Premier Insight. Equity Indonesia Research Daily. Ramayana Lestari (RALS IJ; Hold) Stronger Lebaran 2018 sales. 3 July 2018

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1 Premier Insight 3 July 2018 Equity Indonesia Research Daily JCI Index JCI Index 6,200 18,000 6,100 16,000 14,000 6,000 12,000 5,900 10,000 5,800 8,000 5,700 6,000 5,600 4,000 5,500 2,000 5, May 22-May 23-May 24-May 25-May 28-May 30-May 31-May 4-Jun 5-Jun 6-Jun 7-Jun 8-Jun 20-Jun 21-Jun 22-Jun 25-Jun 26-Jun 27-Jun 28-Jun 29-Jun 2-Jul Foreign net buy (sell) Net buy (sell) in Rp bn Key Indexes 6-Jun 7-Jun 8-Jun 20-Jun 21-Jun 22-Jun 25-Jun 26-Jun 27-Jun 28-Jun 29-Jun 2-Jul Index Closing 1 day 1 year YTD JCI 5, % -2.8% -9.6% LQ % -9.6% -16.4% DJI 24, % 13.2% -1.7% SET 1, % 1.8% -8.4% HSI 28, % 12.4% -3.2% NKY 21, % 8.8% -4.0% FTSE 7, % 2.3% -1.8% FSSTI 3, % 0.5% -4.8% EIDO % -17.0% -20.0% Commodity price Commodities Last price Ret 1 day Ret 1 year (in USD) Oil/barrel (WTI) % 57.1% CPO/tonne % -5.3% Soy/bushel % -8.8% Rubber/kg % -31.5% Nickel/tonne 14, % 54.8% Tins/tonne 19, % -2.0% Copper/tonne 6, % 10.1% Gold/try.oz (Spot) 1, % 1.8% Coal/tonne % 42.0% Corn/bushel % -9.0% Wheat/bushel (USd) % -6.0% Source : Bloomberg 10% 5% 0% -5% -10% -15% -20% -25% -30% -35% % net buy/market turnover Rp bn Ramayana Lestari (RALS IJ; Hold) Stronger Lebaran 2018 sales Strong May18 performance on the back of stronger Lebaran. Growth is supported by higher THR and subsidy disbursement. Significant growth can be seen in the retail industry as a whole. Re-initiate at HOLD with a TP of Rp 1,400 (based on target P/E of 22.4x). Solid May18 performance. RALS has managed to book sales of Rp1.04tn (+41.9% yoy) in May, mainly on the back of a stronger Lebaran season compared to This brings their cumulative 5M18 sales to Rp3.1tn (+12.6% yoy) or achieving 38% of the company s target and 39% of ours. In addition, the company also managed to achieve 5M18 SSSG of 9.3% (vs 5M17: 4.8%; 4M18: - 0.8%), mainly supported by Java ex Jakarta with SSSG of 14%. Overall the company 5M18 performance is still in line with ours and the consensus FY18F estimate. Growth mainly driven by higher THR. This year the government has decided to raise the THR given to civil servants in addition to the 13 th take home pay. According to the government, THR this year will equal to one month of take home pay instead of equaling to one month of the core salary like in previous years. On top of this increase in THR, civil servants will also receive the 13 th take home salary as well as government subsidies disbursements for the low-income families, all of which are in Ramayana s target market. Unlike last year, the government has also assured the public that the THR will be distributed on-time this year. This substantial increase in disposable income helped drove the sales for the company. Significant growth in the retail industry. According to the Indonesian Retail Association (Aprindo), overall retail sales this Lebaran season has spiked by +20% yoy. This growth was contributed largely by the tremendous growth in the fashion segment growing at +60% yoy and was then followed by the cosmetic segment. In addition, they are also seeing a considerable increase in sales volume in the industry as a whole, as many retailers are experiencing faster depletion in their stock inventories compared to Lebaran in 2017 and This means that consumer appetite and spending are starting to improve this year, hence we should also expect this positive performance to continue through June. Valuation. We re-initiate coverage on RALS with a HOLD rating and TP of Rp 1,400, which is based on our target P/E of 22.4x. Currently the company is trading at FY18F P/E of 22.2x and EV/EBITDA of 14.8x. We are still optimistic on the company s performance and initiatives going forward. However considering the recent share price rally, we believe that at their current valuation the company s growth stories for this year have all been priced in, given near +40% YTD growth. Year To 31 Dec 2016A 2017A 2018F 2019F 2020F Revenue (RpBn) 5,857 5,623 6,156 6,746 7,354 EBITDA (RpBn) EBITDA Growth (%) Net Profit (RpBn) EPS (Rp) EPS Growth (%) 21.4 (0.3) Net Gearing (%) (18.1) (21.5) (24.9) (28.6) (32.4) PER (x) PBV (x) Dividend Yield (%) EV/EBITDA (x) Source : RALS, IndoPremier Share Price Closing as of : 29-June-2018

