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BRI Danareksa Sekuritas Equity Snapshot - 19 Januari 2021
January 19, 2021 10:41 WIB

FROM EQUITY RESEARCH

 

Bank Rakyat Indonesia: Growth Opportunities Abound (NOT RATED)

The micro segment will remain as the growth engine for BBRI going forward supported by the bank’s participation in channelling the Government’s micro grant program and KUR super micro (max IDR10mn ticket size). We also believe that BBRI will continue its partnership with P2P lending to explore the digital ecosystem further. Furthermore, the extension of OJK’s policy on loans restructuring relaxation until March 2022 should also help BBRI to oversee its loans portfolio in a more manageable way.

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MARKET NEWS

 

MACROECONOMY

Govt optimistic of economic recovery in 2Q21

The Ministry of Finance foresees economic recovery taking place in 2Q21 rather than in 1Q21 as social distancing restriction measures are still in place to combat the pandemic, resulting in weak aggregate demand. Moreover, the festive season marked by Ramadan and Lebaran in 2Q21 should help stimulate demand. The government’s vaccination program is essential to restore confidence in society, especially among the upper middle income class to stimulate consumption. The govt is also optimistic that Indonesia will record a better trade balance this year as economic recovery is expected to start earlier in some trading partners such as the US, Europe, and China. As aggregate demand has started to pick up, the govt foresees recovery in investment, particularly in the banking sector as the demand for credit will increase. The govt is still optimistic that the 5% economic growth target in the govt’s budget will be achieved. (Kontan)

 

Govt to reallocate IDR58tn of expenditures for vaccinations

The Ministry of Finance stated that there will be budget reallocation from ministries/institutions expenditures for the vaccination program amounting to IDR58tn. This decision is stipulated in the Circular Letter of the Ministry of Finance No.S-30/MK/02/2021. The target reallocation is for spending on non-operating goods and capital for ministries and institutions. Hence, with this decision the total expenditure budget for ministries/institutions will be reduced by ~6% from IDR1,032tn to IDR974tn. (Kontan)

 

Omnibus Law: Discussions on three Labor law regulations completed

The Ministry of Manpower stated that the govt is now preparing 4 derived regulations in the employment section of the Omnibus Law. Of the 4 derived regulations, the govt has finished discussing 3 of them with the tripartite team (workers, businessmen, and govt). The three regulations are: the regulation of foreign workers, the regulation of contract labor (PKWT), outsourcing, off-duty and termination, and the regulation of compensation. The remaining regulation in the pipeline is the regulation of job termination allowances (JKP). (Kontan)

 

SECTOR

Fundraising continues on digital platforms - Grab explores IPO in US market

According to Reuters Grab is exploring IPO of at least US$2bn in US market. A lot of background activity from Indonesia's giant digital platforms from Tokped, Gojek, Grab, TravelokA, SEA. Companies maybe meeting some required profitability levels. Given also the general sentiment to synergize, and taking corporate actions, it appears those digital platforms may have completed their greenfield investments and necessary expansions. The next investments are expected to be used for more ecosystem investment building a more integrated/unified/seamless offering that includes ecommerce tapping into e-groceries and financial services with much wider scope for mid-low segments - grassroots. In relation to financial services, Grab was also recently awarded banking license in Singapore. Moreover Grab’s financial services arm Grab Financial Group raised over $300 million led by South Korea’s Hanwha Asset Management in its Series A round. In a similar move. Singapore-based internet major SEA Ltd has acquired Indonesia’s Bank Kesejahteraan Ekonomi with the objective of ultimately transforming the local lender into a digital bank. The deal can be seen as part of NYSE-listed Sea's ongoing plan to increase customer retention on its e-commerce platform Shopee by doubling down on its payments app ShopeePay.

 

CORPORATE

CENTRATAMA CENT IJ: Digital Colony is close to striking its first acquisition deal in Asia

TMT Finance has learnt that global infrastructure investor Digital Colony is close to striking its first acquisition deal in Asia, with the investment firm said to be close to agreeing to buy Indonesian tower operator Centratama [CENT]. Three sources told TMT Finance that the acquisition is in advanced stages with two sources saying a deal has been signed and will close soon. Digital Colony is understood to be acquiring Centratama in two steps, according to the two sources. Firstly, it will buy a significant minority stake in the business – said to be around 40%; and secondly it will buy the remaining majority stake in the next few years if the towerco meets some of the agreed milestone targets.


Bank Rakyat Indonesia: Growth Opportunities Abound (NOT RATED) - 18 Januari 2021
January 19, 2021 10:41 WIB

Bank Rakyat Indonesia (BBRI IJ)

Growth Opportunities Abound

The micro segment will remain as the growth engine for BBRI going forward supported by the bank’s participation in channelling the Government’s micro grant program and KUR super micro (max IDR10mn ticket size). We also believe that BBRI will continue its partnership with P2P lending to explore the digital ecosystem further. Furthermore, the extension of OJK’s policy on loans restructuring relaxation until March 2022 should also help BBRI to oversee its loans portfolio in a more manageable way.  

