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FROM EQUITY RESEARCH DESK |
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IDEA OF THE DAY |
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Equity Strategy: Riding the Wave of Earnings Growth, Strong IDR and Liquidity Catalysts
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MARKET NEWS |
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RESEARCH COMMENTARY
KROM Aug24 Results
8M24 Insight:
- Net Profit: KROM reported a 10% yoy increase in net profit to Rp93.2bn in 8M24, with NIM reaching 21.4%.
- Given the bank's rebranding as a digital bank at the end of Feb24, we believe it is most appropriate to focus on monthly comparisons when evaluating its overall performance.
Aug24 Insight:
- Net Profit: KROM’s net profit reached Rp12.6bn in Aug24, a 19% mom decrease, despite a 17% mom rise in PPOP, primarily due to a 32% increase in provisions.
- NIM: NIM improved to 22.3% (+46bps mom) in Aug24, supported by a 77bps mom increase in EA yield to 25.3% and a flattish CoF of 7.9%.
- CIR: CIR improved by 604bps mom to 17.7% in Aug24, mainly driven by an 8% mom NII growth and further supported by a 19% mom decline in opex (other expense: -40% mom).
- CoC: CoC rose to 22.9% in Aug24 from 19.3% in Jul24.
- Loans and Deposits: In Aug24, loan and customer deposits grew by 12% and 15% mom, respectively, resulting in an LDR of 166.5% (-489bps mom). The CASA ratio stood at 13.1% (+13bps mom) in Aug24.
Summary:
- Overall Performance: In our view, KROM's ability to sustain its NIM while reducing its LDR is notable. However, the elevated CoC remains a concern, especially when compared to other digital banks. (Victor Stefano & Naura Reyhan Muchlis – BRIDS)
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SMGR Aug24 Data
- SMGR recorded sales vol. of 3.4 Mt in Aug24 (-3.7% mom/-11.8% yoy), bringing 8M24 sales vol to 24.6Mt (-3.3% yoy).
- Domestic sales vol recorded at 2.9Mt in Aug24 (-1.9% mom/-5.1% yoy), bringing 8M24 domestic sales vol to reach 20Mt (-1.7% yoy). Bag segment portion to total sales reached 69.4% in Aug24 vs. average of 69.9% in Jan-Aug24.
Comments: SMGR total sales reached 60% of our estimated FY24E volume (vs. seasonality of 64%, thus below expectation). SMGR's domestic sales vol. in Aug24 was also weak at -5.1% yoy vs. the industry at +1.1% yoy and INTP ex. Grobogan at +3.5% yoy. SMGR has also been losing market share for 3 consecutive months, with Aug24's market share at 48.4% vs. its peak at 52% in Jun24 and average Jan-Aug24 at 49.6%. We reiterate our preference on INTP over SMGR. We have a Hold rating on SMGR and a TP of Rp 4,100. (Richard Jerry, CFA & Christian Sitorus – BRIDS)
Tech Sector: Shopee to Partner with YouTube - First reaction
- Room for YouTube to grow ad revenue. YouTube Shopping (launched in June 2023) and Shopee together are a very good fit in theory. YouTube can engage deeper with local merchants and offer their goods on its platform. It positions Youtube to compete more effectively against IG, FB, WA and TikTok in areas like advertising revenue and sponsorships.
- Shopee penetration opportunity into Google. Shopee may achieve a significant milestone by potentially leveraging YouTube's massive 187mn active users (as of July) in Indonesia. This collaboration could generate valuable segment analytics, as YouTube’s user base spans various age groups. Also, Shopee platform becomes instantly more attractive for merchants to sell their goods. This heightens the competition for TikTok's social commerce GMV and GOTO's fee income.
- Key differences for Tiktok and Shopee Social Commerce: owning vs. partnership and first mover advantage. TikTok seems to have greater flexibility, given its 75% stake and full control of Tokopedia, in contrast to Shopee's partnership with YouTube. Moreover, we believe that TikTok Shop will expedite operations and form stronger alliances incl. the ones with GOTO to cement its first mover advantages in the Indonesian market.
- Potential challenges for Shopee include integration issues with YouTube, such as ensuring a seamless consumer experience, logistics, and cannibalization of Shopee’s own video streaming platform.
