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16 June 2014
EQUITY RESEARCH
Automotive sector
Initiating Coverage
R
Sustaining growth momentum
•
•
•
•
ASII
BUY
Target Price
Current Price
Upside (downside)
Rp 8,400
Rp 7,400
+13.5%
Share Performance
3M
6M
12 M
Absolute (%)
-5.1
21.3
5.0
Relative to JCI (%)
-6.1
2.0
1.5
52-WK range (Rp)
5,100 – 8,050
Price Chart
120
115
110
105
Low penetration in 4W to drive future growth
Commodity segment provides solid cash flow
Strong synergies between the automotive and financing segments
Initiate coverage with a BUY recommendation and a target price of Rp 8,400
We initiate coverage of Astra International (ASII) with a BUY
recommendation, based on a sum-of-the-parts target price of Rp 8,400,
which translates into an FY14-15F PER of 16.0-14.0x and FY14-15F
EV/EBITDA of 14.0-12.1x. ASII has good brand equity and a strong value
chain in the automotive sector, being supported by two global brand
names: Toyota/Daihatsu (4W) and Honda (2W). Subsidiaries in the
commodity sectors provide healthy cash flow despite weak commodity
prices. Other subsidiaries are relatively self-sustaining and pose no
burden to the parent. Overall, we believe ASII offers investors a solid
business mix in one stock.
Low penetration in 4W. The 4W segment has been growing at a CAGR of 10.4%
in FY00-10. The penetration rate for 4W is low, at only 39 units per 1,000
population. We expect the 4W segment to grow at a CAGR of 15.5% in FY11-16F
due to the rising purchasing power, introduction of affordable models, and
availability of financing in Indonesia. Nonetheless, ASII is facing stiffer competition
as more companies enter the low MPV segment. We believe with product support
from Toyota and its strong distribution network, ASII will be able to respond.
Meanwhile, we think that 2W has reached maturity, but we see a potential shift
towards sports models and away from cub/scooter models in the mid-term.
100
Limited downside in the commodities sector. ASII’s two subsidiaries, Astra
Agro Lestari (AALI) and United Tractors (UNTR), have been hampered by weak
commodity prices. We believe that the worst is over, limiting the downside for
these companies. In addition, the two companies have exercised sound cost
control and high capex discipline, resulting in solid cash flow to the parent. We
expect both companies to sustain such contributions. We are also more positive on
the CPO price, while tend to be neutral on coal.
95
90
85
80
75
70
13-Jun
13-Sep
13-Dec
JCI
13-Mar
ASII
Source: Bloomberg
Share Data
Out’ shares (b)
Market Cap (US$ m)
6 M avg.daily (US$ m)
40,484
25,396.6
24,141,963
Shareholder information
Jardine Cycle & CARR
Free float
Chandra Pasaribu
[email protected]
+62 21 5793 1168
50.1 %
49.9%
Capturing the value chain in finance. Having a strong financing arm in 4W and
2W, together with the insurance business, enhances the value chain of the
automotive business. Financing is channeled through Permata Bank, a jointly
controlled entity of ASII and Standard Chartered Bank, providing a competitive
source of financing. Another revenue enhancement for 4W comes in the form of
car rental and used-car dealerships. This is a unique advantage that ASII’s rivals
are unable to replicate.
Sound financials to ensure dividends. ASII has implemented strong financial
discipline across its subsidiaries. This is shown by the relatively low gearing and
self-sustaining financing by subsidiaries. Therefore, ASII avoids being burdened by
its subsidiaries’ business expansions. We assume that ASII will maintain its
dividend payout ratio of 45%. As a result, it should be able to maintain its dividend
distribution with yields of 3.6% in FY14F and 4.2% in FY15F.
Key Financials
2012
2013
2014F
2015F
2016F
Revenue, Rp bn
188,053
193,880
204,230
231,854
252,769
26,226
25,596
27,443
31,255
32,877
14.3
(2.4)
7.2
13.9
5.2
19,421
19,417
21,206
24,331
26,388
651.8
EBITDA, Rp bn
EBITDA growth, %
Net Profit, Rp bn
EPS, Rp
479.7
479.6
523.8
601.0
EPS growth, %
9.2
0.0
9.2
14.7
8.5
Net gearing, %
34.8
29.1
36.7
27.0
22.4
PER, x
15.4
15.4
14.1
12.3
11.4
PBV, x
3.3
2.8
2.4
2.1
1.9
Yield, %
3.3
3.3
3.6
4.2
4.5
12.6
12.9
12.6
10.8
10.2
EV/EBITDA, x
Source: ASII, IndoPremier
1
Refer to important disclosures on the last of this report
Initiating coverage
4W: plenty of potential but facing stronger headwinds
Total domestic car sales reached 1.2mn in FY13, up 10.1% yoy, while in the first four
months of FY14 sales were 426,753 units (+7.2% yoy). Indonesia has become the
second-largest market after Thailand. The automotive industry is highly influenced by:
(i) reductions in the fuel subsidy, which affect inflation, GDP growth, and consumer
confidence; (ii) GDP per capita, as Indonesia has hit GDP per capita of US$4,000,
surpassing the level at which motorization starts, at US$3,000; and (iii) a regulatory
framework with tax incentives. Over the past 10 years, Indonesia’s auto industry volume
has grown at a CAGR of only 10.4%. We expect faster industry growth at a CAGR of
13.9% in FY11-16, simply due to low penetration and supported by improved
affordability from rising incomes.
Furthermore, auto penetration (passenger cars excluding two wheelers) in Indonesia
remains very low at only 39 per 1,000 population, compared with Thailand at 74 and
Malaysia at 341 in 2011. The auto industry remains highly concentrated in Java, in
particular the Greater Jakarta area. The lack of infrastructure such as roads, storage
facilities, and logistics in non-Java areas hinders acceleration of auto penetration.
Exhibit 1 Auto demand has accelerated starting in 2010
Exhibit 2 Number of passenger cars per 1,000 population
Source: Gaikindo, IndoPremier
Source: World Bank
Fuel hikes have affected purchasing power and the cost of borrowing
Despite having plenty of potential, the industry remains very sensitive to economic
policies on: (i) fuel subsidies affecting purchasing power; and (ii) the tax implications of
import duties and the luxury tax. For instance, the auto industry went into a slump in
2005 and 2009, when the Government increased fuel prices, leading to higher inflation.
As a consequence, higher inflation led to reduced purchasing power, a direct increase in
transportation costs, and more expensive financing, which together affected consumer
confidence. Currently, the fuel subsidy remains significant in budget spending at about
Rp 211tn, representing 11.6% of the total budget. Lately, the Government has been
exploring options for reducing the subsidy, such as a fixed subsidy per liter, introducing
dual fuel usage (gas and fuel), prohibiting cars from using subsidized fuel and
introducing more efficient vehicles (LCGCs) with tax incentives. Fuel hikes usually result
in delays in the purchase of durable goods, creating demand pressure for up to one year
after the hike. Nonetheless, as soon as confidence is restored demand should picks up
again.
The major tax regimes
There are three main taxes on 4W: (i) import duty (bea masuk); (ii) VAT (PPN); and (iii)
luxury tax (PPN BM). Import duty is based on value-added in assembly. Fully imported
cars (CBU) are subject to higher taxes of 40% vs completely knocked down (CKD) and
incomplete knocked down (IKD) of only 10% and 7.5%, respectively. Import duties are
less relevant, since most models are manufactured in Indonesia. Under the ASEAN free
trade agreement, CBU units imported from ASEAN countries are exempt from import
duty. This agreement favors those Japanese manufacturers that have integrated
production facilities in ASEAN. Therefore, policy changes in luxury tax hold the key to
the auto industry. VAT tax is unavoidable, as every item on the market is subject to
VAT. This is most unlikely to change.
2
Initiating coverage
Exhibit 3 Simplified tax structure for 4W
Import duty
VAT
Non sedan
CBU
Luxury tax
IKD
<1500 cc
10%
1500-2500cc
20%
> 3000cc
125%
40%
Sedan
CKD
10%
7.5%
10%
<1500 cc
30%
1500-3000cc
40%
> 3000cc
125%
Source: Ministry of Finance, Ministry of Industry and Ministry of Trade
A major component in selling prices is the luxury tax, which ranges from 10-125%
depending on the model (sedan vs non-sedan) and engine size. Sedans are subject to a
higher tax of 30-40%, compared with non-sedans of only 10-20%. The non-sedan
category includes city cars, hatchbacks, MPVs and SUVs. Meanwhile, large engine sizes
of over 3000cc are subject to 125%. Recently, the Ministry of Finance increased the
luxury tax for large engines to reduce the current account deficit.
There is also a tax exemption for low-cost green cars (LCGCs), with the luxury tax
waived if certain requirements are fulfilled. These requirements are:
•
•
•
•
Engine size of 980-1200cc
Ceiling price of Rp 95mn, with a tolerance of 15% if using automatic
transmission and 10% for usage of airbags (safety features)
Fuel consumption not lower than 20km/liter
Local content of minimum 60%, to increase to 80% over the next five years
Nonetheless, the Ministry of Finance, together with the Ministry of Industry, may reevaluate this ruling, as the Government tries to reduce fuel subsidy costs. The
Government has proposed some ideas including restricting the use of subsidized fuel for
LCGCs, although nothing has been decided.
