Indonesia Healthcare Sector

Transcription

Indonesia Industry Focus
Refer to important disclosures at the end of this report
DBS Group Research . Equity
Long road to good health
 Universal healthcare plan – the game changer
 Plenty of upside, but there are challenges
 Scarcity driven valuation
 Prefer pharmaceuticals over healthcare services
Universal healthcare plan – the game changer.
Indonesia’s healthcare expenditure is among the lowest
in the region, at only 2.7% of GDP in 2012. The
introduction of the universal healthcare plan (JKN)
starting in 2014 is expected to change the sector’s
outlook in the long run. JKN calls for 100% healthcare
coverage for all Indonesians by 2019. This structural
change should drive Indonesia’s healthcare spending
growth ahead, and be higher than 12% CAGR.
Plenty of upside, but there are challenges. There is
substantial upside for the healthcare sector, driven by
under-spending in healthcare, rising income,
infrastructure deficiency and growing insurance
industry. Nevertheless, we identified some key
challenges, in particular the lack of government
funding, low participation from the private sector and
lack of appropriate infrastructure to support this major
change in the healthcare system.
Prefer pharmaceuticals over healthcare services.
Direct beneficiaries are pharmaceuticals and healthcare
services sectors. Pharmaceutical producers procuring
generic medicines would see volumes surge but slight
margin pressure will be inevitable. Healthcare services
players, on the other hand, face larger risks, both
operational (a cap on implementation of INA–CBG
standard rates for health services) and financial (capital
intensive business). Both sectors currently trade at
premium valuations driven by lack of options, but we
prefer pharmaceuticals over healthcare services.
Pharmaceuticals offers better returns and more stable
cash flows. Top pick is Kalbe Farma (KLBF).
www.dbsvickers.com
ed: JS / sa: MA
24 Jun 2014
JCI :
4,842.13
Analyst
Edward Tanuwijaya +6221 3003 4932
[email protected]
Maynard ARIF +6221 3003 4930
[email protected]
STOCKS
Price
Company
Kalbe Farma
Kimia Farma
Tempo Scan Pacific
Sido Muncul
Siloam
Sarana Meditama
Sejahteraraya
Rp
1,645
950
2,960
750
14,300
2,750
219
Mkt Cap
US$m
Target
Price
Rp
6,437 1,900
440
N.A
1,112
N.A
939
N.A
1,380 12,750
N.A
271
N.A
147
Source: DBS Vickers, Bloomberg Finance L.P
Performance (%)
3 mth
13.5
16.6
(4.5)
(9.1)
37.5
9.3
6.8
12 mth
Rating
38.2
BUY
6.7
NOT RATED
208.3
NOT RATED
N.A
NOT RATED
N.A FULLY VALUED
37.5
NOT RATED
(15.8)
NOT RATED
Industry Focus
Analysts
Edward Tanuwijaya (6221) 3003 4932
[email protected]
Maynard Arif (6221) 3003 4930
[email protected]
Table of Contents
Highlights
3
Indonesia healthcare industry overview
4
 Acutely low healthcare sector spending
4
 Private expenditure remains as major
contributor
4
Healthcare reform on its way
6
 Universal healthcare plan – the game
changer
6
 Thailand’s success story as a benchmark
7
Pharmaceuticals and hospitals sector to reap the
benefits
8
 Generic drugs – the low hanging fruit for
pharmaceutical companies
8
 Striving for adequate healthcare service
coverage
9
 Potential repatriation of Indonesian pationes 10
Prefer pharmaceuticals over hospitals sector
11
APPENDIX
12
 Healthcare services players summary
12
 Pharmaceuticals players summary
12
 Pharmaceuticals valuation
13
 Hospitals valuation
13
 BPJS participants classification
14
 Hospital beds facility allotment
15
 JCI accredited hospitals in Indonesia
15
 Hospital bed shortage analysis
16
 Regulations for pharmaceuticals sector
17
 Regulations for hospital sector
18
 Negative investment list changes
19
Stock profiles
Page 2
20
Industry Focus
Highlights
Universal coverage – game changer in long term. We
expect structural shift in Indonesia's healthcare sector in the
long run with the introduction of universal healthcare plans
(JKN) since early 2014 due to several reasons:



Acutely low healthcare spending at only 2.7% of 2012
GDP, among the lowest in the Asia Pacific region.
JKN’s roadmap targets 100% healthcare coverage for
all Indonesians healthcare by 2019.
Favorable demographics: rising middle to upper class
population (from 97.5m people (or 41% of population)
in 2002 to 151.3m (or 61% of population) in 2013,
defined as both Emerging Consumer Class and
Consumer Class on World Bank studies), urbanisation,
and improving affordability.
Chill and relax in the near term. Despite the positive long
term structural shift, we are more cautious in the near term as
we believe there are challenges in JKN’s implementation.
requirement of number of beds. Moreover, lack of of
healthcare coverage also reduces affordability in accessing
hospital services.
On the flip side, there are challenges that will restrict the
growth opportunities in the private healthcare service industry
in the near term: high capital requirement to set up
hospitals.and cap rate on healthcare service charges (based on
INA-CBG) as defined in Health Ministry regulation no.
69/2013.
Premium valuations justified. Defensive sectors in general
command premium valuations, especially in a volatile market.
Moreover, the additional boost in the Indonesian market is
driven by scarcity premium as there are limited choices for
investors based on market cap and liquidity.
KLBF performance during correction
170
JCI Index
160



Funding could potentially be an issue with low budget on
healthcare.
Slow progress in infrastructure development to
accomodate JKN’s registration process and logistics.
Low participation from the private sector on healthcare
services.
KLBF
150
140
130
120
110
100
90
The industry will directly benefit from the boost in healthcare
spending primarily generic drugs. Generic drugs is set to grow
faster than the overall industry at c.12% CAGR in the same
period with the implementation of JKN. Hence, local players
will benefit more as they dominate the generic segment and
key players are Kalbe Farma (KLBF IJ), Kimia Farma (KAEF), Indo
Farma (INAF), Hexpharm (non-listed), and Dexa Medica (nonlisted).
Healthcare services: Plenty of upside but accompanied
by risks. There is substantial upside for healthcare services due
to lack of supply. Indonesia’s bed ratio per 10,000 population
at 10.9 is well below ASEAN’s average of 15.7. Our analysis
shows that at least 20 provinces fell short in terms of
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80
Pharmaceutical sector: more sustainable growth. The
pharmaceutical industry is well established and has been
growing at a CAGR of 8.7% in the past four years. Business
Monitor International (BMI) expect slightly stronger growth
(c.9% p.a.) for the next four years to reach Rp89.3tr by 2017.
Source: Bloomber Finance L.P.
Strategy and stock picks. Direct beneficiaries of JKN
implementation are pharmaceutical and healthcare services
sectors. We prefer pharmaceuticals over healthcare services as
pharmaceuticals players offer better returns and more stable
cash flows. We upgraded Kalbe Farma to BUY (from HOLD)
with a new TP of Rp1,900 (offering 16% upside). We also
initiated coverage on Siloam Hospitals with FULLY VALUED call
and TP of Rp12,750.
Where things can be different

Better and faster JKN implementation

Increased budget allocation towards healthcare sector

Better than expected macro outlook in Indonesia
Page 3
Industry Focus
Indonesia healthcare industry overview
Acutely low healthcare sector spending
Indonesia’s healthcare expenditure was an inadequate 2.7% of
GDP in 2012, despite growing at 12% CAGR for the past 5
years. This figure is one of lowest in the region and below
ASEAN countries’s average of 4%.
Indonesia healthcare spending
300
Rp tr
248
12% CAGR
250
224
202
200
Private expenditure remains a major contributor
Government spending on healthcare will remain subdued with
the state budget’s emphasis on energy subsidies. Private
healthcare expenditure (even with larger base) has outgrown
government healthcare expenditure significantly in the past 4
years. As such, private healthcare expenditure has been the
major contributor to the steep rise in healthcare expenditure
per capita (at ~15% CAGR from 2009 - 2012). Despite the
high growth, Indonesia’s healthcare expenditure per capita
remains one of the lowest in ASEAN.
183
160
150
100
50
2009
2010
2011
2012
2013
Source: WHO, Business Monitor International (BMI)
Indonesia among the lowest healthcare spender
Strong growth in healthcare expenditure per capita
% of GDP
1,200,000
Rp
Rp/capita (LHS)
US$/capita (RHS)
120
US$
989,949
1,000,000
100
95
Brunei
Myanmar
Laos
Indonesia
Malaysia
India
ASEAN
Thailand
Singapore
Philippines
China
Cambodia
Vietnam
Japan
2.7%
South Korea
10%
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
Moreover, according to recently issued President Instruction
(Inpres) no. 4/2014 on 19May2014 and the state budget
revision, the Health Ministry’s budget is cut by as part of the
government’s streamlining measures to save c.Rp43tr in order
to keep the national current account deficit below 2.4% of
GDP this year. This is also partly due to budget increase
(c.30%) in energy and fuel subsidies. Therefore, we believe this
will put further pressure on healthcare spending in the near
term.
800,000
80
600,000
60
400,000
40
200,000
20
Source: CIA World Factbook
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Government healthcare expenditure (at 1.5% of total
government expenditure in 2014) remains miniscule compared
to the amount allocated and spent for energy and fuel
subsidies.
Source: WHO, DBS Vickers
Private vs gov’t healthcare expenditure
300
Rptr
Government
Private
250
Gov’t healthcare expenditure (vs energy subsidy)
25%
Healthcare
Electricity subsidy
Fuel subsidy
200
166
150
20%
17.3%
100
96
117
133
14.6%
CAGR
6.4%
CAGR
149
15%
82
50
10%
64
66
69
2009
2010
2011
-
8.7%
Source: WHO, DBS Vickers
5%
1.5%
0%
2008
2009
2010
2011
2012
2013
2014
Source: WHO, Ministry of Finance (Indonesia), Budget Statistics
Page 4
75
2012
2013
Industry Focus
Healthcare expenditure per capita comparison
2,500
2,395
2,000
1,500
1,061
1,000
372
500
221
109
105
95
56
39
18
-
Source: WHO, ASEAN.org, DBS Vickers
Private spending on healthcare (at 66% of the total in 2011)
remains the larger pie as the government’s share declined from
40% in 2009 to 34% in 2011. The underpenetration of
commercial health insurance in Indonesia resulted in a high
percentage of out-of-pocket healthcare spending. Out-ofpocket expenses formed 76% of private healthcare spending
or 50.2% of total healthcare expenditure (higher than
ASEAN’s average of 46.3%) in 2011.
Out-of-pocket expenditure remains the highest portion
Government
Private - out of pocket
100%
90%
Private - other source
17%
16%
16%
14%
13%
12%
11%
12%
45%
44%
45%
54%
52%
49%
48%
48%
38%
40%
40%
32%
35%
40%
40%
2002
2003
2004
2005
2006
2007
2008
15%
16%
48%
50%
40%
36%
34%
2009
2010
2011
80%
70%
60%
50%
40%
30%
20%
10%
0%
Source: WHO
Out-of-pocket healthcare expenditure portion comparison
90%
80.6%
80%
70%
60.4%
60%
57.0% 56.0% 55.6%
50.2%
50%
46.3%
39.6%
40%
35.4%
30%
20%
14.8% 13.7%
10%
Thailand
Brunei
Malaysia
Laos
ASEAN
Indonesia
Vietnam
Philippines
Cambodia
Singapore
Myanmar
0%
Source: WHO
Page 5
Industry Focus
Healthcare reform on its way
Universal healthcare plan – the game changer
Despite the urgent need for healthcare reform, the neverending debate on universal healthcare coverage has been on
for a long time. Indonesia’s law no. 40/2004 described the
need to implement universal insurance system (JKN). There are
several schemes currently - public sector workers (ASKES),
social security (JAMSOSTEK), social security for Indonesia
armed forces (ASABRI) and civil servant’s savings & insurance
(TASPEN). To achieve a unified national health insurance
system, law no. 24/2011 mandated that existing schemes will
be unified under one social security agency (BPJS) in stages
starting January 2014.
As of 1 January 2014, ASKES and JAMSOSTEK have officially
ceased operations and renamed “BPJS Kesehatan” and “BPJS
Ketenagakerjaan”, respectively. “BPJS Kesehatan” has taken
over the health insurance scheme effective immediately, while
“BPJS Ketenagakerjaan” is expected to start taking over the
existing social security schemes from JAMSOSTEK by 1 July
2015. ASABRI and TASPEN will have to complete the transfer
of their programs to “BPJS Ketenagakerjaan” by 2029.
Milestones
Source: BPJS implementation regulation no.1/2014
BPJS participants are divided into two categories:


PBI (Penerima Bantuan Iuran): Beneficiaries of health
insurance contributions (i.e. poor and near-poor) and
Non-PBI: Participants (including foreigners who have
worked in Indonesia for at least 6 months)
contributing designated monthly premiums.
Under the new system, BPJS participants are entitled to receive
designated health services at healthcare providers participating
in JKN scheme. The new system provides a more structured
and streamlined process for referrals (from primary care to
secondary referrals, etc). The rates that can be claimed by
healthcare providers is also standardised and is extensively
Page 6
described in Indonesia Case-Based Group (INA-CBG) under
Health Ministry regulation no.69/2013.
BPJS acts as facilitator with main functions of pooling
members’ premiums and making payments to healthcare
providers for services provided to members under the universal
healthcare scheme. Currently, there are close to 120m
members (representing less than ~50% coverage). In its “BPJS
roadmap”, the government is targeting full coverage by 2019 .
National universal coverage (JKN) roadmap
(2019)
270m
100% coverage
(2014)
120m
50% coverage
(2012)
76.4m
30% coverage
Source: Roadmap to National Health Insurance 2012 – 2019
Refer to APPENDIX for more details on participants (including
their contributions) and hospital bed facilities allotment.
Starting 1 January 2014, JKN must cover at least:
 PBI (Penerima Bantuan Iuran): Beneficiaries of health
insurance contributions (i.e. poor and near-poor)
 Indonesia’s national army (ABRI) and civil servants
under the Ministry of Defence and his/her family
members
 Indonesia’s police (Polri) and civil servants in the
police department and his/her family members
 Existing members of ASKES
 Existing members of JAMSOSTEK
However, as expected, the first few months of implementation
have highlighted the lack of preparation of this new system
despite issuance of JKN implementation regulation no.1/2014.
Our back-of-envelope estimate points that the JKN program is
unfunded when compared against the expected national
healthcare expenditure. The government’s allocated budget for
JKN of c.Rp29tr only makes up a mere 12% of total healthcare
expenditure. The underfunded status should improve over
time.
The huge potential of the healthcare sector, while currently a
“big if”, lies with the successful implementation of JKN, which
Industry Focus
will be crucial in shaping Indonesia’s healthcare industry and
definitely benefit healthcare players in Indonesia in the long
run.
Thailand’s declining portion of out-of-pocket expenses
based on total healthcare expenditure
100%
90%
Thailand’s success story as a benchmark
Look no further than Indonesia’s neighbour Thailand ( started
universal coverage initiative in 2002) for the huge potential
that JKN can generate. Fast forward a decade later. The
universal coverage program was implemented efficiently and is
an overwhelming success. The following statistical data backs
this impressive achievement:
80%
9
9
8
9
27
27
26
27
64
64
65
64
2002
2003
2004
10
9
9
10
11
11
17
15
14
15
14
14
73
76
76
75
75
76
2006
2007
2008
2009
2010
2011
70%
60%
50%
40%
30%
20%
10%
0%

Healthcare expenditure per capita has more than
tripled to US$202 in 2011 from US$60 in 2001.
Portion of government’s expenditure was lifted to a
staggering 76%, from 57% in 2001, which in turn
significantly reduced the population’s burden on
healthcare expenditure. The portion of out-of-pocket
expenses was slashed to just 13.7% from 22% in
2001.

Gov't
2005
Private - out of pocket
Private - others
Source: WHO
Indonesia’s current healthcare expenditure per capita of US$95
is Thailand’s level in 2005.
Thailand healthcare spending tripled within a decade
since 2002
US$
202
200
179
150
158
160
2008
2009
130
108
100
73
78
2002
2003
86
94
50
0
2004
2005
2006
2007
2010
2011
Source: WHO
Page 7
Industry Focus
Pharmaceutical and hospital sectors to reap the benefits
Pharmaceuticals and hospitals, the two main sectors in the
heavily regulated industry, are bound to be significantly
impacted by the new government initiatives. Refer to
APPENDIX for list of regulations that regulate the
pharmaceutical and hospital sectors.
Generic drugs –low hanging fruit for pharmaceutical
companies
Indonesia’s pharmaceutical industry is well-established, with
local pharmaceutical manufacturers controlling approximately
75% of the market, according to International Pharmaceutical
Manufacturers Group (IPMG). This is partly due to regulations
favouring local drug producers (i.e. protectionist business
environment) which form formidable barriers to entry to
foreign drugmakers.
The newly issued negative investment list (DNI) under
Presidential Decree 39/2014 does not have a significant impact
on the pharmaceutical sector. The maximum foreign
ownership in manufacturers in the pharmaceutical sector was
raised only from 75% to 85%.
Pharmaceutical sales rose by 8.7% CAGR in the past 4 years to
Rp63.8tr and contributed 26% of total healthcare expenditure.
Prescription medicine (which includes patented and generic
drugs) drove pharmaceutical sales, posting 11% CAGR in the
same period.
Strong growth in pharmaceutical sales
70
Rp tr
64
65
8.7% CAGR
60
50
59
53
55
49
46
45
40
35
30
25
20
2009
2010
2011
2012
2013
Source: Business Monitor International (BMI)
Patented drugs manufactured by international firms command
premium prices. These patented drugs are preferred by the
higher-income population and will benefit from Indonesia’s
growth in income. But, these drugs are more vulnerable to
Page 8
counterfeit (due to sub-standard supervision quality and lax IP
regime), and overall low purchasing power of the Indonesian
population.
The roll-out of new BPJS initiatives starting 2014 will
potentially spur generic drug sales volume further, albeit
generating lower margins to pharmaceutical companies as
compared to patented drugs.
Prescription drugs is the key driver
45
Rp tr
Patented
Generic
40
39
11% CAGR
35
34
31
30
25
28
25
26
24
20
15
17
19
21
10
5
8
9
9
11
12
2009
2010
2011
2012
2013
-
Besides prescription drugs, over-the-counter (OTC) drugs make
up a significant portion of pharmaceutical sales in Indonesia.
Low purchasing power and the limited availability of
prescription drugs in some areas are the major reasons that a
high portion of Indonesians (more than 60%) are selfmedicating.
Indonesia is considered as the most attractive market for OTC
producers in ASEAN. However, as purchasing power increases
and the more affordable generic drugs became increasingly
available, OTC product sales growth has moderated over the
past few years (at 5.4% CAGR, vs prescription drugs at 11%
CAGR). Its contribution to pharmaceutical sales has also
steadily declined from c.45% in 2009 to c.41% in 2013. OTC
products are now widely regarded as “preventative” medicine.
Industry Focus
Declining contribution of OTC drug sales
Patented drug
Generic drug
Public vs private hospitals market share trend
100%
OTC
90%
100%
80%
90%
80%
44.8%
42.1%
43.1%
41.0%
40.7%
70%
70%
60%
60%
50%
50%
40%
57%
60%
48%
43%
40%
2013
2014
40%
37.7%
40.0%
39.4%
40.5%
40.4%
30%
30%
20%
20%
10%
52%
17.5%
17.5%
17.9%
18.4%
19.0%
2009
2010
2011
2012
2013
10%
0%
0%
2012
Public
Private
Source: Ministry of Health, DBS Vickers
Moderating growth in OTC sales
Indonesia hospitals breakdown (Jan 2014)
Rp tr
30
5.4% CAGR
25
22
21
20
Ministry of
Health & other
ministries
1.6%
25
24
20
15
10
Private
59.6%
Gov't
(provincial,
district,
municipal)
28.7%
5
Military & Police
7.2%
2009
2010
2011
2012
2013
State-owned
3.0%
Striving for adequate healthcare service coverage
The number of hospitals in Indonesia has reached 2,244 as of
Jan 2014, according to data from the Ministry of Health. As
expected, private hospitals (both non-profit and profit)
outnumber public hospitals with 60% market share. Public
hospitals’ market share declined quite significantly to 40%,
from 48% in 2012.
Hospitals in Indonesia are divided into 2 categories - general
and special. Each category has further breakdowns in terms of
classes, number of specialists and medical services provided.
Hospital categories
Minimum requirement
2,500
Public
Private
2,244
2,083
2,000
Class
Basic
specialist
General
hospitals
A
B
C
D
4
4
4
2
Category
Class
Medical
specialist
facility
Medical subspecialist
facility
Special
hospitals
A
B
C
Complete
Limited
Minimum
Complete
Limited
Minimum
1,721
22.6% CAGR
1,500
1,195
4.7% CAGR
888
907
2013
2014
0
2012
Subspecialist
12
8
13
2
Minimum requirement
1,000
828
5
4
4
Other
specialist
1,337
893
500
Medical
support
specialist
Category
Number of hospitals in Indonesia
Source: Law no. 44/2009, DBS Vickers
Page 9
Industry Focus
Despite the ~24% increase in hospital beds annually, the
current ratio of beds per 10,000 population is 11, still
significantly below ASEAN’s average of 15.7 per 10,000
population.
Analysis on hospital beds shortage
Required bed capacity ratio
(per 10,000 population)
Indonesia hospitals bed capacity and beds-to-population
ratio
300,000
Beds (LHS)
12.0
Beds / 10,000 population (RHS)
280,000
10.9
260,000
10.0
9.7
240,000
9.0
220,000
200,000
273,762
180,000
238,373
7.0
6.0
140,000
8.0
7.0
160,000
120,000
11.0
6.0
170,656
5.0
144,410
100,000
4.0
2010
2011
2012
Beds to 10,000 population ratio - regional comparison
28
25
20
21**
27***
No. of province in hospital beds shortage
20
29
32
% of province in hospital beds shortage
61%
88%
97%
Source: WHO, Indonesia Ministry of Health, DBS Vickers
Note: * equivalent to ASEAN average level, ** equivalent to Thailand’s
level and *** equivalent to Singapore’s level. Refer to APPENDIX for
more detailed data per province.
Potential repatriation of Indonesian patients.
In 2012, Indonesian patients were estimated to have
accounted for c.48% and c.56% of international patients in
Singapore and Malaysia, respectively. We recognize that this
represents untapped potential in Indonesia healthcare sector,
when Indonesia’s healthcare services improve in the future.
The upside potential is estimated to be as large as c.7% of
Indonesia’s current healthcare expenditure of ~US$ 24bn.
2013
30
15.7*
Singapore and Malaysia private hospitals attract mostly
Indonesians
27
22
21
18
15.7
15
10.9
10
10
7
7
6
5
0
Source: Singapore Tourism Board (STB), Malaysia Healthcare Travel
Council (MHTC), DBS Vickers
Source: CIA Factbook, Indonesia Ministry of Health, DBS Vickers
We did an analysis on adequacy of hospital beds in all 33
provinces in Indonesia based on data from the Ministry of
Health. Our analysis shows that at least 20 provinces (or 60%
of the total) fell short on the number of hospitals beds
required.
According to the Singapore Tourism Board, foreign visitors
seeking healthcare services in Singapore increased at c.9%
CAGR between 2008 – 2012 and surpassed 850,000 in 2012.
Indonesian healthcare visitors made up just below 50%, and
c. 80% were from Jakarta. In terms of spending, Indonesian
healthcare visitors (including those accompanying someone
with healthcare needs) spent an average of SGD 2,207
(equivalent to Rp20.5m) in 2012. This translates to Rp8.3tr.
According to Malaysia Healthcare Travel Council (MHTC), the
number of incoming healthcare travellers reached 671,727 in
2012 (c.16% CAGR from 2008 – 2012). This translates to
about Rp5.4tr, if we assume 56% are from Indonesia and
spend about 30% less per person compared to Singapore.
Page 10
Industry Focus
Prefer pharmaceuticals sector over hospitals sector
We believe that the newly implemented JKN system will
undoubtedly shape Indonesia’s healthcare sector in the long
term. However, the huge potential upside is also
accompanied with execution risk which is related to adequate
infrastructure to carry out the necessary plans.
Both pharmaceuticals and health services sectors are the
direct beneficiaries from the potential successful BPJS
implementation. However, there are limited number of listed
Indonesian companies in these two sectors, which in turn
justify premium valuations due to scarcity:


