FROM EQUITY RESEARCH
Indosat Ooredoo Hutchison: 4Q23/ FY23 earnings beat offers a credible prospect of another growth out performance in FY24 (ISAT.IJ IDR 9.500 BUY.TP IDR 13.300) ·         IOH fully absorbed its FY23 capex budget in 4Q23 signaling its growth commitments, hence its guidance of another outperformance in FY24F. ·         IOH subs offer significant ARPU upside to over Rp40k in FY24F and onwards, hence we see near 50% EBITDA margin guidance is attainable. ·         We include the Home BB Internet take-up, raised our FY24-25F earnings by (23%/19%), lifting our TP to Rp13,300 (implying 6.1x EV/EBITDA); reiterate Buy rating on strong fundamentals and growth outlook To see the full version of this report, please click here   To see the full version of this snapshot, please click here   MARKET NEWS

MACROECONOMY

China Consumer Price Fell by 0.8% yoy in Jan24

China's consumer prices fell by 0.8% yoy in Jan24, the most in more than 14 years and worse than market forecasts of a 0.5% fall. It was the fourth straight month of decline in CPI, the longest streak of drop since October 2009. Food prices declined at a record pace (-5.9% vs -3.7% in December). Meanwhile, non-food inflation was down to 0.4%. (Trading Economics)

 

Indonesia FX Reserve Fell to US$145.1bn in Jan24

Indonesia FX Reserve fell in January to US$145.1bn from Dec's two-year high at US$146.4bn. The decrease came from the maturity of foreign bonds. (Bank Indonesia)

 

SECTOR

Automotive: Indonesia’s EV Battery Production Capacity Predicted to Reach 0.4% of Global Production

The Energy Shift Institute (Energy Shift) estimates that this year Indonesia will only have 10 gigawatt-hours (GWh) or less than 0.4% of the global battery production capacity of 2,800 GWh. According to Energy Shift, Indonesia's nickel downstream relies on the goals and narratives built by the government to increase the added value of nickel and become a key player in the world's battery-based electric motor vehicle (KBLBB) industry. (Kontan)

 

Telco 4Q23 revenue latest insights

• XL Axiata (EXCL IJ) got approvals to release FY23 results, the day of release aimed on Tue. 13th Feb.
• We decipher that XL performed better than we anticipated closer to +3%qoq on the topline, better than initially thought of +1.5%qoq, (Cons -1.8%qoq)
• This bodes well with our last insight that IOH and EXCL were more aggressive in 4Q23 (evidenced already for IOH) possibly at the expense of the incumbent who preferred not to match the intensity and play the longer game. We still believe Telkomsel and Telkom grew in 4Q but potentially at <3%qoq less than anticipated (BRIDS +4%qoq, Cons +5.8%qoq). (Niko Margaronis – BRIDS)

 

CORPORATE

AUTO Prepares Capex of Rp500bn for 2024

AUTO prepares capex of Rp500bn for 2024. The routine capex is prioritized for the preparation of new vehicle models, engine maintenance, and the implementation of digitalization and automation in all aspects. In addition to the development of the EV business segment, AUTO remains focused on strengthening the Original Equipment Manufacturer (OEM) business as well as the after-market or Replacement Market (REM). (Kontan)

 

Daihatsu Retail Sales Reached 16,976 in January 2024

Daihatsu Indonesia recorded retail sales of 16,976 (+12.5% mom). In terms of volume and model, Daihatsu’s retail sales were dominated by the top three models, which were Sigra (31.3%), Gran Max PU (24.4%), and Terios (13.4%). The highest percentage increase in sales was for the Ayla Model (+152% mom), followed by Gran Max Mini Bus (+137% mom) and Terios (+134% mom). (Kontan)

 

GOTO IJ, reviving talks for ride-hailing / food delivery merger

Scenarios mentioned in the Bloomberg article:

• GRAB to acquire GOTO using a combination of cash and stock. Patrick Walujo appears more open to such deal than preceding leaderships. Talks are on-and-off. The shareholders are driving this deal.
• GRAB potentially to run the Singapore and some other markets, GOTO to run Indonesia.
• Current share price of GOTO is a hurdle. Merger valued at US$20bn. Current market caps: GRAB US US$12.2bn, GOTO IJ US$6.5bn
• GOTO representative said no such discussion is taking place. (Bloomberg)

 

With courtesy of DealStreetAsia, we unearthed previous articles from when first merger talks possibly took place in Feb 2020 well before both their IPOs when talks between GOTO and GRAB were advancing while Covid was impacting their businesses.

 

Key DealStreet commentary:

• Both already had agreed in principle on the merger ironing out the fine print. Back then GRAB offered Gojek 30% in the merged entity in a deal valued at US$20bn also with Soelistyo and Aluwi to be reporting to GRAB co-founder Anthony Tan. Gojek and shareholders were pushing for larger stake.
• Back then companies were deadlocked about who will run the management and geographical control. They were not in agreement however about their approach in Indonesia. A core group in GRAB management strongly opposed the idea and was interested only in Indonesia only merger and asking GOTO to exit other markets (BRIDS: Singapore & Vietnam left only basically, GOTO not present in Thailand and Philippines any longer). Anthony Tan built GRAB from scratch and wanted the management in Indonesia. (Thus the comment from Bloomberg that with P. Walujo and Nadiem Makarim not anymore in Gojek management, the merger deal is more plausible). The last reference suggested that GRAB was favored in a joint branding, while Gojek preferred to retain its label in the home market. (DealStreetAsia)

 

Shareholders activism key role in driving the merger

• GRAB was considered one of the prized investments of Softbank investing US$3bn+ (Softbank also has stake in GOTO of 7.59% while Alibaba 8.72% as per 5/2/24 IDX board). Investors have every interest to drive a merger and consolidate the play across SE Asia.

