Indofood CBP Sukses Makmur

Transcription

1 Indonesia Company Guide Version 7 Bloomberg: ICBP IJ Reuters: ICBP.JK Refer to important disclosures at the end of this report DBS Group Research. Equity 15 Nov 2017 BUY (Upgrade from HOLD) Last Traded Price ( 14 Nov 2017): Rp8,550 (JCI : 5,988.30) Price Target 12mth: Rp10,200 (19% upside) (Prev Rp9,000) Analyst Tiesha PUTRI tiesha.narandha@id.dbsvickers.com Andy SIM CFA andysim@dbs.com What s New ICBP should see some margin expansion in 2018 as its key raw material prices have moderated Project net profit growth to move up a notch to 12% y oy in FY18 on households spending recovery Trading at 23x PE 18F, slightly below its fiveyear historical mean PE Upgrade to BUY with TP of Rp10,200 Price Relative A preferred consumption recovery and margin play Upgrade to BUY. Weak households spending and concern over margins following a spike in wheat price in Sep have caused ICBP s share price to underperform the JCI by 13% YTD/17% y oy. ICBP now trades at 23x PE 18F, slightly below its fiveyear mean PE. At this price, we think market has priced in most of the negatives. We expect ICBP s margins to bottom out in 4Q17 before recovering in 2018, supported by favourable soft commodity prices. As at end of Sep, ICBP had Rp7.8tr cash on its balance sheet, which opens up the possibility of inorganic growth should any acquisition opportunity arises. We upgrade our call to BUY with a TP of Rp10,200, based on 27x PE 18F. Where we differ: We expect consumption to gradually recover and F&B segment would be among the first to benefit from households spending increase. In addition, we believe ICBP should see some margin support in 2018 as its key raw material prices have moderated. Our FY17F/18F net profit forecast is 1%/3% higher than consensus. Forecasts and Valuation FY Dec (Rp m) 2016A 2017F 2018F 2019F Revenue 34,466 35,877 39,135 42,832 EBITDA 5,618 6,015 6,745 7,432 Pretax Profit 4,989 5,432 6,037 6,681 Net Profit 3,600 3,937 4,406 4,875 Net Pft (Pre Ex.) 3,600 3,937 4,406 4,875 Net Pft Gth (Preex) (%) EPS (Rp) EPS Pre Ex. (Rp) EPS Gth Pre Ex (%) Diluted EPS (Rp) Net DPS (Rp) BV Per Share (Rp) 1,506 1,689 1,898 2,127 PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) CASH CASH CASH CASH ROAE (%) Earnings Rev (%): 1 0 (3) Consensus EPS (Rp): N/A N/A N/A Other Broker Recs: B: 15 S: 6 H: 10 Source of all data on this page: Company, DBSVI, DBS Bank, Bloomberg Finance L.P Potential catalysts: 1) Regional election which should support household consumption growth, particularly in rural areas, and 2) noodles ASP increase due to price hike and/or improvement in product mix. Valuation: Our TP rises to Rp10,200 as we roll over our valuation base to FY18. Our TP is still based on 27x PE or +1SD of ICBP s fiveyear historical mean PE. Key Risks to Our View: Intensifying competition particularly in dairy and snack segment. At A Glance Issued Capital (m shrs) 11,662 Mkt. Cap (Rpbn/US$m) 99,709 / 7,356 Major Shareholders (%) PT Indofood Sukses Makmur (%) 80.5 Free Float (%) m Avg. Daily Val (US$m) 2.4 ICB Industry : Consumer Goods / Food Producers ed: CK / sa:ma, PY