 

The micro segment remains its core. In Friday’s small group call, BBRI emphasised that the micro segment would remain its main growth engine given the potentially untapped segment of nearly 60mn borrowers. To penetrate this lucrative market, BBRI should benefit from its participation in the Government’s micro grant program with loans extended to 7.7mn business owners and the Government’s KUR Super Micro loans program (max ticket size of IDR10mn). The 8.7mn potential borrowers from both schemes should be the low hanging fruit for BBRI to grow its micro business. As such, BBRI targets double digits yoy growth for the micro segment in 2021, pushing its micro exposure above the management’s target of 40% to total loans by 2022.  

 

Expanding further into digital areas.Given its strong position in micro lending, BBRI will continue to improve its digital business processes, particularly in regard to the loan underwriting process through BRISPOT. BBRI plans to roll out more features in BRISPOT, such as a cash pick-up feature, KUR Super Micro, a micro customer profiling pipeline and cross-selling marketing and micro insurance. Aside from that, BBRI will also provide loans for P2P lending with short term loans (max 12 months), including names such as Investree, Amartha, Gojek, and Grab, whilst offering several digital loan products via e-commerce channels. Nonetheless, we believe that BBRI is still in the learning phase for these digital initiatives as it needs to familiarize itself with this business and be careful in assessing the risk profile in all aspects. 


Less pressure on the restructured loans bucket. With IDR200tn of total projected restructured loans as of December 2020 (bank only) and mainly dominated by the MSME segment, we believe the formation of new restructured loans in 2021 should be minimal. BBRI, however, emphasised that it conservatively assumes 15% of the restructured loans (~IDR30tn) would be downgraded to lower stages, i.e. stage 2 and 3. To ensure an ample buffer, BBRI has given guidance for credit costs of 2.5-3.0% for FY21F, still above its normal level yet lower than last year’s figure of 3.2%.


... Read More 20210118 BBRI


Ace Hardware Indonesia(ACES IJ.IDR. 1.810 BUY TP: IDR. 1,925) - 18 Januari 2021
January 19, 2021 10:40 WIB

Ace Hardware Indonesia (ACES IJ)

SSSG dipped back in Dec 20

As a result of strict PSBB to minimize holiday Covid-19 clusters, ACES’ SSSG dipped to -14.5% in Dec20 with sales of IDR772bn (+32.4% MoM and -12.2% yoy), leading to a YTD December 2020 SSSG figure of -9.3%. Jan20 should be marked with a lower figure because of the stricter PSBB from 18 December to 8 January 2021, which will be followed by Java – Bali from 11 January to 25 January. The stricter PSBB may result in a potentially heavier slump in Jan20 as malls have to close at 7.00pm. We maintain our TP at IDR1,925 despite the proven resilience of ACES under the worst PSBB conditions. Given the recent share price decline, we upgrade our call to BUY with limited upside of 10.6%. 

 

Still hampered by strict PSBB. December sales were tempered by the strict PSBB from 18 December to 8 January 2020. The result is a -14.5% Dec20 national figure and -18.4% in Jakarta. For the capital city, the figure slumped by 8.3p.p vs Nov20. The weakness in the trend is across the board with ex Java being the biggest decliner. Nevertheless, the Indonesian 12M20 sales of IDR7.5tn (-7.4% yoy) are still in-line with our estimates despite the tempestuous 2020. 

 

January 2021 to also be challengingdue to the tail-end of the holiday PSBB up until 8 January and the newly-imposed Java and Bali strict PSBB shortening the operational hours to 7.00pm only. A closer look at mall traffic indicates the traffic only inched up by 2.5% at high season post implementation when its . For ACES, its SSSG will be lowered by this new PSBB. We view that the Jan21 SSSG might be in the same region of negative teens as the Dec 20 figure of -14.5%.  

 

The National vaccination program has already started with the Indonesian President, Joko Widodo, getting the first shot to mark the start of the program. Options are also kept open for self-paid vaccinations to ease and expedite vaccinations although the majority of the population will be entitled to free vaccines. Given this backdrop, we believe the Ramadan and Eid momentum can still be salvaged this year, thus lifting the performance of retailers in 2021.   



Upgrade to BUY, same TP of IDR1,925 as the company has proven to be the most resilient amid the current pandemic with sales being in-line. ACES currently trades at 29.8x 2021 earnings, just above the average of its 5 year forward PE, steep but still offer some upside.

... Read More 20201218 ACES