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Danareksa Equity Snapshot - Strategy: Progression Continues
April 18, 2019 09:47 WIB

Strategy

The Big Day: Jokowi Leads in Quick Counts

 

A new milestone for Indonesia democracy, the first direct election for both presidential as well as national and regional parlianment in single day, with more than 192m registered vote. The excitement was palpable with the turnout rate is more than 80%. Based on 9 quick count results, Jokowi won the election with margin of victory of 8.24% - 11.20%. Meanwhile Prabowo also claimed victory based on internal real count. In our view, Jokowi’s winning will ensure policy and infra development continuation and we expect more inflow to support market and currency.

 

Indonesia election: smooth and peaceful events. 2019 election has set a new milestone for Indonesia democracy, whereby for the very first time, direct election was done concurrently for both presidential as well as national and regional parliament in one day, requiring complex coordination and logistical planning and execution. Yesterday election was also one of the largest in the worlds, with a total of 192m registered voters (both overseas and domestic). We note the excitement for Indonesian in 2019 election was considerably higher, not only for domestic voters but also for Indonesian overseas. It reflects to stronger turnout rate, with several quick counts results revealed for more than 80% participation, much higher than 2014’s 70%. In our view, the most important thing from yesterday event was its peaceful and smooth events, with only minor logistical problems were reported.

 

Jokowi is leading based on unofficial quick count results. Several unofficial quick count results concurrently released at 3pm, a time that is set by Constitutional Court for the release of the results. From 9 quick counts results release, Jokowi – Amin lead with 54.12% - 55.60% vs Prabowo – Sandi 44.40% - 45.88%, implying margin of victory of 8.24% - 11.20%.  Indeed the margin was smaller when compared to previous pre-election surveys, nonetheless it was more decisive than Jokowi’s 6.3% margin of victory in 2014 presidential election.   After the release of quick count results, in his press conference, Prabowo claimed to win the election, garnering 62% vote based on internal real count, a deja vu to 2014’s event. Supporters of both camps celebrates their victory, very much alike to the last election. The situation remains conducive however, and no incident reported between the two supporters, with the police force has been standby on the highest alert all across the country. General Election Commission will have 35 days to release the actual result, at the latest on 22 May 2019.

 

Positive market impact. The Jokowi winning will ensure policy continuation, which has been focusing in infra development, healthcare, education and social safety fund. With Jokowi lead in various quick count release, we believe this will further strengthened confidence level to Indonesia equity market, with the expected more inflow going in and will also attract domestic investors which previously adopted cautious stance. We anticipate for further inflow, both to equity and bond market, which will undoubtedly give a support to Rupiah. Improvement in CAD outlook, in our view, will become a prelude of Rupiah appreciation and will also pave the way for greater room for rate cut by Central Bank, which we believe to take place toward year-send. 3 basket themes to play: 1. Post election (construction & cement: WIKA IJ, WSKT IJ, SMGR IJ), 2. Lebaran demand (Consumer: ASII IJ, ICBP IJ, HMSP IJ); and 3. Rate sensitive (Banking & property: BBNI IJ and CTRA IJ).

 

 

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Danareksa Equity Snapshot - 18 April 2019
April 18, 2019 09:46 WIB

FROM EQUITY RESEARCH

Strategy: The Big Day: Jokowi Leadsin Quick Counts

A new milestone for Indonesia democracy, the first direct election for both presidential as well as national and regional parlianment in single day, with more than 192m registered vote. The excitement was palpable with the turnout rate is more than 80%. Based on 9 quick count results, Jokowi won the election with margin of victory of 8.24% - 11.20%. Meanwhile Prabowo also claimed victory based on internal real count. In our view, Jokowi’s winning will ensure policy and infra development continuation and we expect more inflow to support market and currency.

To see the full version of this report, pleaseclick here

 

Automotive: Impressive Domestic Car Sales in Mar 2019

Gaikindo reported domestic car sales of 90,189 units in March 2019 (+10.4% mom, but -11.4% yoy). However, due to weak domestic car sales in the first two months of 2019, sales dropped by 13.1% yoy to 253,863 units in 1Q19. The 1Q19 sales are slightly below our estimate as they are only 21.9% of our full year forecast. All in all, we expect flattish car sales of around 1.16mn units in 2019 given high interest rates and uncertainty surrounding the outlook for commodity prices.