Pharmaceuticals: Kalbe Farma (KLBF), Kimia Farma
(KAEF), Indofarma (INAF), Tempo Scan (TSPC), and
Sido Muncul (SIDO).
Hospitals: Siloam International Hospitals (SILO),
Sarana Meditama Metropolitan (SAME), and
Sejahteraraya Anugrahjaya (SRAJ).
We believe that the clear winners from the JKN
implementation are pharmaceutical producers procuring
generic medicines (with the potential of accelerating volume
growth), although margin pressures are inevitable.
As the price of generic medicines are capped by the ceiling
set in Ministry of Health Decree no 092/MENKES/SK/11/2012,
the focus should be on the cost side. Pharmaceutical
producers with large production capacities and networks
should have the edge to win procurement tenders conducted
by the government for generic medicines.
Hospital developers and operators are in a good position to
rake in extra revenue. However, hospital players face larger
risks in both operations and financial aspects. Strong brands
(which goes hand-in-hand with excellent service quality) and
significant top line growth are critical to ease concerns on
cashflow (given the nature of low operating margins in this
business) and capital intensive requirement on expansion.
Implementation of INA-CBG standard rate for health services
should further cap revenue generation. Health Ministry
regulation no 69/2013 provides a comprehensive healthcare
service category list with assigned standard tariffs for each.
Physician density per 10,000 population
Australia
United Kingdom
United States
Japan
Singapore
China
Brunei
Vietnam
Philippines
India
Burma
Thailand
Cambodia
Indonesia
38.5
27.7
24.2
21.4
19.2
14.6
13.6
12.2
12
6.5
5
Density
(per 10,000
population)
3
2.3
2
0
10
20
30
40
50
Source: CIA World Fact Book, WHO, Kaiser Family Foundation
To conclude, pharmaceutical players have a better risk to
reward ratio than hospitals. Additionally, valuations for
pharmaceuticals players are more reasonable than hospital
developers & operators.
For the pharmaceuticals sector, our top pick is KLBF. We
upgraded KLBF to BUY (from HOLD) with a new TP of
Rp1,900 (offering 16% upside), implying 34x FY15F PE. KLBF
stands to reap benefits from higher spending on
pharmaceuticals, particularly higher volumes in generic
products.
Together in this report, we initiate coverage on SILO with
FULLY VALUED call and Rp12,750 TP, based on DCF valuation
on its existing hospitals and potential new hospitals, implying
20x EV/EBITDA 2015 (expensive as compared against regional
peers). Potential upside to our valuation will be from better
than expected operational performance of its younger
hospitals (less than 5 years operation under SILO brand) and
successful execution of future acquisitions. With its current
position as the market leader in private hospital business,
SILO is in great position to tap into Indonesia’s
underpenetrated healthcare sector and the country’s rising
healthcare need. SILO is in an aggressive expansion mode
until 2017, whereby it would require large and constant
funding to reach its goal.
In addition, Indonesia is facing a shortage in medical human
resources as compared to regional countries to support
healthcare providers.
Page 11
Industry Focus
APPENDIX
Healthcare service players summary
Ticker
No. of
hospitals
Geographic exposure
SILO IJ
16
8 hospitals in Java (i.e. Greater
and Surabaya) and another 8
hospitals outside Java.
Sarana Meditama
Metropolitan
SAME IJ
2
Greater Jakarta only
Adding capacity to existing hospitals
Sejahteraraya Anugrahjaya
SRAJ IJ
2
Greater Jakarta only
Focusing on turning around the operations
of its 2nd hospital
Company
Siloam International Hospitals
Business strategy / Expansion plan
Aggressive expansion - target to have 40
hospitals by end of 2017
Source: DBS Vickers, Bloomberg Finance L.P.
Pharmaceuticals players summary
Company
Ticker
Key segments
Balance sheet
Expansion plan
Kalbe Farma
KLBF IJ
OTC &
prescribed
drugs
Net cash of Rp970bn (-11%
net gearing) as of 1Q14
Adding capacity to
current manufacturing
facilities
Kimia Farma
KAEF IJ
Retail
Net cash of Rp343bn (-21%
net gearing) as of Dec 2013
Exploring to expand into
Saudi Arabia and
Vietnam
State-owned company
Tempo Scan
TSPC IJ
OTC
Net cash of Rp1.4tr (-34%
To enter nutritional
health business
Focus on its 9 core OTC
brands
Exploring to expand into
Japan, Vietnam and
Thailand through JVs
and to invest in hotels
and real estate in
Central Java
- Too dependent on its
market leading herbal
medicine brand "Tolak
Angin"
- Recently IPO on 18Dec2013
- 99.5% dividend payout
ratio in 2013 (as SIDO has
sufficient cashflow for future
expansion)
Sido Muncul
SIDO IJ
Herbal
medicine
Page 12
Net cash of Rp1.4tr (-50%
Other remarks
Industry Focus
Pharmaceuticals valuation
BB Ticker
Company name
Market
cap
US$m
PE(x)
13A
14F
PB(x)
15F
13A
14F
15F
Div. Yield
ROE
%
%
KLBF IJ
Kalbe Farma
6,470.3
35.4
28.6
23.7
8.3
7.3
6.3
1.7
26.1
KAEF IJ
Kimia Farma
449.3
25.2
22.8
18.1
3.4
3.0
2.6
0.7
14.1
TSPC IJ
Tempo Scan Pacific
1,092.2
20.1
18.8
15.7
3.2
3.1
2.8
2.9
17.1
SIDO IJ
Sido Muncul
957.0
28.3
24.6
21.4
4.4
4.0
3.6
1.8
20.7
32.3
26.7
22.2
7.0
6.2
5.4
2.0
23.8
Weighted average
Hospitals valuation
Market cap
BB Ticker
SILO IJ Equity
SAME IJ Equity
SRAJ IJ Equity
BGH TB Equity
EV/EBITDA(x)
PE(x)
PB(x)
Div. Yield
ROE
Company name
Siloam International
Hospitals
Sarana Meditama
Metropolitan *
Sejahteraraya
Anugrahjaya *
Bangkok Dusit
Medical Services
US$m
FY14F
FY15F
FY14F
FY15F
FY14F
FY15F
%
%
1,388.5
27.2
19.1
175.8
122.2
8.2
7.7
0.0
5.4
271.1
n/a
n/a
n/a
n/a
n/a
n/a
0.0
42.8
152.0
n/a
n/a
n/a
n/a
n/a
n/a
0.0
-5.8
8,022.2
2.7
2.1
3.1
2.7
0.5
0.4
13.1
17.5
2,537.9
16.6
14.1
27.6
23.5
6.9
5.9
1.8
27.8
611.1
15.8
13.9
28.5
24.4
4.5
4.2
0.0
13.8
BH TB Equity
Bumrungrad Hospital
BCH TB Equity
Bangkok Chain *
RFMD SP Equity
Raffles Medical
1,751.6
19.4
18.0
27.3
24.2
3.8
3.4
1.6
19.7
IHH SP Equity
IHH Healthcare
11,000.5
20.2
18.2
40.4
35.6
1.7
1.7
0.7
3.6
KPJ MK Equity
KPJ Healthcare *
2,769.1
16.9
14.7
30.5
27.3
2.8
2.7
0.0
9.4
APHS IN Equity
Apollo Hospitals
Enterprise *
2,226.5
17.7
14.8
34.0
27.8
4.2
3.8
0.0
11.1
FORH IN Equity
Fortis Healthcare *
927.3
23.3
15.7
127.0
46.1
1.2
1.2
0.0
3.1
RHC AU Equity
Ramsay Healthcare *
10,010.6
15.1
12.0
28.6
24.2
5.8
5.2
1.9
20.7
SHL AU Equity
Sonic Healthcare *
7,303.4
11.9
10.9
17.5
15.7
2.2
2.1
4.0
12.6
PRY AU Equity
Primary Healthcare *
2,377.4
8.3
7.7
13.5
12.1
0.8
0.8
4.7
5.9
Indonesia
27.2
19.1
175.8
122.2
8.2
7.7
0.0
10.1
Thailand
6.5
5.5
10.0
8.6
2.2
1.9
9.8
19.6
Singapore
20.1
18.2
38.6
34.0
2.0
1.9
0.9
5.8
Malaysia
16.9
14.7
30.5
27.3
2.8
2.7
0.0
9.4
India
19.4
15.1
61.3
33.2
3.3
3.0
0.0
8.7
Australia
13.1
11.1
22.7
19.6
3.8
3.5
3.0
15.9
Market weighted average
Source: DBS Vickers, Bloomberg Finance L.P. . Note: * Bloomberg consensus estimate
Page 13
Industry Focus
BPJS participants classification
Source: Presidential Decree No. 111/2013
Page 14
Industry Focus
Hospital beds facility allotment
Source: Presidential Decree No. 111/2013
JCI accredited hospitals in Indonesia
No
Name
Location
First Accredited
1
Eka Hospital
West Jakarta suburb
11-Des-10
2
Eka Hospital Pekanbaru
West Sumatra
01-Mar-14
3
Fatmawati General Hospital
South Jakarta
14-Des-13
4
RS Premier Bintaro
West Jakarta suburb
15-Jan-11
5
RS Premier Jatinegara
East Jakarta
03-Des-11
6
RS Premier Surabaya
Surabaya (East Java)
06-Mar-13
7
RSUP Sanglah
Bali
24-Apr-13
8
RSUPN Dr. Cipto Mangunkusumo
South Jakarta
20-Apr-13
9
Rumah Sakit Pondok Indah - Puri Indah
West Jakarta
16-Mar-13
10
Santosa Hospital
West Java
13-Nop-10
11
Siloam Hospitals Lippo Village
West Jakarta suburb
19-Sep-07
Source: Joint Commission International (JCI)
Page 15
Industry Focus
Hospital bed shortage analysis
No.
Province
Population (m)
Required beds (*)
Beds available
Shortage (Surplus)
1
N.A.D
4.60
7,218
8,559
(1,341)
2
Sumatera Utara
12.98
20,382
20,840
(458)
3
Sumatera Barat
4.90
7,700
6,970
730
4
RIAU
5.54
8,695
6,586
2,109
5
Jambi
3.17
4,977
3,671
1,306
6
Sumatera Selatan
7.45
11,697
8,342
3,355
7
Bengkulu
1.77
2,771
2,194
577
8
Lampung
7.88
12,368
6,339
6,029
9
Kepulauan Bangka Belitung
1.30
2,041
1,720
321
10
Kepulauan Riau
1.68
2,636
2,764
(128)
11
Dki Jakarta
9.76
15,326
22,987
(7,661)
12
Jawa Barat
45.74
71,806
36,177
35,629
13
Jawa Tengah
39.29
61,687
40,378
21,309
14
D I Yogyakarta
3.46
5,428
10,960
(5,532)
15
Jawa Timur
37.48
58,839
44,406
14,433
16
Banten
10.63
16,693
8,915
7,778
17
Bali
3.89
6,108
6,242
(134)
18
Nusa Tenggara Barat
4.53
7,114
4,498
2,616
19
Nusa Tenggara Timur
4.68
7,354
5,677
1,677
20
Kalimantan Barat
4.40
6,902
5,752
1,150
21
Kalimantan Tengah
2.21
3,473
2,318
1,155
22
Kalimantan Selatan
3.70
5,801
4,796
1,005
23
Kalimantan Timur
3.55
5,578
7,089
(1,511)
24
Sulawesi Utara
2.27
3,565
5,845
(2,280)
25
Sulawesi Tengah
2.52
3,950
4,008
(58)
26
Sulawesi Selatan
7.68
12,057
13,929
(1,872)
27
Sulawesi Tenggara
2.28
3,576
2,962
614
28
Gorontalo
1.04
1,633
1,569
64
29
Sulawesi Barat
1.16
1,819
1,168
651
30
Maluku
1.53
2,408
2,883
(475)
31
Maluku Utara
1.04
1,630
1,712
(82)
32
Papua Barat
0.76
1,194
1,917
(723)
33
Papua
3.31
5,198
4,684
514
248.17
389,624
308,857
80,767
Total
Source: DBS Vickers, Ministry of Health, WHO
Note: * Total population (in m population) x 15.7 (the average bed ratio per 10,000 population for ASEAN) x 100.
Page 16
Industry Focus
Regulations for pharmaceuticals sector
Regulation
1
Health Ministry regulation no.
1799/MENKES/PER/XII/2010
Regarding
Key points
Pharmacy Industry
1. Pharmaceutical company has to obtain
license from Health Minister to produce drugs
and/or drug ingredients.
2. Pharmaceutical company has the following
functions: manufacturing; educating and
training; research and development.
3. A licensed pharmaceutical company has to
be a limited company and have at least 3
pharmacists (Indonesia citizens) for quality
assurance, production and quality control.
4. A licensed pharmaceutical company must
produce report activities (including production
volume and value) every 6 months.
2
1120/MENKES/PER/XI/2008
Drug registration
1. Every drug circulated in Indonesia must be
registered and licensed for marketing (valid
and renewable every 5 years).
2. Locally produced drug can only be
registered by a licensed pharmaceutical
company. (Pharmaceutical company is licensed
by Health Minister)
3. Imported drug registration can be
registered by local pharmaceutical company
which has written approval from foreign
pharmaceutical.
4. Pharmaceutical company has to market the
registered drugs within 1 year of approval
date.
5. Penalties & suspensions for violating
regulations.
3
Health Ministry decree no.
312/MENKES/SK/IX/2013
National essential
drugs list
Contain a list of national essential drugs with
guidance on usage and management
4
Health Ministry decree no.
436/MENKES/SK/XI/2013
Generic drug price
Contain a list of generic drug in Indonesia
together with retail price ceiling
5
Presidential decree no.
39/2014
Negative
investment list
(DNI)
Maximum foreign ownership increased to
85% from 75% previously
Remarks
Revision of Health Ministry
regulation no.
1010/MENKES/PER/XI/2008
decree no.
2500/MENKES/SK/XII/2011
decree no.
092/MENKES/SK/II/2012
Revision of Presidential decree
no. 36/2010
Page 17
Industry Focus
Regulations for hospital sector
Regulation
Regarding
1
Law no. 44 / 2009
Hospital operation
2
147/MENKES/PER/I/2010
Hospital license
Key points
1. Defining hospitals duties and functions.
2. Infrastructure and facility requirements of operational hospitals.
3. Classification of hospitals based on type of services and
management. (Refer to previous table of hospital classification).
4. Each hospital has to have construction permit (for a period of 2
years and extendable for another 1 year) and operational license
(valid & renewable every 5 years). Both can be revoked during period
of validity.
5. National tariff scheme is set by Health Ministry.
6. Penalties for violating regulations
1. Valid registration for medical practice is issued by Indonesia
medical council.
2. Doctor and dentist registration letter and license to practice is
valid, renewable every 5 years and can be revoked during period of
validity.
3. Each doctor and dentist is granted licenses to practice maximum in
three places (including gov't, private and individual practice).
4. Defining medical practitioner obligations, patient rights and
obligations
5. Foreign graduates who intend to have medical practice in
Indonesia should possess work permit, proficient in Bahasa Indonesia
and passed Indonesia medical council evaluation.
6. Foreign medical practitioner can only practice as a means of
knowledge and technology transfer and is prohibited to practice
independently.
7. Foreign medical practitioner license to practice is valid, renewable
every 1 year and can be revoked during period of validity.
8. Foreign medical practitioner can only practice on either class A or
B hospitals.
9. Penalties for violating regulations
3
Law no. 29 / 2004
Medical practitioner
4
2052/MENKES/PER/X/2011
Medical practitioner license
5
317/MENKES/PER/III/2010
Foreign nationals health
personnels
6
69/2013
Standard tariff rates for
healthcare services (first-level
and advanced) in national
health insurance program
List of standard tariff for each category of healthcare services
7
Presidential decree no. 39/2014
Negative investment list (DNI)
Maximum foreign ownership increased to 85% from 75% previously
Page 18
Industry Focus
Negative investment list changes
1
Sector
Presidential Decree no. 39/2014
Presidential Decree no. 36/2010
More open to foreign investment
Power plants (10 MW and above)
Electricity transmission
Electricity distribution
Max. foreign ownership is 95%.
Max. foreign ownership is 100% for
public private partnership (PPP)
Pharmaceuticals
Venture capital
Horticulture
Max. foreign ownership is 95% for public
private partnership (PPP)
Max. foreign ownership is 49% with
recommendation from Transportation
Ministry
Max. foreign ownership is 85%
More restricted to foreign investment
Power plants (1-10 MW capacity)
Onshore oil and gas drilling
Domestic investment only
Seaports
Land transportation terminals
General cargo terminals
2
3
Closed
Offshore oil and gas drilling
Oil and gas well operation and maintenance service
Oil and gas design and engineering service
Telecommunication sector (content, information
center, other value added services)
Data communication system
Internet connection service
Restricted to partnership
(outside East Indonesia region)
New regulations
Oil and gas platform construction
Oil and gas spherical tank construction
Onshore upstream oil and gas installations
Onshore oil and gas pipeline
Offshore oil and gas pipeline
Oil and gas horizontal / vertical tank construction
Onshore oil and gas storage
Oil and gas survey
Geology and geophysics survey
Geothermal survey
Oil and gas technical inspection service
Biomass pellets producer
Electricity maintenance and testing service
Non-hazardous waste treatment
Distribution
Storage
Cold storage in Sumatra, Java and Bali
Cold storage in Kalimantan, Sulawesi, East Nusa
Tenggara, Maluku and Papua
Retail trade
Source: Investment Coordination Board (BKPM), DBS Vickers
Page 19
Industry Focus
Stock Profiles
Page 20
Kalbe Farma
Bloomberg: KLBF IJ | Reuters: KLBF.JK
BUY Rp1,620 JCI : 4,847.70
Tried & tested resilience
(Upgrade from HOLD)
Price Target : 12-Month Rp 1,900 (Prev Rp 1,390)
Potential Catalyst: M&A, new products
DBSV vs Consensus: In line
 Defensive play
 Structural change to support LT growth
 Ability to maintain margin is key
Analyst
Maynard ARIF +6221 3003 4930
[email protected]
Upgrade to BUY from HOLD with new TP of
 Rp1,900
Defensive play. We favour Kalbe Farma not only as
a consumer stock but also as a defensive stock for
investors who are looking for shelter in an uncertain
environment. While Kalbe is not immune to the
challenging macro environment, the company has
been a consistent performer and was able to sustain
its operating margin at mid- to high-teen levels even
during 2008-09.
Price Relative
Rp
R e la t iv e In d e x
1 ,7 6 0 .0
247
1 ,5 6 0 .0
227
1 ,3 6 0 .0
207
187
1 ,1 6 0 .0
167
9 6 0 .0
147
7 6 0 .0
127
5 6 0 .0
107
3 6 0 .0
J u n -1 0
J u n -1 1
K a lb e F a r m a ( L H S )
J u n -1 2
87
J u n -1 4
J u n -1 3
R e la t iv e J C I IN D E X ( R H S )
Forecasts and Valuation
FY Dec (Rp bn)
Turnover
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
EPS (Rp)
EPS Pre Ex. (Rp)
EPS Gth (%)
EPS Gth Pre Ex (%)
Diluted EPS (Rp)
Net DPS (Rp)
BV Per Share (Rp)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)
Earnings Rev (%):
Consensus EPS (Rp):
Other Broker Recs:
2013A
2014F
2015F
2016F
16,002
2,825
2,573
1,920
1,920
41
41
11
11
41
16
173
39.6
39.6
81.4
26.7
1.0
9.4
CASH
25.3
18,506
3,459
3,111
2,259
2,259
48
48
18
18
48
19
202
33.6
33.6
39.3
21.8
1.2
8.0
CASH
25.7
(12)
49
B: 14
21,405
4,016
3,579
2,598
2,598
55
55
15
15
55
22
235
29.2
29.2
29.1
18.5
1.4
6.9
CASH
25.4
(16)
60
S: 1
24,666
4,659
4,163
3,044
3,044
65
65
17
17
65
26
274
24.9
24.9
26.8
15.7
1.6
5.9
CASH
25.5
N/A
69
H: 9
ICB Industry : Health Care
ICB Sector: Pharmaceuticals & Biotechnolog
Principal Business: Kalbe Farma manufactures and distributes
pharmaceutical, consumer health, and nutritional products. It
commands the highest market share within Indonesian
pharmaceutical and OTC drugs market.
Source of all data: Company, DBS Vickers, Bloomberg Finance L.P
Page 21
www.dbsvickers.com
ed: TH / sa: MA
Structural change to support LT growth. The
healthcare industry’s longer-term outlook is
supported by a structural shift, with the introduction
of universal healthcare plan (BPJS) which will cover all
Indonesians by 2019 (from just 50% in 2014). For
Kalbe, the main beneficiary of BPJS will be its
prescription drugs business.
Upgrade to BUY. We are upgrading Kalbe Farma
from HOLD to BUY with a new price target of Rp1,900
based on 34x FY15F PE (10% discount to Unilever).
While we reckon that Kalbe's valuation is expensive,
the premium is justified by its leadership in pharma
sector and solid results even in tough times, akin to
Unilever's resilient performance.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (Rpbn/US$m)
Major Shareholders
Gira Sole Prima (%)
Santa Seha Sanadi (%)
Others (%)
Free Float (%)
Avg. Daily Vol.(‘000)
46,875
75,938 / 6,338
9.8
9.3
33.7
47.2
46,511
Kalbe Farma
Defensive play
Healthcare spending to support LT growth
We favour Kalbe Farma not only as a consumer stock but
also as a defensive stock for investors who are looking for
shelter in an uncertain environment. While Kalbe is not
immune to the challenging macro environment, the
company has been a consistent performer and was able to
sustain its operating margin at mid- to high-teen levels even
during 2008-09. Moreover, Kalbe has a healthy balance
sheet with a net cash position of almost Rp1tr.
From a macro perspective, the healthcare industry’s longerterm outlook is supported by a structural shift, with the
introduction of a universal healthcare plan (BPJS) which will
cover all Indonesians by 2019 (from just 50% in 2014).

