We believe that oil price will remain low in 2Q15 since there will not be any major demand improvement in that period.

Teks penuh

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maxi liesyaputra maxi@sucorinvest.com +62 21 299 60 875 aZ researCH tOp piCKs: - ptpp - wton - jsmr

Strategy Report

Volatile IDr movement

IDR has been cumulatively depreciating by 2.3% over a 2-month period up to 14 April 2015, exacerbated by the strengthening of the USD against major global currencies on the back of economic recovery in the U.S.A., accompanied by a lower BI rate. We believe that the Fed is not likely to increase the Fed rate in 2Q15 since the institution is very conservative in deciding rate movement, even though there is an estimate that the rate will reach 0.625% (median estimate) by the end of 2015.

Current IDR depreciation is different from the previous one, during the 2008 global crisis. Current IDR depreciation is not accompanied by any credit default swap (CDS) jump, unlike the IDR depreciation in 2008 which was followed by significant jump of CDS.

stable interest rate

We believe Bank Indonesia will maintain the benchmark rate of 7.50% in 2Q15 after lowering the rate in February 2015. The expectation is based on forecasted Indonesia’s inflation rate of 4.5-5% in 2015 and BI’s expectation to maintain IDR exchange rate against USD. In 2Q15, we expect inflation will be higher related to fuel price hike at end of March 2015, entering new education calendar and fasting month.

Low oil price phenomena

As demand relatively constant accompanied by increasing supply, world oil price shows tendency to decline. The new president Jokowi’s administration is benefited by the low oil price phenomena, which may allow the institution to reduce oil subsidy. Ron 88 premium oil subsidy has been revoked. The government only subsidizes diesel oil in certain amount per liter. At the end, the government will have room to reallocate the oil subsidy to infrastructure development, on the back of lack of infrastructure availability and quality in Indonesia. Beside using state budget, the government is also open for private sector participations in infrastructure development, since it needs a lot of fund. Therefore, the government’s efforts to attract both international and domestic investors are urgently required.

We believe that oil price will remain low in 2Q15 since there will not be any major demand improvement in that period.

society’s income increases

In 2009 – 2014 period, there was gradual improvement of Indonesia’s society disposable income. For range of more than USD5,000 up to USD7,500 per year (the largest portion), the percentage increased to 62.5% in 2014 from 54.6% in 2009. The same thing also happened for disposable income range of USD7,500 up to USD15,000 per year, the percentage improved to 41.1% in 2014 from 30.4% in 2009.

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Benefited sectors in 2Q15

We favor some sectors which are resilient or not negatively impacted by the explained situation above. The sectors are construction (PTPP, WTON) and infrastructure (JSMR). Those three companies do not have USD debt. Pay atten-tion to those companies which large debt exposure in USD, i.e. ISAT, ASRI, MSKY and EXCL. We do not favor sectors with much USD exposure in their costs, i.e. consumer, poultry, media and retailer.

Source: Bloomberg

Figure 3: IDr vs regional currencies

Source: Bloomberg 50.0 250.0 450.0 650.0 850.0 1,050.0 1,250.0 1,450.0 1,000.0 3,000.0 5,000.0 7,000.0 9,000.0 11,000.0 13,000.0 15,000.0 4/ 8/ 20 05 4/ 8/ 20 06 4/ 8/ 20 07 4/ 8/ 20 08 4/ 8/ 20 09 4/ 8/ 20 10 4/ 8/ 20 11 4/ 8/ 20 12 4/ 8/ 20 13 4/ 8/ 20 14 IDR/USD IDR/USD CDS -10% -5% 0% 5% 10% 15% 20%

Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 IDR Yen RMB Sing Dollar Ringgit Mly Thai bath

Figure 4: IDr vs CDs

Source: Bloomberg

Figure 5: BI rate vs Inflation

3 4 5 6 7 8 9 5.5 6.5 7.5 8.5

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 BI Rate Inflation Rate

Source: Bloomberg

Figure 6: BI rate vs the FED rate

0 2 4 6 8 10 12 14 0 1 2 3 4 5 6

Fed rate (LHS) BI rate (RHS)

IDr movement compared to other currencies

We see that IDR depreciation against USD is in the middle among regional currencies. IDR depreciation is not fol-lowed by CDS hike in 2015, unlike the currency’s depreciation in 2008.

Source: Bloomberg

Figure 1: jCI prices vs ptpp & wton

Source: Bloomberg

Figure 2: BI rate vs the FED rate

400 1,200 2,000 2,800 3,600 4,400 3,500 4,500 5,500 6,500

Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 JCI (LHS) PTPP WTON 4,000 5,000 6,000 7,000 8,000 4,000 5,000 6,000

Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 JCI (LHS) JSMR (RHS)

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Indonesia economic indicators

With manageable inflation of between 4.5-5.0% in 2015, we expect Indonesia will reach economic growth of 5.3% in the same period, higher than 5.02% in 2014.

