19 november 2018 msci global standard index tkim wskt journal... · proposal draft and even if...

The Journal

19 November 2018

MSCI Semi-Annual Index Rebalancing (13 November 2018).

MSCI announced changes to its index on 13 November 2018 (GMT)

after U.S. close. The changes will be traded on 30 November, 2018,

and be effective on 3 December, 2018. For the MSCI Global Standard

Index, they have added PTBA and TKIM; and deleted LPPF and WSKT.

For the MSCI Global Small Cap Index, they have added LPPF, POOL,

WSKT; and deleted BBKP, HRUM, ITMG, BHIT, MDLN, SILO, VIVA. We

expect there will be constant flow as active funds will adjust their

weight on the stocks listed above, while passive funds will make the

adjustments on the closing of trading session on 30 November, 2018.

Buying opportunity can arise when passive funds adjust and sell

deleted stocks, as on 3 December 2018 changes would have been

effective and valuations might be undemanding by then. Note that the

next MSCI quarterly Index Reviews will be announced on 11 February,

2019 (GMT) and will be effective on 1 March, 2019 (GMT).

BI raised 7DRRR by 25 bps to 6.00% in November meeting;

FASBI and REPO O/N raised to 5.25% and 6.75% respectively.

Governor Perry Warjiyo explained during the press conference that

decision to raise the 7DRRR was taken to strengthen the nation’s

current account and increase financial assets’ attractiveness. In

addition, decision to raise the rate was also taken in anticipation of

further tightening on global monetary policy.

On the flip side, while headline Rupiah reserve requirement was

maintained at 6.50%, Rupiah reserve averaging was raised by 100 bps

to 3.00% in an effort to increase liquidity flexibility and distribution

within the financial system. Additionally, BI also increased the PLM’s

(macroprudential liquidity buffer) portion that can be repoed to the

central bank to 4.00%. The PLM relaxation is expected to improve the

liquidity condition given that 100% (previously 50%) of the securities

that are used to conform to PLM can now be used as underlying.

Research Team +62 21 392 5550 ext. 611 [email protected]

Global MSCI addition/deletion

Source: MSCI, Sinarmas Investment Research

Additions (+) Deletions (-)

PTBA LPPF

TKIM WSKT

Additions (+) Deletions (-)

LPPF BBKP

POOL HRUM

WSKT ITMG

BHIT

MDLN

SILO

VIVA

MSCI Global Standard Index

MSCI Global Small Cap Index

2 Coal Mining Sector | 23 January 2018

Renewal package over starterpack. We believe the new competition landscape would be focusing more on renewal package/reload package as operators would likely to focus more on expansion and quality improvement since the focus would not be in acquisition anymore. Based on the information from investor relation of TLKM, currently government is working on a new regulation to set guidance on tariff gap between starterpacks and reload packages with price of reload packages must be lower than starter packs to encourage sustainable cus-tomer shift to reload/renewal packag-es. Doing so would help prevent the industry from returning to starterpack-heavy sales model lead to a lower churn rates and achieve the efficiency objectives as set by the existing pre-paid SIM card registration policy. Potential surge in data pricing on welcoming festive season. After the recent price wars caused by the SIM card regulation, we expect there will be an increase in data pricing considering that the price wars is beginning to subside and the implementation of SIM regulation would reduce the potential price war in

the

future. Furthermore, based on our meeting with Telkomsel Investor Relation, there is an indication that

64%16%

20%

2017

Revenue Share(%)

Telkomsel

XL Axiata

Indosat Ooredoo 66%

17%

17%

1Q18

Revenue Share(%)

Telkomsel

XL Axiata

Indosat Ooredoo

69,830

85,398

103,294

129,044

160,724 167,617

44,946 52,012

58,879

84,484

101,094 105,792

24,280

40,304

50,687 56,483

61,357 64,375

2013 2014 2015 2016 2017 1Q18

BTS on air

TLKM EXCL ISAT

Source:

2 Houseware - WOOD | 19 September 2018

We view BI’s decision to raise policy rate will bring positive impact to

the market. Considering the key objectives behind the rate hike were

strengthening current account and attracting foreign investment to the

country, widened trade deficit that was announced earlier that day,

however, might have played a critical role in BI’s decision. Be that as it

may, we believe that measures taken by BI may have the power to

regain investors’ confidence as it promotes currency stability and shows

amidst the tightening monetary policy, BI still has some room to

maneuver at the macroprudential level to address the liquidity issue.