 

Regulation poses a key hurdle, but there was a solution

• Together the 2 companies control majority of the market (many instances we heard they control 50:50 of the market, thus naturally should raise antitrust concerns). Back then the case was that Gojek would pacify with the regulator by seeking to sunset / phase out the GRAB brand, and thus the merger would be completed along the M&A lines of GRAB acquisition of UBER.

 

BRIDS Comment:

We do tend to side with the thought that this is shareholder driven M&A initiative to bring the 2 ride-hailers together. Key differences since 2020:

• Both are on adj. EBITDA positive position.
• Gojek has consolidated its presence in Indonesia, Singapore & Vietnam.
• GRAB is in talks with Delivery Hero to acquire Food Panda ride-hailer (present in 11 Asian markets).
• Both pursuing fintech (BNPL, digital lending) aspirations.

However, Softbank exerts pressure by selling again 0.02% of its stake on last Monday while we are still looking to identify the buyer in last Monday’s crossing of 16.2bn shares ~1.3% stake. GOTO’s key position at this point is that they will not shy away from a value accretive deal. However, if those talks do take place and is well communicated to shareholders, the selling pressure might stop as investors will rally behind latest deal efforts.

 

In light of the new Bloomberg article and the background of the story, we like the ride-hailing consolidation story unfolding which significantly changes the optics in the Indonesian opportunity outlook (less money to fight competition and more money towards ecosystem investments to build a common front in fintech (Gopay – OVO 90% owned by GRAB and digital banking Superbank + Jago)). We currently have a BUY rating in GOTO IJ, with target price Rp125, having recently upgraded our TP to account for GOTO’s recent accretive deal in our view with leading social media Tiktok and its ecommerce biz. (Niko Margaronis – BRIDS)

 

HMSP’s FY23 sales volume down 4% yoy

• Indonesia’s 4Q23 cigarette sales volume was 72.5bn sticks (down 1.2% yoy), leading to FY23 sales volume of 291.6bn sticks (down 4.1% yoy vs 9M23: -5.1% yoy).
• HMSP’s 4Q23 sales volume was down 4.1% yoy, leading to FY23 volume of 83.4bn sticks (down 4% yoy) and reaching 99% of our FY23F volume estimate of 84.6bn sticks (down 2.5% yoy) i.e inline.
• In 4Q23, HMSP’s market share down to 28% (3Q23: 28.9%). However, higher market share in the previous quarters supported the company to maintain FY23 market share at 28%.

 

Comment:  High excise tax put pressure on Indonesia’ cigarette sales volume and Tier-1 producer including HMSP. (Natalia Sutanto – BRIDS)

 

 

NCKL to Carry Out a Private Placement and Rights Issue

NCKL plans to carry out two corporate actions, private placement and rights issue. NCKL will issue 6.3bn new shares in a private placement. This amount is equivalent to 10% of the paid-up and issued capital. The final plan for this private placement is to purchase shares in a company engaged in nickel refining. Meanwhile, NCKL will issue 18.93bn shares in the rights issue. This rights issue will also be carried out to support the implementation of share purchase transactions in nickel smelter companies. (Kontan)

 

PGAS Conducts International LNG Trading Of 7 Cargoes

PGAS conducts international LNG trading, buying, and selling business to China, with a total LNG shipment of 7 cargoes/65 BBTUD. This collaboration benefits by establishing milestones in the global LNG industry and increasing networking. Efforts are gradually being made to improve infrastructure reliability and communication with LNG suppliers and customers worldwide. (Investor Daily)

 

UNVR IJ FY23 result: Below our and consensus

• In 4Q23, revenue was down 21% qoq and 16% yoy following the negative impact of boycott especially in Nov and Dec-23, leading to FY23 top line of Rp38.6tn, down 6.3% yoy. 
• FY23 volume (UVG) down -4.1% yoy (9M23: -1.4%) and ASP (UPG) also decline by 1.1% yoy (9M23: -0.8% and FY22: 11.5%). Pressure on revenue with lower 4Q23 gross margin and higher opex led to lower FY23 net profit.
• UNVR reported 4Q23 net profit of Rp612bn, down 19% yoy and -57% qoq, leading to FY23 bottom line of Rp4.8tn, down 11% yoy. The FY23 net profit was accounted for 89% of our FY23 forecast and 85% of consensus’ estimate, i.e below
• UNVR stated that in Jan-24, sales running rate already improved to 92% from the lowest at 74% (after Fatwa MUI). We will revisit our forecast following the release of FY23 result. (Natalia Sutanto – BRIDS)