2 WHAT S NEW A preferred consumption recovery and margin play; upgrade to BUY A brighter outlook in 2018 We project ICBP s sales to grow by 9% yoy in FY18F, accelerating from 4% yoy in FY17F, as household spending starts to recover. On the back of this, we expect ICBP s net profit to grow by 12% yoy in FY18F (vs. 9% yoy in FY17F), partly supported by margin expansion as the company benefits from lower soft commodity prices, particularly wheat, sugar and palm oil. Segmentwise, we expect noodles EBIT to grow by 7% in FY18F, driven by a 4.8% price increase (in line with inflation) and 50bps EBIT margin expansion. Stronger growth should be seen in ICBP s smaller segment, particularly dairy and snack food. We forecast dairy and snack food s EBIT to grow by 14% yoy and 76% yoy, respectively, supported by robust demand and a gradual recovery in snack food s margin. Noodles: Value over volume We believe price hike along with premiumisation strategy would continue to drive growth in ICBP s noodle segment. ICBP has consistently demonstrated its strong pricing power in Indonesia with an ASP growth that is 1.2x of food CPI in With a 71% share in the noodle market, we think ICBP will be able to maintain its superior pricing power, while in the longer term, we expect its premiumisation strategy to play an increasing role in driving growth. In our model, we assume 1.4%/5.9% yoy noodle revenue growth in FY17F/FY18F, mostly driven by ASP increases. Premiumisation strategy still in the early stage. The concept of premium noodle was introduced by ICBP back in 2013 through Taste of Asia noodles but gained more traction in when Mayora Group introduced Bakmi Mewah, ICBP introduced Indomie Real Meat and ABC President launched Yomp Super Bowl. These noodles feature real food ingredients and a more sophisticated packaging as key differentiation points. Bakmi Mewah and Indomie Real Meat noodles are priced 3x more expensive compared to regular pouch noodles, while Yomp Super Bowl is priced 89x higher than regular pouch noodles. Rising income and more active product launches to drive premium noodle growth in the long term. The contribution of the premium Real Meat noodles to ICBP s revenue remains small but we believe the products will gain traction as disposable income rises. Looking at the price point and the variant of premium noodles available in the modern trade, we think the trend of instant noodles premiumisation in Indonesia is still in the very early stage with the two key players (88% market share) having introduced only four variants of premium instant noodle with c.200% price premium. We note that in China, premium noodle can be priced up to 600% higher compared to regular noodles while the flavours and textures are more varied. Product innovation among premium instant noodle makers in Indonesia is still limited to new flavours or toppings. Very few players have introduced new texture or expanded its product line to attract more health conscious consumers (i.e. lower sodium or whole wheat noodles). We believe more aggressive product launches and innovations particularly by the market leaders, who have more extensive distribution network and financial capability to advertise the products more aggressively, will provide the next leg of growth. Dairy: Milking growth from lifestyle changes. While noodles should remain the backbone of ICBP in the foreseeable future, we see increasing contribution of its dairy business. The segment recorded 15% CAGR in , driven by a structural shift in diet as well as inorganic growth from its Milkuat acquisition in We believe the segment would continue to benefit from changes in lifestyle toward a healthier diet and a stepup in marketing activities among dairy producers in Indonesia. For the dairy segment, we expect revenue growth to pick up to 14% yoy in FY18F (from 7% yoy in FY17F) as household spending recovers. We expect the segment to book 11% EBIT margin in FY17F/FY18F. We think any additional profit coming from lower milk powder or sugar price would be reinvested through advertising and promotion spending as competition in domestic dairy market remains tight. Snack food: Gaining appetite for snacks. Snack food is another fastgrowing segment of ICBP, contributing to 7% of ICBP s revenue. Among the popular snack brands of ICBP are Chitato (potato chips), Chiki and Cheetos (extruded snacks). ICBP also introduced Qtela back in 2007, a brand that modernises traditional Indonesian snacks such as cassava chip, soybean cracker and prawn cracker. Qtela has seen its market share more than doubling from 0.6% of total salty snack sales in 2008 to 1.7% in 2016 (Euromonitor). Salty snack market in Indonesia is highly fragmented with top three players controlling 35% market share. Competition has recently intensified as the top players are stepping up promotional activities. We believe this condition would persist as the robust demand for snack attracts competition. In 9M17, snack food s EBIT margin stood at 1.5%, declining from 5.3% in FY16 on the back of tight competition and more aggressive product launches. We assume snack food s EBIT margin to only recover to the FY16 level in FY19. We Page 2