MPVs, SUVs, and hatchbacks/city cars are the main market given tax structure
As a result of the current tax structure, sedans with similar engine sizes are more
expensive than MPVs, SUVs, and hatchbacks/city cars. As a relatively young automotive
industry, Indonesian customers remain very price sensitive. Sedans with similar engine
size are 30% more expensive than MPVs. As a result, sedans only accounted for 1.8% of
total car sales in FY13. The cheaper MPVs/SUVs/city/hatchback cars dominate the
market, at 68%. Meanwhile, trucks and pick-ups used for commercial activities
accounted for about 30%.
The Indonesian Automotive Association (Gaikindo) has proposed to the Government a
reduction in the luxury tax on small sedans. The Government is still evaluating this
proposal. If approved, this would eliminate the price advantage of non-sedans. Having
an even playing field should result in a higher market proportion for the sedan segment.
However, limited passenger capacity may be a concern for customers, as Indonesians
often travel in extended family groups. Hence, manufacturers usually target the nonsedan segments, simply due to price competitiveness and passenger capacity.
3
Initiating coverage
Exhibit 4 MPVs, SUVs and hatchback/city cars dominate 4W demand
Source: Gaikindo, IndoPremier
The main market of low MPVs is becoming crowded
If we strip out pick-ups, we see that the top 5 selling cars are MPVs, dominated by
Toyota/Daihatsu, and then followed by Suzuki and Nissan. Competition in this segment
is becoming tighter. The Avanza and Xenia were introduced back in 2004, with relatively
little competition. Nissan introduced the Livina to challenge the dominance of the
Avanza/Xenia in 2007. Suzuki also entered this segment by launching the Suzuki Ertiga
(which means R3 in bahasa) in late 2012. Then Honda joined the segment with the
introduction of the Honda Mobilio (also adopting Indonesian names, mobil means car in
bahasa). As the market experienced rapid growth after 2010, other manufacturers saw
an opportunity to challenge Astra’s established segment of low MPV models. Nissan,
Suzuki and Honda used to serve niche markets in Indonesia, leaving Toyota and
Daihatsu to dominate under Astra. Nevertheless, using a regional model approach,
Japanese competitors started to challenge Toyota/Daihatsu in this popular segment.
Nissan successfully introduced the Nissan Livina, an attractive model at a competitive
price. However, it was less successful in after-sales service, the availability of spare
parts, and independent workshops, which hampered rapid growth. Recently, Nissan
Motor Indonesia appointed Mitra Pinasthika Mustika (MPMX, Rp 1,295, BUY) as its new
main dealer in Indonesia, replacing Indomobil (IMAS, Rp 4,730, Not rated). By
appointing a new main dealer, Nissan expects an improved value chain to add overall
value to Nissan’s products.
The reception to the Suzuki Ertiga and the Honda Mobilio has been very positive so far,
although both Suzuki and Honda still need to invest further in their value chains, such as
after-sales service and availability of spare parts. Rapid expansion of newly launched
models could create long queues for after-sales service workshops. Having a bad
experience with after-sales service could affect future sales and the resale value of
models.
Exhibit 5 Low MPV models are the most popular among customers
Price
Ertiga
Avanza
Xenia
Mobilio
Rp 150-215m
Rp 160-205m
Rp 144-200m
Rp 160-200
1400
1300-1500
1000-1300
1500
Engine
Transmission
Capacity
Source: Company websites
4
MT/AT
7 seater/3 rows
Initiating coverage
Exhibit 6 Best selling cars in 2013-12 (units)
2013
2012
market
share
192,146
17.2%
1
Toyota Avanza
213,458
market
share
17.5%
2
Daihatsu Xenia
64,611
5.3%
73,418
6.6%
3
Toyota Kijang Innova
64,539
5.3%
71,685
6.4%
3
4
Suzuki Ertiga
63,317
5.2%
34,074
3.1%
8
5
Daihatsu Gran Max Pick-up
48,012
3.9%
37,948
3.4%
6
6
Suzuki Carry Pick-up
46,208
3.8%
43,926
3.9%
5
7
Nissan Grand Livina
35,422
2.9%
34,129
3.1%
7
8
Toyota Rush
35,004
2.9%
34,033
3.0%
9
9
Mitsubishi T120-SS Pick-up
29,662
2.4%
25,935
2.3%
12
10
Honda Jazz
27,803
2.3%
21,244
1.9%
15
11
Mitsubishi L300 Pick-up
27,498
2.3%
27,652
2.5%
11
12
Daihatsu Terios
25,674
2.1%
23,949
2.1%
13
13
Toyota Agya
22,376
1.8%
0
0.0%
-
14
Honda CR-V
20,385
1.7%
14,753
1.3%
21
15
Suzuki APV Pick-up
19,567
1.6%
15,744
1.4%
19
16
Daihatsu Ayla
19,141
1.6%
0
0.0%
-
17
Honda Freed
18,595
1.5%
19,811
1.8%
17
18
Toyota Fortuner
17,475
1.4%
20,498
1.8%
16
19
Daihatsu Gran Max Minibus
15,678
1.3%
14,644
1.3%
22
20
Suzuki APV
14,531
1.2%
15,333
1.4%
20
volume
volume
Rank
2012
1
2
Source: JSMR, IndoPremier
Pressure on market share from Mobilio
According to Gaikindo, the low MPV segment accounted for about 31% of the total auto
industry in FY13. In this segment, the Avanza/Xenia commands about 71.7% market
share. Suzuki has entered this segment with the Ertiga, Chevrolet with the Spin, Nissan
with the Livina, and Honda with the Mobilio. This has created stiff competition in the
largest segment. In FY13, Avanza held a market share of 55.1%, followed by the Xenia
with 16.7%, and the Ertiga with 16.1%. With the introduction of the Honda Mobilio,
market share of Avanza shrank to 47.6%, while Xenia’s market share fell to 13.2%. The
introduction of the Mobilio also affected market shares of the Ertiga and the Livina.
Exhibit 7 Auto demand has accelerated since 2010
Exhibit 8 Monthly sales figures of low MPVs (unit/month)
Source: Gaikindo
Source: Gaikindo
A new market segment with LCGCs
The Government has recently introduced tax incentives for low cost green cars (LCGCs),
which will be exempt from luxury tax. LCGCs have to fulfill the following criteria: (i)
engine size below 1200cc; (ii) fuel consumption below 20km per liter; and (iii) a ceiling
price of Rp 95mn. Therefore, LCGCs open a new segment with a price point of around
Rp 100mn per unit. Back in 2004, the Avanza and the Xenia were introduced at a price
of Rp 100mn. Nonetheless, due to price rises triggered by a weakening rupiah and
subsequent inflationary pressures, these models now sell for Rp 150-200mn.
5
Initiating coverage
Toyota/Daihatsu launched the Agya and the Ayla to fill in this segment, while Honda
introduced its Honda Brio Satya, Suzuki its Wagon-R and Nissan just launched its Datsun
Go and Go+. These are all regional models introduced by the principals across the Asia
region.
The most interesting newcomer is Nissan’s Datsun Go+, which is the only 7-seater
model in this category. All other 7-seater MPVs are in the low MPV segment, priced at
Rp 150-200mn, with an engine size of 1300-1500cc. The Datsun Go+ therefore has the
potential to erode the market of low MPVs.
Exhibit 9 LCGC models recently launched in Indonesia
Model
Manufacturer
Engine
Agya
Ayla
Karimun Wagon R
Brio Satya
Go+
Toyota
Daihatsu
Suzuki
Honda
Datsun
998
998
998
1200
1200
Transmission
Price - Rp mn
AT/MT
100-120
MT
76.5-114
80-103
105-117
85-102
Source: Company websites
The LCGC was introduced in 4Q13 after the Government approved the tax incentive by
waiving luxury tax for this segment. ASII took a large market share of 81.1% in 4Q13
due to its strong brand equity and availability of units. Astra was among the first auto
manufacturers in Indonesia to invest in new production lines for LCGCs. In 1Q14, Honda
and Suzuki were able to catch up with their own production facilities coming on line,
causing ASII’s market share to fall slightly to 70.2%. Meanwhile, Nissan has just
launched its Datsun Go+. Production by Nissan Motor Indonesia will start slowly at 1,000
units per month. Therefore, we are confident that ASII can continue to command a
market share of 60-65%, above its total national market share.
Exhibit 10 Market share in the LCGC segment
Source: Gaikindo
Dominance in other market segments
The non-sedan segment can be divided into six broad categories based on functionality
and price bracket. Hatchbacks or city cars account for 21.4% of the total non-sedan
segment, which is the second-largest segment after low MPVs. Pick-ups and minibuses
account for 18%, in which Mitsubishi and Suzuki are market leaders. Other segments
are relatively small. Nonetheless, ASII tends to lead in each of these segments except in
vehicles for commercial use (minibuses, pick-ups and trucks). Despite facing competition
in the largest segment, we think that ASII’s dominance in other segments will endure.
But it will be important for Toyota/Daihatsu to support product launches with upgraded
technology and newer designs to meet the rising competition in such segments.
6
Initiating coverage
Exhibit 11 Low MPV models most popular among customers
% non sedan
ASII
1Q14
market share
Hatchbacks/city cars
21.4
57
Pick-ups + minibuses
18.0
35
58,088
Low MPVs
31.5
62
101,625
MPVs
8.3
61
26,643
SUVs
8.8
65
28,291
12.0
11
38,569
Trucks
Units
69,053
Total non-sedan
322,269
Total industry
325,976
Source: Gaikindo
Measuring brand equity from resale value
Re-sale value is the most important factor among Indonesian consumers when deciding
to buy a vehicle, followed by passenger capacity. All other factors, such as engine,
technology, safety features and design, are lower concerns. Strong resale value comes
from ease of maintenance by third-party workshops (which are cheaper than authorized
workshops), availability of spare parts from independent retailers, and reliability of the
vehicle (longer usage). Indonesian customers have a tendency to follow the market. The
more popular one model is, the lower the depreciation over time. Thus, popularity is an
important factor in determining the second-hand prices of certain models. High inflation
sometimes outpaces depreciation, as newer models are launched at higher prices.
