US$/bl) Dow Jones 18, EUR/US$ Nickel spot (US$/mt) 13, Nikkei 19, YEN/US$ Gold spot (US$/oz) 1, SET 1, SGD/US$ Tin 3-month (US$/mt) 17, Hang Seng 24, CPO futures (Ringgit/ton) 2, STI 3, ADR Stocks Soybean oil (US$/100gallons) S&P 500 2, TLK in Rp 14, Rubber forward (US /kg) Coal (US$/ton) Ishares indo Baltic Dry Index Property Valuation JCI Code Rec. Market Cap (Rp bn) Share price Target Price Discount to NAV RNAV per share (Rp) Premium (discount) to replacement cost Replacement cost per share (Rp) P/E 15F P/E 16F ROE 15F ROE 16F BSDE Buy 37, ,055 2,400-57% 4,725 33% 1, % 15.5% PWON Buy 24, % 1,033 9% % 30.8% SMRA Buy 24, ,680 1,550-46% 3, % % 18.5% CTRA Neutral 20, ,380 1,350-38% 2,234 77% % 17.0% JRPT Buy 15, ,100 1,130-61% 2, % % 27.6% ASRI Neutral 10, % 1,538 33% % 18.9% APLN Buy 8, % % % 15.9% LPCK Buy 8, ,725 12,300-52% 24, % 4, % 19.5% MDLN Buy 6, % 1,712-9% % 15.7% CTRS Buy 5, ,930 3,600-64% 8,077 6% 2, % 15.2% BKSL Neutral 3, % 1,010-42% % 12.4% Simple Average -57% % 16.7% Plantation Valuation Ticker Rec. Market Cap (Rp bn) Share price Target Price planted (US$) EV/ha PER EV/EBITDA ROE Mature (US$) FY15F FY16F FY15F FY16F FY15F FY16F AALI Buy 38,660 24,550 30,800 14,636 17, % 25.4% LSIP Buy 12,145 1,780 2,700 7,413 9, % 17.5% SGRO Buy 3,638 1,925 3,050 5,713 8, % 16.7% Weighted average 11,104 13, % 12.8% Page 5 of 8

6 Equity Valuation Price Price Mkt Cap Net Profit EPS Growth PER (x) EV/EBITDA (x) P/BV (x) Div.Yield Code Rating (Rp) Target (Rp Bn) Mandiri Universe 5,448 5,450 3,527, , , % 15.9% % 2.3% Banking 946,121 72,685 84, % 16.9% N.A. N.A % 1.8% BBCA Neutral 14,550 14, ,730 18,784 21, % 13.5% N.A. N.A % 1.4% BBNI Neutral 7,100 6, ,405 12,455 14, % 12.8% N.A. N.A % 1.9% BBRI Buy 13,000 13, ,699 27,875 33, % 20.3% N.A. N.A % 1.9% BBTN Buy 1,165 1,300 12,311 1,634 1, % 12.1% N.A. N.A % 3.3% BDMN Neutral 4,870 4,600 46,677 3,970 4, % 21.5% N.A. N.A % 1.9% BJBR Neutral ,357 1,129 1, % 26.7% N.A. N.A % 7.2% BJTM Buy ,827 1,189 1, % 15.5% N.A. N.A % 8.1% BTPN Buy 4,300 4,600 25,113 2,552 3, % 22.6% N.A. N.A % 2.5% PNBN Buy 1,370 1,200 33,000 3,096 3, % 11.9% N.A. N.A % 1.9% Building Materials 171,015 11,705 13, % 12.0% % 2.1% SMCB Neutral 1,525 2,050 11, % 22.5% % 2.1% INTP Buy 21,650 27,000 79,699 5,231 5, % 12.1% % 2.1% SMGR Buy 13,425 16,500 79,631 5,658 6, % 10.3% % 2.1% Constructions 122,830 4,294 5, % 35.8% % 0.6% ADHI Neutral 3,165 3,300 5, % 30.7% % 0.0% PTPP Buy 3,830 4,200 18, , % 45.3% % 0.0% WIKA Buy 3,515 4,000 21, , % 38.8% % 0.0% WSKT Neutral 1,770 1,700 17, % 33.5% % 0.0% WTON Buy 1,275 1,600 11, % 44.4% % 1.1% JSMR Buy 7,200 8,650 48,960 1,569 2, % 30.2% % 1.3% Consumer 591,489 21,943 25, % 14.9% % 2.2% AISA Neutral 2,160 2,500 6, % 29.3% % 0.0% GGRM Buy 50,650 68,500 97,455 6,158 6, % 11.7% % 2.5% ICBP Buy 14,700 16,800 85,716 2,916 3, % 20.0% % 1.7% INDF Buy 7,475 9,000 65,630 4,482 5, % 12.1% % 3.4% MYOR Neutral 28,800 26,500 25, % 12.8% % 1.0% ULTJ Buy 4,000 5,100 11, % 27.0% % 0.4% UNVR Neutral 38,900 38, ,807 6,451 7, % 15.2% % 2.2% WIIM Buy , % 31.5% % 5.1% DYAN Buy % 49.5% % 0.0% Healthcare 105,405 4,026 4, % 19.5% % 1.5% KLBF Neutral 1,840 1,820 86,250 2,745 3, % 20.8% % 1.3% SIDO Buy , % 11.0% % 1.2% TSPC Buy 2,390 4,000 10, % 20.2% % 4.1% Transportation 1, % 25.0% % 3.1% TAXI Buy 885 1,600 1, % 25.0% % 3.1% Retail 109,932 4,648 5, % 25.7% % 2.0% ACES Buy , % 23.2% % 1.8% ERAA Buy 985 1,440 2, % 18.1% % 4.3% LPPF