Live Chat Software
Berita Dan Riset Terbaru
Riset Perusahaan

Danareksa Equity Snapshot - Strategy : Panacea Polices
August 16, 2018 16:03 WIB

Strategy

Policy Panacea

 

The government and central bank have made a synchronized move to combat the rising CAD and currency volatility. While the central bank maintained its tightening policy by hiking the 7-D RR rate by 25 bps to 5.5%, the government will limit imports and provide incentives for exports. The former, in our view, could affect economic growth although populist policies in the form of social spending should help to support consumption.

 

 

Policy remedies – on dual fronts

A twin deficit has always been the main spectre overshadowing Indonesia’s investment story, especially in relation to its currency. While the windfall income on rising oil prices is enough to increase energy subsidies, thus leading to stable inflation given no hikes in administered prices this year, the growing current account deficit is now taking center stage, creating further IDR volatility. As we highlighted in our recent report Widening CAD in 2Q18, BOP in deficit (13 Aug 2018), there are 3 primary reasons why the CAD widened in 2Q18: 1. A lower trade surplus in 2Q18; 2. A widening deficit on services accounts of USD1.8b vs USD1.6b in 1Q18 and 3. A USD8.2b Primary Income deficit arising from dividends outflow and coupon payments on debt instruments, inline with seasonality. The first two matters will need to be addressed promptly to prevent the rupiah from coming under more pressure, with responses needed from both the government and central bank.

 

First measure: Hiking rates

With the Balance of Payments in deficit YTD depleting the country’s forex reserves, monetary market operations to support the currency are less desirable, with BI opting to continue its tightening monetary policy by hiking the 7-day Reverse Repo Rate by another 25 bps to 5.5%, culminating in a total of 125 bps rate hikes so far this year. The central bank’s focus has shifted toward the short-term priority of stabilising the currency, hiking rates to widen the yield gap in a bid to encourage inflows back into Indonesia. The gap between the 10 year Indo bond over the US Treasury now stands at 513bps vs 390bps at the beginning of the year.

 

Second measure: Limit imports – a temporary measure

As a temporary measure, the government will seek to limit imports, mainly of 500 consumer goods. The government will also temporarily stop importing government and SOE-controlled capital goods, including by PT Pertamina and PT PLN, as well as provide incentives to exporting companies. The government will issue this regulation in due course and also implement the policy on increasing the usage of domestic biodiesel through the B20 mandate.

 

The CAD may reach the upper limit of the safety level

While the CAD in 1H18 was 2.6% of GDP, it will go up to the upper limit of the safety level of 3% by year-end if its current trend continues in 2H18. Based on our calculations, every USD1b of savings in the CAD will reduce the CAD to GDP ratio by 0.1%. As such, at least USD5b of savings in the CAD will be needed to bring the year-end CAD back to the safety level of 2.5% of GDP. The central bank expects the CAD to be under 3% by the year-end.

 

… read more 20180816 Strategy


Danareksa Equity Snapshot - Bekasi Fajar Industrial Estate(BEST IJ. IDR230. BUY. TP: IDR300)
August 16, 2018 10:52 WIB

Bekasi Fajar Industrial Estate(BEST IJ)

Catching up in 2H18

 

BEST posted 2Q18 net profits of Rp44bn (-50.9% YoY, -53.3% QoQ), resulting in 1H18 net profits of Rp137bn (-20.4% YoY), or reaching 27.6% of our full year target and 27.8% of consensus estimates, mainly due to slower revenues recognition in 1H18 (-5.5% YoY) and higher other expenses of Rp22bn, mainly forex losses and interest expenses. We expect revenues to catch up in 2H18, given the backlog of 31Ha as of Jun’18. Maintain BUY.

 

Lower-than-expected 1H18 results. BEST reported 1H18 net profits of Rp137bn (-20.4% YoY), or reaching 27.6% of our full year target and 27.8% of consensus estimates. This mainly reflects slower revenues recognition in 1H18 (-5.5% YoY) and higher other expenses of Rp22bn, in particular forex losses (Rp32bn) and interest expenses. BEST has around USD35mn of loans that are still unhedged; hence it is exposed to some forex risk. The 1H18 revenues were Rp402bn (-5.5% YoY), only 36% of our full year target and 35% of the consensus, mainly driven by higher ASP of Rp2.71mn/sqm (+13% YoY) but offset by lower land sales of 12.5Ha (vs.15.6Ha in 1H17). The 1H18 gross margin stood at 73.5% (vs. 68.9% in 1H17), driven by higher land ASP and lower land acquisition costs.