Meanwhile, tighter monetary policy is expected to reduce the import-

export divergence (23.4% vs 8.8% YTD), and lead to lower current

account deficit and healthier balance sheet.

Another trade balance deficit in October 2018. Indonesia posted

Oct-18 exports at USD 15.8 bn which grew by 3.59% YoY and 5.87%

MoM, supported by a mild growth of 4.03% YoY in the non oil & gas

(non O&G) while oil & gas (O&G) saw a slight contraction of 0.44%

YoY. Contraction in O&G was contributed by -25.7% YoY and -17.3%

YoY growths in refined oil and crude oil respectively, which we view,

was on the back of higher domestic usage. Meanwhile, non O&G growth

of 9.71% YoY should come from coal export.

On the other hand, imports reached USD 17.6 bn in Oct-18 (+23.66%

YoY and +20.6% MoM), pushed by 31.78% YoY and 22.17% YoY

growth from O&G and non O&G. Significant oil price hike had pulled up

crude oil and refined oil imports to USD 878 mn (+13.2% YoY) and

USD 1.7 bn (+44.3% YoY) respectively, despite the moderate volume.

Classified into the usage of goods (consumer, raw materials and

capital), all three sections still posted strong growth in Oct-18. Growing

consumer goods and raw materials imports could indicate strong

domestic demand, whereas strong growth on capital goods could be a

signal of higher spending for infrastructure projects.

With imports far exceeding exports, we once again saw trade balance

deficit of USD 1.82 bn (contributed by a deficit of USD 1.4 bn and USD

393.2 mn from O&G and non O&G respectively) in Oct-18, compared to

a surplus of USD 227 mn in the previous month. In the upcoming

months, we expect a softening trade balance as we see 1) continuous

lower oil imports on the B20 implementation and 2) plunging oil price

to ~USD 57/barrel (as of 16 Nov 2018) following US waiver on Iran

sanction as well as rising production and inventory had raised concern

on supply glut in the near term.

2 The Journal | 19 November 2018

(2,500)

(2,000)

(1,500)

(1,000)

(500)

-

500

1,000

1,500

2,000

Jun

-17

Jul-

17

Aug-1

7

Sep-1

7

Oct-

17

Nov-1

7

Dec-17

Jan-1

8

Feb-1

8

Mar-

18

Apr-

18

May-1

8

Jun

-18

Jul-

18

Aug-1

8

Sep-1

8

Oct-

18

Indo Trade Balance (in USD Mn)

Indonesia Trade Balance

Source: BPS, Sinarmas Investment Research


Renewal package over starterpack. We believe the new competition landscape would be focusing more on renewal package/reload package as operators would likely to focus more on expansion and quality improvement since the focus would not be in acquisition anymore. Based on the information from investor relation of TLKM, currently government is working on a new regu-lation to set guidance on tariff gap be-tween starterpacks and reload packag-es with price of reload packages must be lower than starter packs to encour-age sustainable customer shift to re-load/renewal packages. Doing so would help prevent the industry from returning to starterpack-heavy sales model lead to a lower churn rates and achieve the efficiency objectives as set by the existing prepaid SIM card regis-tration policy. Potential surge in data pricing on welcoming festive season. After the recent price wars caused by the SIM card regulation, we expect there will be an increase in data pricing considering that the price wars is beginning to subside and the implementation of SIM regulation

would reduce the potential price war in the future. Furthermore, based on our meeting with Telkomsel Investor Relation, there is an indication that