Exhibit 12 Rate of price depreciation for popular 4W models in Indonesia
Price list (Rp mn)
Brand
2009
2011
2014
CAGR
price
increase
2nd price
(Rp mn)
Depreciation
over 5 years
Kijang Innova G MT
225.8
232.8
266.6
4.2%
150
-34%
Avanza G MT
145.5
151.5
179.5
5.4%
100
-31%
Grand Livina 1.5 SV MT
179.0
184.5
199.0
2.7%
120
-33%
Jazz RS AT
221.5
224.0
242.5
2.3%
150
-32%
Xenia 1.3 MT
127.2
141.7
161.8
6.2%
100
-21%
Suzuki Swift GLX MT
180.5
184.5
182.5
0.3%
120
-34%
CRV 2.4 AT
379.0
388.0
431.0
3.3%
220
-42%
Camry
481.0
498.4
539.6
2.9%
220
-54%
Source: Auto Bild Indonesia, OLX.co.id, Kaskus.co.id
Popular models from Toyota, Daihatsu, Honda and Suzuki tend to have similar
depreciation rates. The popularity of the models carries high value besides the brand.
We look at best-selling models, such as the Kijang Innova, Avanza/Xenia, Swift and
Jazz. These brands have experienced depreciation of 30-35% over the past five years.
Higher-priced vehicles such as the Honda CRV and Toyota’s Camry have higher
depreciation rates of 42% and 54%, respectively, due to larger engine size, which is
perceived as less economical. Second-hand car purchasers look for fuel efficiency, ease
of servicing by independent workshops and the availability of OEM spare parts.
High re-sale value is also driven by the fact that Indonesia continues to experience high
inflation. Auto manufacturers increase prices in accordance with rupiah/USD exchange
rate fluctuations and inflationary pressure on production costs. Over the past five years
in general, the list price of cars has increased in line with inflation. However, popular
models from Toyota/Daihatsu have had a slightly stronger ability to increase prices than
competitors, thanks to their strong brand equity. Nonetheless, this was when
Toyota/Daihatsu did not have any serious competition in the MPV segment. Being the
market leader, Toyota/Daihatsu may lose pricing power as they consider the list prices
of their competitors. In a high growth environment, pricing power is derived by being a
market leader. We think that competitors will increase prices according to the market
leader. This will not be the case if demand is weak. The secondary market in Indonesia
is very lucrative due to: (i) low car penetration, (ii) relative weak purchasing power, and
(iii) a high inflation environment.
7
Initiating coverage
What makes ASII stand out from its competitors?
Auto manufacturers in Indonesia typically have: (i) a principal that usually has a
majority stake in a manufacturing facility, (ii) a sole distributor (could be integrated with
the manufacturing company), and (iii) main dealers and retailers (combination with local
third-parties). ASII has a similar structure with manufacturing, a sole distributor and
dealers, but its real strength is its stronger distribution network than competitors. This
also adds re-sale value to its products, due to ease of maintenance and the availability
of spare parts.
Toyota Motor Corporation holds a majority stake of 95% in Toyota Motor Manufacturing
Indonesia (TMMI), with ASII holding only 5%. TMMI is the company that owns the
manufacturing facilities in Indonesia. The sole distributor, known as ATPM (in
Indonesia), is Toyota Astra Motor, with ASII holding 51% and Toyota Motor Corporation
49%. Toyota Astra Motor is responsible for distribution of Toyota brands in Indonesia.
Toyota Astra Motor appoints ASII together with four other independent companies as
main dealers. ASII controls about 70% of Toyota’s total distribution volume.
Daihatsu is slightly different. Daihatsu Motor and ASII hold 50:50 in Astra Daihatsu
Motor (ADM), which has the manufacturing facilities and acts as sole distributor.
Furthermore, ADM appoints ASII together with seven other local companies as Daihatsu
dealers in Indonesia.
In both cases, ASII has full control over the dealership in Indonesia, as it controls both
the sole distributor and the dealers. Indomobil (IMAS) is the main competitor of ASII in
auto distribution in Indonesia. IMAS holds sole distributorship for Renault, VW and Audi,
while owning minority stakes in dealerships for Suzuki and Nissan. IMAS has less control
over the more popular brands of Nissan/Datsun and Suzuki, since it owns only minority
stakes in dealerships. The sole distributorships of Suzuki and Nissan are not under IMAS.
This exposes IMAS to less control in distribution of Suzuki and Nissan products in
Indonesia than ASII. Another strong brand is Honda Prospect Motor, which is not listed.
Honda has a similar structure to IMAS, which involves more third parties, which again
translates into less control over distribution.
Exhibit 13 Top selling brands in 1Q14
Source: Gaikindo
Toyota/Daihatsu have had fast-selling products for years. Recently, competitors such as
Nissan, Honda and Suzuki have been able to challenge Toyota/Daihatsu’s most popular
models. Toyota/Daihatsu are perceived as having excellent after-sales service. Nissan,
with its fast-selling Livina model, has had some hiccups in its after-sales service. If we
assume that only vehicles under 3-years-old return to authorized service workshops,
Toyota/Daihatsu have better economies of scale, as one dealer is able to handle around
4,600 units and 3,300 units, respectively. Suzuki is the third most efficient with handling
capacity of 2,675 units. However, with its fast-selling model the Suzuki Ertiga, Suzuki
will need to keep up its service quality as the population grows. Honda will face a similar
challenge due to the launch of its Mobilio. Any decline in after-sales service quality would
have a negative impact on future sales and buying intentions.
ASII has set up its auto distribution service as a “one-stop shop”. The auto distribution
business is not only supported by 3S (sales, service and spare parts) but also by:
8
Initiating coverage
•
•
•
Financing, through its financing arm Astra Sedaya Finance, allowing ASII to
capture extended revenue from auto financing.
Insurance, through its subsidiary of Asuransi Astra Buana, which provides
insurance for financed/non-financed cars.
Used car center, to provide a second-hand market for Toyota/Daihatsu used
cars. Another extension of the value chain of the distribution business.
None of ASII competitors is able to replicate such a value chain. Indomobil and Nissan
are partly replicating this business model but on a dealer level. For ASII, this business
model is applied from the sole distributor level, providing greater control over the whole
value chain.
Impact on market share and revenue
Low penetration in 4W provides ample room for future growth. We believe that 4W sales
volume will grow by 12.0% to 1.4mn units in FY14, and 14.0% to 1.6mn units in FY15.
However, due to stiff competition in low MPVs, we expect ASII’s market share to decline
to 41% in FY14 and FY15, from 43.4% in FY13. The introduction of LCGCs should
support the industry’s growth. Nonetheless, we expect this cheaper car segment to pull
down the blended average price by 7.3% in FY14, before we see a recovery of 4% in
FY15. The lower average selling price is likely to negate some of the volume growth,
leaving revenue to decline by -1.8% in FY14, recovering to 18.6% in FY15.
Exhibit 14 Main assumptions on 4W
Industry – volume (units)
Growth (%)
2012
2013
2014F
2015F
2016F
1,116,230
1,229,916
1,365,207
1,529,032
1,712,516
25.0
10.2
11.0
12.0
12.0
ASII
Volume – (units)
483,383
533,234
559,735
626,903
702,132
Growth (%)
24.2
10.3
5.0
12.0
12.0
Market share (%)
Avg blended price – Rp
mn/unit
43.3
43.4
41.0
41.0
41.0
159.4
150.6
143.7
149.5
149.5
Source: ASII, IndoPremier
Toyota/Daihatsu have very strong brand equity in Indonesia. For many years the
dominance of these two brands remained untouched. With stronger demand,
competitors such as Honda and Nissan are now willing to compete head-to-head with
Toyota/Daihatsu products. This competition should not be something new for
Toyota/Daihatsu, since these Japanese manufacturers compete in the global market.
Therefore, Toyota/Daihatsu should be able to fight competition in Indonesia, but they
will need to offer competitive products in terms of both quality and pricing.
9
Initiating coverage
2W: a maturing market
The motorcycle (2W) market has a simpler market structure than the 4W market.
Honda, Yamaha and Suzuki are the main players in the motorcycle market, commanding
about 98% of the total market. The remaining 2% is filled by Kawasaki, which serves
the niche sports motorcycle segment. The models offered are mainly cubs, scooters and
sports motorcycles, with limited models due to the simplicity of the motorbikes. Honda
leads in the Indonesian motorcycle market due to (i) its strong production base, which
translates into competitive pricing and flexible model launching; (ii) wide distribution
support for sales and service; and (iii) support from a financing company, Federal
Finance International (FIF), which specializes in motorcycle financing.
A high penetration market…
The motorcycle market in Indonesia seems to have reached saturation point as
penetration has reached 251 motorcycles per 1,000 population. A similar level has been
reached in neighboring countries such as Thailand, while Vietnam and Malaysia are
above 300 units per 1,000 population, or one motorcycle for every three people. With
such a high penetration level, motorcycle sales should mature and become filled by the
replacement market.
Exhibit 15 Motorcycle density per 1,000 population (units)
Source: Global Status Report On Road Safety, WHO 2013
Motorcycles account for the majority of road transportation in developing countries. In
Vietnam, about 96% of total registered vehicles were motorcycles in 2011. Indonesia
has reached a high level of 83%, similar to Cambodia, although Indonesia has a higher
motorization rate in 2W. Having such a high proportion of motorcycles provides more
opportunities in the 4W segment, as people have the potential to shift from 2W to 4W.
