Strategy
t wo weeks before t he celebrat ion. Anot her t hing t o not e is t hat last year’s difference is only + 3 hours from I ndonesia. Therefore, t he gam e will be on -air at prim e t im e from 5pm t o 2am . Com pared t o World Cup 2014, t he
TV St a t ion RCTI , Global TV ANTV, TVOne Trans TV, Trans7
W h e r e t h e m on e y w ill b e com in g f r om hold KKS ( Kart u Keluarga Sej aht era) . KKS is gradually shift ing t o debit card form at which support s disbursem ent t hrough e- warong and Bulog and ot her saving account feat ures. The first disbursem ent of I DR 500k has been execut ed in February 2018. The rest is going t o be re- disbursed in t he next phases on May , August , and Novem ber.
2017 Govt budget (IDR tn) 2018 Govt budget (IDR tn)
Socia l a ssist a n ce p r ogr a m
KI P ( Ka r t u I n don e sia Pin t a r ) a n d KJP ( Ka r t u Ja k a r t a Pin t a r )
I n order t o elevat e t he educat ion level of I ndonesian fut ure generat ion, KI P and KJP are dist ribut ed t o st udent s in need whose age ranging from 7 t o 18 years old for KI P and from 6 t o 21 years old for KJP. Governm ent assigns I DR 10.8 t n of budget for 19.4 m illion st udent s for KI P where each receives I DR 450k – 1 m n per year based on t heir educat ion level. Meanwhile, KJP is exclusively given for Jakart a resident s in which kids accept I DR 3 - 5 m n/ year. Budget allocat ion for KJP program am ount s for I DR 3,9 t n wit h 800 st udent s as it s t arget .
KI S ( Ka r t u I n don e sia Se h a t )
To guarant ee t he sust ainabilit y of nat ional healt hcare program , President Joko Widodo launched t he brand- new KI S t o t he poor t o com plet e t he exist ing healt h insurance card ( Askes, Jam kesm as, KJS, BPJS Kesehat an) . Looking at current num bers, t here are 92.4 m illion KI S holders wit h I DR 25.5 t n governm ent budget for t he program . Considering t he im port ance of healt h t owards cit izens’ living qualit y, t he governm ent aim s t o at t ain 107 m illion KI S holders by 2019.
Polit ica l ca m pa ign s
On t op of governm ent ’s social assist ance program s in t he aforem ent ioned, we view t hat t he upcom ing regional, president ial, and legislat ive cam paigns will st im ulat e m edium - t o- low incom e segm ent ’s spending t o a cert ain ext ent given t he pot ent ial m oney circulat ion arising from cam paign act ivit ies and hist orical pat t ern of t he dom ino effect s.
Pr ogr a m Allow a n ce s pe r r e cipie n t
( I D R) Re cipie n t s D ist r ibu t ion
Tot a l bu dge t 2 0 1 7
Tot a l bu dge t 2 0 1 8
PKH 1.89m n/ year/ fam ily 10 m n beneficiary fam ilies 4 Phases ( Feb, May, Aug, Nov) 11.3 t n 17.3 t n
BPNT ( food subsidy) 110k/ m ont h/ fam ily 10 m n beneficiary fam ilies 110.000 per m ont h, 25t h 19.8 t n 20.8 t n
Dana Desa ~ 800m n/ village 74,985 villages 3 phases ( Jan- Feb 20% , Mar- Jun
40% . Jul- Dec 40% 60 t n 60 t n
KI P 450k - 1m n/ year/ person 19.4 m n st udent s Sem i annually ( Mar/ Apr and
Aug/ Sep) 10.3 t n 10.5 t n
KJP 3 - 5.4m n/ year/ person 0.8 m n st udent s Sem i annually ( Mar/ Apr and
Aug/ Sep) 3.3 t n 3.9 t n
KI S 92.4 m n st udent s 25.5 t n 25.5 t n
Source: Various News, Sinarmas Investment Research
D ow n side r isk :
Despit e of being opt im ist ic t owards consum pt ion recovery brought by event s and social program s as t he cat alyst s, our research t eam not ed down a num ber of occurrences which m ight serve as downside risk t o our t hesis. At t he t im e of t his writ ing, JCI st ood at 6,211 ( - 2.3% YTD) , down from a record high of 6,693 ( + 5.3% YTD) in Feb ‘18 as I DR 20 t rillion foreign out flow erased YTD gains. While it get s increasingly harder t o m easure t he uncert aint y from Tr um p adm inist rat ion, prim arily concerning Rex Tillerson oust ing ( replaced by Mike Pom peo) and early indicat ion of furt her t ax reform as well as t rade wars loom ing from recent developm ent , we view t hat dom est ic econom y st ill rem ains on t rack despit e possible weak 1Q18 reading as export fell below expect at ion and t he lack of cat alyst s t hat support dom est ic consum pt ion. I n addit ion t o t hat , Harvest season t hat fell on t he 1st quart er last year, lags t o April t his year. These uncert aint ies and 1.5% YTD currency depreciat ion have changed foreign invest ors’ perspect ives t o I ndonesia as an EM w hich during t he early part of 2018 was t raded at 18.0x PE.