To see the full version of this report, pleaseclick here

 

Kino Indonesia: Enticing turnaround story (KINO IJ. IDR 2,520 BUY.TP IDR 3,400 )

KINO offers investors an enticing turnaround story thanks to successful distribution revamping which puts the company in a better position to tap segmented niche markets in consumer products. All in all, we believe the improving performance will translate into strong FY19 earnings growth of 25% yoy. Upgrade to BUY.

To see the full version of this report, pleaseclick here

 

To see the full version of our snapshot, pleaseclick here

 

MARKET NEWS

MACROECONOMY

Government: increase Non-oil and gas export target

Government increased non-oil and gas export target to USD 175bn or from 7.5% to 8%. To support new target, government will expand new destination of export and accelerate the building of new trade agreements. Government will utilize digital infrastructure and industrial revolution 4.0 to accelerate development of all industry. There are five prioritized sector: food and beverage, textile and clothing, automotive, electronical and chemical. (Investor Daily)

 

CORPORATE

HMSP to seek shareholder approval in EGM in 9 May 2019

HM Sampoerna will conduct AGM and EGM in 9 May 2019. In the EGM, the company will seek shareholder approval to adjust the Article 3 regarding the company’s purpose and objectives and business activities. Below are several Proposal for the adjustment:

 

1.HMSP also include the distribution in the scope of business (previously only agribusiness and trade)

2.The company enlarges the main business activities to inclue flavoring ingredients, chewed and snuff tobacco,

3.large trade scale trade in tobacco and cigarette business

   Supporting business activities are also extend to logistic and packaging (Company)


Danareksa Equity Snapshot - KINO, 18 April 2019
April 18, 2019 09:45 WIB

Kino Indonesia(KINO IJ)

Enticing turnaround story

 

 

KINO offers investors an enticing turnaround story thanks to successful distribution revamping which puts the company in a better position to tap segmented niche markets in consumer products. All in all, we believe the improving performance will translate into strong FY19 earnings growth of 25% yoy. Upgrade to BUY.

 

Expect the solid growth to continue. KINO recorded much better sales performance in 2018 buoyed by successful distribution revamping. This year, the company is optimistic that the improvements will continue, especially with the support from several new products which were launched last year: (1) Lola Remedios – a herbal remedy entering the Philippines’ market in November 2018; (2) Sasha Toothpaste – a halal product targeting the Muslim community with plans for more aggressive promotions starting in 2Q19 and (3) pet food - with its Pro Diet and Pro Balance brands. Furthermore, this year’s food revenues will get a timely boost from the full consolidation of Morinaga Kino Indonesia (MKI).

 

FY19F earnings estimated to grow 25% yoy. Following the release of strong FY18 results, we estimate that KINO’s FY19 revenues will grow briskly by 20% yoy to IDR4.3tn. According to the management, its personal care products – including its Ellips brand (Hair Vitamin) – are enjoying strong demand in both local and export markets. To cater to the growing demand, additional capacity is expected to come onstream in 2Q-3Q19. For beverages, its products are continuing to gain market share - approaching that of its closest competitor Cap Badak (in FY18, the revenues growth of KINO’s beverages reached 25% yoy). To promote its new products, we believe that the FY19F A&P expenses will be little changed from those incurred in FY18.  Against this backdrop, we revise up our FY19F earnings estimate by 7.8% to IDR188bn (+25% yoy).

 

Upgrade to BUY. Based on our survey, Sasha toothpaste is already available in major minimarkets at competitive prices. For pet food, Nestle Purina is the leader in Indonesia’s market - with 29% market share, followed by Mars Pedigree (26%) – based on data from Mordor Intelligence. All in all, we like the stock for its attractive valuation of 18.5x FY19F with FY19F earnings growth that is estimated to surpass that of the sector. Taking into account our new forecast, we upgrade our recommendation to BUY with a higher TP of IDR3,400 (FY19F PE 25.9x) – based on DCF valuation (WACC 11.6%, TG 5%).

 

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