Market leadership. Kalbe has been the pharmaceutical
industry leader with a 12% market shares (FY13) in
Indonesia. Moreover, Kalbe is also tops in the prescription
drug market with 15% of the pie (FY13), supported by
the largest marketing team across the country.

Growing faster than the industry. Kalbe has been able to
grow faster than the industry at a 15% CAGR from
2009-13. Meanwhile, the pharmaceutical industry itself
has been growing steadily at a CAGR of almost 11% in
the same period.

New products. The company is well positioned for future
growth with product expansions such as oncology and
nutrition. Kalbe also plans to expand into stem cells and
genomics as part of its future pipelines.

As such, healthcare spending is expected to sustain and grow
in excess of 10% until 2017, according to a BMI report. Using
the case study of Thailand, there is a potential for significant
long-term boost in healthcare spending in Indonesia.
Healthcare spending in Thailand has more than tripled in a
decade since its introduction.
For Kalbe, the main beneficiary of BPJS will be its prescription
drugs business. However, we expect the first phase of the
implementation to be slow and the impact to be minimal to
Kalbe. Kalbe expects a small incremental business (just an
additional 1-2% per annum) for its unbranded generic
products. Moreover, generic drugs have lower margins and
hence Kalbe will maintain a balanced mix to keep its margins
high.
National universal coverage (JKN) roadmap
(2019)
270m
100% coverage
Healthy margin and profit. Despite the revenue volatility,
Kalbe has a solid track record in maintaining its margin
and profitability at mid to high teen. The company was
able to maintain its margin at 48% in FY13 despite a
20+% depreciation in the rupiah.
(2014)
120m
50% coverage
(2012)
76.4m
30% coverage
Operating margin and revenue
Source: Roadmap to National Health Insurance 2012 – 2019
Rpbn
20.0%
25,000
16.0%
20,000
12.0%
15,000
8.0%
10,000
4.0%
5,000
Upgrade to BUY
We are upgrading Kalbe Farma from HOLD to BUY with a new
price target of Rp1,900 (Rp1,390 previously). We upgrade
Kalbe for the following reasons:

0.0%
08
09
10
11
Revenue (RHS)
Source: DBS Vickers 12
13
14F
EBIT margin (LHS)
15F