Th e b a t t le of on lin e a n d offlin e
Con su m e r st a p le s a n d r e t a il se ct or
Am id a ye a r of gr e a t cha nce s. Last year was a disappoint ing year for consum pt ion, im pact ed by: 1) lacklust er purchasing power on elect ricit y t ariff adj ust m ent and 2) people’s t endency t o save m ore t han t o spend. Throughout 2017, FMCG v alue has only grown by 2.5% ( vs 7.8% in FY16) , worsen by t he fact t hat v olum e was down 2.3% ( v s + 2% in FY16) . While ret ailers, especially t he m iddle- t o- low- end one, have seen lower t han ex-pect ed SSSG. This t im e ar ound, t he m aj or event s st art ing in t he upcom ing m ont hs unt il 1H19 should prom ise a bet t er at m osphere for consum pt ion as discussed earlier. Aligned wit h t he sm oot h disbursem ent of social assis-t ance program s, we expecassis-t m oney circulaassis-t ion assis-t o rise, spending assis-t o surge, hence benefit consum er nam es, bot h st aples and ret ailers.
Top pick s for st a ple s. We rem ain opt im ist ic t o see bet t er FMCG dem and on t he back of pot ent ial consum pt ion recovery t his year. For st aples, we favor t he m ass producer nam es such as I ndofood group ( I NDF and I CBP) . Ut ilizing t heir well- known product s t hat t arget all consum er classes coupled wit h nat ionwide dist ribut ion channel, posit ive volum e growt h should be visi-ble t his year. I NDF would benefit from higher dem and of daily st aples ( flour, cooking oil, m argarine, syr ups et c) during t he fast ing and Eid Al - Fit r. Meanwhile, increasing consum pt ion on snacks and beverages during World Cup and Asian Gam es would provide som e fresh air for I CBP.
Top pick s for r e t a ile r s. Hist orically, ret ailers count on Lebaran season which com m only account s for 30% - 40% of t heir annual sales. I t is also wort h t o not e t hat recent dat a released by LPPF ( bet t er - t han- expect ed 4Q17 result ) and RALS ( im proving Feb 2018 SSSG) signaling recovery is around t he corner. Great er growt h part icularly occurred at out er Java area on behalf of rising com m odit y prices, wit h coal leading t he rally. Being opt i-m ist ic, we look upon RALS and LPPF w hose t arget i-m arket are governi-m ent social program s’ priorit ies as t he m ain beneficiaries should t heir cust om ers are back t o shop.
Te le com m u n ica t ion se ct or
St r e a m in g t im e ! Short ly , we will face several m aj or event s in t hese up-com ing m ont hs whereas dat a t raffic growt h is expect ed t o im prove rapidly. Rising dat a t raffic will becom e t he key st rat egy for t elecom m unicat ion in-dust ry t his year as legacy revenue has experience it s downfall. Eid Al - Fit r, World Cup 2018, Asian Gam es 2018 as well as regional and president ial elect ion cam paign will becom e t he m ain t rigger for rising dat a consum p-t ion. Hisp-t orically, during Eid al- Fip-t r weeks, dap-t a consum pp-t ion could grow by around 128.7% YoY or around 21.6% higher t han norm al periods. More-over, we could count on rising dat a consum pt ion during World Cup and Asian Gam es as live online st ream ing and m at ch highlight video replay be-com e very popular during t hese period. Not t o m ent ion, social m edia and int ernet forum s will becom e m ore act ive as people t end t o share t he lat est news and video of t he m at ch. Last ly, polit ical cam paign could also be an addit ional m aj or force t oward dat a consum pt ion growt h. Overall, we be-lieve rising consum er spending and several huge event s occurrence t his year could boost dat a t raffic growt h and benefit ed t elecom m unicat ion sec-t or.