3 forecast snack food revenue to grow at 17% yoy in FY17F FY19F supported by rising income and expansion of the modern trade channel. We believe the latter has supported the demand for branded snacks as modern grocery retailers typically only sell branded packaged snacks. This leads to consumers switching from traditional snacks to branded packaged snacks. Beverage: Building scalability. ICBP expanded into the beverage market in 2013 by setting up JV companies with Asahi Group. The JVs have yet to turn profitable as they still lack economies of scale (in 2016, the utilisation rate was only 40%). Currently, Asahi is in talk with ICBP to divest its entire stake in the beverage JVs as part of Asahi s portfolio restructuring programme. In 9M17, beverage sales grew by 8% yoy to Rp466bn (5% of ICBP s sales), while EBIT losses increased to Rp241bn (vs. Rp219bn in 9M16). In the same period, sales volume only grew by 1% yoy in 9M17 as lowend consumers cut nonbasic F&B consumption. We expect demand for beverages to recover mildly next year on the back of higher wages, a more stable electricity tariff and regional elections. That said, we expect the segment s losses to narrow on the back of improving scalability. In our forecast, we assume 10%/16% revenue growth in FY17F/18F mainly supported by volume increase, while EBIT losses gradually narrow from Rp295bn in FY17F to Rp213bn in FY18F. Noodles revenue trend and forecasts 30,000 25,000 20,000 15,000 10,000 5, F 2018F 2019F Noodles' revenue, Rp bn (LHS) Dairy s revenue trend and forecasts 12,000 10,000 8,000 6,000 4,000 2,000 Growth yoy (RHS) F 2018F 2019F Dairy's revenue, Rp bn (LHS) Growth yoy (RHS) Snack food s revenue trend and forecasts 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 20.0% 15.0% 10.0% 5.0% Noodles operating margin trend and forecasts 25.0% 20.0% 15.0% 10.0% 5.0% 15.2% 16.6% 17.2% Dairy s operating margin trend and forecasts 18.0% 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 19.5% 20.0% 20.0% F 2018F 2019F 6.1% 9.7% 16.8% 11.0% 11.0% 11.0% F 2018F 2019F Snack food s operating margin trend and forecasts 4,000 3,500 3,000 2,500 2,000 1,500 1, % 15.0% 10.0% 5.0% 0.0% 5.0% F 2018F 2019F Snack food's revenue, Rp bn (LHS) Growth yoy (RHS) 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 5.3% 4.2% 4.0% 3.0% 2.0% 1.4% F 2018F 2019F Page 3

4 Regional peer comparison Company PE 17F (x) PE 18F (x) EV/EBITDA 17F (x) EV/EBITDA 18F (x) PB 17F (x) EPS growth 17F EPS growth 18F Indonesia Home and Personal Care (HPC) Unilever Indonesia % 10% Indonesia Food and Beverage % 12% Indofood Sukses Makmur % 6% Mayora Indah % 17% Simple avg Indonesia HPC and Staples avg Regional F&B Singapore Thai Beverage PCL % 11% Delfi Ltd % 20% Super Group Ltd % 7% Del Monte Pacific Ltd % 6% JUMBO Group Ltd % 10% Katrina Group Ltd % 17% BreadTalk Group Ltd % 10% Thailand Thai Union Group PCL % 10% Taokaenoi Food & Marketing PCL % 55% Philippines Universal Robina Corp % 14% Jollibee Foods Corp % 17% Emperador Inc % 2% Century Pacific Food Inc % 13% Malaysia QL Resources Bhd % 0% MSM Malaysia Holdings Bhd % 65% Oldtown Bhd % 18% Regional Staples avg *Price as of 13 Nov 2017 Source: DBSVI, DBS Bank, Bloomberg Finance L.P Page 4

