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Danareksa Equity Snapshot - 11 Januari 2019
January 11, 2019 09:55

FROM EQUITY RESEARCH

Plantation: Dec 18 Inventory: Another Record High (OVERWEIGHT)

Malaysia’s palm oil inventory jumped to another record high of 3.22mn tons in Dec 18 (+17.7% YoY, +6.9% MoM), exceeding the street’s estimate of 3.14mn tons, due to both weaker-than-expected exports and higher-than-expected output. Over the near term, we expect the CPO price to get support from seasonally-lower output and higher exports due to Chinese New Year demand. We remain positive on the FY19 CPO price outlook on slower supply growth and stronger demand boosted by the B20 program and India’s recent move to cut import duty on ASEAN palm oil. Maintain OVERWEIGHT

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MARKET NEWS

 

MACROECONOMY

Government: expects non-oil and gas exports to grow by 7.5%yoy in 2019

The Ministry of Trade expects non-oil and gas exports to grow by 7.5%yoy in 2019, lower than in the previous year (11%). The Ministry of Trade also stated that the exports growth target may not be reached. This lower target reflects concerns on the global economy which according to the IMF may only grow 2.7%yoy in 2019. To support exports growth, the government also plans to complete 12 trade treaties in 2019 and to obtain better access to markets in the Middle East, South Korea and Europe. (Bisnis Indonesia)

 

Government to ease foreign ownership regulation in the property sector

This policy will be contained in the Land Law Draft which is being discussed in the House of Representatives. According to the Minister of Agrarian and Public Space, Sofyan Djalil, foreigners can obtain a right to use (hak pakai) which can follow the period of right to build (HGB). However, only property within certain price limits (that will be regulated later by a Minister Regulation) can be owned by foreigners. (Kontan)

 

Comment: Despite the decision to match the ownership period of right to use with that of right to build, it is unclear if the apartment will be allowed to have both the right to use and right to build at the same time. Since we believe the perception of right to use is below that of right to build, we expect a minimal impact from this policy on property sales.

 

 

SECTOR

Consumer: Packaging companies target 5-6% yoy growth in 2019

Packaging companies are targeting 5-6% yoy growth in 2019. While the F&B business is expected to show stronger growth, there are some challenges including the possibility that excise tax is imposed on plastic products and changes in people’s lifestyle habits. The Indonesian Federation of Packaging Industry stated that the turnover in the packaging industry may reach IDR90tn this year, higher than 2017’s figure of IDR87tn. Around 40-60% of the total raw materials required for the plastic industry are imported. (Bisnis Indonesia)

 

 

CORPORATE

Adhi Karya: Targets 20%yoy growth of new contracts in 2019

Adhi Karya (ADHI) has set a target of 20%yoy growth in new contracts in 2019 to IDR28.4tn from 2018’s realization of IDR23.7tn. Infrastructure projects such as toll roads, water treatment, dams, and property will remain the company’s focus this year. ADHI is waiting for the third tranche of payment for the Jakarta LRT project of IDR4.0tn based on the works carried out from Jul-Dec 2018. ADHI received the first two tranches of payment for the Jakarta LRT project stage 1 in 2018. The first payment in Mar18 amounted to IDR3.4tn, while the second payment in Dec18 was IDR2.5tn. As such, ADHI is optimistic it can book positive operating cash flow for FY18. Furthermore, ADHI seeks to conduct IPOs for two of its subsidiaries in 2019: Adhi Persada Gedung and Adhi Commuter Properti. (Investor Daily)

 

Two banks shortlisted to advise Indosat on tower sales

Two banks are said to be frontrunners to advise Indosat Ooredoo on a potential divestment of its cellular towers. An official mandate has not been given yet, but Indosat has reportedly shortlisted JP Morgan and UBS, with one of them selected to undertake the sale process. Based on previous reports, Indosat was expected to sell 2,000-3,000 towers, with a total value of US$280-400m, (Rp3.9-5.6 tn) based on past tower deals. (TMT Finance)

Comment: Based on TMT Finance’s valuation range, the implied average value is Rp1.9 - 2.0 bn / tower. Based on previous calculations we think the valuation is ~Rp1.4 bn / tower. Indosat has ~8,500 towers with a tenancy ratio above 1.3x.