M e dia se ct or
Rising a d- spe n ding. Heading t o 2Q18, we m ost likely see rising ad -spending on t he back of rising consum pt ion and m aj or event s for t his year. As we have point ed out , t here will be several big event s held t his year nam ely World Cup, Asian Gam es as well as regional and president ial elect ion cam paign which should bolst er ad - spending. Looking at t he dat a in 2010 and 2014, ad- spending on t he World Cup m ont h ( June & July) had increased by 15.3% / 31.5% respect ively com pared t o norm al periods. Despit e having no direct im pact t oward m edia com panies under our coverage, t he rising consum pt ion effect could t rigger higher overall ad -spending. Not t o m ent ion, Asian Gam es will also be held one m ont h right aft er t he World Cup ended, which we believe could cont ribut e sim ilar port ion t oward overall ad spending. Wort h t o not e, SCTV under SCMA has t he broadcast ing right s for Asian Gam es. Last ly, we also have our regional and president ial elect ion m edia cam paign. Flashing back t o 2014, ad spending from polit ical cam paign during elect ion grew by 89% YoY where RCTI under MNCN posit ioned as t he second biggest port ion of ad spending in t he last elect ion cam paign. Overall, ad - spending should significant ly im prove t his year. Furt her m ore, rising consum pt ion effect could also t rigger higher ad- spending especially from FMCG com panies and also e- com m erce. Taking everyt hing int o considerat ion, we rem ain our posit ive st ance on m edia sect or.
Our t op picks for t he sect or is MNCN ( 12.5x forward PE, - 2.4SD below 5 years avg PE) as it owns a m ore at t ract ive valuat ion com pared t o SCMA ( 25.0x forward PE, - 1.1 SD below 5 years avg PE) . However, we also like SCMA as it has exposur e t oward Asian Gam es. Overall, we t hink bot h com panies will perform well t his year support ed by higher overall ad spending.
Ad sp e n d in g 2 0 1 0 a n d 2 0 1 4
W or ld Cu p 2 0 1 8 : Ge r m a n y t o lift t he t r oph y
The 2018 World Cup will be held in Russia from June t o July 2018. This t im e around, unlike t he pr evious World Cup bracket s, t here are no “ group of deat hs” ( t hough som e observers m ight say Group F is, but wit h aging I brahim ovic and Sout h Korea being a shadow of t heir own past , Germ any is alm ost cert ain t o cruise t heir way past t he group st ages) . That being said, t his is The World Cup w here any pot ent ial surprises could happen such as Egypt overt hrowing Russia, Nigeria’s neck - in- neck bat t le wit h Croat ia t o be Argent ina’s plus one as well as Colom bia upset t ing Poland t o be Group’s Winner.
Going forward, round of 16 and quart er finals should be rat her st raight forward. I nt erest ing t o not e is Spain vs Argent ina w here Messi is expect ed t o bring his side vict orious against arguably t he best goalkeeper in t he world, Spain’s De Gea. Anot her int erest ing gam e is Brazil vs Belgium where bot h squads are st ill very young and abounds w it h t alent s. However, Brazil’s st rong leadership qualit y in t he form of Alves as well as Thiago Silva which Belgium lacks should give t hem t he edge.
Sem i- finals are t ricky. On paper, France should have t he upper hand given t heir 3- layer squad st rengt h backed by t he ast onishing t alent s of t heir young st ars Griezm ann, Dem bele and Mbappe. But t hey are facing a squad which has Cout inho and Neym ar. This is a t ough call but our fait h is on t he Brazil’s m agicians. For Argent ina vs Germ any , t his t im e t he “ flea” argum ent will not work because t his is Germ any, t he j uggernaut of big t im e t ournam ent s. Consist ent ly ranks in t he t op 4, Germ any has everyt hing t hey need, including possibly t he st rongest m idfield in t he gam e. Wit h Ozil and Kross at t he cent re, as t he t eam ’s passing m et ronom e, as well as Thom as Muller’s goal- get t er inst inct , Germ an should out shine t he brilliance Messi.
The Final will be a show of resilience bet ween Brazil’s persist ence at t ack vs Germ any’s unrelent ing defence. Neym ar will be t oo m uch for Hum m els t o handle, given his lack of speed. Furt herm ore, Philip Lahm ’s ret irem ent m ay also leave Germ any slight ly disorient ed. But t his is Der Panzer we are t alking about . I f Kim m ich / Boat eng can collapse on Neym ar / Cout inho, Brazil’s aggressive offense is sure t o be cont ained. Toni Kroos has becom e t he spirit ual leader and cent re- piece of Germ any’s play w hich provides st abilit y t o t he ent ire syst em . I f him and Ozil are in sync, Germ an will undoubt edly win.
* Feel free t o cast your vot e via em ail t o: research@sinarm assekurit as.co.id
SI N ARM AS SEKURI TAS I N VESTM EN T RATI N GS GUI D E
BUY: Share price m ay rise by m ore t han 15% over t he next 12 m ont hs.
AD D: Share price m ay range bet ween 10% t o 15% over t he next 12 m ont hs.
N EUTRAL: Share price m ay range bet ween –10% t o + 10% over t he next 12 m ont hs.
RED UCE: Share price m ay range bet ween –10% t o –15% over t he next 12 m ont hs.
SELL: Share price m ay fall by m ore t han 15% over t he next 12 m ont hs.
D I SCLAI M ER
This report has been prepared by PT Sinarm as Sek urit as, an affiliat e of Sinarm as Group.
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