5 CRITICAL DATA POINTS TO WATCH Critical Factors: Critical Factors Noodle segment the primary earnings driver. The noodle segment was ICBP s primary revenue and earnings contributor in FY16, at 65% and 79% respectively. This is also its strongest product segment, capturing 71% market share in Indonesia to maintain a comfortable lead over its closest competitor which has 15% market share. The strong lead allows it to be a pricesetter in the segment, which is an advantage during times of rising costs and slowing demand. Instant noodles are the preferred substitute to rice by many Indonesians, hence, the resilient demand for the product. In an attempt to improve its product mix, the company has recently become more active in launching premium products with pricing points of more than 3x higher compared to its regular instant noodles. Rupiah strength and commodity prices are key margin drivers. The primary ingredient for noodles is wheat flour. Palm oil, skimmed milk powder, sugar, potatoes and chillies are also ingredients for ICBP. Most of the soft commodities such as wheat and milk powder are imported, which means that their costs are affected by the strength of the rupiah. A stronger rupiah and declining soft commodity prices are positive for ICBP s margins. 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% Revenue* contribution by segment 6% 5% 5% 5% 6% 6% 7% 7% 8% 9% 18% 19% 20% 21% 22% 64% 64% 62% 60% 58% 2015A 2016A 2017F 2018F 2019F Noodles Dairy Snack foods Food seasonings Nutrition & SF Beverages 110% 90% 70% 50% 30% 10% 10% 30% 15% 89% EBIT* contribution by segment 23% 79% 16% 16% 17% 87% 84% 81% 2015A 2016A 2017F 2018F 2019F Noodles Dairy Snack foods Food seasonings Nutrition & SF Beverages The fastgrowing dairy and snacks. Liquid milk and salty snacks are among the fastest growing F&B categories in Indonesia with revenue CAGR of 20%and 9% in (Euromonitor respectively. We like ICBP for its exposure to both segments, which will likely become the next growth engine of ICBP as noodle consumption in Indonesia reaches saturation point. In 2016, dairy and snack segment contributed 20% and 7% to ICBP s consolidated revenue respectively CBOT wheat price Startup losses in beverage segment. ICBP formed joint ventures with Asahi, one of the largest beverage producers in Japan, back in 2014 to manufacture and distribute nonalcoholic beverages products in Indonesia, among them are RTD tea (Ichi Ocha and Tekita), RTD coffee (Cafela), mineral water (Club), carbonated soft drink (Pepsi and 7Up), fruit flavoured drink (Fruitamin) and energy drink (Sting). Both JVs are still loss making due to the lack of economic scalability. In Oct 2017, ICBP announced that it is considering buying Asahi Group s stakes in the JVs. 300 Jan15 Jul15 Jan16 Jul16 Jan17 Jul17 CBOT wheat (cents/bu.) Quarterly avg. price Skim milk powder price 3,200 3,000 2,800 2,600 2,400 2,200 2,000 1,800 1,600 1,400 Jan15 Jul15 Jan16 Jul16 Jan17 Jul17 Skim milk powder (USD/MT) Quarterly avg. price *Before elimination Source: Company, Bloomberg Finance L.P., GlobalDairyTrade, DBSVI, DBS Bank Page 5

6 Appendix 1: A look at Company's listed history what drives its share price? ICBP share price performance vs. consumer confidence index Remarks Investors see ICBP s business as defensive during an economic downturn given its strong market leadership and pricing power in domestic noodle market. As a result, its share price outperformed JCI when consumer sentiment as reflected on consumer confidence index weakened ICBP vs. JCI (LHS) CCI (RHS) ICBP share price performance vs. gross margin With a relatively stable revenue growth, gross margin is ICBP s key earnings driver. Our analysis suggests that ICBP s share price performance correlated strongly with its gross margin (87% correlation in the past five years) Oct10 Oct11 Oct12 Oct13 Oct14 Oct15 Oct16 Oct17 ICBP vs. JCI (LHS) T12M gross margin, % (RHS) ICBP share price performance vs. wheat price , Wheat flour is the largest cost component for ICBP s noodle business. An increase in wheat and wheat flour price poses a downside risk to ICBP s margin if the company cannot pass on the cost inflation to consumers. ICBP vs. JCI (LHS) Wheat price, cents/bu. (RHS) Source: Bloomberg Finance L.P., DBSVI, DBS Bank Page 6

