14 March 2018

Premier Insight
News & Analysis
JCI Index Corporates
Equity | Indonesia | Research Daily

6,800 9,000

8,000 INTP: Indocement (INTP IJ; Rp20,400; Hold) released its sales volume for Feb
6,700
7,000
18 with highlights as follow:
6,600 6,000
JCI Index

•
5,000
Rp bn
6,500
4,000
Domestic demand was 4.8mn tons in Feb18 (+6.0% yoy) with overall Java
6,400 3,000 +5.5% yoy and ex-Java +6.5% yoy, pretty much an even growth across
6,300
2,000 the nation. Bags grew +2.4% yoy while bulk increased by +17.5% yoy
1,000
indicating significant demand from infrastr ucture with property demand
6,200 -
still lagging behind. YTD Feb18 volume stood at 10.5mn tons (+8.2% yoy),
9-Feb
12-Feb
13-Feb
14-Feb
15-Feb
19-Feb
20-Feb
21-Feb
22-Feb
23-Feb
26-Feb
27-Feb
28-Feb
1-Mar
2-Mar
5-Mar
6-Mar
7-Mar
8-Mar
9-Mar
12-Mar
13-Mar

still showing strong momentum growth.

Foreign net buy (sell) • Indocement’s sales volume was 1.3mn tons (+11.2% yoy) growing faster
than the industry causing market share to expand to 26.2% vs 24.9% a
0 10%
year earlier. Due to heavy competition, Indocement lost some market
0 5%
share in Jakarta, Banten and West Java, while wining market share in ex-
% net buy/market turnover

- 0%

Java. Indocement maintained Rajawali as the fighting brand introduced in

Net buy (sell) in Rp bn

26-Feb

27-Feb

28-Feb

1-Mar

2-Mar

5-Mar

6-Mar

7-Mar

8-Mar

9-Mar

12-Mar

13-Mar

(0) -5%

(0) -10%
30 cities and accounts about 1% of total volume.
(0) -15% • YTD Feb 18, Indocement’s volume was 2.8mn tons (+11.3% yoy) continue
(0) -20%
to outperform the industry with bags sales to grow +8.7% yoy and bulk to
(0) -25%
grow +20.9% yoy.
(0) -30%

Comment: The cement industry indicted healthy growth momentum in the first
Key Indexes two months resulted from increasing demand from infrastructure. Demand from
Index Closing 1 day 1 year YTD
property remains to lag. Increasing demand from infrastructure will have neutral
JCI 6,501 1.0% 20.2% 2.3%
impact on margins since bulk sales is usually more competitive than retail sales,
LQ45 1,075 1.0% 20.0% -0.4% translating to less pricing power. We maintain our Hold call on Indocement with
DJI 25,179 - 0.6% 20.6% 1.9% volume growth estimates of 5-6%.
SET 1,800 1.4% 17.2% 2.7%
HSI 31,594 1.9% 32.6% 5.6%
APLN: Agung Podomoro Land (APLN IJ; Rp224 ; Buy) claimed that Podomoro City
NKY 21,824 1.7% 11.2% -4.4%
FTSE 7,215 - 0.1% -2.1% -6.2% Deli Medan apartment sales has reached more than 90%. The Podomoro City Deli
FSSTI 3,486 0.0% 10.8% 4.0% Medan stood on 5.2ha of land on which 7 tower are built with 3,000 unit available
EIDO 29 0.4% 15.3% 0.5% for sale with purchase price starting from Rp800mn/unit. (Kontan).

Commodity price PWON: Pakuwon Jati (PWON IJ; Rp635 ; Buy) has just launched one project in
Commodities Last price Ret 1 day Ret 1 year
Surabaya in this April as the company still has several existing residential projects
(in USD)
Oil/barrel (WTI) 61.4 -1.1% 26.5%
outstanding and available for sale in Tunjungan Plaza, Kasablanka, and Pakuwon
CPO/tonne 610.0 0.2% -14.1% city. The project includes 370 units with the price starting from Rp2bn/unit. In
Soy/bushel 10.1 0.2% 2.1% regard to the project, the company allocated Rp2tr for construction and
Rubber/kg 1.7 0.0% -43.7%
development project this year. They eye for Rp2.6tr sales target with 70%
Nic kel/tonne 13,623 -1.4% 38.4%
Tins/tonne 21,430 -0.2% 10.7%
proportion coming from apartment project. (Bisnis Indonesia).
Copper/tonne 6,876 -0.9% 20.3%
Gold/try.oz (Spot) 1,323 0.0% 9.9% UNTR: United Tractors (UNTR IJ; Rp35,200; Buy) reported Jan’18 operational
Coal/tonne 98.0 -1.4% 24.4%
performance as follow:
Corn/bushel 3.7 0.0% 6.4%
Wheat/bushel (USd) 489.8 0.2% 15.8%
• Heavy equipment sales reached 405 units, up 26% mom and 50% yoy in
Jan’17. January sales were 28% higher than average monthly sales of 316
Source : Bloomberg units recorded in 2017. Sales improvement was backed by increasing
demand from the mining sector, which formed 56% of total Jan’18 sales
(vs. 37% in Jan’17).
• PAMA recorded OB removal of 66.6mn bcm (-9.4% mom, +21% yoy) while
coal mining volumes reached 8.6mn tons (-17% mom, +4.9% yoy) in
Jan’17. OB removal in Jan’18 relatively flat compared to average OB
removal volumes of 66.7mn bcm posted in 2017, while coal mining
volumes in Jan’18 were 10% below average monthly coal mining volumes
of 9.4mn tons in 2017.
• Coal mining division posted coal sales volumes of 737k tons in Jan’18,
approximately 40% above average monthly coal sales volumes of 528k
tons recorded in 2017. (Company).
Refer to Important disclosures in the last page of this report
PremierInsight

Comment: We maintain our positive outlook for UNTR due to strong machinery
sales. We reiterate our Buy rating with TP of Rp40,000.