 

Lower 2Q18 earnings. BEST booked 2Q18 net profits of Rp44bn (-50.9% YoY, -53.3% QoQ). The lower earnings mainly stemmed from lower revenues recognition in 2Q18 (-20.5% YoY, -9.6% QoQ) and higher other expenses associated with forex and interest. Other expenses totalled Rp65bn in 2Q18. The 2Q18 revenues reached Rp191bn (-20.5% YoY, -9.6% QoQ) as the company only booked land sales of 5.7Ha (vs. 8.7Ha in 2Q17). The 2Q18 gross margin stood at 77.5% (vs. 69.9% in 1Q18 and 68.8% in 2Q17).

 

Revenues to catch up in 2H18. We expect its revenues recognition to catch up in 2H18. With its backlog standing at 31 Ha as of Jun’18 and assuming ASP of Rp2.7mn/sqm, BEST may be able to add another Rp830bn of revenues. We maintain our FY18 revenues forecast of Rp1.1tn (+10.9% YoY). The downside risk to earnings will arise from possible further depreciation of the IDR against the USD.

 

Maintain BUY. We are maintaining our BUY call on BEST with an unchanged TP of Rp300, based on a 72% discount to NAV. BEST is currently trading at an 80% discount to NAV vs the sector’s 79%.


 

… read more 20180816 BEST

 


Danareksa Equity Snapshot - Strategy : Panacea Polices
August 16, 2018 09:56 WIB

Strategy

Panacea Polices

 

As an integral policies mix, both government and Central Bank made a  synchronized move to combat rising CAD trend and currency volatility.  Central Bank maintain its tightening policy by rising 7 DRR by 25 bps to 5.5%, while government will limit importation while providing incentives for export activity. The former, in our view, could affect economic growth trend although will be negated by government’s adamant preference toward populist policies on social spending that will support consumption.

 

 

Policy remedies – on dual fronts

A twin deficit has always been the main spectre to the investment story to Indonesia, especially in relation to its affect to currency. While the windfall income on rising oil price is now ample to add energy subsidy, hence stable inflation given no hike in administere  d price this year, growing current accounts deficit is now taking the center stage, further pressure volatility on IDR. As we highlights in our recent report Widening CAD in 2Q18, BOP in deficit (13 Aug 2018), there are 3 primary reasons why the CAD widened in 2Q18: 1. A lower trade surplus in 2Q18; 2. A widening deficit on services accounts of USD1.8b vs USD1.6b in 1Q18 and 3. A USD8.2b Primary Income deficit arising from dividends outflow and coupon payments on debt instruments, inline with seasonality. The first two factors will need to be addressed fast to prevent any further retracted impact to the currency, with response comes from both Governmen  t and Central Banks.

 

First measure: Rising rates

With Balance of Payment has been on deficit level YTD depleting forex reserves, monetary market operation to support currency is less favorable, with BI opt to continues its tightening monetary policy by rising 7 days Reverse Report by another 25 bps to 5.5%, which make a total of 125 bps increase this year. Central Bank focus has been shifted into short term priority to stabilised currency, rising rate to widening yield gap, to lure inflow back to Indonesia. So far, the gap between Indo 10 years bond to US Treasury is now at 513bps vs 390bps at the beginning of the year.

 

Second measures: Import limitation – a transient measure

As a transient measure, the government will implement import limitation, mainly on 500 consumer goods. The government will also temporarily stop importing government and SOE-controlled capital goods, including by PT Pertamina and PT PLN, as well as providing incentives for exporting companies. The govt will issue this regulation in due course as well as the use of more domestic biodiesel through B20 mandate.

 

Safety limit on CAD

While CAD in 1H18 only reached 2.6% of GDP, it will go up to the upper limit of safety level of 3% by year end, if the current CAD trend were to continues in 2H18. Based on our calculation, every USD1b saving in CAD will reduce CAD to GDP by 0.1%. As such, at least USD5b saving on CAD will be need to bring year end CAD back to safety level of 2.5% of GDP. Central Bank expects CAD to be under 3% by year end.

 

… read more 20180816 Strategy