As purchasing power increases and 4W prices become cheaper (due to introduction of
small fuel efficient cars), a medium-term shift from 2W to 4W is likely to occur.
10
Initiating coverage
Exhibit 16 Motorcycle density in ASEAN, motorcycles per 1,000 population
Source: Global Status Report On Road Safety, WHO 2013
Based on data from the Asean Automotive Federation, Indonesia has reached maturity in
motorcycles, similar to Thailand and Malaysia, where penetration is already high. We
expect motorcycle sales to grow by 3.4% in FY14 and 2% p.a. in FY15 and FY16, in line
with population growth.
Exhibit 17 Sales volume of motorcycles in ASEAN countries
Source: Asean Auto Federation
…but less competition
The main players in the Indonesian motorcycle segments are Honda, which currently
dominates the market, with a 60.7% market share in FY13, followed by Yamaha with
32.2% and Suzuki with 5.1%. Models offered in the market remain limited to three
types: scooters, cubs, and sports motorcycles. Before 2005, motorcycles were
dominated by cubs. Yamaha introduced the scooter type with automatic transmission in
2005 and gained much attention. Since 2005, the market has shifted to scooters,
opening up a new segment in the industry.
11
Initiating coverage
Exhibit 18 Market segment has shifted to scooters since their introduction in 2005
Source: AISI
Due to current import duties, reasonable pricing only applies to motorcycles of less than
250cc. Above this level, import duties of 75% to 125% are applied. Therefore, the mass
market in each segment has engine sizes of under 250cc for all models.
Winning back market share
Yamaha became a serious player with the introduction scooters. Honda at that time had
no such product line. As the reception of scooters was overwhelming, Yamaha gained
market share from 16.3% in 2005 to reach its peak of 45% in FY09-10. Nonetheless,
Honda was able to fight back by introducing head-to-head products in scooters and
gained market share starting in 2007. Up to 2013, Honda was able to re-gain its
dominance over Yamaha in almost all segments. This is strong evidence of the product
quality and solid distribution network of Honda. Currently, Honda holds a market share
of 60.7%. We are confident that Honda will be able to maintain its market share at the
current level due to its strong distribution and after-sales networks, and support from its
internal financing arm, FIF.
Aggressive financing encourage high demand growth
The high growth period in FY06-13 with a CAGR of 8.3% was supported by low downpayments on motorcycle purchases. Down-payments could be as low as Rp 500,000, or
5% of the total value of the motorcycle. Some dealers were even more aggressive,
giving cash back of a similar amount as the down-payment, meaning that practically no
down payment was required. This created large numbers of low quality credit customers.
In the end, it hurt financing companies most, which were forced to write off large
amounts of assets. FIF was shielded due to its better credit assessments and larger
number of customers, resulting in a lower bad-debt-to-asset ratio. However, the recent
regulation requiring down-payments of a minimum of 25% has negatively impacted
demand, although it also improves asset quality of the financing companies. This should
be positive in the longer term.
12
Initiating coverage
Exhibit 19 Honda has regained market share due to strong product mix, brand equity and
distribution
Source: AISI
What next?
As the motorcycle industry has reached maturity, growth will come from the
replacement market and natural growth linked to demographics. However, motorcycle
manufacturers must still closely follow market dynamics. For instance, the introduction
of scooters back in 2005 brought a swing in market share and growth opportunities.
Currently, Yamaha has started to penetrate the sports segment by introducing full
fairing models such as the R15 and R25, which will compete head-to-head with Honda’s
CBR150R and CBR250R. Rising disposable income will affect preferences in the
replacement market. We feel that there is a potential shift into the sports market, as
motorcycles can be used not only as a mode of transportation, but also to reflect
lifestyles. Kawasaki has gained significant market share by penetrating the upper sports
market segment with engine sizes of 250cc to 1000cc.
Exhibit 20 New models in the sports segment offered by the main Japanese brands
Yamaha
Type
Engine (cc)
Cylinder
Price (Rp mn)
Honda
Kawasaki
R15
R25
CBR150R
CBR250R
Ninja
150
Mono
28.0
250
Dual
53.0
150
Mono
42.9
250
Mono
46.8
250
Dual
53.7
Source: Yamaha Indonesia, AHM, and Kawasaki Motor Indonesia
Distribution chain
Honda’s products are very well-known in Indonesia, translating into market dominance.
In terms of product quality, Japanese manufacturers should be relatively similar. We
think that Honda’s dominance is supported by its strong distribution network. Honda has
about 1,800 dealers in Indonesia, followed by Yamaha with 144, while Kawasaki and
Suzuki remain relatively niche players, with only 279 and 200 dealers, respectively.
Honda has better economies of scale, as the dealership share is only 48% but this
translated into a market share of 60.7% in FY13.
13
Initiating coverage
Exhibit 21 Honda has a better distribution network than its rivals
Source: AISI
Dominance in financing
To leverage its business position, ASII has extended its value chain in the motorcycle
business by providing financing under its subsidiary, Federal International Finance (FIF).
Unlike 4W financing, 2W financing does not compete directly with bank financing. 2W
financing is less attractive for banks due to the small sums involved (only about
Rp 10mn per unit) with resources needed for risk management and collection. This is
regarded as micro-financing from a banking standpoint. Therefore, FIF only competes
with other financing companies. The advantage of FIF is that its sister company, Astra
Honda Motor (AHM), controls the distribution of the leading motorcycle in Indonesia.
Having a strong parent such as ASII translates into high availability of funding at
competitive costs.
Value chain of the motorcycle business
Compared with the automotive industry, the 2W business model has a better value
chain, starting from manufacturing (under the joint operation of Astra Honda Motor),
followed by distribution from the main distributor to dealerships, plus the financing arm.
However, due to the low value of motorcycles, there is no value-added from the
insurance business. The value-added from manufacturing provides stability in profit
margins, unlike the 4W business, which is exposed to distribution margins only.
Expecting maturity with stable market share
We believe that the 2W market has reached maturity due to the high penetration rate.
Nonetheless, demand should be fueled by the replacement market. This year, demand
for motorcycle is still seeing the impact from increasing down-payments and interestrate increases. We expect overall motorcycle demand to grow by just 0.6% in FY14 and
2% in FY15. Honda with its strong brand equity, and excellent distribution and aftersales service, should be able to maintain its market share. However, Honda needs to be
more progressive in introducing and updating its models, especially with market trends
that are shifting to sports motorcycles. Honda saw stiff competition from Yamaha when
it introduced scooters. Nevertheless, Honda was able to fight back by launching similar
products. Honda and Yamaha are competing in the global market, so the product
excellence of both has been proven. Therefore, Honda should be more aggressive by
introducing newer models in different segments.
Exhibit 22 Main assumptions for 2W business segment
Industry – volume (units)
Growth (%)
2012
2013
2014F
2015F
2016F
7,064,460
-11.8
7,743,879
9.6
8,007,171
3.4
8,167,314
2.0
8,330,661
2.0
1,226,667
1,413,797
1,521,362
1,551,790
1,582,826
na
15.3
7.6
2.0
2.0
17.4
18.3
19.0
19.0
19.0
11,686,135
12,088,725
12,693,162
13,200,888
13,596,915
ASII
Volume – (units)
Growth (%)
Market share (%)
Avg blended price – Rp/unit
Source: IndoPremier
14
Initiating coverage
Auto components: supporting production lines
Astra Otoparts (AUTO, Rp3,640, not rated) acts as a holding company for different
automotive parts for 2W and 4W, as the company has 34 subsidiaries within its company
structure. Currently, all of these subsidiaries manufacture about 48 types of parts for 2W
and 58 types of parts for 4W. Looking at the type of parts manufactured, production
lines of AUTO and its subsidiaries support the production of 2W and 4W manufacturing
through OEM parts. Types of parts that are sold to the replacement market remain
limited, at fewer than 20 types. Therefore, growth of AUTO is driven by the capacity
expansion of auto and motorcycle manufacturers. This year, AUTO has allocated capex
of Rp 4.5tn for expanding capacity and enhancing capability, as well as for investment.
Sales contribution mainly from OEM and the replacement market
AUTO markets its products mainly to OEM manufacturers and to the replacement market
with limited sales for export. The largest contribution comes from OEM manufacturers at
52% in FY13, followed by the replacement market at 38%, with the remaining allocated
for exports. Not only Astra Daihatsu Motor (ADM), Toyota Motor Manufacturing
Indonesia (TMMIN) and Astra Honda Motor (AHM) are manufacturing customers of
AUTO, but also other well-known manufacturers such as Honda, Suzuki, Nissan and
Mitsubishi. We think that AUTO has a good diversified customer base to secure growth in
auto parts. Increasing competition in the low MPV segment should have less impact on
AUTO than the manufacturing arm of ASII. AUTO could benefit from increasing auto
parts sales to Toyota/Daihatsu’s competitors, such as Nissan, Honda and Suzuki, which
have successful launched new products in this category.
Exhibit 23 Revenue contribution by OEM, replacement and exports
Source: AUTO
Growth in OEM sales has outpaced growth in the replacement market, with a CAGR of
19.1% vs 15.2%, respectively, over the past five years (FY07-13). During the same
period, exports only grew at a CAGR of 6.2%. This highlights that the export market is
not a priority for AUTO. As mentioned earlier, sales growth of AUTO is a function of
production of 2W and 4W. Recently, we have seen plenty of news about the auto
industry increasing production capacity. Nevertheless, AUTO will mostly support the
production of Honda motorcycles and Daihatsu/Toyota manufacturing in Indonesia.