BI rate compared to Fed rate

We expect there will be no change both in the Fed rate and BI rate in 2Q15.

Low oil price benefit Indonesia economic fundamentals since the country is a net oil importer.

Source: Bloomberg

Figure 5: BI rate vs Inflation

Source: Bloomberg

Figure 6: oil prices vs Indo GDp

3 4 5 6 7 8 9 40 50 60 70 80 90 100 110 120

Jan-10 Nov-10 Sep-11 Jul-12 May-13 Mar-14 Jan-15 (%) (USD/bbl)

Crude Oil WTI Indo CPI YoY

2 3 4 5 6 7 8 9 10 40 60 80 100 120 140 160

Crude Oil WTI Constant 2010 Prices

Source: Bloomberg, Sucorinvest

Figure 7: macro economic assumptions

Source: Bloomberg

Figure 8: jCI pBV band for the last five years

-1 ST.Dev Mean +1 ST.Dev -2 ST. Dev +2 ST. Dev 1.5 2.0 2.5 3.0

Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15

Desc (%) 2012 2013 2014 2015F

Inflation 4.30 8.38 8.36 5.00

GDP growth 6.26 5.78 5.02 5.30

BI rate 5.75 7.50 7.75 7.50

Improving income

There is increasing portion of Indonesia’s disposable income of more than USD5,000 per year as a result of continu-ing domestic economic growth.

Consumer confidence index (CCI)

CCI shows tendency to increase since 1Q14 supported by potential economic growth in years ahead.

Figure 9: Indonesian income class

Figure 10: Indonesia CCI

31 41 51 61 90 100 110 120 130

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Source: Company

Figure 11: net foreign flow

-10 0 10 20 30 40 50 60 70

Jan-14 Apr-14 Jul-14 Oct-14 Jan-15

(I D R tn ) net foreign inflow

Since the beginning of 2015, net foreign has increasing tendency on the back of their trust in Indonesian economic growth.

Conclusions

From explained situation above, we believe that defensive stocks with minimum cost or debt exposure in USD will be our top picks. We select construction sector (PTPP, WTON) and infrastructure (JSMR) as our selected picks. Those three companies do not have USD debt. Pay attention to those companies which large debt exposure in USD, i.e. ISAT, ASRI, MSKY and EXCL. We do not favor sectors with much USD exposure in their costs, i.e. consumer, poultry, media and retailer.

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sucorinvest, rating definition, analysts certification, and important disclosure ratings for sectors

Overweight : We expect the industry to perform better than the primary market index (JCI) over the next 12 months. Neutral : We expect the industry to perform in line with the primary market index (JCI) over the next 12 months.

Underweight : We expect the industry to underperform the primary market index (JCI) over the next 12 months.

ratings for stocks

Buy : We expect this stock to give return (excluding dividend) of above 10% over the next 12 months.

Hold : We expect this stock to give return of between -10% and 10% over the next 12 months.

Sell : We expect this stock to give return of -10% or lower over the next 12 months.

Analyst Certification

The research analyst(s) primarily responsible for the preparation of this research report hereby certify that all of the views expressed in this research report accurately reflect their personal views about any and all of the subject securities or issuers. The research analyst(s) also certify that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.

Disclaimers

This document has been prepared for general circulation based on information obtained from sources be-lieved to be reliable but we do not make any representations as to its accuracy or completeness. PT Sucor-invest Central Gani accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities. PT Sucorinvest Central Gani and its directors, officials and/or employees may have positions in, and may effect transactions in securi-ties mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies. PT Sucorinvest Central Gani may also seek investment banking business with companies covered in its research reports. As a result inves-tors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

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research Email

1. Maxi Liesyaputra Head of Research maxi@sucorinvest.com

2. Andy Wibowo Gunawan Equity Analyst andy.gunawan@sucorinvest.com

3. Vasthi Juwita Permata E Equity Analyst vasthi.permata@sucorinvest.com

4. Inav Haria Chandra Equity Analyst inav.chandra@sucorinvest.com

Figur

Figure	4:	IDr	vs	CDs Source: Bloomberg Figure	5:	BI	rate	vs	Inflation 34567895.56.57.58.5

Figure 4: IDr vs CDs

Source: Bloomberg Figure 5: BI rate vs Inflation 34567895.56.57.58.5 p.2
Figure	7:	macro	economic	assumptions Source: Bloomberg Figure	8:	jCI	pBV	band	for	the	last	five	years-1 ST.DevMean+1 ST.Dev-2 ST

Figure 7: macro economic assumptions

Source: Bloomberg Figure 8: jCI pBV band for the last five years-1 ST.DevMean+1 ST.Dev-2 ST p.3
Figure	9:	Indonesian	income	class Figure	10:	Indonesia	CCI 31415161 90100110120130

Figure 9: Indonesian income class

Figure 10: Indonesia CCI 31415161 90100110120130 p.3

Referensi

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