7 ICBP share price performance vs. noodles ASP Oct10 Oct11 Oct12 Oct13 Oct14 Oct15 Oct16 Oct17 ICBP vs. JCI (LHS) Noodle ASP, Rp/pack (RHS) Remarks ICBP is the market leader in noodle category with a market share of 71% (Euromonitor). ICBP s market dominance and the fact that instant noodle remains one of the cheapest dish in Indonesia are the two reasons behind ICBP s strong pricing power. Based on our analysis, we found that ICBP s share price performance moved in line with its noodle s ASP. There are two factors driving ICBP s ASP increase, i.e. annual price adjustment and improvement in product mix as ICBP pursues growth through premiumisation. ICBP share price performance 12,000 10,000 Strong top line growth driven by dairy segment Pursuing inorganic growth in Dairy segment through the acquisition of Milkuat , , ,000 2,000 0 Margin contracted due to Rupiah depreciation Declining soft commodity prices drove share price outperformance Oct10 Dec10 Feb11 Apr11 Jun11 Aug11 Oct11 Dec11 Feb12 Apr12 Jun12 Aug12 Oct12 Dec12 Feb13 Apr13 Jun13 Aug13 Oct13 Dec13 Feb14 Apr14 Jun14 Aug14 Oct14 Dec14 Feb15 Apr15 Jun15 Aug15 Oct15 Dec15 Feb16 Apr16 Jun16 Aug16 Oct16 Dec16 Feb17 Apr17 Jun ICBP share price (LHS) ICBP vs. JCI (RHS) Source: Bloomberg Finance L.P., DBSVI, DBS Bank Page 7

8 Balance Sheet: Strong cash position with a steady cash conversion cycle. As at the end of Sep, ICBP had Rp7.8tr cash on its balance sheet. This will allow the company to tap on attractive acquisitions and/or joint ventures. Leverage & Asset Turnover (x) Share Price Drivers: Soft commodity prices and rupiah. The majority of ICBP s raw materials are linked to the USD. These include wheat flour and skimmed milk powder. Therefore, the strength of the rupiah and volatile commodity prices would affect margins. During periods of bad harvests, a supply deficit would inflate the price of the affected commodity. This would lead to expectations of weaker margins, and pressurise the share price. Rpbn Capital Expenditure Economic recovery. When GDP growth meets market expectations, it is normally favourable for staple food companies like ICBP. This would raise expectations for higher sales volumes and topline growth, which could lift the share price. Key Risks: Rupiah depreciation and commodity price hike. ICBP is susceptible to these because it is exposed to imported raw materials such as wheat flour and skim milk powder. ROE (%) Company Background (ICBP) is an 80.5%subsidiary of Indofood Sukses Makmur PT (INDF IJ). It is the Consumer Branded Products arm of INDF, with noodles being its biggest revenue and profit contributor. In the domestic market, ICBP holds the largest market share for noodles at 71%. Other segments in the company include dairy, snack food, food seasoning, beverage, and nutritional food. Forward PE Band (x) PB Band (x) Page 8

9 Segmental Breakdown FY Dec 2015A 2016A 2017F 2018F 2019F Revenues (Rpbn) Noodles 20,996 22,540 22,851 24,187 25,660 Dairy 5,880 6,807 7,288 8,337 9,556 Snack Foods 1,989 2,340 2,738 3,204 3,748 Food Seasonings 1,247 1,433 1,505 1,644 1,795 Others 1,842 1,673 1,844 2,130 2,460 Total 31,741 34,466 35,877 39,135 42,832 Operating Profit (Rpbn) Noodles 3,479 3,877 4,456 4,837 5,132 Dairy 569 1, ,051 Snack Foods Food Seasonings Others (331) (336) (295) (213) (123) Total 3,992 4,864 5,121 5,751 6,335 Operating Profit Margins Noodles Dairy Snack Foods Food Seasonings Others (18.0) (20.1) (16.0) (10.0) (5.0) Total Income Statement (Rpbn) FY Dec 2015A 2016A 2017F 2018F 2019F Revenue 31,741 34,466 35,877 39,135 42,832 Cost of Goods Sold (22,122) (23,607) (24,515) (26,577) (29,047) Gross Profit 9,619 10,859 11,362 12,559 13,785 Other Opng (Exp)/Inc (5,627) (5,995) (6,241) (6,807) (7,450) Operating Profit 3,992 4,864 5,121 5,751 6,335 Other Non Opg (Exp)/Inc Associates & JV Inc (94.1) (99.2) Net Interest (Exp)/Inc Exceptional Gain/(Loss) (63.3) Pretax Profit 4,010 4,989 5,432 6,037 6,681 Tax (1,087) (1,358) (1,467) (1,600) (1,770) Minority Interest 77.6 (31.0) (28.5) (31.8) (35.2) Preference Dividend Net Profit 3,001 3,600 3,937 4,406 4,875 Net Profit before Except. 3,001 3,600 3,937 4,406 4,875 EBITDA 4,691 5,618 6,015 6,745 7,432 Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) Net Profit Gth (Preex) (%) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x) NM NM NM NM NM Page 9