The structural story on universal healthcare plan
which will support the longer-term outlook for the
industry.
Stable and resilient business, especially in the
pharmaceutical and health-related products.
Proven ability to sustain margins over the last several
years through strong brand name and pricing power.
Our new price target of Rp1,900 is based on 34x FY15F PE and
the multiple is at a 10% discount to Unilever's 38x. While we
reckon that Kalbe's valuation is expensive, the premium is
justified by its leadership in pharma sector and solid results
even in tough times, akin to Unilever’s resilient performance.
Page 5
Kalbe Farma
Income Statement (Rp bn)
Balance Sheet (Rp bn)
FY Dec
Turnover
Cost of Goods Sold
Gross Profit
Other Opng (Exp)/Inc
Operating Profit
Other Non Opg (Exp)/Inc
Associates & JV Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Pre-tax Profit
Tax
Minority Interest
Preference Dividend
Net Profit
Net Profit before Except.
EBITDA
2013A
16,002
(8,323)
7,679
(5,130)
2,549
2
0
22
0
2,573
(602)
(51)
0
1,920
1,920
2,825
Sales Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (%)
Effective Tax Rate (%)
Cash Flow Statement (Rp bn)
FY Dec
Pre-Tax Profit
Dep. & Amort.
Tax Paid
Assoc. & JV Inc/(loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Capital Exp.(net)
Other Invts.(net)
Invts in Assoc. & JV
Div from Assoc & JV
Other Investing CF
Net Investing CF
Div Paid
Chg in Gross Debt
Capital Issues
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash
2014F
2015F
2016F
18,506
21,405 24,666
(9,624) (11,128) (12,769)
8,882 10,277 11,897
(5,766)
(6,674) (7,684)
3,116
3,603
4,213
3
4
4
0
0
0
(9)
(29)
(54)
0
0
0
3,111
3,579
4,163
(793)
(913) (1,041)
(59)
(68)
(79)
0
0
0
2,259
2,598
3,044
2,259
2,598
3,044
3,459
4,016
4,659
17.3
13.8
14.9
10.7
23.4
15.7
22.4
22.3
17.7
25.5
15.7
16.1
15.6
15.0
25.5
15.2
16.0
16.9
17.2
25.0
2013A
2014F
2015F
2016F
2,573
281
(646)
0
0
(1,274)
933
(965)
82
0
2
0
(881)
(901)
287
0
3,111
346
(793)
0
(733)
0
1,930
(1,000)
0
0
0
0
(1,000)
(904)
0
0
3,579
416
(913)
0
(477)
0
2,605
(500)
0
0
0
0
(500)
(1,039)
0
0
4,163
451
(1,041)
0
(741)
0
2,832
(500)
0
0
0
0
(500)
(1,218)
0
0
Turnover
Cost of Goods Sold
Gross Profit
Other Oper. (Exp)/Inc
Operating Profit
Associates & JV Inc
Pre-tax Profit
Tax
Minority Interest
Net Profit
Net profit bef Except.
EBITDA
Sales Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (%)
Gross Margins (%)
Opg Profit Margins (%)
Net Profit Margins (%)
2013A
2014F
2015F
2016F
Net Fixed Assets
Invts in Associates & JVs
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Other Current Assets
Total Assets
2,926
42
850
1,615
3,053
2,145
684
11,316
3,739
42
835
1,635
3,558
2,468
684
12,962
3,846
42
820
2,693
3,845
2,854
684
14,785
3,919
42
804
3,800
4,404
3,246
684
16,899
ST Debt
Creditor
Other Current Liab
LT Debt
Other LT Liabilities
Shareholder’s Equity
Minority Interests
Total Cap. & Liab.
584
1,152
905
0
175
8,108
392
11,315
584
1,245
1,511
0
0
9,464
451
13,255
584
1,442
1,001
0
0
11,022
519
14,568
584
1,651
1,041
0
0
12,849
597
16,722
3,826
1,031
3,953
1,051
4,941
2,109
5,642
3,216
2013A
2014F
2015F
2016F
Gross Margins (%)
48.0
Opg Profit Margin (%)
15.9
Net Profit Margin (%)
12.0
ROAE (%)
25.3
ROA (%)
18.5
ROCE (%)
23.0
Div Payout Ratio (%)
40.0
Net Interest Cover (x)
NM
Asset Turnover (x)
1.5
Debtors Turn (avg days)
45.1
44.5
Creditors Turn (avg days)
Inventory Turn (avg days)
117.2
Current Ratio (x)
2.8
Quick Ratio (x)
1.4
Net Debt/Equity (X)
CASH
Net Debt/Equity ex MI (X)
Cash
Capex to Debt (%)
165.3
Z-Score (X)
22.4
N. Cash/(Debt)PS (Rp)
22
Opg CFPS (Rp)
20
Free CFPS (Rp)
(1)
Segmental Breakdown / Assumptions
48.0
16.8
12.2
25.7
18.6
23.5
40.0
361.6
1.5
45.5
47.1
130.0
2.5
1.2
CASH
Cash
171.3
20.4
22
57
20
48.0
16.8
12.1
25.4
18.7
23.7
40.0
124.8
1.5
45.4
45.8
126.0
3.3
1.8
CASH
Cash
85.6
16.1
45
66
45
48.2
17.1
12.3
25.5
19.2
24.2
40.0
78.3
1.6
45.1
45.8
122.1
3.7
2.2
CASH
Cash
85.6
0.0
69
76
50
2013A
2014F
2015F
2016F
3,869
2,505
3,792
5,836
N/A
16,002
4,521
2,903
4,698
6,385
N/A
18,506
5,255
3,369
5,777
7,004
N/A
21,405
6,065
3,871
7,051
7,680
N/A
24,666
2,353
1,335
2,287
1,704
N/A
7,679
2,713
1,518
2,787
1,864
N/A
8,882
3,102
1,761
3,369
2,045
N/A
10,277
3,519
2,024
4,112
2,242
N/A
11,897
60.8
53.3
60.3
29.2
N/A
48.0
60.0
52.3
59.3
29.2
N/A
48.0
59.0
52.3
58.3
29.2
N/A
48.0
58.0
52.3
58.3
29.2
N/A
48.2
Non-Cash Wkg. Capital
Net Cash/(Debt)
Rates & Ratio
0
(613)
96
(466)
0
(904)
0
27
0
(1,039)
0
1,066
0
(1,218)
0
1,115
Quarterly / Interim Income Statement (Rp bn)
FY Dec
FY Dec
2Q2013
3Q2013
4Q2013
1Q2014
3,931
(1,997)
1,934
(1,297)
637
(6)
0
10
0
641
(148)
(16)
478
478
697
4,019
(2,070)
1,948
(1,330)
619
(31)
0
(1)
0
587
(134)
(9)
444
444
657
4,562
(2,454)
2,108
(1,391)
717
41
0
1
0
759
(189)
(16)
553
553
758
4,067
(2,122)
1,945
(1,301)
643
12
0
2
0
657
(152)
(13)
493
493
715
12.6
10.1
10.7
7.6
49.2
16.2
12.2
2.2
(5.7)
(2.9)
(7.1)
48.5
15.4
11.1
13.5
15.3
15.9
24.6
46.2
15.7
12.1
(10.9)
(5.6)
(10.3)
(10.9)
47.8
15.8
12.1
FY Dec
FY Dec
Revenues (Rp bn)
Prescription
Consumer Health
Nutritionals
Distribution & Logistics
Others
Total
Gross Profit (Rp bn)
Prescription
Consumer Health
Nutritionals
Others
Total
Gross Profit Margins (%)
Prescription
Consumer Health
Nutritionals
Others
Total
Source: Company, DBS Vickers
Page 23
Kimia Farma Persero
Refer to important disclosures at the end of this
Bloomberg: KAEF IJ | Reuters: KAEF.JK
report
NOT RATED Rp950 JCI : 4,842.13
All eyes on potential merger
Price Target : Not Rated
Potential Catalyst: Merger with Indofarma (INAF)
Involved in entire value chain from
 manufacturing to retail
Analyst
[email protected]
 Negatively impacted by weakening IDR
 Potential merger with Indofarma
 Trading on reasonable valuations
From manufacturing to retail. Kimia Farma
Persero (KAEF) derives revenue from three core
businesses - manufacturing (22%), distribution (40%)
and retail (37%). Manufacturing segment generates
high single digit net profit margin, while margins are
low for the other two segments.
Price Relative
Rp
578
1 ,1 1 2 .5
478
9 1 2 .5
378
7 1 2 .5
278
5 1 2 .5
178
3 1 2 .5
1 1 2 .5
J u n -1 0
J u n -1 1
J u n -1 2
K im ia F a r m a P e r s e r o ( L H S )
J u n -1 3
78
J u n -1 4
FY Dec (Rp bn)
Turnover
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
EPS (Rp)
EPS Pre Ex. (Rp)
EPS Gth (%)
EPS Gth Pre Ex (%)
Diluted EPS (Rp)
Net DPS (Rp)
BV Per Share (Rp)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)
Other Broker Recs:
2010A
2011A
2012A
2013A
3,184
170
179
139
139
25
25
122
122
25
0
193
38.0
38.0
29.8
30.0
0.0
4.9
CASH
13.2
3,481
249
232
172
172
31
31
24
24
31
8
218
30.7
30.7
164.6
20.7
0.9
4.4
CASH
14.5
3,734
316
278
205
205
37
37
19
19
37
6
249
25.7
25.7
25.5
15.9
0.7
3.8
CASH
15.3
4,348
272
284
215
215
39
39
5
5
39
6
282
24.6
24.6
34.9
18.4
0.6
3.4
CASH
14.1
B: 4
S: 0
H: 0
ICB Sector: Pharmaceuticals & Biotechnology
Principal Business: KAEF manufactures, distributes, and sells
pharmaceutical, chemical and other materials for use of
manufacturing of consumer goods
Page 24
www.dbsvickers.com
ed: JS / sa: MA
Negatively impacted by weakening IDR. KAEF
(like most of pharmaceuticals companies in Indonesia)
imports c.90% of raw materials required for
production. COGS went up significantly by 20% y-o-y
(vs historical average of 7%) in 2013 and this led to a
3 ppt reduction in consolidated GP margins to
29.7%.
Brighter after the merger? Recent changes in
Indofarma (INAF)’s Board of Directors, which now
consist of few of KAEF‘s former management team,
gave some hint that the merger between the two
leading state-owned pharmaceuticals companies may
finally happen. However, the decision is pending
approvals from the Ministry of State-Owned
Enterprise and House of Representatives (DPR).
Reasonable valuation with potential upside from
merger. KAEF currently trades at 18.1x FY15F PE
based on consensus earnings, in line with peers’
average. The potential merger with INAF should have
positive synergies in the long-term. However, pricing
and merger scheme (which is very fluid at the
moment) would affect sentiment in the short term.
At A Glance
Major Shareholders
Republic of Indonesia (%)
Free Float (%)
5,554
5,276 / 440
90.0
10.0
4,793
Kimia Farma Persero
Good distribution across Indonesia
As the oldest pharmaceutical company in Indonesia, KAEF’s
brand is well recognized and it has a vast distribution network
across Indonesia. KAEF continues to aggressively expand its
number of pharmacies, clinic labs and health clinics every year,
leveraging on its five plants and 44 wholesalers. Around 60%
of KAEF business units are located on Java island.
Still domestic driven
KAEF currently derives c.95% revenue from domestic demand
(down from c.99% in 2008). Export revenue’s 40% CAGR
(from 2008) was strong, but came from a very low base. In
particular, exports grew strongly to Timor Leste (6.3x), Malaysia
(4.5x) and Netherlands (3.3x). KAEF has also established a 3070 joint venture with Averroes Pharmaceutical to open and
operate drugstores in Malaysia since 4th July 2013.
KAEF’s business unit expansion
Business Unit
Plant
Wholesalers
Pharmacies
Clinic Labs
Health clinics
2011
5
43
395
37
10
2012
5
44
412
33
64
2013
5
44
512
36
200
Local vs export revenue contribution
100%
99%
1%
2%
2%
1%
4%
98%
5%
97%
96%
95%
99%
98%
98%
99%
96%
94%
95%
93%
92%
2008
2009
2010
Local
2011
Export
2012
2013
KAEF network distribution as of 2013
Source: Company
Page 25
Kimia Farma Persero
Entire value chain - manufacturing to retail
KAEF derives its revenue from three main businesses manufacturing, distribution and retail. KAEF’s manufacturing
and distribution business segments’ revenue CAGR was a
modest 7.8% since 2008, while retail segment expanded by
12% CAGR since 2008. Revenue contribution from the
various segments has been stable over the years.
KAEF’s revenue contribution
COGS breakdown
Others
4%
Labor
3%
Raw material
12%
Fuel & utilities
1%
Finished goods
80%
100%
90%
80%
36%
39%
38%
41%
40%
40%
70%
60%
50%
40%
42%
40%
40%
37%
36%
37%
23%
22%
21%
21%
22%
22%
30%
20%
10%
0%
2008
2009
Manufacturing
2010
2011
2012
Distribution
Retail
Others
2013
Impacted by USD/IDR exchange rate movement
KAEF’s COGS was negatively affected by the weakening IDR
in 2013, as 90% of raw materials were imported. COGS had
risen significantly by 20% y-o-y and KAEF was not able to
fully pass the higher costs to customers. As a result, GP
margins fell to 29.7% from 31.5% in the previous year and
this was reflected in lower net profit margins as well.
KAEF organisation structure
Source: Company
Page 26
Potential upside from merger. The ongoing discussions on
KAEF’s merger with another state-owned pharmaceutical
company Indofarma (INAF) is still pending approval from both
the Ministry of State-Owned Enterprise and House of
Representatives (DPR). INAF’s market cap is about one-eighth
of KAEF and incurred losses in 2013.
KAEF currently trades at 18.1xFY15F PE based on consensus
earnings (2 analysts), similar to peers’ average. The potential
merger with INAF should deliver positive synergies in the longterm. However, in short term, pricing and merger scheme
(which is very fluid at the moment) would affect sentiment.
Kimia Farma Persero
FY Dec
2010A
2011A
2012A
2013A
3,184
(2,279)
905
(758)
146
44
0
(12)
0
179
(40)
0
0
139
139
170
3,481
(2,443)
1,038
(816)
222
20
0
(10)
0
232
(60)
0
0
172
172
249
3,734
(2,559)
1,175
(913)
263
20
0
(4)
0
278
(73)
(1)
0
205
205
316
4,348
(3,056)
1,292
(1,043)
250
41
0
(6)
0
284
(68)
(1)
0
215
215
272
Sales Gth (%)
11.6
EBITDA Gth (%)
20.5
Opg Profit Gth (%)
30.6
Net Profit Gth (%)
121.9
22.3
9.3
46.3
51.9
23.8
26.0
7.3
27.3
18.3
19.4
26.1
16.4
(14.1)
(5.0)
4.6
24.1
2010A
2011A
2012A
2013A
179
24
(40)
0
15
0
177
(35)
0
0
0
0
(35)
0
(20)
0
232
27
(60)
0
(166)
0
32
(40)
0
0
0
0
(40)
(46)
(25)
0
278
54
(73)
0
(52)
(1)
207
(76)
0
0
0
0
(76)
(34)
3
10
284
22
(68)
0
(86)
(1)
151
(72)
0
0
0
0
(72)
(31)
30
0
Turnover
Cost of Goods Sold
Gross Profit
Operating Profit
Associates & JV Inc
Pre-tax Profit
Tax
Minority Interest
Preference Dividend
Net Profit
EBITDA
FY Dec
Pre-Tax Profit
Dep. & Amort.
Tax Paid
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Capital Exp.(net)
Other Invts.(net)
Div from Assoc & JV
Other Investing CF
Net Investing CF
Div Paid
Chg in Gross Debt
Capital Issues
Other Financing CF
Net Financing CF
Chg in Cash
0
(20)
0
122
FY Dec
2010A
2011A
2012A
2013A
Net Fixed Assets
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Total Assets
413
0
105
265
387
358
130
1,657
427
0
105
199
456
384
224
1,794
449
0
121
316
530
459
200
2,076
499
0
163
394
641
547
229
2,472
ST Debt
Creditor
Other Current Liab
LT Debt
Minority Interests
Total Cap. & Liab.
39
301
130
0
73
1,114
0
1,657
14
284
161
0
82
1,253
0
1,794
17
341
179
0
98
1,426
15
2,076
47
478
221
0
101
1,608
16
2,472
444
226
618
185
669
299
718
347
2010A
2011A
2012A
2013A
28.4
4.6
4.4
13.2
8.6
9.7
0.0
12.1
2.0
38.0
53.3
66.7
2.4
1.3
CASH
Cash
88.6
NA
41
29
26
29.8
6.4
4.9
14.5
10.0
12.8
26.9
22.9
2.0
38.9
44.2
63.6
2.7
1.3
CASH
Cash
278.3
9.5
33
36
(1)
31.5
7.0
5.5
15.3
10.6
13.4
16.7
61.2
1.9
41.2
45.6
71.9
2.8
1.4
CASH
Cash
439.0
8.6
54
47
23
29.7
5.7
4.9
14.1
9.4
11.4
14.3
42.0
1.9
42.2
49.3
70.5
2.4
1.3
CASH
Cash
151.3
7.1
62
43
14
Net Cash/(Debt)
Rates & Ratio
0
(71)
0
(79)
15
(6)
0
124
1
0
0
80
FY Dec
Gross Margins (%)
ROAE (%)
ROA (%)
ROCE (%)
Asset Turnover (x)
Current Ratio (x)
Quick Ratio (x)
Net Debt/Equity (X)
Capex to Debt (%)
Z-Score (X)
Opg CFPS (Rp)
Free CFPS (Rp)
FY Dec
1Q2013
2Q2013
3Q2013
4Q2013
Turnover
Cost of Goods Sold
Gross Profit
Operating Profit
Associates & JV Inc
Pre-tax Profit
Tax
Minority Interest
Net Profit
EBITDA
799
(571)
228
(207)
21
7
0
1
0
30
(5)
0
24
24
21
941
(672)
269
(245)
24
4
0
0
0
28
(10)
0
18
18
24
1,075
(712)
364
(261)
102
8
0
(2)
0
108
(30)
0
79
79
102
1,532
(1,101)
431
(329)
102
21
0
(4)
0
118
(24)
(1)
93
93
102
Sales Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (%)
Gross Margins (%)
(17.5)
(62.6)
(62.6)
(57.1)
28.6
2.7
3.1
17.8
12.7
12.7
(25.0)
28.6
2.6
1.9
14.2
321.9
321.9
329.2
33.8
9.5
7.3
42.5
(0.6)
(0.6)
18.3
28.1
6.6
6.1
Page 27
Sarana Meditama Metropolitan
Refer to important disclosures at the end of this
Bloomberg: SAME IJ | Reuters: SAME.JK
report
NOT RATED Rp2,750 JCI : 4,842.13
Growing steadily
Potential Catalyst: Successful expansion
 Two hospitals operating in Greater Jakarta
Targeting to expand bed capacity by 60% by
 2016
Analyst
[email protected]
Expect margins to continue to improve after
 expansion
Operating in Greater Jakarta. Sarana Meditama
Metropolitan (SAME) operates private hospitals under
the brandname of Omni Hospital. Currently, there are
two hospitals under its portfolio - Pulomas (168 bed
capacity, located in East Jakarta and operational since
1984) and Alam Sutera (232 bed capacity, located in
West Jakarta suburb and operational since 2007).
Price Relative
Rp
889
3 ,3 6 0 .0
789
2 ,8 6 0 .0
689
2 ,3 6 0 .0
589
1 ,8 6 0 .0
489
389
1 ,3 6 0 .0
Targeting 60% bed capacity expansion in the
near term. SAME targets to add 2 new hospitals
(through organic and inorganic expansion) in Greater
Jakarta, to have a total capacity of 630 beds by 2016.
289
8 6 0 .0
3 6 0 .0
J a n -1 3
189
89
J u n -1 3
N o v -1 3
S a r a n a M e d it a m a M e t r o p o lit a n ( L H S )
A p r -1 4
FY Dec (Rp bn)
Turnover
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
EPS (Rp)
EPS Pre Ex. (Rp)
EPS Gth (%)
EPS Gth Pre Ex (%)
Diluted EPS (Rp)
Net DPS (Rp)
BV Per Share (Rp)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)
Other Broker Recs:
2010A
2011A
2012A
2013A
173
32
(29)
(25)
(25)
(21)
(21)
N/A
N/A
(21)
0
7
nm
nm
N/A
109.5
0.0
398.5
31.7
N/A
242
64
7
(12)
(13)
(10)
(11)
51
47
(10)
0
(3)
nm
nm
106.1
54.9
0.0
nm
CASH
(594.8)
270
76
28
23
23
20
20
N/A
N/A
20
0
16
139.5
139.8
59.3
45.3
0.0
168.8
10.7
306.6
337
93
51
47
47
21
21
9
9
21
0
61
128.5
128.5
88.1
66.0
0.0
45.1
1.2
61.3
B: 0
S: 0
H: 0
ICB Sector: Health Care Equipment & Services
Principal Business: SAME provides full range of hospital services
under the name of Omni Hospital in Pulomas and Alam Sutera
Source of all data: Company, DBS Vickers, Bloomberg
Page 28
www.dbsvickers.com
ed: JS/ sa: MA
Consistent improvement after second hospital
started operations in 2007. Revenue CAGR was
23% (from 2009 – 2012) as occupancy rate increased
from 52% to 68%, while EBITDA and net margin
reported consistent improvement suggesting that
SAME is able to control its cost. SAME generated
positive net margins in 2012 (4 years after its second
hospital - Alam Sutera hospital - started operations).
Hospital business command premium valuations.
Considering 25% revenue growth p.a. and stable
EBITDA margin in 2015, SAME trades at 17x
EV/EBITDA 2015, cheaper than Siloam Hospital (SILO),
which has the largest market cap for private hospital
operators.
At A Glance
Major Shareholders
Omni Health Care (%)
Free Float (%)
1,180
3,245 / 271
84.5
15.5
2,756
SAME currently has 2 hospitals in its portfolio - Omni Hospital
Pulomas and Omni Hospital Alam Sutera.
Revenue trend
400
Revenue (LHS)
350
The Omni Hospital Pulomas with 168 bed capacity is SAME’s
flagship hospital located in East Jakarta. This hospital was
founded as a non-profit hospital organization in 2 Sep 1972
to provide psychiatric diagnosis and therapy to the local
community. Starting 1984, SAME acquired this hospital and
transformed it into a general hospital with full range of
medical services.
80%
Occupancy rate (RHS)
66%
69%
67%
61%
300
60%
52%
250
70%
50%
337
200
40%
150
30%
270
242
100
20%
173
50
10%
122
Omni Hospital Pulomas
0
0%
2009
2010
2011
2012
2013
Typical revenue breakdown for Omni hospitals
MCU
4%
Other services
12%
Admin
4%
Out-patient
6%
Source: Company
The second hospital (Omni Hospital Alam Sutera) has been
operational since 8 Aug 2007. Besides being Center of
Excellence for Neurosciences Center, Cardiac Center,
Orthopaedic Center and Urology Center, this hospital is the
only Kawasaki Center in South East Asia.
Omni Hospital Alam Sutera
Medical
support
57%
Rooms
17%
Consistent improvement on margins after expansion
40%
EBITDA margin
30%
Net income margin
26%
28%
28%
19%
20%
14%
12%
9%
10%
0%
-5%
-10%
-14%
-20%
-21%
-30%
Source: Company
2009
2010
2011
2012
2013
Page 29
FY Dec
2010A
2011A
2012A
2013A
FY Dec
2010A
2011A
2012A
2013A
Turnover
Cost of Goods Sold
Gross Profit
Operating Profit
Associates & JV Inc
Pre-tax Profit
Tax
Minority Interest
Preference Dividend
Net Profit
EBITDA
173
(116)
57
(51)
6
(1)
0
(34)
0
(29)
4
0
0
(25)
(25)
32
242
(138)
103
(67)
36
1
0
(31)
1
7
(19)
0
0
(12)
(13)
64
270
(148)
123
(74)
49
(1)
0
(20)
0
28
(5)
0
0
23
23
76
337
(172)
164
(92)
73
0
0
(21)
0
51
(4)
0
0
47
47
93
Net Fixed Assets
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Total Assets
268
0
15
9
6
17
5
320
257
0
3
9
8
17
9
303
245
0
8
6
8
21
3
291
315