Investment in additional production lines should have a positive impact on AUTO’s
revenue growth.
15
Initiating coverage
Exhibit 24 Revenue growth of AUTO is in line with capacity expansion of ADM, TMMIN
and AHM
Source: AUTO, ASII
Increasing investment in the automotive industry should provide opportunities for AUTO,
especially for common shared parts, such as batteries, bearings, tyres, air con, bulb
lamps, filters etc. Other major Japanese manufacturer, such as Nissan Motor Indonesia,
Suzuki Indomobil Motor, Honda Prospect Motor and Mitsubishi Krama Yudha
Manufacturing, are significantly increasing production capacity. This year AUTO has
allocated capex of Rp 4.0tn to increase its production capacity in various auto parts. We
believe this strategic decision is in line with the expansion of automotive manufacturers.
Exhibit 25 Minority stake of Jasa Marga in several toll road operators
Capacity
Company
Existing
New
%
increase
in
operation
Nissan Motor Indonesia
100,000
250,000
150.0
2014
Suzuki Indomobil Motor
150,000
250,000
66.7
2016
80,000
200,000
150.0
2014
120,000
220,000
83.3
na
Honda Prospect Motor
Mitsubishi Krama Yudha
Manufacturing
Source: Individual company websites and press release
Future opportunities from LCGCs
The Low Cost Green Car (LCGC) is required to have minimum local content of 80%
within five years to enjoy the luxury tax incentive. According to the Directorate General
of Technology-based Industry at the Ministry of Industry, current local content of LCGC
is about 45-51%. In the next five years, LCGC manufacturers are expected to fulfill local
content of 80%. This means more components will be manufactured domestically. We
think that AUTO will benefit from such a requirement.
Profit margins controlled by the principal
Competition in the automotive sector has increased in the past 2-3 years. The
introduction of low MPV by other manufacturers such as the Ertiga from Suzuki, the
upcoming Datsun Go, and the Honda Brio Satya has increased the competitive
landscape. Discounts and cash-back offers have become effective tools to boost sales
volume but at the price of sacrificing margins. This burden is not only absorbed by the
principal but is shared throughout the value chain, including AUTO. As a result, profit
margins have slipped since 2010. However, we think the current level of profitability
should be sustainable. Higher contributions from OEMs should also affect margins, as
OEMs carry lower margins than the replacement market. There is a trade-off between
volume and pricing. Having a relative weaker bargaining position against the principal,
AUTO is prone to cost increases from a weakening currency and increasing raw material
prices, such as for steel.
16
Initiating coverage
Exhibit 26 Profit margins of AUTO are under pressure due to tight competition in the low
MPV segment
Source: AUTO
Exhibit 27 Financial forecast summary of AUTO
Revenue, Rp bn
EBITDA, Rp bn
Net profit, Rp bn
2012
2013
2014F
2015F
2016F
8,277
10,702
12,533
15,590
18,581
670
972
1,112
1,512
1,844
1,136
1,058
1,141
1,333
1,746
Growth
Revenue (%)
12.4
29.3
17.1
24.4
19.2
EBITDA (%)
2.2
45.1
14.4
36.0
22.0
Net profit (%)
3.1
-6.9
7.8
16.8
31.1
16.4
16.0
15.5
14.9
15.3
8.1
9.1
8.9
9.7
9.9
Net margin (%)
13.7
9.9
9.1
8.5
9.4
ROE (%)
22.3
14.1
11.4
12.3
14.6
ROA (%)
14.3
9.8
7.9
7.9
9.8
GPM (%)
EBITDA margin (%)
Source: AUTO, IndoPremier
17
Initiating coverage
Heavy equipment: No icing on the cake
The heavy equipment division is listed under a separate company, United Tractors
(UNTR, Rp 23,000, BUY), which is the second-largest contributor in terms of revenue
(after automotive) and the third-largest in terms of net income. UNTR has three
business segments: (i) contract-mining, which contributed 61.7% of revenue and 84.6%
of pre-tax profit in FY13; (ii) machinery, which contributed 30.6% of revenue and 17.1%
of pretax profit in FY13; and (iii) coal-mining, which contributed 7.7% of revenue and
remained in net loss in FY13.
Exhibit 28 Revenue contributions by segment
Exhibit 29 Gross profit contribution by segment
Source: UNTR, IndoPremier
Source: UNTR, IndoPremier
In FY14-16, our analyst William Simadiputra expects recovery in the machinery
segment, while contract-mining will remain a cash cow. Contributions to revenue are
expected to be 57.8% and 34.8% in FY14 from contract-mining and machinery,
respectively. Profit contributions are expected to be dominated by contract-mining, at
67.8%, followed by machinery at 28.6%. We also expect a turnaround in the coal
business, with a profit of Rp 226bn, representing about 3.5% profit contribution.
UNTR is highly exposed to coal prices, as its customer base is concentrated in coal
mining activities for both contract mining and machinery. In the contract-mining
business, UNTR holds a market share of 33%, with customers mainly the large coalmining companies, such as Adaro (ADRO, Rp 1,325, not rated), Indominco, a subsidiary
of Indotambang Raya Megah (ITMG, Rp 27,900, not rated), and Kideco, a subsidiary of
Indika Energy (INDY, Rp 705, not rated). Nevertheless, the weak coal price has
translated into lower capex, which has reduced demand for machinery from the coal
sector. Rising demand from the infrastructure sector is not enough to compensate for
the lost mining sales.
Exhibit 30 Cash cost of major coal miners
Source: ADRO, PTBA, INDY and ITMG
18
Initiating coverage
Contract-mining as a cash cow
Amid the weak coal price, large coal miners in Indonesia can still operate due to theirn
relatively low cash cost of around US$37-49 per tonne, well below the current coal price
of around US$80/ton. Therefore, at the current coal price these miners are still making
healthy profits, which means sustainability in the sector. In order to maintain their cash
costs, miners have started to renegotiate contract-mining fees with Pama Persada
(subsidiary of UNTR). The company has agreed to absorb lower fees if compensated with
higher volumes of coal production. This has simply translated into lower stripping ratios,
and a win-win solution for both parties to keep profitability at sustainable levels. We
expect:
•
•
•
The stripping ratio of Pama Persada to be around 7.2-7.5x in FY14-16, lower
than 8.9x in FY13.
Growth of overburden volume and coal production to reach CAGR of 3.5% and
6.0% in FY13-16, respectively. We believe this will reflect defensive volume
expansion from coal miners to maintain profitability due to a low coal price of
US$80-85/ton.
Pama Persada to maintain a stable gross margin at 18.9% due to its costefficiency program and its ability to renegotiate contracts in coping with rising
consumable costs and contract re-pricing from miners.
Exhibit 31 Volume of overburden, coal production, and the stripping ratio
Source: UNTR, IndoPremier
Limited downside from the machinery business
Of the total machinery sales volume in FY13, the mining sector contributed the largest
portion, at 42.6%, followed by agro at 25.6%, and then construction at 23.6%, with
forestry at only 8.2%. As commodity prices plunged (both for coal and CPO), demand
for heavy equipment from these two sector halted, causing the machinery group’s gross
profit to decline by 77.5% to Rp 1.2tn in FY13. Nonetheless, we believe that the worst is
now over, leaving limited further downside in the machinery business.
Exhibit 32
Sales volume breakdown of machinery by sector
Source: UNTR, IndoPremier
19
Exhibit 33
Heavy equipment sales volume
Source: UNTR, IndoPremier
Initiating coverage
Margin support from a weaker rupiah and strong after-sales service
UNTR has enjoyed margin expansion from the weaker rupiah, thanks to inventory priced
at a lower price. Gross margin increased to 23.0% and 25.4% in 3Q14 and 4Q14,
respectively, vs an 18% 5-year average gross margin. UNTR has used this margin gain
to enhance sales incentives to boost sales volume.
With delayed replacement and purchase of new equipment, after-sales service has
become important to lengthen product life cycles. After-sales service and spare parts
sales carries margins of 20-35%, which is significantly higher than the machinery sales
margin of only 15-17%. Higher contributions from after-sales service and spare parts
should enhance margins. We expect this segment to grow by 15% yoy in FY14-15 to
Rp 1.9tn and Rp 2.2tn, respectively. We believe that margins should be sustainable at
22-23% for FY14-15 from a combination of currency gains and a higher contribution
from after-sales service.
At the current weak coal price, we believe that demand for heavy equipment from the
coal sector will be fuelled by the replacement market. Coal miners have slashed their
capex. Therefore, we should not expect any demand from expansion. Moreover, demand
for small- to medium-size heavy equipment could come from the agricultural and
infrastructure sectors, due to recovery in the CPO price and increasing infrastructure
spending. We expect UNTR’s sales volume to grow by 7.1% and 5.0% in FY14-15,
respectively, with ASP increasing by 3% and 5% due to its superior brand image and
strong after-sales service.
Exhibit 34 Gross margin trend
Exhibit. 35 Spare parts sales and % of machinery sales
Source: UNTR, IndoPremier
Source: UNTR, IndoPremier
Coal business to concentrate on profitability
UNTR has decided to delay its expansion in the coal business due to the weak coal price
and instead focus on profitability. The coal business incurred losses in 2H13, while over
the past year the coal-mining business operated at close to break-even. Under such
circumstances, UNTR will concentrate on profitable sites for its mining activities and
reduce exposure to more challenging and costly sites.