64%16%

20%

2017

Revenue Share(%)

Telkomsel

XL Axiata

Indosat Ooredoo 66%

17%

17%

1Q18

Revenue Share(%)

Telkomsel

XL Axiata

Indosat Ooredoo

69,830

85,398

103,294

129,044

160,724 167,617

44,946 52,012

58,879

84,484

101,094 105,792

24,280

40,304

50,687 56,483

61,357 64,375

2013 2014 2015 2016 2017 1Q18

BTS on air

TLKM EXCL ISAT

Source:


New proposed regulation on coal permits. Local news have cited

the potential cut tax rate from 45% to 25% for coal miners whose coal

contracts of work (PKP2B) will soon expire and be converted to special

mining permits (IUPK). According to the draft, trade off from lower tax

rate will come from higher royalty tax from 13.5% to 15% as well as

additional 10% tax from net profit (6% for regional government and

4% for central government). Our sensitivity analysis suggests that as

long as profit before income tax margin remain above 10%, the new

tax regulation will bring benefit to the coal miners. In the case of ADRO

and Kideco whose PBT margin were at 24%/30% respectively, it could

potentially uplift ADRO and Kideco net profit margin by up to 1.5-2.0%,

assuming no further tax given. However, note that this is only a

proposal draft and even if implemented, its benefit will only take place

right after the conversion of permit, though it should give short term

catalyst to the sector.

Industry consolidation is imminent. Cement sector’s consolidation

phase has finally started with Semen Indonesia (SMGR) taking the first

step in acquiring Holcim Indonesia (SMCB). LafargeHolcim closed the

acquisition deal of 80.6% SMCB’s stake disposal with USD 1.75 bn

transaction value on a 100% basis. The assets to be sold include four

cement plants (total capacity of 15 mn tons, 33 ready mix-plants, and

two aggregate quarries. In order to complete the deal, SMGR receives

new loan facilities from foreign and local banks amounting to USD 1.28

bn. We believe that the acquisition, though driving company's finance

cost higher for the next two years, is a necessary action for the sake of


-40%

-20%

0%

20%

40%

60%

80%

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18

Indo Exports (in USD Mn) Indo Imports (in USD Mn)

Export YoY Growth Import YoY Growth

Indonesia export/import

Source: BPS, Sinarmas Investment Research

Coal company Contract expiry date

Kaltim Prima Coal 2021

Arutmin Indonesia 2020

Adaro Energy 2022

Kideco Jaya Agung 2023

Berau Coal Energy 2025

Source: Local news, Sinarmas Investment Research

Expiry date for CCoW of coal mining companies



the


64%16%

20%

2017

Revenue Share(%)

Telkomsel

XL Axiata

Indosat Ooredoo 66%

17%

17%

1Q18

Revenue Share(%)

Telkomsel

XL Axiata

Indosat Ooredoo

69,830

85,398

103,294

129,044

160,724 167,617

44,946 52,012

58,879

84,484

101,094 105,792

24,280

40,304

50,687 56,483

61,357 64,375

2013 2014 2015 2016 2017 1Q18

BTS on air

TLKM EXCL ISAT

Source:


sectoral recovery. It will benefit SMGR as well since the consolidation

reinforces SMGR's dominance through 55% market share (SMGR alone:

39.4% market share) and 47.3 mn tons capacity (SMGR alone: 32.2

mn tons). The consolidation brings positive sentiment for cement sector

as a whole since SMCB’s acquisition is won by local player, SMGR,

which is expected to support pricing recovery. As competition lessened

and more pricing power gained, SMGR will have much more room for

adjusting prices.