0
19
15
8
16
4
378
N/A
N/A
N/A
N/A
N/A
39.9
98.6
499.1
51.0
274.0
12.0
19.8
35.8
N/A
17.0
24.4
22.5
48.0
100.6
8.4
ST Debt
Creditor
Other Current Liab
LT Debt
Minority Interests
Total Cap. & Liab.
88
20
15
179
9
8
0
320
104
19
23
150
12
(4)
0
303
91
20
23
120
18
19
0
291
74
23
22
102
24
133
0
378
(6)
(258)
(7)
(245)
(11)
(205)
(18)
(160)
2010A
2011A
2012A
2013A
2010A
2011A
2012A
2013A
7
27
(19)
0
15
0
31
(17)
0
0
0
0
(17)
0
(14)
0
28
27
(5)
0
4
0
55
(15)
0
0
0
0
(15)
0
(43)
0
51
21
(4)
0
1
0
68
(97)
0
0
0
0
(97)
0
(35)
67
32.9
3.5
(14.4)
N/A
N/A
N/A
N/A
0.2
NM
N/A
N/A
N/A
0.3
0.2
31.7
31.7
0.0
NA
(219)
0
0
42.8
14.9
(5.0)
(594.8)
(3.9)
(23.0)
N/A
1.2
0.8
25.7
63.5
24.6
0.3
0.2
CASH
Cash
6.7
6.6
(207)
13
11
45.3
18.1
8.6
306.6
7.8
16.0
0.0
2.4
0.9
25.6
58.5
24.9
0.3
0.2
10.7
10.7
7.0
7.8
(174)
43
34
48.8
21.6
13.9
61.3
14.0
22.9
0.0
3.4
1.0
19.9
52.0
19.1
0.4
0.3
1.2
1.2
55.5
15.7
(74)
31
(14)
Sales Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (%)
FY Dec
Net Cash/(Debt)
Rates & Ratio
Pre-Tax Profit
Dep. & Amort.
Tax Paid
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Capital Exp.(net)
Other Invts.(net)
Div from Assoc & JV
Other Investing CF
Net Investing CF
Div Paid
Chg in Gross Debt
Capital Issues
Other Financing CF
Net Financing CF
Chg in Cash
0
(14)
0
(1)
0
(43)
1
(2)
0
32
2
5
FY Dec
Gross Margins (%)
ROAE (%)
ROA (%)
ROCE (%)
Asset Turnover (x)
Current Ratio (x)
Quick Ratio (x)
Net Debt/Equity (X)
Capex to Debt (%)
Z-Score (X)
Opg CFPS (Rp)
Free CFPS (Rp)
FY Dec
2Q2013
3Q2013
4Q2013
1Q2014
Turnover
Cost of Goods Sold
Gross Profit
Operating Profit
Associates & JV Inc
Pre-tax Profit
Tax
Minority Interest
Net Profit
EBITDA
85
(42)
43
(24)
19
0
0
(5)
0
14
(3)
0
11
11
19
89
(45)
44
(24)
20
(1)
0
(4)
0
15
(3)
0
12
12
20
89
(46)
43
(24)
19
1
0
(8)
0
12
4
0
16
16
19
89
(46)
43
(25)
19
0
0
(6)
0
13
(1)
0
12
12
19
Sales Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (%)
Gross Margins (%)
16.5
29.8
29.8
51.7
50.6
22.2
13.0
4.0
5.9
5.9
9.5
49.4
22.6
13.7
0.8
(5.1)
(5.1)
32.1
48.5
21.3
18.0
(0.3)
(1.7)
(1.7)
(27.3)
48.8
21.0
13.1
Page 30
Bloomberg: SRAJ IJ | Reuters: SRAJ.JK
Waiting for angels
Potential Catalyst: Operational turnaround on new hospital
 Focusing in Greater Jakarta area
 Steady revenue from flagship hospital
Drag from ballooning G&A expenses from
 second hospital
Analyst
[email protected]
 Waiting for a turn around
Focusing in Greater Jakarta area. Sejahteraraya
Anugrahjaya (SRAJ) operates private hospitals under
the Mayapada brandname. Currently, there are two
hospitals under its portfolio - Tangerang (located in
West Jakarta suburb and operational since 1995) and
Lebak Bulus (located in South Jakarta and operational
since Oct 2013).
Price Relative
Rp
4 8 8 .2
489
4 3 8 .2
439
3 8 8 .2
389
3 3 8 .2
339
2 8 8 .2
289
2 3 8 .2
239
1 8 8 .2
189
139
1 3 8 .2
8 8 .2
A p r -1 1
89
A p r -1 2
A p r -1 3
S e ja h t e r a r a y a A n u g r a h ja y a ( L H S )
A p r -1 4
FY Dec (Rp bn)
Turnover
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
EPS (Rp)
EPS Pre Ex. (Rp)
EPS Gth (%)
EPS Gth Pre Ex (%)
Diluted EPS (Rp)
Net DPS (Rp)
BV Per Share (Rp)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)
Other Broker Recs:
2010A
2011A
2012A
2013A
149
34
8
6
6
1
1
17
17
1
0
116
174.6
174.6
65.3
35.1
0.0
1.9
0.2
1.2
167
42
6
5
5
1
1
(33)
(33)
1
0
114
261.3
261.3
49.4
32.9
0.0
1.9
0.3
0.8
195
44
6
5
5
1
1
2
2
1
0
115
256.0
256.0
6.2
38.1
0.0
1.9
0.7
0.7
221
(8)
(72)
(55)
(55)
(7)
(7)
N/A
N/A
(7)
0
103
nm
nm
29.8
nm
0.0
2.1
CASH
(5.8)
B: 0
S: 0
H: 0
Principal Business: SRAJ provides full range of hospital services
under the name of Mayapada hospital in Tangerang and Lebak
Bulus
Source of all data: Company, DBS Vickers, Bloomberg Finance L.P.
Page 31
www.dbsvickers.com
ed: JS / sa: MA
Steady revenue from flagship hospital. Revenue
from the 200-bed Mayapada Hospital Tangerang
posted 16% CAGR from 2009 – 2013, as bed
occupancy rate (BOR) improved from 35% to 50%.
This flagship hospital has five Centers of Excellence to
provide customers with one-stop service.
Dragged by G&A expense from second hospital.
G&A expense increased significantly in 2013, mainly
due to its second hospital (i.e. Lebak Bulus in South
Jakarta). The grand opening of this hospital took
place on 24 Oct 2013. In 2013, G&A expense
represented 48% of revenue, higher than the 32% to
36.6% range between 2009 – 2012.
Waiting for a turn around. Substantial G&A
expenses stemming from its second hospital has led
to the company recording net losses from early 2013.
It is paramount that the hospital turns around
operationally soon considering large capex
requirements for future expansion and the nature of
thin margins for hospital business.
At A Glance
Major Shareholders
Surya Cipta Inti Cemerlang (%)
A J Adisarana Wanaartha (%)
Free Float (%)
8,030
1,759 / 147
54.9
6.9
38.2
419
SRAJ currently has 2 hospitals in its portfolio; Mayapada
Hospital Tangerang and Mayapada Hospital Lebak Bulus
Steady revenue mostly supported by flagship hospital
The Mayapada Hospital Tangerang with capacity of 200 beds
is SRAJ’s flagship hospital located in West Jakarta suburb.
This hospital was operating under the name of Rumah Sakit
Honoris since 1995 and changed its name to Mayapada
Hospital with the new management. It has 5 Centers of
Excellence providing customers with one-stop service: Tahir
Neuroscience Center, Gastrointestinal & Liver Center,
Cardiovascular Center, Aesthetic Wellness & Orthopaedic
Center and Oncology Center.
200
Mayapada Hospital Tangerang
250
Revenue (LHS)
60%
Occupancy rate (RHS)
50%
52%
50%
44%
40%
39%
150
221
35%
30%
100
195
20%
167
149
122
50
10%
0
0%
2009
2010
2011
2012
2013
Ballooning G&A expense (as % of revenue)
60%
48%
50%
40%
37%
32%
34%
36%
30%
20%
10%
0%
2009
2010
2011
2012
2013
Source: Company
The newly operational Mayapada Hospital Lebak Bulus in
South Jakarta held its grand opening on 24 Oct 2013, and
has a capacity for 243 beds.
Mayapada Hospital Lebak Bulus
Turning into net loss (due to second hospital
operations)
10.0
5.0
%
3.7
4.0
2.8
2.3
-5.0
-10.0
-15.0
-20.0
-25.0
-24.9
-30.0
2009
2010
Source: Company
Page 32
2011
2012
2013
SRAJ shareholder structure
Source: Company
Page 33
FY Dec
2010A
2011A
2012A
2013A
FY Dec
2010A
2011A
2012A
2013A
149
(80)
69
(56)
13
0
0
(5)
0
8
(2)
0
0
6
6
34
167
(88)
79
(59)
20
2
0
(16)
0
6
(1)
0
0
5
5
42
195
(127)
68
(49)
18
1
0
(13)
0
6
(2)
0
0
5
5
44
221
(152)
70
(113)
(43)
(11)
0
(18)
0
(72)
16
0
0
(55)
(55)
(8)
Net Fixed Assets
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Total Assets
690
0
5
11
12
7
3
728
831
0
3
8
15
6
2
864
1,167
0
9
26
10
9
15
1,236
1,359
0
33
620
16
15
9
2,052
Sales Gth (%)
22.1
EBITDA Gth (%)
240.0
Opg Profit Gth (%)
28.9
Net Profit Gth (%)
33.7
27.7
12.3
25.6
59.0
(22.7)
21.0
16.1
4.3
(10.9)
2.0
25.1
13.9
N/A
N/A
N/A
N/A
ST Debt
Creditor
Other Current Liab
LT Debt
Minority Interests
Total Cap. & Liab.
29
0
23
117
3
554
3
728
11
6
26
167
5
646
3
864
161
35
52
326
9
651
3
1,236
201
94
95
403
13
1,243
3
2,052
(1)
(134)
(9)
(170)
(53)
(460)
(149)
16
2010A
2011A
2012A
2013A
FY Dec
2010A
2011A
2012A
2013A
8
21
(2)
0
(11)
0
16
(92)
0
0
0
0
(92)
0
21
55
6
22
(1)
0
(2)
0
25
(162)
0
0
0
0
(162)
0
47
88
6
26
(2)
0
163
0
194
(362)
0
0
0
0
(362)
0
186
0
(72)
35
16
0
79
0
59
(227)
0
0
0
(220)
(447)
0
114
647
Gross Margins (%)
ROAE (%)
ROA (%)
ROCE (%)
Asset Turnover (x)
Current Ratio (x)
Quick Ratio (x)
Net Debt/Equity (X)
Capex to Debt (%)
Z-Score (X)
Opg CFPS (Rp)
Free CFPS (Rp)
46.2
8.6
4.0
1.2
0.9
1.4
0.0
2.7
0.2
16.4
N/A
56.1
0.6
0.3
0.2
0.2
63.3
NA
(28)
6
(16)
47.3
12.2
2.8
0.8
0.6
2.1
0.0
1.2
0.2
13.5
16.1
73.0
0.7
0.3
0.3
0.3
91.2
3.9
(31)
5
(25)
34.7
9.3
2.4
0.7
0.5
1.4
0.0
1.4
0.2
13.6
73.3
44.6
0.2
0.1
0.7
0.7
74.4
1.4
(83)
6
(30)
31.4
(19.5)
(24.9)
(5.8)
(3.4)
(2.9)
N/A
(2.4)
0.1
19.7
200.9
41.3
1.7
1.6
CASH
Cash
37.6
1.6
2
(2)
(21)
Turnover
Cost of Goods Sold
Gross Profit
Operating Profit
Associates & JV Inc
Pre-tax Profit
Tax
Minority Interest
Preference Dividend
Net Profit
EBITDA
FY Dec
Pre-Tax Profit
Dep. & Amort.
Tax Paid
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Capital Exp.(net)
Other Invts.(net)
Div from Assoc & JV
Other Investing CF
Net Investing CF
Div Paid
Chg in Gross Debt
Capital Issues
Other Financing CF
Net Financing CF
Chg in Cash
0
76
0
0
Net Cash/(Debt)
Rates & Ratio
0
135
1
(2)
0
186
2
20
(59)
703
2
317
FY Dec
Turnover
Cost of Goods Sold
Gross Profit
Operating Profit
Associates & JV Inc
Pre-tax Profit
Tax
Minority Interest
Net Profit
EBITDA
Sales Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (%)
Gross Margins (%)
2Q2013
3Q2013
4Q2013
1Q2014
54
(29)
25
(35)
(10)
0
0
(4)
0
(13)
6
0
(7)
(7)
(10)
54
(30)
24
(37)
(13)
(12)
0
(3)
0
(28)
7
0
(21)
(21)
(13)
62
(66)
(4)
(13)
(17)
0
0
(7)
0
(24)
4
0
(20)
(20)
(17)
85
(72)
13
(28)
(15)
0
0
(9)
0
(23)
7
0
(17)
(17)
(15)
4.1
(212.0)
(212.0)
(1.1)
46.8
(18.4)
(13.5)
(0.1)
(32.1)
(32.1)
(182.8)
45.0
(24.3)
(38.3)
15.4
(31.3)
(31.3)
3.1
(6.6)
(27.6)
(32.2)
36.3
14.9
14.9
17.1
15.4
(17.3)
(19.6)
Page 34
Sido Muncul
Bloomberg: SIDO IJ | Reuters: SIDO.JK
Herbal booster
Price Target : Not rated
Potential Catalyst: Factory expansion
 Growing awareness on herbal products
 Highly dependent on herbal segment
Analyst
[email protected]
 Intense competition in energy drinks market
Expect growth to moderate; valuations in line
 with peers’ average
Growing awareness on herbal products. Sido
Muncul (SIDO), with its two leading brands in herbal
medicine and energy drinks, is tapping into the
growing herbal consumption trend in Indonesia (+
35% CAGR for the past 4 years).
Price Relative
Rp
1 ,0 2 2 .0
209
9 2 2 .0
189
169
8 2 2 .0
149
7 2 2 .0
129
6 2 2 .0
109
5 2 2 .0
D e c -1 3
S id o M u n c u l ( L H S )
89
M a r -1 4
J u n -1 4
FY Dec (Rp bn)
Turnover
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
EPS (Rp)
EPS Pre Ex. (Rp)
EPS Gth (%)
EPS Gth Pre Ex (%)
Diluted EPS (Rp)
Net DPS (Rp)
BV Per Share (Rp)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)
Earnings Rev (%):
Consensus EPS (Rp):
Other Broker Recs:
2010A
2011A
2012A
2013A
1,867
433
339
237
237
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0.0
0.0
0.0
0.0
N/A
0.0
CASH
N/A
2,198
459
455
340
340
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0.0
0.0
0.0
0.3
N/A
0.0
0.3
77.1
2,392
540
514
388
388
N/A
N/A
N/A
N/A
N/A
N/A
N/A
0.0
0.0
0.0
0.0
N/A
0.0
CASH
42.1
2,372
563
583
406
406
27
27
N/A
N/A
27
10
175
27.7
27.7
17.3
17.1
1.3
4.3
CASH
20.7
N/A
N/A
B: 1
N/A
N/A
S: 1
N/A
N/A
H: 1
ICB Industry : Consumer Goods
ICB Sector: Food Producers
Principal Business: Sido Muncul manufactures and produces
medicinal herbs, energy drinks, sweets and other beverages
Source of all data: Company, DBS Vickers, Bloomberg Finance L.P.
Page 35
www.dbsvickers.com
ed: JS / sa: MA
Highly dependent on herbal segment. “Tolak
Angin”, the herbal medicine for cold symptoms has
75% market share (miles ahead of its three closest
competitors). SIDO generates more than 65% gross
profit margins from the lucrative herbal segment.
Revenue contribution from this segment is expected
to increase to > 50% in two years from 43%
currently, aided by its new factory and slower growth
from the energy drink segment.
Intense competition in the energy drink
segment. While still leading the energy drink
segment with 60% market share, volume sales of
“Kuku Bima” declined by c.25% in 2013 due to
intense competition. SIDO expects energy drink sales
volume to be flat this year.
Expect growth to moderate; valuation in line
with peers’ average. SIDO expects revenue to grow
15-18% this year (heavily dependent on growth in
herbal medicine segment), on stable gross and net
profit margins. SIDO currently trades at 21.4x FY15F
PE based on consensus earnings, implying 1.4x PEG,
in line with peers’ average (22x PE and 1.5x PEG).
At A Glance
Major Shareholders
Sulistio Desy (%)
Hidajat Family (%)
Free Float (%)
15,000
11,250 / 939
45.0
45.0
10.0
12,365
Sido Muncul
Growing market for herbal products
The growing awareness for herbal products has led to a
significant increase in herbal consumption (i.e. 35% CAGR
for the past 4 years) in Indonesia. This has prompted
manufacturers to increase production capacity to keep up
with demand as utilisation rates hit above 95%.
Herbal medicine and energy drink have contrasting
revenue trends
1,600
Herbal
Rpbn
Energy Drink
1,340
1,400
1,266
1,202
1,200
1,031 1,013
1,000
Demand and supply for herbal medicine in Indonesia
25,000
99%
Consumption (LHS)
Production (LHS)
Utilization rate (RHS)
tonnes
600
98%
20,000
785
800
587
483
400
97%
200
15,000
96%
10,000
95%
5,000
94%
93%
0
2008
2009
2010
2011
2012
Source: Capricorn Indonesia Consult (Sep 2013)
SIDO’s two leading brands - “Tolak Angin” (75% market
share in herbal medicine) and “Kuku Bima” (60% market
share in energy drinks) – targets consumers in the 15-54 age
group, which made up 59.3% of Indonesia’s total population
of 251m.
2010
2011
2012
2013
Source: Company
This segment currently contributes 43% of total sales
(significant increase from 26% in 2009). SIDO expects the
contribution from this segment to increase to > 50% in 2
years’ time, aided by its new factory and slower growth in
energy drink segment. SIDO’s current facility can produce
75m sachets of 15ml “Tolak Angin” per month.
Herbal medicine’s increasing contribution
expense of energy drinks
70%
Herbal
at
the
Energy Drink
60%
Indonesia population demographics
>65 years old
6.5%
64%
61%
50%
43%
53%
40%
33%
55-64 years old
7.6%
30%
0-14 years old
26.6%
26%
43%
27%
20%
10%
Target market
25-54 years old
42.2%
15-24 years old
17.1%
Source: CIA World Factbook (July 2013)
Herbal medicine segment – the growth catalyst
SIDO’s herbal medicine segment revenue delivered a
staggering 29% CAGR (from 2010 to 2013). SIDO is the
leading producer in this segment (well-known “Tolak Angin”
brand) with 75% market share and hence, it is able to
consistently generate more than 65% gross profit margin. Its
three closest competitors have less than 5% market share
each.
0%
2010
2011
2012
2013
Source: Company
SIDO is budgeting Rp365.4bn capex for its new raw materials
factory in Ungaran, Semarang (Central Java). Funding will
come from its internal cash (SIDO raised Rp870bn from its
recent IPO on 18Dec2013). Strong financials with zero debt
and Rp1.5tr cash position as of end Dec-13.
Energy drink segment – intense competition
“Kuku Bima” sales volume declined significantly (c.25%) in
2013. SIDO expects sales volume growth to be flat this year,
citing tight competition as more players enter this segment.
Page 5
Sido Muncul
Significant increase in cash conversion cycle
SIDO’s cash conversion cycle (CCC) went up significantly to
81 days in 2013 as part of company’s strategy to provide
buffer (to increase inventory of “Tolak Angin”products from
1 week to 1 month). Going forward, SIDO expects CCC to
stay around 80 days.
Expect growth to moderate; valuation in line with
peers’ average
Guidance as follows : (1) Revenue to grow 15-18% this year,
heavily dependent on growth in the herbal medicine
segment. (2) 7% increase in price and 8-11% increase in
volume sales for “Tolak Angin”. (3) Flat gross profit margins
(38.5 - 42.6%) and net profit margin (16.2 -17.2%). 39% of
COGS is exposed to USD/IDR exchange (mostly for raw
materials). SIDO currently trades at 21.4x FY15F PE based on
consensus (of 1 analyst), implying 1.4x PEG, in line with
peers’ average (22x PE and 1.5x PEG).
Cash conversion cycle trend
85
days
81
80
75
70
65
60
55.5
55
50.4
48.6
50
45
2010
2011
2012
2013
Source: Company
SIDO shareholder structure
Desy Sulistio Hidayat
40.5%
Irwan Hidayat
8.1%
Sofyan Hidayat
8.1%
Johan Hidayat
8.1%
David Hidayat
8.1%
Sandra Linata Hidayat
8.1%
Public
19%
Sido Muncul (SIDO)
99.99%
Semarang Herbal Indoplant
99.99%
Muncul Mekar
Source: Company
Page 37
Sido Muncul
FY Dec
2010A
2011A
2012A
2013A
1,867
(1,181)
686
(351)
335
1
0
3
0
339
(102)
0
0
237
237
433
2,198
(1,321)
878
(439)
439
5
0
11
0
455
(115)
0
0
340
340
459
2,392
(1,471)
921
(416)
504
4
0
5
0
514
(126)
0
0
388
388
540
2,372
(1,362)
1,011
(494)
516
(55)
0
121
0
583
(177)
0
0
406
406
563
Sales Gth (%)
N/A
EBITDA Gth (%)
N/A
N/A
Opg Profit Gth (%)
Net Profit Gth (%)
N/A
30.1
17.8
5.9
31.0
43.3
25.3
8.8
17.7
14.9
14.0
24.5
(0.8)
4.3
2.4
4.7
30.3
Turnover
Cost of Goods Sold
Gross Profit
Operating Profit
Associates & JV Inc
Pre-tax Profit
Tax
Minority Interest
Preference Dividend
Net Profit
EBITDA
2010A
2011A
2012A
2013A
Pre-Tax Profit
Dep. & Amort.
Tax Paid
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Capital Exp.(net)
Other Invts.(net)
Div from Assoc & JV
Other Investing CF
Net Investing CF
Div Paid
Chg in Gross Debt
Capital Issues
339
98
(102)
0
37
0
372
(147)
0
0
0
(22)
(169)
(97)
11
0
455
20
(115)
0
(185)
0
174
(110)
0
0
0
(88)
(198)
(160)
19
0
514
36
(126)
0
(380)
0
43
(170)
0
0
0
(8)
(179)
(651)
43
1,094
583
47
(177)
0
199
0
652
(161)
0
0
0
32
(130)
(150)
(299)
1,062
21
(65)
0
139
2010A
2011A
2012A
2013A
Net Fixed Assets
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Total Assets
217
0
35
277
172
167
22
890
307
102
16
122
206
208
208
1,169
442
102
22
411
236
261
678
2,151
556
0
28
1,611
288
330
138
2,952
ST Debt
Creditor
Other Current Liab
LT Debt
Minority Interests
Total Cap. & Liab.
1
99
168
236
41
346
0
890
3
155
203
253
20
535
0
1,169
299
193
346
0
9
1,305
0
2,151
0
175
150
0
1
2,625
0
2,952
95
41
264
(134)
635
112
431
1,611
2010A
2011A
2012A
2013A
36.7
18.0
12.7
N/A
N/A
N/A
40.8
NM
NM
N/A
N/A
N/A
2.4
1.7
CASH
Cash
62.0
NA
39.9
20.0
15.5
77.1
33.0
45.7
47.1
NM
2.1
31.1
N/A
N/A
2.1
0.9
0.3
0.3
43.0
4.1
38.5
21.1
16.2
42.1
23.3
31.4
168.0
NM
1.4
35.8
N/A
N/A
1.9
0.8
CASH
Cash
57.0
2.5
42.6
21.8
17.1
20.7
15.9
17.0
37.0
NM
0.9
45.5
N/A
N/A
7.3
6.0
CASH
Cash
N/A
24.0
107
30
33
2010A
2011A
2012A
2013A
483
1,202
140
30
12
1,867
587
1,340
230
32
10
2,198
785
1,266
267
59
14
2,392
1,031
1,013
160
149
20
2,372
320
322
17
17
10
686
412
402
37
19
8
878
513
321
41
34
11
921
662
244
33
54
17
1,011
66.3
26.8
12.2
57.9
78.8
36.7
70.2
30.0
16.0
59.2
80.3
39.9
65.3
25.4
15.5
57.5
79.2
38.5
64.3
24.1
20.7
36.1
85.3
42.6
Net Cash/(Debt)
Rates & Ratio
FY Dec
Other Financing CF
Net Financing CF
Chg in Cash
FY Dec
9
(132)
0
(156)
(61)
425
0
289
2
615
1
1,138
FY Dec
Gross Margins (%)
ROAE (%)
ROA (%)
ROCE (%)
Asset Turnover (x)
Current Ratio (x)
Quick Ratio (x)
Net Debt/Equity (X)
Capex to Debt (%)
Z-Score (X)
Opg CFPS (Rp)
Free CFPS (Rp)
Segmental Breakdown / Assumptions
FY Dec
Revenues (Rp bn)
Herbal
Energy Drink
Drink and Candy
Health Drink
Others
Total
Gross profit (Rp bn)
Herbal
Energy Drink
Drink and Candy
Health Drink
Others
Total
Gross profit Margins (%)
Herbal
Energy Drink
Drink and Candy
Health Drink
Others
Total
Page 38
Indonesia Company Focus
Bloomberg: SILO IJ | Reuters: SILO.JK
25 Jun 2014
FULLY VALUED Rp14,300
Expansive but expensive
JCI : 4,842.13