With a profit-oriented strategy, we expect UNTR’s production to reach 4.3mn tons
(+3.5% yoy) and 4.8mn tons (+11.1% yoy) in FY14-15. Furthermore, we assume ASP
for coal to be US$85.6 per ton (-10.9% yoy) and US$87/ton in FY14-15. Based on these
assumptions, gross margin should recover to 1.0% in FY14 and 2.3% in FY15F
compared with a net loss of -3.2% in FY13.
Relying on contract-mining
Due to the weak coal price, UNTR will rely on its contract-mining operations to generate
stable cash flow. Renegotiation of contracts will be compensated by higher coal
production volumes, thus having little impact on cash flow. The machinery segment has
already reached bottom, with rising revenue from after-sales service and spare parts.
Therefore, dilution of earnings from the machinery business is already limited. In coal
production, UNTR will focus on turning the business into profit or at least breaking even,
from a loss position last year. We are confident that UNTR will be able to do so. Overall,
UNTR should provide generous cash flow to its parent company, ASII.
20
Initiating coverage
Exhibit 36 Gross profit breakdown by segment in relation to coal price
Source: UNTR, IndoPremier
21
Initiating coverage
Plantation: strong US$ cash flow
Positive on CPO price outlook
Our plantation analyst, William Simadiputra, remains positive on the CPO sector with a
CPO price assumption of US$900 for FY14 and US$1,000 for FY15, based on a tightening
global supply/demand outlook for CPO. Subdued growth in supply is expected in
Indonesia and Malaysia, with CPO inventory in Malaysia expected to stay below 2.0mn
tons in FY14. Indonesia’s CPO production growth is expected to be low given that ageing
trees are affecting small farmers and government-owned estates. In addition, restrictive
regulations, such as the 100,000 ha land-bank limitation for privately owned planters
and a two-year moratorium, should stifle any excess estate expansion and create higher
entry barriers to the industry. Also, Indonesia’s CPO exports to China and India have
been recovering over the past six months—a trend that is expected to continue. Demand
from China and India accounts for 50% of total global CPO consumption. The bio-diesel
requirement in Indonesia may also boost demand for CPO if implemented consistently.
Exhibit 37 FY14F-15F CPO benchmark price
Exhibit 38 Malaysian inventory to remain low
Source: Bloomberg, IndoPremier
Source: Bloomberg, IndoPremier
Exhibit 39 India’s demand growth for CPO
Exhibit 40 China’s demand growth for CPO
Source: Bloomberg, IndoPremier
Source: Bloomberg, IndoPremier
Astra Agro Lestari (AALI, Rp 26,650, under review)
As with other plantation companies, the CPO price is the major variable affecting AALI’s
profits and growth. However, the CPO price is beyond the control of any CPO plantation
company, including AALI. Plantation companies such as AALI are able to control the
production process, which leads to cost controls and higher yields. We remain positive
on AALI mainly for two reasons:
•
•
22
Successful intensification program
Ample cash for land acquisitions
Initiating coverage
Enhancing yields through intensification
Ageing trees should be a major concern for AALI, as the average age of its matured
estate is 16 years—very close to peak maturity of 18 years. This is relatively high
compared with younger plantations, such as BW Plantation (BWPT, Rp 1,280, BUY) of 12
years and Sampoerna Agro (SGRO, Rp 2,300, BUY) of 14 years. Given such maturity,
AALI faces decelerating yields in the near future, as its trees will pass the prime age.
However, thanks to an innovative intensification program, AALI has been able to
enhance yields of its prime-age trees. We expect that this program will support CPO
production yields for the next three years. Also, 25% of its current estate size (44k ha)
will enter early prime-age of 8-18 years. Combining the intensification program with
early prime age trees (planted in FY05-09), we expect AALI to yield 24.5 ton per ha in
FY14-16.
Exhibit 41 Age profile AALI vs others (years)
Source: AALI, LSIP, BWPT and SGRO
Exhibit 42 Intensification helps to extend prime age by
improving yields
Exhibit 43 AALI’s annual CPO output
Source: AALI, IndoPremier
Source: AALI, IndoPremier
Abundant cash for acquisitions
AALI faces constraints in production growth due to the high maturity profile of its estate.
It has 200,000 ha of estate, of which only 5% is unplanted. In contrast, young
plantation companies such as BWPT have a 50:50 composition of planted-unplanted.
This raises the issue of possible M&A activity, especially with the Government’s new
regulation restricting land bank for privately unlisted planters to a maximum 100k ha.
23
Initiating coverage
Exhibit 44 Potential acquisition capacity of AALI
Funding Capacity @ net gearing 200% - Rp bn
22,104
Acquisition cost EV/ha - Rp bn @ IPO
SSMS – Sawit Sumbermas Sarana
111.5
DSNG – Dharma Satya Nusantara
107.1
Average – Rp bn
109.3
Total land acquisition
202,255
Source: SSMS, DSNG and IndoPremier
This scenario is based on the following assumptions:
1.
If AALI maxes out its debt covenant to 200% net gearing, totaling funds of
Rp 23tn
2.
Acquisition cost of Rp 110m/ha (based on EV/ha of recent IPO listing of SSMS and
DSNG)
In this scenario, AALI should be able to double its size by acquiring 200,000ha.
However, this raises the question of availability, as few CPO plantations are available or
the estate quality may not justify the price due to low yields, insufficient fertilizer
affecting future harvests, and lack of availability of mills and other infrastructure.
Exhibit 45 AALI’s net gearing
Source: AALI, LSIP, BWPT and SGRO
Another cash cow and US$-earner for ASII
In the context of ASII, AALI is another cash cow that earns US$ for ASII. We expect that
AALI to generate a strong EBITDA of Rp 5.2tn and Rp 6.3tn in FY14-15, combined with
relatively flat capex of Rp 2.2tn and Rp 2.4tn, respectively. In addition, the company is
expected to maintain its low gearing of less than 10% in FY14-15F. Therefore, AALI
should have sufficient room to leverage its balance sheet for M&A activities if needed.
The recent IPOs translate into an EV/ha valuation of Rp 110mn. Despite being a cash
cow, AALI also provides protection against US$/rupiah exchange rate fluctuations. AALI
should benefit from a weaker rupiah, providing a natural hedge against the automotive
business, which is likely to be hurt by rupiah weakness.
24
Initiating coverage
Financial services: enhancing returns via internal synergies
The financial services of ASII contributed about 22% to total divisional income, the
second-largest after the automotive segment. Financial services consist of:
•
•
•
•
•
4W financing with contribution from Astra Sedaya Finance (ASDF, non-listed)
and Toyota Astra Financial Service (TAFS, non-listed)
2W financing under Federal International Finance (FIFA, non-listed)
Heavy equipment financing served by SAN finance (SANF, non-listed) and
Komatsu Astra Finance (KAF, non-listed)
Banking provided by Bank Permata (BNLI, Rp1,335, not rated)
Insurance under Asuransi Astra Buana (AAB, non-listed)
Exhibit 46 Net income contribution from the financial services segment
Company
FY13
ASII ownership
ASDF
1,014
100%
TASF
133
50%
1,205
100%
242
60%
65
50%
BNLI
769
45%
AAB
851
96%
FIFA
SANF
KAF
TOTAL
4,280
Source: ASII and individual companies
Total net income contribution from financial services was Rp 4.3tn in FY13 with the
largest contribution coming from 2W financing at 28%, followed by 4W financing at
27%, insurance at 20%, banking at 18%, and heavy equipment at 7%. However,
contribution by business segment is affected by shareholding ownership. We do not
expect contribution by segment to change significantly over the next three years.
Increasing contribution should come from 4W due to faster growth from low penetration,
while 2W financing is expected to be flat due to the maturity of the market. Capital
injections may be required for other financial services, such as banking and insurance, if
faster growth is required. Nonetheless, ASII has not indicated that it will undertake this
anytime soon.
Exhibit 47 Financial services contribution by segment, 2013
Exhibit 48 Net income contribution to ASII by segment
Source: ASII
Source: ASII, IndoPremier
4W financing
The 4W financing business is run by ASDF, a 100% subsidiary of ASII and TAFS, a
jointly controlled entity with a shareholding composition of 50:50 between ASII and
Toyota Financial Service Corporation of Japan. In FY13, net profit of ASDF was Rp 1.0tn,
while net income contribution from TAFS to ASII was Rp 133bn (or a net profit of
Rp 265.3bn). As ASDF is larger in size and being consolidated, while TAFS is recorded
using an equity method, contribution from ASDF is significantly higher.
ASDF is slightly different from TAFS, as the company finances new and used cars and
heavy equipment, while TAFS concentrates only in 4W (new and used) under the Toyota
brand. TAFS has a narrower target market than ASDF, which has more flexibility in
25
Initiating coverage
penetrating 4W financing or heavy equipment. Last year, TAFS entered the leasing
business for forklifts. The total outstanding finance sum for ASDF was Rp 26tn in FY13,
compared with TAFS of Rp 9.4tn. The number of units financed by ASDF was 192k vs
TAFS of 62k in FY13.
The NIM of ASDF reached 7.3% in FY13 with yield spread of 5.3%, which is slightly
above the banking sector with NIM of around 6%. We expect NIM of ASDF to contract to
6.3% in FY14 and 6.8% in FY15 due to increasing borrowing costs as a result of the tight
monetary policy of the central bank. Moreover, 4W financing faces competition from the
banking sector, which has a much lower cost of funds. ASDF’s funding structure is
sourced from bonds issuance and bank loans with average interest cost of 8.0% in FY13.
We expect interest costs to increase to 10.0% in FY14 and 9.5% in FY15.