Domestic cement sales grew by 5.1% YoY as of 10M18. Overall

domestic cement sales grew in-line with industry’s target of 5% YoY

growth. The sector sustained last year’s demand recovery where

industry posted 5.1% YoY 10M18 domestic growth and 5.9% YoY

growth including export sales. The improvement is mainly supported by

intensive infrastructure projects as indicated by solid bulk cement sales

for the past two tears (+12.9% YoY in 10M18). On the other hand,

10M18 bag cement sales grew by only 2.6% YoY, giving a hint that

sluggish demand from property sector remains. Banten contributed the

highest growth in Oct-18 (+23.1% YoY) compared to other regions. We

also note a slowing demand from Sumatera and Kalimantan whose

sales volume grew by +2.5% YoY and +3.8% YoY respectively in Oct-

18.

10M18 National 4W Wholesales climbed to 7.1% YoY. Indonesia’s

car sales from January to October 2018 recorded a positive growth of

7.1% YoY with a total of 962,817 units. In October only, car sales

recorded at 106k units (+13.7% MoM, +12.3% YoY) which was only

second to Jul-18 sales ( 107.5k units). We believe the strong wholesale

growth October was backed by the decrease in inventory level.

Nonetheless, we expect 4W sales to remain stable until year-end 2018.

Breaking sales down into brands, Toyota leads with 36.2k units

(+20.8% MoM, +20.2% YoY), followed by Daihatsu with 21k units

(+22.9% MoM, +25.5% YoY). The overall Astra brands which include

Toyota, Daihatsu, Isuzu, and Peugeot booked a total of 59.9k units

(+20.1% MoM, +22.0% YoY) in Oct-18, gaining back its market share

and grabbed 56.5% of total industry sales during the period (this is the

highest sales that Astra has recorded in the past 19 months). However,

Astra’s sales YTD stood at 484.5k units (-1.7% YoY and equivalent to

50.3% market share). While the number is lower compared to last

year, after strong sales in Oct-18, this is the first month that Astra's

market share came back above 50%. On the other hand, Mitsubishi

booked 15.2k units of wholesales in Oct-18 (-5.8% MoM, +28.7% YoY),


0

1

2

3

4

5

6

7

8

9

Au

g-1

2

No

v-1

2

Feb

-13

May

-13

Au

g-1

3

No

v-1

3

Feb

-14

May

-14

Au

g-1

4

No

v-1

4

Feb

-15

May

-15

Au

g-1

5

No

v-1

5

Feb

-16

May

-16

Au

g-1

6

No

v-1

6

Feb

-17

May

-17

Au

g-1

7

No

v-1

7

Feb

-18

May

-18

Au

g-1

8

Cement Sales Volume (in mn tons)

Source: Company data, Sinarmas Investment Research

Cement industry monthly sales volume



the


64%16%

20%

2017

Revenue Share(%)

Telkomsel

XL Axiata

Indosat Ooredoo 66%

17%

17%

1Q18

Revenue Share(%)

Telkomsel

XL Axiata

Indosat Ooredoo

69,830

85,398

103,294

129,044

160,724 167,617

44,946 52,012

58,879

84,484

101,094 105,792

24,280

40,304

50,687 56,483

61,357 64,375

2013 2014 2015 2016 2017 1Q18

BTS on air

TLKM EXCL ISAT

Source:


while Honda recorded 15.5k units (+41.3% MoM, -9.0% YoY) boosted

from the launching of New Honda Brio (6.7k units in Oct-18). To add,

Suzuki posted 8.5k units sales in Oct-18 (-4.1% MoM, -11.3% YoY)

while Nissan booked 167 units of sale during the same period (+5.7%

MoM, -60.9% YoY).

While competition remains tight this year, we see next year to be even

more interesting as more new models will be launched. From the

Chinese automakers, Wuling plans to launch its SUV models in 1H19,

while DFSK also plans 2 new SUV models which will be positioned

under the Glory 580. These models will bring competition to multiple

brands such as Mitsubishi Xpander, Toyota Rush, Daihatsu Terios, and

Honda HR-V. On the flip side, Mitsubishi commits to add 4 bn yen

worth of investment to increase the production capacity in Indonesia

and to collaborate with Nissan to produce Xpander’s engines in Nissans’

factory. Lastly, Nissan has confirmed that they are planning to launch

a similar model to Mitsubishi Xpander under Nissan brand in 2019.