2 Economic Update Soft festive inflation Jun18 s Eid inflation was a mild 3.1% (1.9% ytd)...with low core inflation of 2.7%. Food and transportation drove June s price hike. Eid inflation considered stable except for transportation. Soft Jun18 inflation. Data reading for June s Eid inflation suggested a soft 3.1% (0.6% mom) and a decline against May and last year s Eid. This month, Eid ul-fitr fell in the second week of June, making the bulk of inflation-triggering events already materialised in May18. With this realisation, inflation for the first half already reached 1.9% and arguably in line with patterns of inflation in the years prior to 2018 (2016: 1.8%), except for 2017, where administered price hikes were aplenty. We believe the reading should signal positive price stability which should theme this year, notably as solid price management is preferred this year. Low core inflation. Core inflation was low at 2.7% yoy (0.24% mom), which was also evident throughout the year, as we compare it against last year s 3.3%. The decline in core inflation happened as the past semester observed lower prices in goods category of processed food, housing and utilities, health, as well as transportation. Clothing and education-recreation (Jun18 s inflation: 3.6% and 2.8% yoy, respectively), therefore, became the two exceptional categories, of which price increases were more intensive. Based on our observation, the higher appetite for clothing happened across sub-categories, including male, female, and children apparels; whereas for education-recreation, the incidence of higher inflation appeared as families prepare for school term commencement in July as well as more leisure spending expedited during school and Eid holiday. Food & transportation. As had been common, we view food and transportation were major contributors for the Eid inflation in June. Food was rising by some 4.7% yoy with fish and chicken being largest drivers for food inflation, largely similar with last three years patterns, except that they had contributed more, suggesting either a whetting demand in both food or increase in supply cost. Akin to food, the transportation category endured similar annual pattern to those of two years before, where air and intercity transports were two major contributors of inflation (contributing 39% of inflation in the month). Stable Eid inflation. We find no diversion in this year s Eid inflation pattern in comparison to the last five years (see Fig. 1), deeming it as overall stable and managed, except for transportation, which made up 44% to total inflation (vs an average 33%). Inflation was rather low with 0.6% monthly realisation but with food and transportation altogether accounted for 76% of total inflation in the month, which was higher than the period s 67% average. Likely and partly, this would be due to increase in oil price, which, should continue challenge inflation this semester. Fig. 1: Eid ul-fitr inflation comparison Year Annual inflation (%, yoy) Core inflation (%, yoy) Monthly inflation (%, mom) Contribution to monthly inflation (% of total) Processed Food Food Transportation Source: Statistics Indonesia, IndoPremier 2

3 News & Analysis Corporates AISA: Tiga Pilar Sejahtera Food (AISA IJ; Rp191; Not Rated) According to its financial report, AISA s subsidiary in Rice Mills division, Sakti, IBU, and JSR are currently cooperate with Bulog to produce Bulog s premium rice. Sakti also cooperate with PT Pertani in order to produce premium rice under Delman brand with the minimum production volume between Feb Dec 18 to 30k ton. In return, Sakti will receive Rp536/kg from rice processing business and Rp260/kg from premium rice business. It is also unclear whether the Management want to release the rice segment to the other party. (Kontan). APOL: Arpeni Pratama Ocean Line (APOL IJ; Rp58; Not Rated) soon finishes its debt restructuring program worth $400mn as a prevention of paying high interest cost that might potentially disrupt company s performance. Arpensi s CFO remarked that dollar-denominated debt has burdened and hurt the bottom line as forex market embraces fierce volatility. (Bisnis Indonesia). LPKR: Lippo Karawaci (LPKR IJ; Rp334; Under Review) booked marketing sales of Rp2tn in 1Q18 from Meikarta, forming 20% of FY18 target of Rp10tn. According to the President Director, LPKR is accelerating the contruction in the area to fulfill their target of topping off 28 towers and hand over on December 2018 and February 2019, respectively. Currently LPKR is in a construction stage of 54 building, which 40 of them has reach level 2-5. (Investor Daily). PPRO: PP Properti (PPRO IJ; Rp139; Not Rated) reported marketing sales of Rp2.1tn in 1H18, forming 55% of company s FY18 target of Rp3.8tn. PPRO reported bulk sales of Rp2.1tn to PT Arvada Investama for three apartment buildings in Surabaya namely, Grand Shamaya tower 2, Grand Dharmahusada, and Grand Sungkono tower 4. However, the sales would be book throughout 2018 and In addition, PPRO will also sign agreement with PT Dipa Karya Sejahtera and Koperasi Semandel Bisnis Nusantara worth Rp250bn each. PPRO will launch an apartment tower in Kertajati Aerocity in 2H18 to further improve it marketing sales. (Bisnis Indonesia). Comment: Despite huge contribution from bulk sales, PPRO reported strong marketing sales achievement as of 1H18. We believe this strong achievement will further support PT Pembangunan Perumahan (PTPP IJ; Rp2,030; Buy) performance in FY18. PGAS: Perusahaan Gas Negara (PGAS IJ; Rp1,950; Hold) has officially acquired 51% of Pertagas s shares. The valuation size of Pertagas full value is amounted to US$2.4bn (51%: US$1.2bn). For this acquisition, the management was utilized numbers in 31 December 2017 where PGAS and Pertagas recorded net profit amounted to US$143.1mn and US$141.2mn. The management stated that after the integration, the pipeline network will almost reach 10,000 km as PGAS already operate 7,453 km while Pertagas around 2,438. (Bisnis Indonesia). Comment: Looking at Pertagas s FY17 net profit, our calculation shows that this transaction equivalent to PE 16. VIVA: Visi Media Asia (VIVA IJ; Rp187; Not Rated) target to grow double than industry growth. VIVA s subsidiaries include: PT Intermedia Capital Tbk. (MDIA IJ; Rp169; Not Rated) and LT Lativi Mediakarya (TV One). VIVA predicts 2018F TV industry to grow by 4%YoY. Meanwhile, the company targets MDIA, 89.9% owned by VIVA, to grow 3 to 4x of industry growth. MDIA owned majority of PT Cakrawala Andalas Televisi (ANTV). (Kontan, Company). 3