Noteworthy healthcare potential in Indonesia
(Initiating Coverage)
Price Target : 12-Month Rp 12,750
Reason for Report : Initiating coverage
Potential Catalyst: New hospital acquisitions

Market leader with aggressive expansion plan

Solid business model

Initiate with FULLY VALUED and Rp12,750 TP
Analyst
[email protected]
Vast growth potential in healthcare industry.
Indonesia’s healthcare expenditure only represents 2.7%
of GDP, despite growing at 12% CAGR for the past four
years. Being one of the lowest healthcare spenders per
capita in Asia Pacific region at US$132, Indonesia (the 4th
most populated country) has vast potential in healthcare,
given its rising middle class and demographic shift.
Price Relative
Rp
Relative Index
16,100.0
209
15,100.0
189
14,100.0
13,100.0
169
12,100.0
149
11,100.0
Largest private hospital operator with aggressive
expansion plan. Siloam Hospital (SILO) currently
operates 16 hospitals with 3,755-bed capacity (the largest
among private hospital operators in Indonesia) with an
expansion plan of 4-6 new hospitals annually in its
current expansion phase.
129
10,100.0
109
9,100.0
8,100.0
Sep-13
89
Dec-13
Mar-14
Siloam International Hospitals (LHS)
Jun-14
Relative JCI INDEX (RHS)
FY Dec (Rp bn)
Revenue
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
EPS (Rp)
EPS Pre Ex. (Rp)
EPS Gth (%)
EPS Gth Pre Ex (%)
Diluted EPS (Rp)
Net DPS (Rp)
BV Per Share (Rp)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)
Consensus EPS (Rp):
No. of brokers following:
2013A
2014F
2015F
2016F
2,504
304
72
50
50
43
43
(15)
(15)
43
0
1,394
331.5
331.5
nm
53.0
0.0
10.3
CASH
5.4
3,283
505
106
79
79
68
68
59
59
68
0
1,462
209.0
209.0
37.2
32.4
0.0
9.8
CASH
4.8
4,358
730
153
114
114
98
98
44
44
98
0
1,561
145.3
145.3
26.9
22.7
0.0
9.2
0.0
6.5
5,839
1,040
219
163
163
141
141
44
44
141
0
1,702
101.2
101.2
18.7
16.1
0.0
8.4
0.1
8.7
93
B: 3
121
S: 1
239
H: 1
Principal Business: SILO is Indonesia's largest private hospital
operator nationwide with current 16 operational hospitals in
portfolio and plenty of new hospitals in pipeline for the next 5
years.
www.dbsvickers.com
ed: TH / sa: MA
Solid business model. Good frameworks and system,
as described in its “Four Pillar Foundation” strategy. In
addition, SILO (as part of Lippo group) should benefit
from management expertise, real estate know-how and
cash recyling mechanism through Singapore-listed First
REIT (which has the potential to further unlock its value).
Initiate coverage with FULLY VALUED
recommendation and Rp12,750 TP. Our TP implies
20xEV/EBITDA 2015 (expensive against regional peers,
despite offering more growth and commanding scarcity
premium) and is based on discounted cash flow valuation
of existing and new hospitals. Potential upside from our
valuation will be from better-than-expected operational
performance of its newer hospitals and future
acquisitions.
At A Glance
Major Shareholders
Lippo Karawaci TBK (%)
Free Float (%)
1,156
16,532 / 1,380
78.6
14.0
10,698
Company Focus
Investment thesis
We initiate coverage of Siloam International Hospitals (SILO)
with FULLY VALUED recommendation and Rp12,750 TP,
based on DCF valuation on its existing hospitals and potential
new hospitals. Despite possessing significant growth potential
by being the market leader in private hospital business and
therefore placing itself in a great position to tap into
Indonesia’s underpenetrated healthcare sector and the
country’s rising healthcare needs, SILO’s current valuation is
rich at 24xEV/EBITDA 2015 (expensive as compared with
regional peers). SILO is in an aggressive expansion mode until
2017, whereby it requires large and constant funding to pull
off its goal. Potential upside to our valuation will be from
better-than-expected operational performance of its newer
hospitals and future acquisitions
1)
Largest private hospital operator in Indonesia with
aggresive expansion plan in the next few years.
SILO, currently with 16 hospitals under its portfolio and
3,755-bed capacity, is the market leader for Indonesia’s
private hospital in terms of existing operational beds (and
bed capacity) and number of hospitals. In its current
expansion phase (from 2011–2017), SILO plans to add six
new hospitals annually (either from acquisitions or greenfield
projects). SILO targets to have 40 operational hospitals with
a 10,000-bed capacity by 2017.
Siloam hospitals map
Source: DBS Vickers, Company
Page 40
We think the target of having 40 hospitals by 2017 is too
aggressive. There is a potential risk on the timeline for new
hospitals to be operational, in addition to cash flow, political
and regulatory risks. The last two hospital additions; TB
Simatupang and Bali; were delayed by between 4-6 months.
Our conservative projection shows that SILO should be able
to achieve its stated target by 2019, considering fewer new
hospital additions annually. Typical cash flow for a new
greenfield hospital is shown on the next page.
Siloam hospitals expansion projection
45
no. of hospitals
40
40
37
35
32
30
27
25
22
18
20
14
15
12
10
7
4
5
1
0
1996
2004
2011
2012
2013
2014F
2015F
2016F
2017F
2018F
2019F
Company Focus
New greenfield hospital typical cash flow scenario
Items / Year
No of operational beds
Occupancy rate
Average length of stay (ALOS)
No of in-patient
Revenue from in-patient per patient per day
Revenue from in-patient
No of out-patient
Revenue from out-patient per patient per day
Revenue from out-patient
Total revenue
Revenue growth
EBITDA margin assumption
EBITDA
Capex
Depreciation
Tax
Free cashflow
NPV
IRR
Unit
0
%
day
Rp m
Rpbn
Rp m
Rpbn
Rpbn
%
%
Rpbn
Rpbn
Rpbn
Rpbn
Rpbn
Rpbn
%
-300
-300
32
16%
1
150
10%
4
1,369
3.5
19
40,000
0.5
20
39
-2%
-1
-2
-25
-6
-9
2
150
25%
4
3,422
3.9
54
80,000
0.6
45
98
151%
8%
8
-2
-25
-4
1
3
150
40%
4
5,475
4.4
96
120,000
0.6
75
171
74%
14%
24
-2
-26
0
22
4
150
50%
4
6,844
4.9
135
160,000
0.7
112
247
44%
17%
42
-2
-26
4
44
5
150
60%
4
8,213
5.5
181
180,000
0.8
142
323
31%
21%
68
-2
-26
10
76
6
150
70%
4
9,581
6.2
236
200,000
0.9
176
413
28%
23%
95
-2
-26
17
110
7
150
70%
4
9,581
6.9
265
200,000
1.0
197
462
12%
23%
106
-2
-26
20
124
8
150
70%
4
9,581
7.7
297
220,000
1.1
243
540
17%
23%
124
-2
-27
24
147
9
150
70%
4
9,581
8.7
332
240,000
1.2
297
629
17%
23%
145
-2
-27
29
172
10
150
70%
4
9,581
9.7
372
260,000
1.4
361
732
16%
23%
168
-2
-27
35
202
Source: DBS Vickers
Siloam hospitals location breakdown
Outside Java
8 units / 50.0%
Greater Jakarta
7 units / 43.8%
Surabaya
1 unit / 6.3%
In addition to its current 16 operational hospitals, there
are six under construction hospitals in the pipeline;
namely Medan (North Sumatra), Kupang (east Nusa
Tenggara), Semarang (Central Java), Bandung (West
Page 41
Private hospital competition landscape
18
unit
beds
Operational beds (RHS)
16
2000
1800
No. of hospital (LHS)
1600
14
1400
12
1200
10
1000
8
800
6
600
4
400
Pluit
Mayapada
Omni
Hospitals
Pondok
Indah Group
Eka
Hospitals
Sari Asih
0
Sime Darby Ramsay
Health Care
200
0
Awal Bros
2
Hermina
Potential expansion outside Jakarta and Bali island makes
SILO’s outlook more compeling as its target market
segment (i.e. middle to upper class) in those areas are still
underpenetrated.
Java), Yogyakarta (Central Java) and Purwakarta (West
Java).
Mitra
Keluarga
Strong brand presence nationwide provide firstmover advantage for potential new locations
Currently, SILO hospitals’ location composition is 50% in
the two largest and densest cities in Indonesia (i.e.
Greater Jakarta & Surabaya) and another 50% outside
Java island. SILO (with the connection from parent Lippo
group) has identified locations for the next expansion. In
fact, SILO has signed a master agreement with its parent
company Lippo Karawaci (LPKR IJ) and strategic partner
MPU (e.g. sale purchase, rental agreement and rights to
build hospital) on 30th April 2013 for 30 locations
nationwide.
Siloam
2)
Given the network (current and potential) nationwide,
infrastructure advantage and expected strong cash flow
from its maturing hospitals, SILO should be on track to
become the largest one-stop hospital chain in Indonesia.
3)
Well-managed hospital with solid business model.
SILO’s sheer operation size and its network require a
good framework and system, which is described in its
“Four Pillar Foundation” strategy. It includes excellence in
emergency services, state-of-the-art medical equipment &
system, digital tele-medicine and doctor partnership
development program.
The centralised “500-911” call service and modern
equipment & supplies, coupled with well-established
teams helps shorten response time in emergency cases.
Private jets (joint-venture with Susi Air) and helicopter
services on emergencies are also available on request.
Company Focus
Siloam Medivac Emergency service
Source: DBS Vickers
SILO is one of the pioneers in Indonesia, using 3-Tesla
MRI, 256 slice CT-Scan, Rapid Arc Linear Accelerator and
Gamma Knife (the first knifeless brain surgery equipment
in Indonesia) medical equipment at its Center of
Excellence hospitals. SILO’s hospitals have a minimum
standard suite that includes 1.5-Tesla MRI, 128 slice CTScan, 4D ultrasound, digital mammography and digital Xray.
Gamma Knife equipment in Siloam Hospital Lippo
Village
Source: Company brochure
SILO centralises its operating activities through an
integrated system (which includes keeping patient & lab
records, billing & price system, and procurement
activities) and consolidation for backoffice functions at its
HQ. Through its “Tele-Medicine” system, SILO also
adopts “hub” and “spoke” strategy between its
hospitals. The “spoke” hospitals located in smaller cities
and large towns act as a source of referrals for more
complex cases to the “hub” hospitals (i.e. hospitals with a
high number of specialists, in large urban cities and offers
a greater range of clinical specialities).
Page 42
Siloam Center of Excellent and Hub/Spoke
Hospital
Hub /
spoke
Lippo Village
Kebon Jeruk
Surabaya
MRCCC
Makassar
Cinere
Bali
Hub
Hub
Hub
Hub
Hub
Hub
Hub
Lippo Cikarang
Jambi
Balikpapan
General
Hospital
Manado
Sriwijaya
TB Simatupang
Kuta
Nusa Dua
Center of Excellence
Spoke
Spoke
Spoke
Spoke
Cardiology, neurosciences and orthopedics
Cardiac surgery, urology and orthopedics
Cardiology, and fertility treatment
Cancer treatment
Cardiology for East Indonesia area
Cardiology
Orthopedics, cardiology and medical
tourism hub
Occupational medicine
-
Spoke
Spoke
Spoke
Spoke
Spoke
Gastroenterology
-
Source: DBS Vickers, Company
To attract, retain and develop quality medical personnel,
SILO implement a number of initiatives such as:
 Siloam Doctor Partnership Development Program
(SDPDP), whereby doctors (especially specialists)
enjoy a range of benefits (i.e. life insurance,
medical insurance, pension program, continuing
medical education, etc). In addition, specialists get
high fees depending on exclusivity of practice
arrangement (i.e. exclusive: 94-98% of
consultation fee, non-exclusive: 93-97% of
consultation fee).
 Comprehensive 18-month management associate
program to find best management talent for both
existing and future hospitals.
 Partnership with medical science group University
Pelita Harapan Medical Services (UPHMS), which
trains more than 100 doctors and 100 nurses from
University Pelita Harapan (UPH) annually.
 Collaboration with leading regional universities,
medical and nursing schools in Indonesia.
4)
Unlocking value through a REIT
SILO develops both brownfield and greenfield hospitals.
Once the hospitals are operational and stable, SILO’s
parent company will inject the hospital’s land and
building into its Singapore-listed First REIT and lease the
buildings from the REIT. The sale-and-leaseback
agreement involves a 15-year initial lease term (with
option to renew for another 15 years) and progressive
rental rate (i.e. 1% of annual gross operating revenue
[GOR] for 1st year, 2% of GOR for 2nd year and 3% of
GOR for 3rd year onwards).
Company Focus
Sale and leaseback agreement
Source: DBS Vickers
As part of the Lippo group, SILO can tap into Lippo’s
group structure and synergy for management expertise,
real estate know-how (for identifying land and building
management) and cash recycling mechanism to reduce
execution risk.
This mechanism allows SILO to raise cash for future
expansions and acquisitions at the expense of rising rental
expense. Without the sale-and-purchase mechanism to
REIT mentioned above, SILO will need to raise capital
externally (either by rights issue or loan facility) before
2016. To strengthen its balance sheet, SILO indicated that
they plan to implement a rights issue by the end of 2014.
Lippo Group
Source: DBS Vickers, Companies
Page 43
SILO’s rental term & leases agreement
Hospital
Rental term
Lease agreement
Lippo Village
Kebon Jeruk
Surabaya
Lippo Cikarang
Jambi
Balikpapan
MRCCC
General Hospital
Manado
Makassar
Sriwijaya
Cinere
Bali
TB Simatupang
Kuta
Nusa Dua
Note 1
Note 1
Note 1
Annual rent
n/a
n/a
Note 1
Note 1
Note 1
Note 1
Note 2
Rp6.5bn p.a.
Note 1
Note 1
n/a
n/a
15 years (renewal option for another 15 years)
n/a (Self-owned)
n/a (Self-owned)
10 years (renewal option for another 10 years & 8 years)
n/a
n/a
Source: Company, DBS Vickers.
Note:1. 1% of GOR (1st yr), 2% of GOR (2nd yr), 3% of GOR (3rd yr onwards)
2. Rp3bn (year 1-3), Rp3.5bn (year 4-6) and Rp4bn (year 7-10)
Company Focus
Key catalysts

Rising healthcare needs in Indonesia
Indonesia, the 4th most populated country (~250m people),
has potential to see rising healthcare spending, given its
demographic shift and rising middle class.
Life expectancy
85
years
80
75
Healthcare expenditure grew 12% CAGR for the past four
years, but currently represents only 2.7% of GDP (one of the
lowest in the ASEAN region). Indonesia’s healthcare
expenditure is also at a paltry US$132 per capita, while its
average life expectancy of 67.8 years is at par with the
world’s average. Indonesia’s population has a median age of
28.9 years and currently, 14% of its population is above 55
years. These statistics indicate the growth potential for
Indonesia’s healthcare industry.
Source: CIA World Fact Book, United Nations (UN)
Healthcare expenditure (as % of GDP)
Median age and population portion above 55 years
6.8
4.1
4.1
4
35
3.6
2.8
3
2.7
2.5
2
2
30
25
1
20
0
US$ per capita
3,000
2,500
3,780
3,339
2,797
2,297
2,000
1,500
1,000
500
605
473
390
258
0
Page 44
Russia
Philippines
India
40%
35%
30%
25%
20%
15%
10%
5%
0%

Significant top-line growth to ease cashflow concerns.
Considering the potential above and the aggresive expansion
of hospitals for SILO, we believe our assumption of a 32%
CAGR growth in revenue (for both in-patient and out-patient)
until 2020 are justifiable. The successful execution of
expansion will see SILO generate its first positive cashflow in
2017.
Healthcare expenditure per capita
3,500
45%
Source: CIA World Fact Book
4,000
Indonesia
Median age
40
4.6
5
China
Thailand
Population above 55 years
Malaysia
Vietnam
United States
South Korea
United Kingdom
Canada
Singapore
Japan
years
Australia
60
45
5.7
6
67.9
65
50
8 x
7
70
180
148
132
Company Focus
Key risks and concerns
SILO revenue growth
14,000
Rpbn
In-patient
Out-patient
12,000
4,992
10,000
8,000
3,774
2,786
6,000

Capital intensive and requires large and constant
funding. SILO has laid out an aggressive expansion plan for
the next few years. Therefore, it needs large capital upfront
continuously these few years. As a guidance, SILO needs
US$25m capex upfront for each 150-bed capacity greenfield
hospital project.
2,027
4,000
7,682
1,510
6,124
1,157
2,000
-
963
423
607
537
722
711
1,077
2010
2011
2012
1,541
2,126
2,848
3,812
4,860
2013 2014F 2015F 2016F 2017F 2018F 2019F
Free cash flow forecast
800
Rpbn
670
600
526
Initial capex breakdown for greenfield hospital
Working
capital
Rp12bn, 4%
(by SILO)
Land &
building
Rp120bn, 40%
(by LPKR)
Medical
equipment
Rp168bn, 56%
(by SILO)
400
200
112
Source: DBS Vickers.
Note that 40% of capex is land & building, and therefore will be
spent by parent company property developer Lippo Karawaci (LPKR
IJ)
0
-200
-218
-245
2014F
2015F
-161
-400
Source: DBS Vickers
2016F
2017F
2018F
2019F
In our view, SILO can have 40 operational hospitals by early
2019 (vs company’s target of 2017). Typical new greenfield
hospital cash flow scenario is shown in the next page. To
fund these expansions, SILO needs both internal cash flow
generated by its existing mature hospitals and the cash raised
from hospital sales. This also translates into execution risk for
the planned expansion.

Dependent on REIT’s ability to acquire hospitals. As
mentioned in the previous section, the source of funds for
future expansion is the sale of hospitals to First REIT and is
therefore dependent on First REIT’s ability to acquire hospital
assets and lease them back to the company.

Related party transactions. This risk potentially arises
from the sale and leaseback agreement and loans from
major shareholder (i.e. LPKR, which owns 78.2% of SILO).
On 30th April 2013, SILO entered into a master
agreement with both LPKR and Metropolis Propertindo
Utama (MPU) for 30 hospital locations for future
expansion.
Page 45
Company Focus
Master agreement (signed on 30th April 2013)
Location
Bandung
Yogyakarta
Bintaro
Surabaya Manyar
Pontianak
Kemang
St. Moritz
Medan
Malang
Salemba
Sea Master Surabaya
Palembang
Kupang
Srondol Semarang
Padang
Bangka Belitung
Bogor
Jember
Bluemall Bekasi
Bekasi Grand Mall
MT Haryono
Lampung
Purwakarta
Ambon
Lubuk Linggau
Manado Kairagi
Serang
Pekanbaru
Pluit
Cempaka Putih
Party
LPKR
LPKR
LPKR
LPKR
LPKR
LPKR
LPKR
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
MPU
Agreement
Joint operation
Rights to build hospital
Rights of First Refusal
Rental agreement
Rental agreement
Sale purchase agreement
Rental agreement
Rental agreement
Source: Company
Also, SILO has a loan agreement with LPKR. As at Mar
2014, SILO had an outstanding Rp387bn loan balance to
related party (mostly from LPKR). This loan is interest-free
until Dec 2013. Post-2013, the loan facility can bear
interest rate as high as 12% p.a. In our forecast, we
assume no reduction in loan balance from related party
until 2017, as SILO still requires large funding for its
expansion capex.

Shortage of medical human resource. Although we
view that SILO should not have issues in obtaining and
retaining doctors or specialists, there is a dearth of
workers in this industry (at just 0.2% of the total
population).
Page 46
Physician density per 10,000 population
Australia
United Kingdom
United States
Japan
Singapore
China
Brunei
Vietnam
Philippines
India
Burma
Thailand
Cambodia
Indonesia
38.5
27.7
24.2
21.4
19.2
14.6
13.6
12.2
12
6.5
5
Density
(per 10,000
population)
3
2.3
2
0
10
20
30
40
50
Source: CIA World Fact Book, WHO, Kaiser Family Foundation

Extensively regulated industry. The healthcare sector
is exposed to extensive and dynamic government laws
and regulations. Material changes in current regulations
and laws will probably have an adverse impact on SILO’s
operations.

Example of hospital regulations
Regulation
Hospital operation
Hospital license
Doctor / healthcare worker
Doctor practice license
Foreign nationals healthcare labor
Document
Law UU No. 44/2009
Health ministry decree no. 147/MENKES/PER/I/2010
Law UU No. 29/2004
Health ministry decree no. 2052/MENKES/PER/X/2011
Health ministry decree no. 317/MENKES/PER/III/2010
Source: Ministry of Health