WIKA: Wijaya Karya (WIKA IJ; Rp1,800; Buy) booked earnings of Rp1.2tn (+14%
yoy) in FY17, came slightly below market expectation, forming 96% of consensus
estimate and 97% of our forecast. Revenue was Rp26.2tn (+67% yoy) in FY17,
however COGS was growing faster at 73% yoy, resulting in lower gross margin of
13.2% (FY16: 14%). Moreover, despite booking income from JO of Rp573bn
(+51% yoy) in FY17, operating margin was down by 140bps as WIKA booked
increase of opex to Rp677bn (+28% yoy). Net margin also diminished to 4.6%
(FY16: 6.8%) in FY17 from increase from interest expense (+56% yoy) and
impairment (130%). In quarterly basis, WIKA booked an earnings of Rp519bn
(110% qoq, -12% yoy) in 4Q17, cumulating to 43% of FY17 target.

(In Rp bn) FY17 FY16 YoY 4Q17 3Q17 QoQ yoy % of Consensus % of Ours
Revenue 26,176 15,669 67% 10,300 6,392 61% 63% 114% 114%
Gross profit (before JO) 3,449 2,192 57% 1,227 640 92% 14% 119% 123%
Operating profit 2,772 2,044 36% 1,200 595 102% 11% 105% 109%
Net profit 1,202 1,059 14% 519 247 110% -12% 96% 97%

Gross margin 13.2% 14.0% 11.9% 10.0%

Operating margin 10.6% 13.0% 11.7% 9.3%
Net margin 4.6% 6.8% 5.0% 3.9%

Comment: We believe one of the reasons for WIKA’s slow growth on earnings is
delay on Jakarta- Bandung High Speed Railway (HSR). WIKA is initially expecting
earnings of around Rp200bn from HSR construction. We will review our forecast
based on this FY17 result. At this stage, maintain Buy with TP of Rp2,900.

Markets & Sector

Automotive sector: 4W sales was 93.7k units in Feb18 (-1.5% yoy, -2.3%
mom), with cumulative 2 months numbers to hit 189.7 units (+4.5% yoy).
Mitsubishi was very successful with Xpander as total volume was 55k units of
which 34k units has already been delivered. Daily production has been ramp up to
10k units per months from initial production plans of 5-6k units. In the first two
months, Toyota booked sales of 53k units followed by Mitsubishi of 36k units,
Daihatsu 34k units, Honda 25k units and Suzuki 23k units. (Investor Daily).

Infrastructure sector: Work Safety Committee (KKK) has finished the

evaluation in regard to the accidents occurred in several infrastructure projects.
On March 9th, Public Works and Public Housing Minister as the person in charge of
KKK issued four recommendations:

• First, letter of warning issued to ADHI and WIKA for the accident of their
construction projects
• Second, the replacement of PT Hutama Karya’s project head who is in
charge of Manggarai – Jatinegara Double Track project. The accident to
pertaining project happened in the early of February.
• Third, letter of warning and sanction applied to PT Virama Karya’s
consultant head.
• Fourth, the replacement of board of directors of WSKT who are in charge
of project that experienced an accident. (Kontan).

Comment: We are neutral on the sanction is not going to interfere company’s

operational activity and finance. Moreover, WSKT’s board of director does has
term of service which ending soon in 2018.

Refer to Important disclosures in the last page of this report 2

PremierInsight

Economic

State spending: Indonesia’s plans to maintain electricity and some fuel prices at
the current level for the next two years will cost around Rp8.1tn to be added to
earmarked subsidy – the plan is going to be a discussion material with the House
of Representative. The argument behind this is to increase middle class
purchasing power, finance minister Sri Mulyani being particularly keen to maintain
inflation rate stable and companies balance sheet intact. (Jakarta Globe)

Comment: Earmarked energy subsidy is currently at Rp94.5tn and if the amount

stipulated above is true, the 8.5% addition should have limited impact as we
believe other spending items could still have room for efficiency. The commitment
to maintain the prices, as much as they would help purchasing power, may be
negatively taken by the market as this shows the administration’s commitment to
float energy prices is fluid and contextual pertaining to condition.

Sovereign rating: S&P senior director Kim Eng Tan sees no rating upgrade or
downgrade for Indonesia within one or two years. Concerns evolve around SOEs
balance sheet, which have been reliant toward capital market financing and
undergone significant upward trend in debt-to-equity ratio. Failure to help in
refinancing instruments by the state could potentially make Indonesia reach
heavy debt maturity by 2020, according lead analyst Xavier Jean. As for subsidy,
it is seen that the subsidy would not necessarily damage the rating, provided
there increased benefit from infrastructure earnings. (Jakarta Post).

Refer to Important disclosures in the last page of this report 3

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INVESTMENT RATINGS
BUY : Expected total return of 10% or more within a 12-month period
HOLD : Expected total return between -10% and 10% within a 12-month period
SELL : Expected total return of -10% or worse within a 12-month period

ANALYSTS CERTIFICATION.
The views expressed in this research report accurately reflect the analyst;s personal views about any and all of the subject securities or issuers; and no part of the
research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

DISCLAIMERS
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or liability as to its accruracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general
circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, finacial situation and the particular
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