ASDF has strong ties with its 4W distribution network, which is a unique advantage
compared with its peers or the banking industry, although banks may have more
competitive rates. On the funding side, ASDF should be able to tap into a competitive
cost of funds from Permata Bank, another sister company. Nonetheless, we expect net
profit to decline by 6.8% to Rp 945bn in FY14 due to a higher cost of funds, but to
recover by 26.8% to Rp 1.2tn supported by a recovery in sales volume and NIM.
Exhibit 49 Assets, liabilities and equity of ASDF (Rp bn)
Source: ASDF, IndoPremier
Exhibit 50 Selected financial ratios of ASDF
2011
2012
2013
2014F
2015F
2016F
NIM (%)
7.7
7.6
7.3
6.3
6.8
6.9
Spread yields (%)
4.4
5.0
5.3
3.5
3.8
3.5
ROAA (%)
3.9
3.8
3.6
3.1
3.6
3.7
ROAE (%)
24.1
23.4
24.2
19.9
22.7
24.1
4.6
5.1
5.7
5.2
5.1
5.3
Gross gearing (x)
Source: ASDF, IndoPremier
2W financing
Federal Finance International (FIFA) is 100%-owned by ASII and specializes in
motorcycle financing, especially Honda. In 2013, FIFA expanded its business by entering
consumer multi-purpose financing, such as home appliances, electronics and furniture,
under the brand “Spektra”. FIFA could leverage its customer base from motorcycle
financing, providing a strong client base with a good credit track record.
In 2013, FIFA booked total outstanding financing of Rp 18.8tn for 1.3units new
motorcycle plus 522k units of used motorcycle. Meanwhile, multi-purpose financing
booked Rp 1.3tn (+0.06% yoy). NPLs for new motorcycle financing stood at 1.3%, while
for used motorcycle it was 2.23%, and multi-purpose financing was 2.64%. Given the
maturity of the motorcycle sector, we expect outstanding financing to reach Rp 19.4tn in
FY14 and Rp 20.3tn in FY15.
Consolidated NIM was 15.6% in FY13, which is relative high given the high average
lending rate of 20.7%. Motorcycle financing mimics micro-lending in the banking
industry, where the lending rate is high to compensate for high operational costs.
26
Initiating coverage
Nonetheless, we expect NIM to contract to 14% in FY14-15 due to higher interest costs
from rising interest rates.
FIFA has an excellent credit record with the company’s blended interest cost only
reaching 8.8% in FY13. The company relies heavily on bonds issuance and bank loans as
its main source of financing. In FY13, FIFA had outstanding bonds of Rp 8.1tn and bank
loans of Rp 6.9tn. We expect that FIFA will have no trouble issuing new debt for
refinancing or to support future growth. However, due to the tight monetary policy of
the central bank, we expect financing cost to increase to 10.7% in FY14 and 10.8% in
FY15.
Given that the motorcycle market is now mature, coupled with higher financing costs,
we expect FIFA to book a net profit of Rp 1.3tn (+7.7% yoy) in FY14 and Rp 1.4tn
(+4.5% yoy) in FY15. Strong ties with Honda sales operations and financing, combined
with a competitive source of funds, are the main strength of FIFA.
Exhibit 51 Selected financial ratios of FIFA
2011
2012
2013
2014F
2015F
2016F
NIM (%)
17.6
16.5
15.6
15.1
15.2
15.2
Spread yields (%)
12.6
12.7
11.9
11.0
10.6
10.7
ROAA (%)
7.3
6.2
5.9
5.9
6.1
5.8
ROAE (%)
30.6
30.3
29.0
26.7
23.8
21.5
3.7
3.5
3.5
2.7
2.4
2.3
Gross gearing (x)
Source: FIFA, IndoPremier
Insurance
Asuransi Astra (AAB) is a general insurance company that provides motor vehicle, heavy
equipment, fire, marine cargo, personal accident, and other insurance, including health
insurance. About 58% of its premium revenue is derived from car insurance under the
local brand name “Garda Oto”. The car insurance business enjoys a close relationship
with the financing business, which is offered to customers as a package deal. Total net
premium revenue was Rp 2.2tn (+10.5% yoy) with a net profit of Rp 851bn (+16.5%
yoy) in FY13. Despite moving into other insurance segments, the bulk of revenue is
derived from the 4W business. With relative slower growth in the 4W financing business,
we expect AAB to book a net profit of Rp 891bn in FY14 (+4.7% yoy) and Rp 970bn
(+8.9% yoy) in FY15.
Exhibit 52 Insurance revenue contribution by segment
Source: Asuransi Astra
27
Initiating coverage
Exhibit 53 Financial highlights of Asuransi Astra
Rp bn
2009
2010
2011
2012
2013
Balance sheet highlights
Premium receivable
313
325
359
345
1,016
2,440
3,691
4,392
5,534
5,315
Total asset
3,974
5,055
6,679
6,957
7,648
Liabilities
2,499
3,134
4,582
5,230
5,487
Equity
1,475
1,921
2,097
2,497
2,161
Investment
Profit and loss highlights
Premium income
1,507
1,823
2,157
1,958
2,164
Underwriting income
595
650
846
852
851
Operating income
541
693
793
740
881
Net income
460
612
711
731
851
ROAA (%)
Na
13.6
12.1
10.7
11.7
ROAE (%)
Na
36.1
35.4
31.8
Return on asset investment (%)
Na
10.1
9.0
7.9
Financial ratios
36.5
10.8
Source: Asuransi Astra
Permata Bank: a rough diamond
Bank Permata (BNLI, Rp1,335, not rated) is under joint control of ASII and Standard
Chartered Bank. Each party holds 44.56%, with the remaining balance of 10.88% held
by public shareholders. Recently, BNLI injected fresh capital of Rp 2.2tn into ASDF,
representing about 25.99% of total outstanding shares. ASDF concentrates on 4W
financing, while BNLI will not enter this segment. The company will support ASDF
through joint financing or banking facilities. However, the business synergies between
these two entities will be constrained by the legal lending limit regulation.
Since ASII and Standard Chartered became the majority shareholders in 2004, we have
not seen any significant change in the business model. The bank remains focused on
both consumer, commercial and wholesale banking. The bank is operated relatively
independently from its shareholders. We do not see any significant change of direction in
the near future. The bank should remain within the top 10 banks in the country, in our
view.
With assistance from our banking analyst, Stephan Hasjim, we arrive at our earnings
forecasts for BNLI. We expect earnings to decline 4% yoy in FY14, before recovering by
16.7% and 18.5% yoy in FY15 and FY16, respectively, on the back of stronger loan
growth and a more stable NIM outlook starting from next year. We assume that the
bank’s loan growth will decelerate to 14% in FY14, from 31.2% CAGR in FY10-FY13, due
to a steep 175bps rise in the base interest rate in the past year as Bank Indonesia has
tightened its monetary policy to lower the country’s external balance towards more
sustainable levels. We expect loan growth to improve to 18% p.a. in FY15-FY16F.
We expect the bank’s NIM to narrow further to 3.48% in FY14F, from 3.99% in FY13
(FY12: 4.60%), due to rising interest rates and BNLI’s relatively weak deposit franchise,
as reflected in the decline of its CASA ratio to 35% in FY13, from 42% in FY12. We
expect this level to be sustained in the coming years, given tightening liquidity in
Indonesia’s banking system. However, we see scope for NIM to improve slightly by
10bps in each of FY15 and FY16, as interest rates start to ease gradually given an
expected improvement in the country’s external balance.
28
Initiating coverage
Exhibit 54 Loan vs deposit growth and LDR (% yoy, %)
Exhibit55
Net interest margin (NIM) and CASA ratio (%)
Source: BNLI, IndoPremier
Source: BNLI, IndoPremier
We expect Permata Bank’s asset quality to remain relatively stable in coming years with
credit costs of around 50-60bps in FY14-FY16 (FY13: 47bps). As shown in the chart
below, the bank’s credit cost has improved significantly over the past three years. This is
thanks to new NPL formation declining to 49bps in FY13, down from a peak of 170bps in
FY09 after the 2008 Global Financial Crisis, while the NPL ratio fell to 1.0% from 4.0%
during the same four-year period. Meanwhile, we view the bank’s provisions/NPL
coverage as adequate at 113% in FY13, which also improved from 98% in FY09.
We forecast the bank’s ROAA and ROAE to decline this year to 0.92% and 11.1% in
FY14, respectively (FY13: 1.16% and 13%, respectively), on the back of narrowing NIM
and despite our assumption for the cost/income ratio to be maintained at around 60%.
Going forward, we expect ROAA to be maintained at around 0.9%, but we see scope for
a slight improvement in ROAE to above 12% in FY16F due to rising leverage ratios.
29
Exhibit 56 Credit costs, new NPLs (bps) and NPL ratio (%)
Exhibit 57 Return ratios: ROAA vs ROAE (%)
Source: BNLI, IndoPremier
Source: BNLI, IndoPremier
Initiating coverage
Valuation
We use a sum-of-the-parts valuation to arrive at our target price of Rp 8,400 for ASII,
which translates into an FY14-15F PER of 16.0-14.0x and FY14-15E EV/EBITDA of 14.012.1x. Therefore, we have a BUY rating on the counter.
We used a PER target multiple of 16.0x for the 4W and 2W segments, which make up
42.8% of ASII’s total value. Our target index for the year is 5,300, which translates into
a market PER of 16.8x. We expect the 4W and 2W segments to trade close to market
multiple as ASII has the largest weighting in the index.
For other listed companies such as AALI, AUTO, and ASGR, we have used market cap at
closing price, while for UNTR we use the target price of Rp 25,500 as recommended by
our heavy equipment analyst.