In hindsight, GOTO’s decision to divest Tokopedia to TikTok was a forward thinking move. It allowed GOTO to focus on expanding its fintech and consumer loans and maintaining synergies in the e-commerce space. (Niko Margaronis – BRIDS)
MACROECONOMY
Indonesia: The House of Representative has Officially Ratified the 2025 Budget Draft into a Law
The House of Representative has officially ratified the 2025 budget draft into a law. Here's a refresher for the overall posture and the macro assumptions:
- Revenue: Rp3,005tr
- Spending: Rp3,621tr
- Primary Balance Deficit: Rp63tr
- Fiscal Deficit: Rp616tr (2.53% of GDP)
- Financing: Rp616tr
- GDP Growth: 5.2%
- Inflation: 2.5%
- USDIDR: 16,000
- 10y INDOGB yield: 7%
- ICP: US$82/bbl
The Bank of England (BoE) Voted 8-1 to Keep Rates Steady at 5%
The Bank of England (BoE) voted 8-1 to keep rates steady at 5%, in line with the expectations of economists and investors and pushed GBP to its strongest level against the USD since Mar-22. The Bank of England warned investors it won’t rush to ease monetary policy. The panel also maintained the £100bn (US$132bn) a year pace of its balance sheet run-off, in a unanimous decision on quantitative tightening. (Bloomberg)
SECTOR
Global Cocoa Traders Request EU to Postpone New Environmental Regulations
Cocoa traders are asking the European Union to delay new deforestation regulations (The Regulation on Deforestation Free Products), citing unclear guidelines that hinder compliance. They seek a six-month extension for a smoother transition. Countries like Brazil, Indonesia, and Malaysia have also raised concerns. The regulations, set to begin on December 30, 2024 (June 30, 2025, for small businesses), will cover products like palm oil, cocoa, and timber, impacting both large and small quantities. (Bisnis and Green Business Europa)
Telcos Drive Innovation: Telkomsel and EXCL Partner with Automotive Leaders
In a groundbreaking collaboration, Telkomsel and Toyota Astra Motor are bringing next-level IoT Connected Car technology and In Car WiFi to the Toyota New Fortuner. This partnership merges Telkomsel’s robust connectivity with Toyota’s advanced automotive innovation, elevating the driving experience to be more intelligent, secure, and connected. (Investor Daily)
In other news, EXCL, through XL Axiata Business Solutions (XLABS), has partnered with PT Ide Inovatif Bangsa (Quest Motors), a local electric motorcycle company. Through this collaboration, Quest Motors will implement digital solutions from XLABS into their vehicle platform, enhancing the technological capabilities of their products. (Emiten News)
CORPORATE
AALI Absorbed Rp379bn in Capex
AALI has utilized Rp379bn in capital expenditure during 1H24, with 60%-70% allocated for replanting. This marks a 21.8% decrease compared to Rp485bn in the same period of 2023. The total capex is projected to be between Rp1.2-1.4tr for the year. (Bisnis)
EXCL Partners with Quest Motors for Electric Vehicle Development
EXCL, through XL Axiata Business Solutions (XLABS), partners with PT Ide Inovatif Bangsa (Quest Motors), a local Indonesian electric motorcycle company. This collaboration will see Quest Motors integrate digital solutions from XL Axiata Business Solutions into their electric vehicle platform, enhancing the technological capabilities of their products. (Emiten News)
GOTO Appointed William Xiong as New CTO
GOTO has officially appointed William Xiong, formerly from Alibaba Group, as its new Chief Technology Officer (CTO), whom GOTO confirmed will lead the company’s technological advancements. His extensive experience includes serving as Vice President of Alibaba Cloud Intelligence, General Manager of Enterprise Service Cloud, and General Manager of International Industry Solution Development before joining GOTO. (Bisnis)
JSMR Approves Divestment of Trans Java Toll Shares worth Rp12.8tr
JSMR has approved the divestment of its shares in PT Jasamarga Transjawa Toll (JTT) valued at Rp12.82tr to three investors: PT Metro Pacific Tollways Indonesia Services, Warrington Investment Pte. Ltd, and PT Margautama Nusantara. This decision was made during an EGMS held on Thursday, September 19, 2024, where shareholders agreed to transfer 30.18% of the shares in JTT. Additionally, JSMR issued new shares in JTT worth Rp2.5tr, all of which were fully absorbed by PT Metro Pacific Tollways Indonesia Services, resulting in a dilution of JSMR's ownership by 3.82%. (Emiten News)
PGEO and PLN IP Form Consortium for Geothermal Energy Development
PGEO and PLN Indonesia Power (PLN IP) have formed a consortium to advance the development of the Ulubelu Binary Geothermal Power Plant (30 MW) and the Lahendong Binary Unit (15 MW). This collaboration was formalized with the signing of a Consortium Agreement, highlighting a significant step forward in geothermal energy initiatives. (Kontan)