Litigation risk from medical and legal claims.
Hospital business is by default subject to medical and
legal claims. Currently, there are two ongoing lawsuits
with potential damage of ~Rp200bn.
Company Focus
Valuation
Initiating SILO coverage with FULLY VALUED
recommendation and Rp12,750 TP.
We value the company using discounted cash flow valuation
up to year 2028 of existing and new hospitals. While SILO
offers growth and is the leader of premium hospital in
Indonesia, its valuation is still at a premium to regional
healthcare peers, even with scarcity premium argument. Our
TP implies 20xEV/EBITDA in 2015 (vs 15x regional peers’
average).
Our key assumptions for our valuation model are as follows:
 WACC of 13.9% with beta of 1.2x.
 Additional 4-5 hospitals per annum with initial capex
of US$25m per hospital with 150-bed capacity each.
 No hospital sales in SILO’s book to First REIT.
Page 47
 No repayment on the loans to related parties until
2017 and 11.5% interest expense for those facilities,
which significantly impact earnings.
 Additional loan facilities of Rp90bn per annum in 2015
& 2016 to fund expansion capex.
 New hospitals to generate positive EBITDA in 2nd year
(i.e. 8% EBITDA margin) and reach a stable 23%
EBITDA margin in 6th year.The IRR is 16% within a 10year period.
 Revenue to grow at 30% CAGR from 2013 to 2019,
with gradual improvement in EBITDA margin from
c.12% to c.20% within the same period.
 Free cash flow starts to turn positive in 2017.
 Terminal growth of 4% from 2028 onwards.
 Debt equity post-IPO (i.e. 12 Sep 2013) to stay around
0.27-0.31 range.
Company Focus
Hospitals valuation
Market cap
BB Ticker
SILO IJ Equity
SAME IJ Equity
SRAJ IJ Equity
BGH TB Equity
EV/EBITDA(x)
PE(x)
PB(x)
Div. Yield
ROE
Company name
Siloam International
Hospitals
Sarana Meditama
Metropolitan *
Sejahteraraya
Anugrahjaya *
Bangkok Dusit
Medical Services
US$m
FY14F
FY15F
FY14F
FY15F
FY14F
FY15F
%
%
1,388.5
27.2
19.1
175.8
122.2
8.2
7.7
0.0
5.4
271.1
n/a
n/a
n/a
n/a
n/a
n/a
0.0
42.8
152.0
n/a
n/a
n/a
n/a
n/a
n/a
0.0
-5.8
8,022.2
2.7
2.1
3.1
2.7
0.5
0.4
13.1
17.5
2,537.9
16.6
14.1
27.6
23.5
6.9
5.9
1.8
27.8
611.1
15.8
13.9
28.5
24.4
4.5
4.2
0.0
13.8
BH TB Equity
Bumrungrad Hospital
BCH TB Equity
Bangkok Chain *
RFMD SP
Equity
Raffles Medical
1,751.6
19.4
18.0
27.3
24.2
3.8
3.4
1.6
19.7
IHH SP Equity
IHH Healthcare
11,000.5
20.2
18.2
40.4
35.6
1.7
1.7
0.7
3.6
KPJ MK Equity
KPJ Healthcare *
2,769.1
16.9
14.7
30.5
27.3
2.8
2.7
0.0
9.4
APHS IN Equity
Apollo Hospitals
Enterprise *
2,226.5
17.7
14.8
34.0
27.8
4.2
3.8
0.0
11.1
FORH IN Equity
Fortis Healthcare *
927.3
23.3
15.7
127.0
46.1
1.2
1.2
0.0
3.1
RHC AU Equity
Ramsay Healthcare *
10,010.6
15.1
12.0
28.6
24.2
5.8
5.2
1.9
20.7
SHL AU Equity
Sonic Healthcare *
7,303.4
11.9
10.9
17.5
15.7
2.2
2.1
4.0
12.6
PRY AU Equity
Primary Healthcare *
2,377.4
8.3
7.7
13.5
12.1
0.8
0.8
4.7
5.9
Indonesia
27.2
19.1
175.8
122.2
8.2
7.7
0.0
10.1
Thailand
6.5
5.5
10.0
8.6
2.2
1.9
9.8
19.6
Market weighted average
Singapore
20.1
18.2
38.6
34.0
2.0
1.9
0.9
5.8
Malaysia
16.9
14.7
30.5
27.3
2.8
2.7
0.0
9.4
India
19.4
15.1
61.3
33.2
3.3
3.0
0.0
8.7
Australia
13.1
11.1
22.7
19.6
3.8
3.5
3.0
15.9
Source: DBS Vickers, Bloomberg Finance L.P. Note: * Bloomberg consensus estimate
Page 48
Company Focus
SWOT Analysis
Strengths
 Largest private hospital operator in Indonesia. SILO
currently has 16 hospitals under its portfolio and plans to
expand aggresively in the next few years.
 First-mover advantage in smaller cities, with strong brand
and good network infrastucture nationwide.
 Solid business model, with “Four Pillar Foundation”
strategy that includes excellence in emergency services,
state-of-the-art medical equipment & system, digital telemedicine and doctor partnership development program.
 Value unlocking through REIT, providing avenue for cash
recycling mechanism for future expansion.
 Synergy with parent group Lippo, enabling company to
tap into management expertise and real estate knowledge.
Opportunities
 Rising healthcare needs in Indonesia, with increasing
health consciousness of urban population. Healthcare
expenditure grew 12% CAGR for the past four years. There
is no sign of slowing down in the medium term as it
represents only 2.7% of GDP (i.e. underpenetrated market).
Source: DBS Vickers
Page 49
Weakness
 Dependent on REIT for expansion. Funds for future
expansion is dependent on First REIT’s ability to acquire
hospital assets and lease them back to the company.
 Capital-intensive project requires large and constant
funding, with aggressive plan (i.e. 5-6 new hospitals p.a.)
for the next few years.
 Related party transactions. The asset-light strategy
requires asset transfers between the company and
companies within Lippo group (through property leases,
shareholder loans, etc)
Threats
 Shortage of medical human resource, with healthcare
worker-to-population ratio of only 0.2%.
 Highly subject to government’s extensive laws and
regulations. The company may face an adverse impact if
there are any material changes in the regulations.
 Litigation risk from medical and legal claims. There are
currently three ongoing lawsuits with potential damage of
approximately Rp200bn.
 Botched implementation of universal coverage.
Company Focus
Company Background
in 1996 with a current capacity of 317 beds. SHLV is the first
hospital in Indonesia to be accredited (on 19 Sep 2007) and
re-accredited in triennial review (on 4 Sep 2010) by Joint
Commission International (JCI), the international arm of the
organisation that reviews and accredits hospitals. SHLV acts
as a center of excellence “hub” in cardiology, neurosciences
and orthopedics.
Largest private hospital chain in Indonesia. Siloam
International Hospitals (SILO) currently operates 16 private
hospitals in Indonesia. SILO is conglomerate Lippo group’s
healthcare arm. SILO was listed on the Indonesia Stock
Exchange (IDX) in 12 Sep 2013 and is the largest listed private
hospital company in Indonesia. Parent company LPKR remains
its largest shareholder with a 78.2% stake. Its key asset is
Siloam Hospital Lippo Village (SHLV), which was established
Sales Trend
Profitability Trend
Rp bn
Rp bn
50.0%
5,000
45.0%
4,000
40.0%
3,000
35.0%
2,000
30.0%
1,000
25.0%
249
199
149
0
99
20.0%
2012A
2013A
Total Revenue
2014F
2015F
49
2016F
2012A
Revenue Growth (%) (YoY)
2013A
2014F
Operating EBIT
2015F
Pre tax Profit
2016F
Net Profit
Corporate Structure
LPKR
Public
86%
14%
SILO
100%
SHLV
100%
SHKJ
100%
SHS
99.9%
Subsidiary
80%
SHLC
99.9%
MRCCC
Subsidiary
99.9%
Subsidiary
83%
SHJB
100%
RSUS
100%
SHMN
100%
SHMK
99.9%
Subsidiary
80%
88%
SHBL
SHPL
99.9%
Subsidiary
100%
100%
SHB
SHTB
80%
SHC
99.9%
Subsidiary
99.9%
Subsidiary
80%
80%
SHKU
SHND
Legend:
LPKR: Lippo Karawaci Tbk
SHS: Siloam Ho spital Surabaya
SHB L: Siloam Ho spital Balikpapan
SHP L: Silo am Ho spital Sriwijaya
SHKU: Silo am Ho spital Kuta
SILO: Silo am Internatio nal Ho spitals Tbk
SHLC: Silo am Hospital Lippo Cikarang
RSUS: Siloam Ho spital General Ho spital
SHC: Siloam Ho spital Cinere
SHND: Silo am Ho spital NusaDua
SHLV: Siloam Ho spital Lippo Village
M RCCC: M ochtar Riady Cancer Co mprehensive Center SHM N: Siloam Ho spital M anado
SHB : Siloam Ho spital B ali
SHKJ: Siloam Ho spital Kebo n Jeruk
SHJB: Silo am Hospital Jambi
SHTB: Silo am Hospital TB Simatupang
Source: Company
Page 50
SHM K: Siloam Ho spital M akassar
Company Focus
SILO Milestones
Phase
Year
Hospital
Location
Remarks
Initial
1996
2002
2003
2004
Lippo Village
Lippo Cikarang
Kebon Jeruk
Surabaya
West Jakarta suburb
East Jakarta suburb
West Jakarta
East Java
Greenfield
Greenfield
Brownfield - acquired in 2000
MRCCC
Jambi
Balikpapan
General Hospital
Manado
Makassar
Sriwijaya
Cinere
Bali
TB Simatupang
Kuta
Nusa Dua
Central Jakarta
Central Sumatra
East Kalimantan
West Jakarta suburb
North Sulawesi
South Sulawesi
South Sumatra
West Java
Bali
South Jakarta
Bali
Bali
Greenfield
Greenfield
Greenfield
Greenfield
Greenfield
Greenfield
Consolidation
→
(Year 2004 - 2010)
2011
2012
Expansion
2013
2014 (YTD)
SILO’s existing portfolio – as at Mar 2014
Hospital
Year of
operation under
Siloam brand
SILO
Bed capacity
ownership
(Operational)
(%)
Snapshot
Hospital
Year of
operation under
Siloam brand
SILO
Bed capacity
ownership
(Operational)
(%)
Lippo Village *
1996
100%
(direct)
317 (251)
Manado *
2012
100%
(direct)
249 (224)
Lippo Cikarang *
2002
80%
(through
subsidiary)
108 (108)
Makassar *
2012
100%
(direct)
352 (101)
Kebon Jeruk *
2003
100%
(direct)
266 (197)
Sriwijaya
2012
88%
(through
subsidiary)
347 (99)
Surabaya *
2004
100%
(direct)
177 (160)
Cinere
2012
80%
(through
subsidiary)
21 (21)
MRCCC *
2011
100%
(direct)
336 (112)
Bali *
2013
100%
(direct)
271 (76)
Jambi
2011
83%
(through
subsidiary)
100 (97)
TB Simatupang *
2013
100%
(direct)
269 (55)
Balikpapan
2011
80%
(through
subsidiary)
212 (138)
Kuta
2014
80%
(through
subsidiary)
19 (18)
General Hospital
2012
100%
(direct)
680 (120)
Nusa Dua
2014
80%
(through
subsidiary)
31 (14)
Source: Company, DBS Vickers. Note: * for hospital under First REIT
Page 51
Snapshot
Company Focus
Management Team. SILO’s management team comprises
medical professionals, healthcare administrators and industry
professionals, who have more than 20 years of experience in
the hospital sector.
On 25th April 2014, SILO announced its 1st management
reshuffle after its IPO (12th September 2013). The
management reshuffle included the promotion of Mr. Romeo
F. Lledo to President Director from CFO previously, and the
appointments of Mr. Kailas Nath Raina and Dr. Andry as CFO
and COO respectively.
Key Management Team
Name
Current appointment
Experiences
President Director
- Appointed as President Director since 2014
- Served as Accounting & Finance Director in Siloam International Hospital (2010 2013)
- Has over 11 years of experience as finance executive and 26 years of experience in
commerce and industry management
- Served as President Director at PT Mitra Kreasidharma and PT Inti Everspring
Indonesia (2008 - 2010)
- Served as President Commissioner of PT Indonox Mitra Pratama and PT Unggul
Indah Cahaya Tbk (2008 - 2010)
- Acquired the title of Certificate Public Accountant (CPA) in the Philippines (1977)
- Obtained certification from the Strategic Business Economics Program for Senior
Executives (SBEP) of the Center for Research amd Communication, Philippines (1991)
- Obtained certification from Management Development Program (MDP) of the Asian
Institute of Management, Philippines (1986)
Kailas Nath Raina
Chief Financial Officer Director
- Appointed as Director since 2014
- Senior Vice President in Citibank Indonesia (2010 - 2013) as Cards and Investment
Operations Head
- Vice President in Citigroup Philippines (2007 - 2010) as Head of Credit Operations
and Transaction Services
Dr. dr. Andry, M.M., M.H.
Kes.
Chief Enterprises and
Operational Officer Director
Romeo Fernandez Lledo
- Chief Executive Officer of Siloam Hospital Lippo Village
- Chief Executive Office of Siloam Karawaci Hospital (2001 - 2007)
Dr. Grace Frelita Indradjaja,
MM
Dr. Anang Prayudi
Prof George Mathew
Group Global Quality
Development Director
Director of Strategy and
Development
Director
- Has dedicated over 25 years to the healthcare services development in Indonesia
- Introduced JCI accreditation to Indonesia (2007)
- Earned Masters of Management from the University Indonusa Esa Unggul, Jakarta
(1997)
- Earned a Bachelor of Medicine from Atma Jaya Catholic University, Jakarta (1982)
- Has more than 25 years of experience in the healthcare industry, with Indonesian
Army (TNI-AD) and International SOS
- Served as Medical Director at International SOS (1998 - 2011)
- Obtained a Master of Occupational Medicine of the University of Indonesia, Jakarta
(2006)
- Graduated from Department of General Medicine in University of Brawijaya, Malang
(1989)
- Currently serves as President of Mochtar Riady Institute for Nanotechnology and
President of University of Pelita Harapan (since 2011)
- Currently holds Professor & Head of General Surgery Unit III (General Surgery &
Surgery Oesophago Gastro duodenal) at Christian Medical College, India (since 1997)
- Earned Doctor of Medicine (Surgery) from University of Adelaide, Australia (1997)
- Obtained Master of Surgery from Christian Medical College Vellore, India (1984)
- Earned Medical School (MBSS) degree from Christian Medical College Vellore, India
(1975)
Source: Company
Page 52
Company Focus
Segmental Breakdown
FY Dec
2011A
2012A
2013A
2014F
2015F
2016F
Revenues (Rp bn)
IP-Medical services
415
607
857
1,124
1,492
2,000
IP-Medical supplies
263
403
585
767
1,018
1,364
1,446
OP-Medical services
373
462
620
813
1,079
OP-Medical supplies
165
221
299
392
520
696
44
96
143
188
249
334
1,259
1,788
2,504
3,283
4,358
5,839
Others
Total
Gross profit (Rp bn)
IP-Medical services
104
122
200
304
403
540
IP-Medical supplies
37
85
162
207
275
368
OP-Medical services
151
154
226
296
393
526
OP-Medical supplies
34
34
25
33
44
58
8
50
46
67
89
120
334
445
659
907
1,203
1,612
IP-Medical services
24.9
20.1
23.3
27.0
27.0
27.0
IP-Medical supplies
14.2
21.0
27.7
27.0
27.0
27.0
OP-Medical services
40.5
33.5
36.4
36.4
36.4
36.4
OP-Medical supplies
20.7
15.5
8.4
8.4
8.4
8.4
Others
17.3
51.7
32.4
35.8
35.8
35.8
Total
26.5
24.9
26.3
27.6
27.6
27.6
Others
Total
Gross profit Margins (%)
Page 53
Company Focus
FY Dec
Margins Trend
2011A
2012A
2013A
2014F
2015F
2016F
Revenue
1,259
1,788
2,504
3,283
4,358
5,839
Cost of Goods Sold
(926)
(1,343)
(1,845)
(2,377)
(3,155)
(4,227)
4.5%
334
445
659
907
1,203
1,612
3.5%
(245)
(368)
(583)
(751)
(993)
(1,321)
89
77
76
156
210
291
2.0%
(17)
15
3
0
0
0
1.0%
0
0
0
0
0
0
(13)
(14)
(7)
(50)
(57)
(72)
Gross Profit
Operating Profit
Associates & JV Inc
Pre-tax Profit
Tax
Minority Interest
Preference Dividend
Net Profit
EBITDA
0
0
0
0
0
0
58
77
72
106
153
219
(20)
(25)
(22)
(27)
(38)
(55)
6
(1)
0
(1)
(1)
(1)
0
0
0
0
0
0
44
50
50
79
114
163
44
50
50
79
114
163
179
217
304
505
730
1,040
34.0
Growth
Revenue Gth (%)
22.2
42.0
40.0
31.2
32.7
EBITDA Gth (%)
78.0
21.3
39.8
66.1
44.6
42.5
Opg Profit Gth (%)
(12.1)
(13.1)
(1.3)
105.3
34.8
38.5
Net Profit Gth (%)
(35.2)
15.4
(1.2)
58.6
43.9
43.5
27.6
Margins & Ratio
Gross Margins (%)
26.5
24.9
26.3
27.6
27.6
7.0
4.3
3.0
4.7
4.8
5.0
3.5
2.8
2.0
2.4
2.6
2.8
ROAE (%)
27.2
24.3
5.4
4.8
6.5
8.7
ROA (%)
4.6
3.7
2.4
3.0
3.9
5.0
ROCE (%)
7.6
4.6
2.9
4.9
6.2
7.9
0.0
0.0
0.0
0.0
0.0
0.0
6.6
5.3
11.0
3.1
3.7
4.0
Page 54
6.0%
5.5%
5.0%
4.0%
3.0%
2.5%
1.5%
2012A
2013A
Operating Margin %
2014F
2015F
2016F
Net Income Margin %
Company Focus
FY Dec
Net Fixed Assets
Asset Breakdown (2014)
2011A
2012A
2013A
2014F
2015F
2016F
552
865
1,402
1,649
1,931
0
0
0
0
0
0
Other LT Assets
202
264
291
367
412
474
Cash & ST Invts
147
169
515
295
143
23
44
75
95
110
146
195
124
187
271
300
399
534
43
26
26
32
38
46
1,112
1,586
2,601
2,754
3,068
3,446
Inventory
Debtors
Total Assets
ST Debt
Other Current Liab
LT Debt
2,174
12
16
17
20
20
14
195
252
279
326
426
563
66
55
43
60
150
216
660
1,019
623
630
640
655
183
233
1,611
1,690
1,804
1,968
Minority Interests
(4)
11
28
28
29
30
Total Cap. & Liab.
1,112
1,586
2,601
2,754
3,068
3,446
17
36
113
116
157
212
Net Cash/(Debt)
68
98
456
216
(26)
(207)
28.7
31.8
33.4
31.7
29.3
29.1
44.2
40.8
36.1
33.3
33.2
33.5
17.9
16.5
18.1
19.2
18.4
17.7
Asset Turnover (x)
1.3
1.3
1.2
1.2
1.5
1.8
Current Ratio (x)
1.7
1.7
3.1
2.1
1.6
1.4
Quick Ratio (x)
1.3
1.3
2.7
1.7
1.2
1.0
Net Debt/Equity (X)
CASH
CASH
CASH
CASH
0.0
0.1
CASH
CASH
CASH
CASH
0.0
0.1
Capex to Debt (%)
521.5
640.2
1,280.0
748.1
472.1
431.0
10.9
8.0
11.8
11.3
10.0
9.1
Z-Score (X)
Page 55
Debtors 12.8%
Net Fixed
Assets 70.0%
Assocs'/JVs 0.0%
Inventory 4.7%
Bank, Cash
and Liquid
Assets 12.5%
Company Focus
FY Dec
Capital Expenditure
2011A
2012A
2013A
2014F
2015F
2016F
Pre-Tax Profit
77
72
106
153
219
1000
Dep. & Amort.
140
228
349
520
749
800
Tax Paid
(25)
(22)
(27)
(38)
(55)
600
0
0
0
0
0
400
405
(580)
16
(19)
(28)
200
(1)
0
(1)
(1)
(1)
0
Net Operating CF
596
(302)
444
615
884
Capital Exp.(net)
(453)
(764)
(596)
(801)
(992)
1200
Chg in Wkg.Cap.
Other Operating CF
Other Invts.(net)
0
0
0
0
0
0
0
0
0
0
Div from Assoc & JV
0
0
0
0
0
Other Investing CF
(128)
80
(89)
(57)
(74)
Net Investing CF
(581)
(684)
(685)
(858)
(1,066)
0
0
0
0
0
(8)
(11)
20
90
61
Div Paid
Chg in Gross Debt
Capital Issues
0
1,328
0
0
0
15
16
1
1
1
Net Financing CF
8
1,333
21
91
62
0
0
0
0
0
22
348
(220)
(152)
(120)
Opg CFPS (Rp)
191
240
370
548
789
Free CFPS (Rp)
142
(922)
(131)
(161)
(94)
Other Financing CF
Chg in Cash
Page 56
2012A
2013A
2014F
2015F
Capital Expenditure (-)
2016F
Tempo Scan Pacific
Bloomberg: TSPC IJ | Reuters: TSPC.JK
NOT RATED Rp2,960 JCI : 4,842.13
Potential Catalyst: Potential expansion into other business segments
Sticking to the core
 Remains a domestic play
 Decent overall margins
Analyst
[email protected]
 Rising labour cost may hurt EBIT margins
 Modest growth with reasonable valuations
Still a domestic play. Tempo Scan Pacific (TSPC)’s
domestic revenue grew at 13% CAGR since 2008,
and contributed 95% to total revenue in FY13 ,
despite strong growth in international revenue in the
past two years (28% CAGR).
Price Relative
Rp
230
3 ,3 6 4 .0
210
190
2 ,8 6 4 .0
170
2 ,3 6 4 .0
150
130
1 ,8 6 4 .0
110
90
1 ,3 6 4 .0
70
8 6 4 .0
J u n -1 0
J u n -1 1
Te m p o S c a n P a c if ic ( L H S )
J u n -1 2
50
J u n -1 4
J u n -1 3
FY Dec (Rp bn)
Turnover
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
EPS (Rp)
EPS Pre Ex. (Rp)
EPS Gth (%)
EPS Gth Pre Ex (%)
Diluted EPS (Rp)
Net DPS (Rp)
BV Per Share (Rp)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)
Other Broker Recs:
2010A
2011A
2012A
2013A
5,134
649
629
489
489
109
109
36
36
109
65
551
27.2
27.2
23.8
18.8
2.2
5.4
CASH
19.5
5,781
785
740
566
566
126
126
16
16
126
48
640
23.5
23.5
22.2
15.3
1.6
4.6
CASH
20.2
6,631
787
812
628
628
140
140
11
11
140
76
711
21.2
21.2
21.9
15.1
2.6
4.2
CASH
19.8
6,855
671
830
635
635
141
141
1
1
141
75
761
21.0
21.0
33.2
18.1
2.5
3.9
CASH
17.8
B: 3
S: 0
H: 1
ICB Sector: Pharmaceuticals & Biotechnology
Principal Business: TSPC manufactures and distributes
pharmaceutical, healthcare and cosmetic products
Page 57
www.dbsvickers.com
ed: JS / sa: MA
Decent margins for each business segment.
In
FY13, TSPC’s GP margin was 39.7% (the highest level
since 2008) despite pressure on COGS, implying TSPC’s
ability to pass on cost increases to their customers. GP
margins for Pharmaceuticals & Consumer health
products and Consumer products & Cosmetics have
risen steadily to 65% and 61%, respectively. Although
lower, distribution segment’s (wide network covering
185 locations in Indonesia with 67 branches and 118
sales points) margins are more stable than the other
two divisions.
Higher salary & wages can surpress EBIT
margins. “Salary, wages and employee benefits”
(representing 29% of total SG&A) went up higher
than expected (+18% y-o-y) in FY13. Labour strikes
(like in 2012) has also historically disrupted operations
at its manufacturing facilities.
Modest growth at reasonable valuations. TSPC
expects revenue to grow around 12% this year, while
gross and net profit margins remain stable. TSPC
currently trades at 15.7x FY15F PE based on
consensus earnings (3 analysts), cheaper than peers’
