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Danareksa Equity Snapshot - BMRI, 24 Januari 2020
January 24, 2020 11:39 WIB

Bank Mandiri(BMRI IJ)

Still a keeper

We maintain our BUY call on BMRI with an unchanged GGM-derived TP of IDR9,000 (implying 1.9x 2020F P/BV) following the release of inline FY19 results with IDR27.5tn of net profits. Aside from the corporate segment, BMRI will continue to push its retail segment driven by salary-based loans due to lower credit costs and higher yields. The blended CoF should remain manageable in our view supported by the bank’s active funding strategy to reduce special rates on TD instruments. We therefore expect the blended CoF to touch 3.1% in FY20F. Meanwhile, PSAK 71 implementation should trim CAR by a max of 250bps (IDR21-25tn) from 21.4% as of December 2019. 

FY19 highlights. The IDR27.5tn of net profits were supported by a drop in credit costs to 143bps (FY18: 200bps, 3Q19: 184bps). Loans grew by 10.8% yoy driven by 19.4% yoy growth in the micro segment. NIM, however, only dipped by c.6bps to 5.46% indicating that BMRI’s management was able to manage its assets and liabilities portfolio fairly well amid aggressive policy rate cut last year. Assets quality, meanwhile, stabilised as the gross NPLs ratio reached 2.4% with a 143.4% LLC ratio as of December 2019.

Reliable risk management approach. BMRI emphasised the improved approach toward the issue of assets quality. The bank’s Risk Management team highlighted the tools available which can detect potential troubled borrowers using many parameters. In our view, these tools can help BMRI to have a much more manageable loans portfolio going forward which is more resilient to dynamic changes in the global and domestic macroeconomic environment. BMRI also stated that the potential formation of NPLs this year might reach IDR8tn, mostly coming from the wholesale segment (corporate and commercial). Such an amount is fairly manageable in our view.

Manageable blended CoF. We believe that the blended CoF will remain manageable at 3.1% this year thanks to the bank’s strong retail-based customer deposits. Meanwhile, BMRI’s strategy to selectively offer special rates to institutional customers should provide a limited buffer from a higher blended CoF risk this year. Thus, the contribution of CASA deposits is expected to decline slightly to 58.8% of total customer deposits by December 2020F.

Maintain BUY, TP of IDR9,000. We maintain our BUY call on BMRI with an unchanged GGM-derived TP of IDR9,000 (implying 1.9x 2020F P/BV) assuming 9.0% CoE, 14.6% sustainable ROAE and 3% long-term growth.

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Danareksa Equity Snapshot - 24 Januari 2020
January 24, 2020 09:46 WIB

FROM EQUITY RESEARCH

 

Bank Rakyat Indonesia:  Stay micro, stay profitable (NOT RATED)

BBRI’s FY19 net profits of IDR34.4tn are inline with the consensus (99.0% of FY19F). Loans growth was on the soft side at 8.4% yoy with higher micro lending exposure of 35.8% of the total loans portfolio as of December 2019. NIM, however, normalised to 6.7% due to an uptick in the blended CoF by c.30bps on a yoy basis. Meanwhile, the gross NPLs ratio could be maintained at 2.6% with 257bps credit costs. Going forward, BBRI’s management will continue to focus on its micro lending business with KUR and Kupedes as its core products. As such, BBRI’s management targets 40% micro lending exposure to the total loans book by the end of 2022.

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Semen Indonesia:  Year of consolidation (SMGR IJ. IDR 13,050 BUY TP. IDR 17,500)

Semen Indonesia sold 42.61mn tons of cement in FY19, or +28.5%yoy on the back of consolidation with Solusi Bangun Indonesia (SBI). SMGR’s sales accounted for 53.4% of the domestic cement consumption in FY19, the largest in the country. The sales volume is in-line with our target (103.1%). Excluding SBI, the sales volume reached 32.7mn tons (-1.4%yoy). We maintain our BUY call on SMGR.

To see the full version of this report, pleaseclick here

To see the full version of this report, pleaseclick here

MARKET NEWS

MACROECONOMY

Bank Indonesia kept its 5% policy rate unchanged in Jan-20

In the beginning of 2020, Bank Indonesia maintained its 5% policy rate (7DRRR). Rate cut transmission has taken place since June 2019: a 52 bps decrease in the deposit interest rate to 6.31%, and a 33 bps decrease in the working capital credit interest rate to 10.09% as of end-2019. According to BI, Indonesia has passed the lowest point in the economic cycle. As such, BI still maintained its 5.1-5.5% economic growth projection for 2020 and raised its global economic growth forecast to 3.2%. Despite the better economic outlook for 2020, BI is still committed to pursuing accommodative policies in 2020. (Kontan, Investor Daily)

Government allocates IDR27.4tn of infra financing through sharia bonds

The allocation of infra project financing through sharia government bonds declined in 2020 to IDR27.4tn from IDR28.3tn previously. This condition is different from previous years, as the trend of infra financing through sharia government bonds always increased yoy. The Ministry of Finance stated that the reduction reflects the fact that the government will not provide an allocation to ministries and institutions that cannot accomplish projects financed through sharia government bonds. This may be as a result of failed tenders, performance problems and contractor difficulties, and a change in project leaders. (Kontan)

SECTOR

Plantation: FFB price +7.9% vs December 2019

West Kalimantan FFB Price has increased +7.9% from a 2nd auction of Decemcer 2019 to IDR1,784/kg on average or some 50.7% yoy. South Sumatera FFB has also breached IDR2,022/kg or (+8% from previous auction) Applying our target of MYR2,600/ton average CPO price and USD50 means the FFB would be at IDR1,692/kg, which in-terms will elevate farmers income. (Investor Daily)