10 Quarterly / Interim Income Statement (Rpbn) FY Dec 3Q2016 4Q2016 1Q2017 2Q2017 3Q2017 Revenue 8,296 7,995 9,458 9,003 8,970 Cost of Goods Sold (5,596) (5,596) (6,476) (6,179) (6,144) Gross Profit 2,700 2,399 2,982 2,824 2,826 Other Oper. (Exp)/Inc (1,469) (1,504) (1,466) (1,561) (1,446) Operating Profit 1, ,516 1,263 1,380 Other Non Opg (Exp)/Inc Associates & JV Inc (20.6) (14.1) (26.7) (11.9) (7.5) Net Interest (Exp)/Inc Exceptional Gain/(Loss) Pretax Profit 1,257 1,009 1,535 1,307 1,400 Tax (354) (329) (385) (311) (486) Minority Interest (50.3) 88.4 (58.1) Net Profit ,092 1, Net profit bef Except ,092 1, EBITDA 1,419 1,097 1,719 1,465 1,586 Growth Revenue Gth (%) (10.3) (3.6) 18.3 (4.8) (0.4) EBITDA Gth (%) (10.6) (22.7) 56.7 (14.8) 8.2 Opg Profit Gth (%) (12.4) (27.3) 69.4 (16.7) 9.3 Net Profit Gth (Preex) (%) (17.6) (9.9) 42.1 (8.4) (5.1) Margins Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%) Balance Sheet (Rpbn) FY Dec 2015A 2016A 2017F 2018F 2019F Net Fixed Assets 6,556 7,114 9,720 10,727 11,629 Invts in Associates & JVs Other LT Assets 6,044 6,216 6,216 6,216 6,216 Cash & ST Invts 7,643 8,372 7,915 9,017 10,410 Inventory 2,547 3,110 2,937 3,184 3,480 Debtors 3,513 3,960 3,601 3,928 4,299 Other Current Assets Total Assets 26,561 28,902 30,520 33,202 36,165 ST Debt 1,395 1,158 1,158 1,158 1,158 Creditor 2,581 3,083 2,536 2,749 3,004 Other Current Liab 2,027 2,229 2,229 2,229 2,229 LT Debt 1, Other LT Liabilities 2,740 3,055 3,055 3,055 3,055 Shareholder s Equity 15,455 17,564 19,701 22,138 24,810 Minority Interests ,032 Total Cap. & Liab. 26,561 28,902 30,520 33,202 36,165 NonCash Wkg. Capital 1,711 1,887 1,904 2,265 2,676 Net Cash/(Debt) 4,817 6,338 5,881 6,982 8,376 Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Asset Turnover (x) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) CASH CASH CASH CASH CASH Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH Capex to Debt (%) ZScore (X) Page 10

11 Cash Flow Statement (Rpbn) FY Dec 2015A 2016A 2017F 2018F 2019F PreTax Profit 4,010 4,989 5,432 6,037 6,681 Dep. & Amort ,098 Tax Paid (1,087) (1,358) (1,467) (1,600) (1,770) Assoc. & JV Inc/(loss) Chg in Wkg.Cap. 117 (229) (16.5) (361) (412) Other Operating CF (348) Net Operating CF 3,486 4,585 4,843 5,070 5,597 Capital Exp.(net) (1,396) (1,032) (3,500) (2,000) (2,000) Other Invts.(net) Invts in Assoc. & JV (619) Div from Assoc & JV Other Investing CF (32.6) (559) Net Investing CF (2,047) (1,560) (3,500) (2,000) (2,000) Div Paid (1,295) (1,493) (1,800) (1,969) (2,203) Chg in Gross Debt (29.9) (708) Capital Issues Other Financing CF Net Financing CF (1,265) (2,159) (1,800) (1,969) (2,203) Currency Adjustments 144 (37.1) Chg in Cash (457) 1,102 1,394 Opg CFPS (Rp) Free CFPS (Rp) Target Price & Ratings History Source: DBSVI, DBS Bank Analyst: Tiesha PUTRI Andy SIM CFA Page 11