average of 22x.
At A Glance
Major Shareholders
Bogamulia Nagadi (%)
Free Float (%)
4,500
13,320 / 1,112
77.3
22.7
737
Tempo Scan Pacific
Driven by domestic demand
Tempo Scan Pacific (TSPC) derives its revenue from 3 main
segments - pharmaceuticals & consumer health products;
consumer products & cosmetics; and distribution. Distribution
is the largest contributor to TSPC’s revenue and has posted
the highest 5-year CAGR ( 18%) compared to pharmaceuticals
& consumer health products (7.7%) and consumer products &
cosmetics (14.4%).
Pharmaceuticals & consumer health products and consumer
products & cosmetics GP margins have seen a steady increase to
65% (from 60% in 2008) and 61% (from 50% in 2008),
respectively. Distribution segment (network covering 185
locations in Indonesia with 67 branches and 118 sales points)
has lower but more stable margins that the other two divisions.
GP margins for each segment
Revenue breakdown by segment
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
70%
39%
42%
23%
22%
47%
47%
48%
47%
38%
36%
22%
23%
23%
24%
31%
30%
29%
29%
2012
2013
Pharmaceuticals & consumer health
Consumer product & cosmetic
Distribution
40%
30%
20%
2009
2010
2011
Pharmaceuticals & consumer health
Distribution
0%
2008
Consolidated revenue grew at 13.3% CAGR (~2x GDP
growth)
Rp bn
7,000
Pharmaceuticals & consumer
health
6,631
6,855
5,781
6,000
5,134
5,000
13%
10%
4,000
61%
50%
2008
8,000
65%
60%
4,498
3,634
2009
2010
2011
2012
2013
Bodrex (flu/cough OTC medicine), Oskadon (headache OT
medicine) and Hemaviton (energy drinks) can be considered to
be the main drivers for TSPC revenue in pharmaceuticals &
consumer health products. There is revenue upside with
potential entry into the beverage, nutritional and supplement
markets.
3,000
2,000
1,000
2008
2009
2010
2011
2012
2013
Hemaviton has high market share in the energy drinks category,
just behind Sido Muncul’s “Kuku Bima” and Kalbe Farma’s
“Extra Joss”. TSPC has maintained its market share (in terms of
volume) in the past few years despite competition.
Despite strong growth for the past two years (28% CAGR),
international demand is still small as compared to domestic
demand. In FY13, TSPC derived 95% revenue from domestic
demand.
Revenue breakdown per segment
100%
99%
98%
97%
4%
3%
96%
97%
5%
4%
5%
6%
96%
95%
94%
93%
92%
95%
96%
95%
94%
91%
90%
2008
2009
2010
Domestic
2011
International
2012
2013
Good margins in each business segment
TSPC’s GP margin was 39.7% (the highest level since 2008)
despite pressure on COGS, implying TSPC’s ability to pass on
cost increases to their customers.
Page 58
Tempo Scan Pacific
Market share in energy drinks segment
M-150
7.0%
Kratingdaeng
7.3%
TSPC’s mainstay products
Others
7.3%
Kuku Bima
42.1%
Hemaviton
12.9%
Extra Joss
23.4%
Source: AC Nielsen 2012, DBS Vickers
Pharmaceuticals & consumer health products division has
potential growth catalyst as it has plans to enter the generic
prescription drugs market in the next few years.
In consumer products & cosmetic division, “Marina” is its core
brand. The division’s international business has also risen
commendably (with 35% CAGR growth in the past 2 years),
contirbuted by its Thailand and Philippines operations.
Increase in salary & wages surpressed EBIT margins
Despite recording higher GP margins, FY13 EBIT margin of
9.3% was about 1ppt lower than FY12’s level, due to higher
than expected increases (+18% y-o-y) in “salary, wages and
employee benefits” (29% of total SG&A in FY13).
Source: DBS Vickers
Strong balance sheet for further expansion
TSPC’s debt is mainly made up of short term bank loans for
working capital. As of 1Q14, TSPC had net cash of Rp1.4tr (34% net gearing). Its strong balance sheet would enable TSPC
to make their logistics facilities more efficient, such as opening
regional logistic hubs, acquiring warehouse facilities, etc.
Modest growth expected with attractive valuation.
TSPC expects revenue to grow around 12% this year, while
expecting stable gross and net profit margins. TSPC currently
trades at 15.7x FY15F PE based on consensus earnings (3
analysts), cheaper than peers’ average of 22x.
TSPC logistics network across Indonesia
Source: Company
Page 59
Tempo Scan Pacific
FY Dec
2010A
2011A
2012A
2013A
5,134
(3,240)
1,894
(1,303)
591
(24)
0
63
0
629
(135)
(6)
0
489
489
649
5,781
(3,581)
2,200
(1,542)
658
8
0
74
0
740
(154)
(20)
0
566
566
785
6,631
(4,142)
2,488
(1,787)
702
42
0
68
0
812
(177)
(7)
0
628
628
787
6,855
(4,135)
2,720
(2,072)
648
109
0
73
0
830
(191)
(4)
0
635
635
671
14.1
31.1
32.6
35.8
21.4
12.6
20.9
11.3
15.8
20.8
14.7
0.3
6.7
10.9
21.8
3.4
(14.8)
(7.7)
1.1
23.1
FY Dec
2010A
2011A
2012A
2013A
FY Dec
Pre-Tax Profit
Dep. & Amort.
Tax Paid
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Capital Exp.(net)
Other Invts.(net)
Div from Assoc & JV
Other Investing CF
Net Investing CF
Div Paid
Chg in Gross Debt
Capital Issues
629
58
(135)
0
12
(6)
559
(104)
0
0
0
0
(104)
(293)
50
(1)
740
127
(154)
0
(92)
(20)
601
(252)
0
0
0
0
(252)
(215)
26
17
812
85
(177)
0
(104)
(7)
609
(200)
0
0
0
0
(200)
(343)
(46)
25
830
23
(191)
0
(257)
(4)
401
(226)
0
0
0
0
(226)
(338)
91
203
Gross Margins (%)
ROAE (%)
ROA (%)
ROCE (%)
Asset Turnover (x)
Current Ratio (x)
Quick Ratio (x)
Net Debt/Equity (X)
Capex to Debt (%)
Z-Score (X)
Opg CFPS (Rp)
Free CFPS (Rp)
Turnover
Cost of Goods Sold
Gross Profit
Operating Profit
Associates & JV Inc
Pre-tax Profit
Tax
Minority Interest
Preference Dividend
Net Profit
EBITDA
Sales Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (%)
Other Financing CF
Net Financing CF
Chg in Cash
6
(238)
0
218
(1)
(174)
0
175
(8)
(372)
0
38
10
(34)
0
141
2Q2013
3Q2013
4Q2013
1Q2014
Turnover
Cost of Goods Sold
Gross Profit
Operating Profit
Associates & JV Inc
Pre-tax Profit
Tax
Minority Interest
Net Profit
EBITDA
1,740
(1,035)
705
(483)
222
12
0
18
0
252
(58)
0
194
194
222
1,690
(1,035)
655
(523)
132
30
0
18
0
180
(35)
1
145
145
132
1,835
(1,118)
716
(668)
49
56
0
19
0
124
(64)
0
60
60
49
1,699
(1,022)
677
(399)
278
(7)
0
20
0
292
(36)
(4)
252
252
278
Sales Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (%)
Gross Margins (%)
9.4
(9.8)
(9.8)
(17.1)
40.5
12.7
11.1
(2.9)
(40.6)
(40.6)
(25.1)
38.7
7.8
8.6
8.5
(63.1)
(63.1)
(58.7)
39.1
2.7
3.3
(7.4)
472.2
472.2
320.2
39.9
16.4
14.8
Page 60
2010A
2011A
2012A
2013A
Net Fixed Assets
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Total Assets
761
0
187
1,398
595
536
112
3,590
886
0
242
1,609
726
599
187
4,250
1,001
0
238
1,651
765
746
232
4,633
1,204
0
213
1,792
1,001
809
389
5,408
ST Debt
Creditor
Other Current Liab
LT Debt
Minority Interests
Total Cap. & Liab.
113
419
252
0
161
2,604
41
3,590
140
574
299
0
192
3,007
39
4,250
94
629
374
0
183
3,322
31
4,633
184
745
418
0
198
3,822
41
5,408
Net Cash/(Debt)
573
1,285
640
1,469
739
1,558
1,036
1,608
2010A
2011A
2012A
2013A
36.9
11.5
9.5
19.5
14.3
16.7
59.8
NM
1.5
35.6
49.5
67.7
3.4
2.5
CASH
Cash
91.5
NA
286
122
101
38.1
11.4
9.8
20.2
14.4
16.6
38.0
NM
1.5
35.8
52.5
69.8
3.1
2.2
CASH
Cash
180.5
9.9
326
154
78
37.5
10.6
9.5
19.8
14.1
15.7
54.6
NM
1.5
37.0
54.1
67.1
3.1
2.2
CASH
Cash
213.1
9.6
346
158
91
39.7
9.5
9.3
17.8
12.6
12.7
53.2
NM
1.4
41.4
61.0
78.3
3.0
1.9
CASH
Cash
122.3
8.2
357
146
39
Rates & Ratio
FY Dec
FY Dec
Industry Focus
Research Team Directory
Analyst
Sector
E-mail
Regional
Timothy Wong
Joanne Goh
Paul Yong, CFA
Ben Santoso
Sachin Mittal
Lim Sue Lin
June Ng
Yee Mei Hui
Head, Group Research
Regional Equity Strategist
Transport
Plantations
Telecoms
Banking
Power & Coal
Gaming
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
Hong Kong / China
Carol Wu
Alice Hui, CFA
Allen Chan
Alexander Lee, CFA
Andy Yee
Addison Dai
Danielle Wang, CFA
Dennis Lam
Galant Ng
Herbert Hui,CFA
Jeff Yau, CFA
Ken HE, CFA
Mark Kong
Mark Li
Mavis Hui
Nicole Wu
Patricia Yeung
Rachel Miu
Tam Tsz-Wang, CFA
Titus Wu, CFA
Wee Keat Lee
Head of Research, China Property
Deputy HOR, Consumer
Hong Kong Property
Banking & Finance
China Property
Metal, Cement
China Property
Small Mid Caps
Industrials
Strategy
Hong Kong Property
China Property
Industrials
Consumer
Consumer
Transportation
Environmental
Automobile, Infrastructure, Machinery
Telecom & Internet
Consumer
Oil & Gas, Gaming
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
Head of Research, Strategy,
Infrastructure, Construction
Property
Plantation, Consumer, Banks, Infrastructure, Oil, Gas & Energy
Transportation
[email protected]
[email protected]
[email protected]
[email protected]
Malaysia
Wong Ming Tek
Goh Yin Foo, CFA
Yee Mei Hui
Chong Tjen-San, CFA
Kevin Wong
Quah He Wei
Hon Seow Mee
Chin Jin Han
Research Team
Head of Research, Strategy, Transport, Telecoms
Retail/ Technical Product
Gaming, Property
Constructions, concessionaires, conglomerates, small-mid caps
Auto, Consumer
Oil & Gas, Plantation, Small-mid caps
Banks, rubber gloves, steel, manufacturing
Telecoms, REITs, Media
Consumer, Transport, Small-mid caps
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
Singapore
Janice Chua
Ho Pei Hwa
Lock Mun Yee
Derek Tan
Andy Sim, CFA
Tan Ai Teng
Suvro Sarkar
Allfie Yeo
Head of Research, Strategy, Industrials
Industrials
Property, Reits
Reits, Hospitality
Consumer Services
Electronics, Industrials
Industrials, Transport
Consumer Services
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
Nalyne Viriyasathien
Naphat Chantaraserekul
Head of Research, Strategy, Property, REITs
Banks, Automotive, Electronics, Healthcare
Energy & Utilities, Commerce, Property, Telecom
Food and Beverage, Hotel, Commerce, Air Transportation
Building Materials, Energy & Utilities, Petrochemicals, Chemicals
Korea
Lee Eun Young
Jay (Jaehak) Kim
Basic Materials, Utilities
Automotive, Industrials
[email protected]
[email protected]
Indonesia
Maynard Arif
Wijaya Deidy
Edward Ariadi Tanuwijaya
Research Team
Thailand
Chanpen Sirithanarattanakul
Research Team
[email protected]
[email protected]
Page 61
Industry Focus
DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
* Share price appreciation + dividends
GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by PT. DBS Vickers Securities Indonesia ("DBSVI"), a direct wholly-owned subsidiary of DBS Vickers Securities Holdings Pte
Ltd ("DBSVH"). This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated
in any form or by any means or (ii) redistributed without the prior written consent of DBSVI.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVI
and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to
change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard
to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of
addressees only and is not to be taken in substitution for the exercise of judgment by addressees, who should obtain separate independent legal or
financial advice. DBSVI accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit)
arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not
to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS
Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in
this document. DBSVI, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in
securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can
be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments.
The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it
may not contain all material information concerning the company (or companies) referred to in this report.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and
assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on
which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual
results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED
UPON as a representation and/or warranty by DBSVI and/or DBSVH (and/or any persons associated with the aforesaid entities), that:
(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
(b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk
assessments stated therein.
Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies)
mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the
commodity referred to in this report.
DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research
department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months.
ANALYST CERTIFICATION
The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies
and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation
was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is
published, the analyst and his / her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities
recommended in this report (“interest” includes direct or indirect ownership of securities, directorships and trustee positions).
COMPANY-SPECIFIC / REGULATORY DISCLOSURES
1.
PT. DBS Vickers Securities Indonesia ("DBSVI") has a proprietary position in Kalbe Farma recommended in this report as of 24 June
2014
2.
DBSVI, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered broker-dealer,
may beneficially own a total of 1% or more of any class of common equity securities of as of 25 June 2014.
3. Compensation for investment banking services:
Page 62
Industry Focus
DBSVI, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA may have received compensation, within the past 12 months, and
within the next 3 months may receive or intends to seek compensation for investment banking services from the subject companies.
DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking
transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including
any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact
DBSVUSA exclusively.
RESTRICTIONS ON DISTRIBUTION
General
This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or
located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be
contrary to law or regulation.
Australia
This report is not for distribution into Australia.
Hong Kong
This report is being distributed in Hong Kong by DBS Vickers (Hong Kong) Limited which is licensed and regulated by the
Hong Kong Securities and Futures Commission.
Indonesia
This report is being distributed in Indonesia by PT DBS Vickers Securities Indonesia.
Malaysia
This report is distributed in Malaysia by HwangDBS Vickers Research Sdn Bhd ("HDBSVR"). Recipients of this report, received
from HDBSVR are to contact the undersigned at 603-2711 2222 in respect of any matters arising from or in connection with
this report. In addition to the General Disclosure/Disclaimer by DBS Bank Ltd, the preparer of this report found at the
preceding page, recipients of this report are advised that HDBSVR, its holding company HwangDBS Investment Bank Berhad,
their directors, employees and parties related or associated with any of them may have positions in, and may effect
transactions in the securities mentioned herein and may also perform or seek to perform broking, investment
banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or
seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject
companies.
Wong Ming Tek
Head of Research, HDBSVR
Singapore
This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No.
198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the
Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign
entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial
Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert
Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons
only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from,
or in connection with the report.
Thailand
This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd. Research reports distributed are only
intended for institutional clients only and no other person may act upon it.
United
Kingdom
This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of
the Financial Services and Markets Act and is regulated by The Financial Conduct Authority. Research distributed in the UK is
intended only for institutional clients.
Dubai
This research report is being distributed in The Dubai International Financial Centre (“DIFC”) by DBS Bank Ltd., (DIFC Branch)
rd
having its office at PO Box 506538, 3 Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC),
Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This
research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon
it.
United States
Neither this report nor any copy hereof may be taken or distributed into the United States or to any U.S. person except in
compliance with any applicable U.S. laws and regulations. It is being distributed in the United States by DBSVUSA, which
accepts responsibility for its contents. Any U.S. person receiving this report who wishes to effect transactions in any securities
referred to herein should contact DBSVUSA directly and not its affiliate.
Other
jurisdictions
In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified,
professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
PT. DBS Vickers Securities Indonesia
DBS Bank Tower, Ciputra World 1, 32/F
Jl. Prof. Dr. Satrio Kav. 3-5, Jakarta 10350, Indonesia
Tel. 6221-3003 4900, Fax: 6221-3003 4943
Page 63
Industry Focus
Asian Equities Sales, Sales Trading and Research Contacts
Sales Heads
Tel:
Email:
Kenneth Tang
Andrew Au
Graham Booth
Elaine Yu
Narisara Viseskosin
Linda Gozali
65-6398 6951
852-2820 4992
44-20-7618 1881
1-212-826 3553
662 657 7759
62 21 390 3389
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
Sales Trading Contacts
Tel:
Email:
Loh Chong Jin
Franco Law
Charles Davies
Brenda Wong
65-6398 6927
852-2971 1828
44 20 7618 1883
1 212 826 3558
[email protected]
[email protected]
[email protected]
[email protected]
Research Contacts
Tel:
Email:
Timothy Wong
Janice Chua
Carol Wu
Wong Ming Tek
Chanpen Sirithanarattanakul
Maynard Priajaya Arif
65-6682 3691
65-6682 3692
852-2863 8841
603-2711 0956
662-657 7824
6221-3983 5428
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
[email protected]
Singapore
Hong Kong
London
New York
Thailand
Indonesia
Singapore
Hong Kong
London
New York
Regional
Singapore
Hong Kong
Malaysia
Thailand
Indonesia
DBS Vickers Securities – Regional Offices
HONG KONG
DBS Vickers (Hong Kong) Ltd
18th Floor Man Yee Building
68 Des Voeux Road Central
Central, Hong Kong
Tel: 852-2820 4888
Fax: 852-2868 1523
Participant of the Stock Exchange of Hong Kong
MALAYSIA
Hwang-DBS Vickers Research Sdn Bhd
Suite 26.03, 26Floor Menara Keck Seng
203 Jalan Bukit Bintang
55100 Kuala Lumpur
Tel: 60-3-2711 2222
Fax: 60-3-2711 2333
INDONESIA
PT DBS Vickers Securities (Indonesia)
DBS Bank Tower
Ciputra World 1, 32/F
Jl. Prof. Dr. Satrio Kav. 3-5
Jakarta 12940, Indonesia
Phone: 62 21 3003 4900
THAILAND
DBS Vickers Securities (Thailand) Co Ltd
15th Floor Siam Tower
989 Rama 1 Road
Pathumwan, Bangkok 10330
Tel: 66-2-658 1222
Fax: 66-2-658 1269
UNITED STATES
DBS Vickers Securities (USA) Inc
777 Third Avenue
Suite 26A
New York, New York 10017
Tel: 1-212-826 1888
Fax: 1-212-826 8704
Member of FINRA and SIPC
UNITED KINGDOM
DBS Vickers Securities (UK) Ltd
4th Floor Paternoster House
65 St Paul's Churchyard
London EC4M 8AB United Kingdom
Tel: 44-20-7618 1888
Fax: 44-20-7618 1900
Regulated by The Financial Services Authority
SINGAPORE
DBS Vickers Securities (Singapore) Pte Ltd
2 Marina Boulevard
Level 40, Marina Bay Financial Central Tower 3
Singapore 018982
Tel: 65-6327 2288

Indonesia Healthcare Sector

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