40,000

50,000

60,000

70,000

80,000

90,000

100,000

110,000

120,000

130,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Jan-

12

Ap

r-12

Jul-

12

Oct

-12

Jan-

13

Ap

r-13

Jul-

13

Oct

-13

Jan-

14

Ap

r-14

Jul-

14

Oct

-14

Jan-

15

Ap

r-15

Jul-

15

Oct

-15

Jan-

16

Ap

r-16

Jul-

16

Oct

-16

Astra Others Sales Volume

Source: Gaikindo, Sinarmas Investment Research

National 4W sales

DISCLAIMER This report has been prepared by PT Sinarmas Sekuritas, an affiliate of Sinarmas Group. This material is: (i) created based on information that we consider reliable, but we do not represent that it is accurate or complete, and it should not be relied upon as such; (ii) for your private information, and we are not soliciting any action based upon it; (iii) not to be construed as an offer to sell or a solicitation of an offer to buy any security. Opinions expressed are current opinions as of original publication date appearing on this material and the in-formation, including the opinions contained herein, is subjected to change without notice. The analysis con-tained herein is based on numerous assumptions. Different assumptions could result in materially different results. The analyst(s) responsible for the preparation of this publication may interact with trading desk per-sonnel, sales personnel and other constituencies for the purpose of gathering, integrating and interpreting market information. Research will initiate, update and cease coverage solely at the discretion of Sinarmas Re-search department. If and as applicable, Sinarmas Sekuritas’ investment banking relationships, investment banking and non-investment banking compensation and securities ownership, if any, are specified in disclaim-ers and related disclosures in this report. In addition, other members of Sinarmas Group may from time to time perform investment banking or other services (including acting as advisor, manager or lender) for, or solicit investment banking or other business from companies under our research coverage. Further, the Sinar-mas Group, and/or its officers, directors and employees, including persons, without limitation, involved in the preparation or issuance of this material may, to the extent permitted by law and/or regulation, have long or short positions in, and buy or sell, the securities (including ownership by Sinarmas Group), or derivatives (including options) thereof, of companies under our coverage, or related securities or derivatives. In addition, the Sinarmas Group, including Sinarmas Sekuritas, may act as market maker and principal, willing to buy and sell certain of the securities of companies under our coverage. Further, the Sinarmas Group may buy and sell certain of the securities of companies under our coverage, as agent for its clients. Investors should consider this report as only a single factor in making their investment decision and, as such, the report should not be viewed as identifying or suggesting all risks, direct or indirect, that may be associat-ed with any investment decision. Recipients should not regard this report as substitute for exercise of their own judgment. Past performance is not necessarily a guide to future performance. The value of any invest-ments may go down as well as up and you may not get back the full amount invested. Sinarmas Sekuritas specifically prohibits the redistribution of this material in whole or in part without the writ-ten permission of Sinarmas Sekuritas and Sinarmas Sekuritas accepts no liability whatsoever for the actions of third parties in this respect. If publication has been distributed by electronic transmission, such as e-mail, then such transmission cannot be guaranteed to be secure or error-free as information could be intercepted, corrupted, lost, destroyed, arrive late or incomplete, or contain viruses. The sender therefore does not accept liability for any errors or omissions in the contents of this publication, which may arise as a result of electronic transmission. If verification is required, please request a hard-copy version. Additional information is available upon request. Images may depict objects or elements which are protected by third party copyright, trademarks and other intellectual properties.

©Sinarmas Sekuritas(2018). All rights reserved.

19 november 2018 msci global standard index tkim wskt journal... · proposal draft and even if...

Documents