12 DBSVI, DBS Bank recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (10% to +15% total return over the next 12 months for small caps, 10% to +10% for large caps) FULLY VALUED (negative total return i.e. > 10% over the next 12 months) SELL (negative total return of > 20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends Completed Date: 15 Nov :00:17 (WIB) Dissemination Date: 15 Nov :07:26 (WIB) Sources for all charts and tables are DBSVI, DBS Bank unless otherwise specified. GENERAL DISCLOSURE/DISCLAIMER This report is prepared by PT DBS Vickers Sekuritas Indonesia (''DBSVI''), DBS Bank Ltd. 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Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Page 12

13 Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBSVUSA, a USregistered brokerdealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or comanager or in any other investment banking transaction in the past twelve months and does not engage in marketmaking. ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate 1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests 2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group. COMPANYSPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), DBSV HK or their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 31 Oct Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. Compensation for investment banking services: 3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or comanager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively. Disclosure of previous investment recommendation produced: 4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months. 1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor stepchild, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor stepchild, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant. Page 13

14 RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Australia This report is being distributed in Australia by DBS Bank Ltd. ( DBS ) or DBS Vickers Securities (Singapore) Pte Ltd ( DBSVS ). DBS holds Australian Financial Services Licence no DBSVS is exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 ( CA ) in respect of financial services provided to the recipients. DBSVS is regulated by the Monetary Authority of Singapore under the laws of Singapore, which differ from Australian laws. Distribution of this report is intended only for wholesale investors within the meaning of the CA. Hong Kong This report has been prepared by an entity(ies) which is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Vickers Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report has been prepared by a person(s) who is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities in Hong Kong pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Vickers Hong Kong Limited, a licensed corporation licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). For any query regarding the materials herein, please contact Paul Yong (CE. No. ASE988) at equityresearch@dbs.com. Indonesia Malaysia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia. This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies. Wong Ming Tek, Executive Director, ADBSR Singapore Thailand This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No E) or DBSVS (Company Regn No G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at for matters arising from, or in connection with the report. This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only intended for institutional clients only and no other person may act upon it. Page 14

15 United Kingdom This report is produced by PT DBS Vickers Sekuritas Indonesia which is regulated by the Otoritas Jasa Keuangan (OJK). This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom. In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication. Dubai International Financial Centre United Arab Emirates United States Other jurisdictions This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box , 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it. This report is provided by DBS Bank Ltd (Company Regn. No E) which is an Exempt Financial Adviser as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent. This report was prepared by PT DBS Vickers Sekuritas Indonesia (''DBSVI''), DBS Bank Ltd. DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate. In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions. Page 15

16 DBS Regional Research Offices HONG KONG DBS Vickers (Hong Kong) Ltd Contact: Paul Yong 18th Floor Man Yee Building 68 Des Voeux Road Central Central, Hong Kong Tel: Fax: Participant of the Stock Exchange of Hong Kong MALAYSIA AllianceDBS Research Sdn Bhd Contact: Wong Ming Tek ( U) 19th Floor, Menara MultiPurpose, Capital Square, 8 Jalan Munshi Abdullah Kuala Lumpur, Malaysia. Tel.: Fax: general@alliancedbs.com SINGAPORE DBS Bank Ltd Contact: Janice Chua 12 Marina Boulevard, Marina Bay Financial Centre Tower 3 Singapore Tel: Fax: equityresearch@dbs.com Company Regn. No E INDONESIA PT DBS Vickers Sekuritas (Indonesia) Contact: Maynard Priajaya Arif DBS Bank Tower Ciputra World 1, 32/F Jl. Prof. Dr. Satrio Kav. 35 Jakarta 12940, Indonesia Tel: Fax: research@id.dbsvickers.com THAILAND DBS Vickers Securities (Thailand) Co Ltd Contact: Chanpen Sirithanarattanakul 989 Siam Piwat Tower Building, 9th, 14th15th Floor Rama 1 Road, Pathumwan, Bangkok Thailand Tel Fax: research@th.dbsvickers.com Company Regn. No Securities and Exchange Commission, Thailand Page 16