On the financing side, we impute PBV of 3.0x due to high ROE of 20% for the financing
companies. For the non-listed insurance company, we apply a PER of 13.6x, a discount
of 15% from the parent’s target PER, to reflect the value of a private company.
Meanwhile, for BNLI we apply a PBV of 1.4x, similar to the current PBV of Bank
Danamon (BDMN, Rp 4,325, HOLD).
Exhibit 58 Sum of parts valuation
Segment
Value attributed
(Rp bn)
% of total
Valuation
Method
Note
4W
98,978
29.2
PER multiple of 16.0x
Distribution & manufacturing
2W
51,952
15.3
PER multiple of 16.0x
Distribution & manufacturing
AUTO
14,035
4.1
Market cap on closing price Rp 3,640
80% shareholding
FIFA
16,075
4.7
PBV multiple of 3.0x
100% shareholding
ASDF
14,936
4.4
PBV multiple of 3.0x
100% shareholding
SANF
2,574
0.8
PBV multiple of 3.0x
60% shareholding
BNLI
9,848
2.8
PBV multiple of 1.3x
44.56% shareholding
UNTR
55,929
16.5
Target price of Rp 25,500
59.50% shareholding
AALI
33,438
9.9
Market cap on closing price Rp 26,650
79.68% shareholding
AAB
ASGR
12,112
3.6
PER multiple of 13.6x
76.87% shareholding
2,224
0.7
Market cap on closing price Rp 2,145
27,137
8.0
PER multiple of 16.0x
others
339,237
No of shares (mn)
Value per share
40,484
8,380
Source: IndoPremier
Key risks
ASII has a diversified business model, but is still largely dependent on the automotive
segments. We see several key risks that might affect the valuation and financial
performance of ASII such as:
1.
2.
3.
4.
30
Change in policy on the fuel subsidy. Faced with high fuel subsidies, the
new government may change the policy on the ballooning budget allocated to
fuel subsidies. Higher fuel prices always hamper demand in the automotive
sector due to higher costs of financing and weaker purchasing power.
Change in policy on LCGCs. The introduction of LCGC with tax incentive from
the Government has opened a new segment. At the moment, the LCGC models
are well accepted in the market. However, with rising concern over the fuel
subsidy, there is a possibility for the Government to re-evaluate its policy on
tax incentives for LCGCs or ban LCGC cars from using subsidized fuel. Either
would have a negative impact on demand for LCGCs.
Exchange rate movement. The price of 4W and 2W is highly linked to the
US$ exchange rate, through raw material costs. A weaker rupiah translates into
a more expensive selling price. We suspect that the current selling price has yet
to reflect the full translation of the weaker rupiah. ASII may be somewhat
shielded by its agribusiness, which has revenues in US$. But the net effect
would still be negative.
Weak commodity prices. Listed companies UNTR and AALI are highly
influenced by commodity prices. A prolonged recovery in commodity prices
Initiating coverage
5.
31
would negatively impact ASII’s net profit and valuation. Nonetheless, we feel
that commodity prices have now reached bottom.
Intensified competition. Rivals of Toyota/Daihatsu in 4W and Honda in 2W
have stepped up the intensity of competition by entering the main market of
ASII. Nonetheless, Toyota is used to facing such competition in the global
market, and it should not be something new for ASII and Toyota. However this
situation might erode market share and profit margins.
Exhibit 59 Trailing rolling PER of ASII
Exhibit 60 PER band of ASII
Source: Bloomberg, IndoPremier
Source: Bloomberg, IndoPremier
Initiating coverage
Financial Summary
Income Statement
Year to Dec 31 (Rp bn)
Net revenue
Cost of revenue
Gross profit
Cash Flow Statement
2013
2014F
2015F
2016F
193,880
204,230
231,854
252,769
(158,569)
(167,110)
(189,387)
(207,164)
35,311
37,120
42,467
45,605
Year to Dec 31 (Rp bn)
(8,163)
(8,493)
(9,648)
(10,571)
G&A exp
(8,545)
(8,900)
(9,900)
(10,859)
Interest - net
(166)
(147)
272
862
Forex
(751)
-
-
-
Others - net
3,540
3,581
3,846
4,125
6,297
6,759
7,292
8,070
Share of associates & joint
control
2015F
2016F
27,523
29,920
34,329
37,232
Tax
(6,435)
(4,790)
(6,387)
(6,975)
Depreciation
Adjustment
Cash flow from operation
Capex
Investment - other
Cash flow from investing
6,064
7,716
8,336
8,701
211
(3,667)
(2,076)
(1,381)
(1,074)
(126)
303
229
26,289
29,053
34,505
37,806
(12,098)
(21,091)
(11,593)
(16,365)
(4,872)
(3,407)
(3,729)
(4,152)
(16,970)
(24,498)
(15,323)
(20,517)
Pretax profit
27,523
29,920
34,329
37,232
Bank loans
4,932
(6,478)
4,694
12,694
Tax
(5,226)
(5,685)
(6,522)
(7,074)
Bonds
2,834
(7,881)
(6,113)
(5,830)
Net profit before minority
22,297
24,235
27,806
30,158
Dividend
Minorities
(2,880)
(3,029)
(3,476)
(3,770)
Others
Net Profit
19,417
21,206
24,331
26,388
Equity
Cash flow from financing
Change in cash
Balance Sheet
Year to Dec 31 (Rp bn)
33
-
-
-
(10,026)
(10,906)
(12,513)
(13,571)
499
7,078
116
(1,707)
(1,728)
(18,187)
(13,816)
(8,414)
7,591
(13,631)
5,366
8,875
Key Ratios
2013
2014F
2015F
2016F
Year to Dec 31
2013
2014F
2015F
2016F
18.2
18.2
18.3
18.0
9.6
9.7
9.9
9.6
Cash & equivalent
18,819
5,188
10,554
19,430
Gross margin, %
Account receivables
22,831
26,305
29,322
31,405
Op margin, %
Financing receivables
28,814
27,673
30,061
33,461
Pre-tax margin, %
14.2
14.7
14.8
14.7
Inventory
14,433
14,899
17,102
18,706
Net margin, %
11.5
11.9
12.0
11.9
3,455
3,469
3,938
4,294
ROAA, %
9.8
9.8
10.6
10.3
88,352
77,533
90,977
107,296
ROAE, %
25.0
23.4
23.2
21.8
25,863
23,061
24,709
27,369
A/R, days
4.3
3.5
3.5
3.5
3,389
3,357
3,811
4,155
A/R other, days
2.2
2.7
2.7
2.7
Investment
29,419
32,826
36,555
40,707
Inventory, days
6.4
6.0
6.0
6.0
Fixed assets
58,844
72,220
75,477
83,141
A/P trade, days
3.7
4.0
4.0
4.0
3,149
3,149
3,149
3,149
A/P other, days
13.8
13.0
13.0
13.0
0.3
Others
Current assets
LT financing receivables
LT other receivables
Goodwill & intangibles
Others
Non-current assets
TOTAL ASSETS
4,978
5,257
5,867
6,436
125,642
139,869
149,568
164,957
Debt to equity (x)
213,994
217,402
240,545
272,253
Interest coverage ratio (x)
Net gearing (x)
ST loans
12,854
5,000
-
-
Account payables
22,410
23,299
26,583
29,057
Other payables
11,326
11,423
12,948
14,158
Curr portion loans
24,549
-
-
-
71,139
39,722
39,531
43,215
27,120
45,164
48,745
55,609
9,547
9,969
10,953
11,755
36,667
55,133
59,698
67,364
Equity
83,938
97,267
112,561
129,148
Non controlling
22,250
25,279
28,755
32,525
106,188
122,547
141,316
161,673
213,994
217,402
240,545
272,252
Current liabilities
Loans
Other liabilities
Non curr liabilities
Total equity
TOTAL LIAB & EQUITY
Source: ASII, IndoPremier
32
2014F
Pretax
Change of W/C
Selling exp
2013
0.5
0.4
0.3
16.8
22.1
114.6
na
0.3
0.4
0.3
0.2
Head Office
PT INDO PREMIER SECURITIES
Wisma GKBI 7/F Suite 718
Jl. Jend. Sudirman No.28
Jakarta 10210 - Indonesia
p +62.21.5793.1168
f +62.21.5793.1167
Institutional Equity & Private Client
Benny B. Soebagjo
Head of Equities
[email protected]
Angkula Ruriawan
Equity Sales
[email protected]
Alexander Salim
Equity Sales
[email protected]
Edward Azizy
Equity Sales
[email protected]
Henry Sutanto
Equity Sales
[email protected]
Isna Alfiathi
Equity Sales
[email protected]
Angky Amarylis
Sales Trader
[email protected]
Thomas Samuil
Sales Trader
[email protected]
INVESTMENT RATINGS
Buy : Expected total return of 10% or more within a 12-month period
Hold: Expected total return between -10% and 10% within a 12-month period
Sell : Expected total return of -10% or worse within a 12-month period
ANALYSTS CERTIFICATION. The views expressed in this research report accurately reflect the analyst's personal views about any and all of the subject
securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or
views expressed in the report.
DISCLAIMER: This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor
accept any responsibility or liability 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 not and should not be construed as an offer or a solicitation of an offer to purchase or
subscribe or sell any securities. PT. Indo Premier Securities or its affiliates may be involved in transactions contrary to any opinion herein to make markets, or
have positions in the securities recommended herein. PT. Indo Premier Securities or its affiliates may seek or will seek investment banking or other business
relationships with the companies in this report.