Comment: As we mentioned the farmers income elevation will add purchasing power in Kalimantan and Sumatera and should provide some benefit to GGRM, RALS, TLKM, and ASII to some extent (Andreas Kenny)

CORPORATE

PGN’s subsidiary called to pay for tax underpayments of Rp127.72mn

Based on the 28 Oct 2019 Supreme court decision and note sent to the Saka Energi subsidiary of PGN (PGAS IJ) in Jan. 2020, Saka has to pay USD127.72mn and a penalty for underpaid tax related to the 2014 acquisition field in Pangkah. PGN won its appeal taken place in Nov. 2018. However, the Supreme Court reevaluated the case in favor of the Director General of Taxes and thus SAKA must pay underpaid tax. PGN and SAKA made a new appeal to ask for tax leniency from Dirjen Pajak while it is taking the seller of the Pangkah block to international arbitration to seek tax indemnity. (The Company)

Smartfren secures a new loan facility of Rp3.11tn – expecting a heated sector in 2020

Smartfren through its subsidiary Smartel has entered into a loan facility agreement with the China Bank of Development Shenzen Branch on 21 Jan 2021 with the amount of RMB1.58bn or ~Rp3.11tn for a period of 6 years. Smartfren signed a corporate guarantee offered to China Bank of Development Shenzen Branch on 21 Jan 2021, on behalf of its subsidiary Smartel towards fulfilling the facility requirements. The borrowings will be for used network capex spending. (The Company)

Comment: Smartfren’s 9M19 net debt currently is ~Rp7.1tn meeting its Debt / asset ratio 67% covenant, while it needs to meet its debt service coverage ratio of a minimum of 1.5x. We expect the company to gradually draw down the facility to serve its liquidity and capex needs. The capex-to-sales ratio has been trending consistently over 50% (probably the highest in the sector), and the new facility will help the Company to maintain high capex spending. Essentially FREN continues to frontload investments with a view to monetize in the later quarters. We see ample improvement in Smartfren’s EBITDA (Rp982bn in 9M19). Nonetheless, the operating losses were Rp1.76tn. We predict a heated 2020 for the telco sector as contender operators are getting funded, with Smartfren being the latest case. We still predict sector growth in 2020 to be no greater than in 2019. (Niko Margaronis)


Danareksa Equity Snapshot - SMGR, 24 Januari 2020
January 24, 2020 09:40 WIB

Semen Indonesia(SMGR IJ)

Year of consolidation

Semen Indonesia sold 42.61mn tons of cement in FY19, or +28.5%yoy on the back of consolidation with Solusi Bangun Indonesia (SBI). SMGR’s sales accounted for 53.4% of the domestic cement consumption in FY19, the largest in the country. The sales volume is in-line with our target (103.1%). Excluding SBI, the sales volume reached 32.7mn tons (-1.4%yoy). We maintain our BUY call on SMGR.

Strong sales growth in FY19. Semen Indonesia (SMGR) sold 42.61mn tons of cement in FY19, or +28.5%yoy from 33.17mn tons in FY18. The strong sales were supported by consolidation with Solusi Bangun Indonesia (SBI) since Feb 19. The sales breakdown is as follows: 1) Semen Indonesia; sales in FY19 reached 30.48mn tons (-0.4%yoy) on the back of lower domestic sales (-2.2%yoy) but supported by higher export sales (+15.3%yoy), 2) Thang Long Cement (TLCC); 2.22mn tons of cement sold in FY19, or -14.0%yoy, and 3) SBI; 9.92mn tons of cement sold under SMGR’s ownership in FY19 which contributed 23.3% of the total sales. Semen Indonesia and TLCC contributed 71.5% and 5.2% of the group’s sales in FY19.

SMGR dominated the domestic cement market. In the domestic market, SMGR sold 36.35mn tons of cement domestically in FY19. This is +32.6%yoy on the back of consolidation with SBI. Hence, SMGR dominated the domestic market with market share of 53.4%, the largest in the country. Excluding SBI, the market share would be 38.4%.  Domestic cement consumption in FY19 reached 69.8mn tons (+0.34%yoy) on the back of flattish sales in Java (-0.30%yoy) and lower sales in Sumatra (-4.41%yoy). Strong demand was seen in the eastern part of Indonesia. Cement consumption in Sulawesi grew by +8.15%yoy, while Nusa Tenggara and eastern Indonesia posted growth of +7.74%yoy and +13.8%yoy, respectively. However, the demand in these areas only accounted for 23.7% of the total demand.

Sales in Dec19 soared 36%yoy. On a monthly basis, SMGR sold 3.93mn tons of cement in Dec19. This is +36.0%yoy and -10.7%mom. Semen Indonesia itself sold 2.78mn tons of cement in Dec19 (+4.4%yoy and -12.5%mom), while TLCC sold 235,000 tons (+4.6%yoy and +55.1%mom), and SBI sold 913,000 tons (-7.6%yoy and -14.5%mom). The group contributed 53.1% of the domestic cement consumption in Dec19.

Maintain BUY. SMGR’s cement sales of 42.61mn tons in FY19 are 103.1% of our target of 41.34mn tons. This is in-line with our target. SMGR is trading at EV/ton of USD148.3/ton, cheaper than INTP’s USD179.6/ton.

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