Neutral 17,900 17,072 52,214 1,915 2, % 21.3% % 2.2% MAPI Sell 4,800 4,000 7, % 73.7% % 0.7% MPPA Neutral 4,050 3,000 21, % 26.6% % 0.8% RALS Neutral , % 15.8% % 4.6% RANC Sell % 55.6% % 0.0% TELE Buy 930 1,050 6, % 29.5% % 3.4% Automotive 340,974 21,696 24, % 11.5% % 3.0% ASII U/R 8,150 U/R 329,941 21,212 23, % 10.6% % 3.1% IMAS U/R 3,990 U/R 11, N/M 57.9% % 1.4% Heavy Equipment 83,376 5,427 5, % 4.6% % 2.7% HEXA* Buy 3,450 4,250 2, % 61.1% % 3.6% UNTR Sell 21,575 17,100 80,478 4,992 5, % 3.5% % 2.6% Plantation 54,443 5,118 5, % 12.6% % 4.5% AALI Buy 24,550 30,800 38,660 3,237 3, % 12.6% % 4.5% Page 6 of 8

7 Price Price Mkt Cap Net Profit EPS Growth PER (x) EV/EBITDA (x) P/BV (x) Div.Yield Code Rating (Rp) Target (Rp Bn) Mandiri Universe 5,448 5,450 3,527, , , % 15.9% % 2.3% LSIP Buy 1,780 2,700 12,145 1,378 1, % 10.8% % 4.6% SGRO Buy 1,925 3,050 3, % 17.2% % 4.2% Property 165,951 13,348 15, % 16.0% % 1.4% APLN Buy ,672 1,031 1, % 19.8% % 2.4% ASRI Neutral ,182 1,228 1, % 15.3% % 4.0% BKSL Neutral , % 28.3% % 0.0% BSDE Buy 2,055 2,400 37,754 2,439 2, % 10.1% % 1.6% CTRA Neutral 1,380 1,350 20,929 1,436 1, % 8.4% % 1.4% CTRS Buy 2,930 3,600 5, % -21.6% % 2.6% JRPT Buy 1,100 1,130 15, , % 33.9% % 0.7% LPCK Buy 11,725 12,300 8, % -13.7% % 0.0% MDLN Buy , , % 68.1% % 0.0% PWON Buy ,561 2,087 2, % 28.8% % 2.0% SMRA Buy 1,680 1,550 24,234 1,408 1, % 8.6% % 0.5% Poultry 70,919 4,336 5, % 34.8% % 1.8% CPIN Buy 3,625 6,000 59,533 3,548 4, % 24.7% % 1.7% JPFA Buy 785 1,600 8, , % 77.0% % 2.5% MAIN Sell 1,855 2,100 3, % 89.8% % 1.2% Energy 202,608 15,377 17, % 10.8% % 4.2% ADRO* Neutral 975 1,000 31, % 12.3% % 3.3% HRUM* Neutral 1,510 1,700 4, % 37.0% % 1.3% ITMG* Neutral 17,650 17,650 19, % 11.8% % 6.2% PTBA Neutral 10,550 10,700 24,312 1,733 1, % 14.7% % 4.1% PGAS* Buy 4,900 6, , % 8.3% % 4.3% SOCI* Buy , % 27.5% % 4.1% Metal 41,677 3,304 4, % 42.1% % 4.5% ANTM U/R 890 U/R 8, N/M 265.9% % 3.1% INCO* U/R 3,340 U/R 33, % 21.7% % 4.8% Telecommunication 430,009 21,080 23, % 11.5% % 2.8% EXCL Buy 4,450 6,400 37, ,460 N/M 88.0% % 0.8% ISAT U/R 4,105 U/R 22, ,117 N/M 41.8% % 2.7% TBIG Buy 9,350 10,800 47,559 1,705 1, % 8.8% % 0.0% TOWR Buy 4,000 5,000 40,812 1,434 1, % 21.8% % 0.0% TLKM Neutral 2,920 2, ,363 16,428 17, % 5.9% % 4.0% Media 89,103 4,468 5, % 21.8% % 2.7% SCMA Buy 3,365 4,000 49,202 2,106 2, % 18.3% % 2.5% MNCN Buy 2,830 3,500 39,901 2,361 2, % 25.0% % 3.0% Note: - *) net profit in USD mn - U/R means Under Review - n/a means Not Available - N/M means Not Meaningful - N.A means Not Applicable Page 7 of 8

8 Mandiri Sekuritas A subsidiary of PT Bank Mandiri (Persero) Tbk Plaza Mandiri 28 th Floor, Jl. Jend. Gatot Subroto Kav , Jakarta 12190, Indonesia General: , Fax : (Equity Research), (Equity Sales) RESEARCH John Rachmat Head of Equity Research, Strategy john.rachmat@mandirisek.co.id Tjandra Lienandjaja Banking tjandra.lienandjaja@mandirisek.co.id Handoko Wijoyo Construction, Toll Road handoko.wijoyo@mandirisek.co.id Hariyanto Wijaya, CFA, CFP, CPA Plantation, Heavy eq., Energy hariyanto.wijaya@mandirisek.co.id Herman Koeswanto, CFA Consumer, Poultry herman.koeswanto@mandirisek.co.id Liliana S Bambang Property, Building Material liliana.bambang@mandirisek.co.id Ariyanto Kurniawan Telecom, Coal & Metal Mining ariyanto.kurniawan@mandirisek.co.id Matthew Wibowo Retail matthew.wibowo@mandirisek.co.id Rizky Hidayat Property, Media rizky.hidayat@mandirisek.co.id