4 Markets & Sector Plantation sector: European Union extended the deadline for bio-diesel use from 2021 to However, EU plans to set extra criteria for bio-fuel which accepted to the EU market. The new criteria include the certification of crop-based bio-fuel (CBB) in relation to the land-use risks. Government of Indonesia continues the negotiation process to favor the commodity as Coordinating Maritime Affairs Minister Luhut Pandjaitan believes the new regulation is still unfair for Indonesia. (Jakarta Post). Comment: We maintain our positive view for the sector and maintain our Buy ratings for LSIP IJ (TP: Rp1,900) and AALI IJ (TP: Rp18,500). Property sector: Bank Indonesia (BI) is not expecting house price hike post LTV/FTV relaxation regulation as supply from developers is sufficient. In addition, BI believes property financing is still growing and has not reached its peak. BI target to reach KPR growth of 13.46% by the end of 2018 (May: 12.75%), supported by LTV relaxation regulation. (Investor Daily). Comment: We believe LTV relaxation will boost property sector s mortgage mostly for first home buyer. CTRA and BSDE is our top pick in residential property sector give its large landbank, diverse location and resilient marketing sales. Maintain Buy on CTRA and BSDE with TP of Rp1,355 and Rp2,400, respectively. Telco Sector: Schedule and mechanism for postpaid SIM Card re-registration yet clear. Indonesian Telecom Regulation Body (BRTI) said postpaid SIM card reregistration need no additional regulation as it already stated in related Ministrial Regulation (Permenkominfo No. 12/2016). Meanwhile, Population and Civil Registration (Ducakpil) General Director said postpaid SIM card customer data cannot be officially validated yet if operators do not make data acess agreement to ensure data security. Telkomsel (65% owned by TLKM IJ) and Indosat (ISAT IJ)) already have early discussion data access with Ducakpi but yet in form of agreement, according to Ducakpil. (Bisnis Indonesia). Comment: Neutral for now. We currently expect less impact from post paid SIM card re-registration compared to prepaid SIM card as 1Q18 postpaid subscribers only accounts ~2% to Big 3 Telecom total susbcribers. We will monitor for details of the possible implementation of the postpaid SIM card re-registration. 4

5 Head Office PT INDO PREMIER SEKURITAS Wisma GKBI 7/F Suite 718 Jl. Jend. Sudirman No.28 Jakarta Indonesia p f INVESTMENT RATINGS BUY : Expected total return of 10% or more within a 12-month period HOLD : Expected total return between -10% and 10% within a 12-month period SELL : Expected total return of -10% or worse within a 12-month period ANALYSTS CERTIFICATION. The views expressed in this research report accurately reflect the analyst;s personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. DISCLAIMERS This reserch is based on information obtained from sources believed to be reliable, but we do not make any representation or warraty nor accept any responsibility or liability as to its accruracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, finacial situation and the particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this report.