Vanessa Ariati Tanuwijaya Banking, Health Care vanessa.tanuwijaya@mandirisek.co.id Aldian Taloputra Economist aldian.taloputra@mandirisek.co.id Leo Putra Rinaldy Economist leo.rinaldy@mandirisek.co.id Aditya Sastrawinata Shipping aditya.sastrawinata@mandirisek.co.id Wisnu Trihatmojo Research Assistant wisnu.trihatmojo@mandirisek.co.id Yudha Gautama Research Assistant yudha.gautama@mandirisek.co.id INSTITUTIONAL SALES Lokman Lie Co-Head Institutional Equities lokman.lie@mandirisek.co.id Silva Halim Co-Head Institutional Equities silva.halim@mandirisek.co.id Andrew Handaya Institutional Sales andrew.handaya@mandirisek.co.id Cindy Amelia P. Kalangie Institutional Sales cindy.amelia@mandirisek.co.id Jane Theodoven Sukardi Institutional Sales jane.sukardi@mandirisek.co.id Janefer Amanda Soelaiman Institutional Sales janefer.soelaiman@mandirisek.co.id Karmia Tandjung-Nasution Institutional Sales karmia.tandjung@mandirisek.co.id Mirna Santikara Salim Institutional Sales santikara.salim@mandirisek.co.id Oos Rosadi Institutional Sales oos.rosadi@mandirisek.co.id Vera Ongyono Institutional Sales vera.ongyono@mandirisek.co.id Yohan Setio, CFA Institutional Sales yohan.setio@mandirisek.co.id Zahra Aldila Niode Institutional Sales zahra.niode@mandirisek.co.id Kusnadi Widjaja Equity Dealing kusnadi.widjaja@mandirisek.co.id Edwin Pradana Setiadi Equity Dealing edwin.setiadi@mandirisek.co.id RETAIL SALES Boy Triyono Plaza Mandiri boy.triyono@mandirisek.co.id Boy Triyono Pondok Indah boy.triyono@mandirisek.co.id Yohanes Triyanto Kelapa Gading yohanes.triyanto@mandirisek.co.id Hendra Riady Mangga Dua hendra.riady@mandirisek.co.id Indra Mas'ari Bandung indra.mas ari@mandirisek.co.id Yogiswara P. Yogyakarta yogiswara.perdana@mandirisek.co.id Widodo Solo widodo@mandirisek.co.id Linawati Surabaya Linawati@mandirisek.co.id Bambang Suwanto Malang bambang.suwanto@mandirisek.co.id Ruwie Medan Tiara ruwie@mandirisek.co.id Aidil Idham Palembang aidil.idham@mandirisek.co.id Yuri Ariadi Pontianak yuri.ariadi@mandirisek.co.id INVESTMENT RATINGS: Indicators of expected total return (price appreciation plus dividend yield) within the 12-month period from the date of the last published report, are: Buy (10% or higher), Neutral (-10% to10%) and Sell (-10% or lower). DISCLAIMER: This report is issued by PT. Mandiri Sekuritas, a member of the Indonesia Stock Exchanges (IDX) and Mandiri Sekuritas is registered and supervised by the Financial Services Authority (OJK). Although the contents of this document may represent the opinion of PT. Mandiri Sekuritas, deriving its judgement from materials and sources believed to be reliable, PT. Mandiri Sekuritas or any other company in the Mandiri Group cannot guarantee its accuracy and completeness. PT. Mandiri Sekuritas or any other company in the Mandiri Group may be involved in transactions contrary to any opinion herein to make markets, or have positions in the securities recommended herein. PT. Mandiri Sekuritas or any other company in the Mandiri Group may seek or will seek investment banking or other business relationships with the companies in this report. For further information please contact our number or fax ANALYSTS CERTIFICATION: Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her views about the companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not and will not be influenced by any part or all of his or her compensation.