Banking: Profits outlook remains intact (OVERWEIGHT)

We maintain our OVERWEIGHT call on the sector with inline 5M23 monthly results at the bank only level (38.8% of our FY23F). Loans growth started to pick up with mom growth of 2.0% for our bank universe with flattish growth in deposits. We expect 2Q23 performance to be inline as a few SOE banks will allocate higher provisions on WIKA translating into a flat or slight uptick in the CoC on a qoq basis. BMRI (BUY, TP IDR6,000) remains our top pick in the sector given its decent NIM outlook with an expected 19.6% ROAE this year.

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MARKET NEWS

 
       
       

MACROECONOMY

US FOMC Minutes of Meeting Releases

US Fed’s minutes show disagreement among member. Despite having favourable data on their side (continuing disinflation, loosening job market, credit tightening), 12 members see the pace of change is still not fast enough and support for 2 more hikes in 2023. Other 6 members see 1 more hike while 2 members believe the current level should be enough. Market expectation on rate hike path still unchanged after the minutes release as no surprises were made between last FOMC press conference and this minutes. Market expect 1 more rate hike in July meeting and for rate to stay there until the end of the year. (BRIDS Economic Research)

 

China Caixin Composite PMI Fell to 52.5 in Jun’23 (vs. 55.6 in May’23)

China Caixin General Composite PMI fell to 52.5 in Jun'23 from 55.6 in May, the lowest level since January, while the General Services PMI fell to 53.9 in June 2023 from 57.1 in May. The figure indicated that services activity expanded for the sixth consecutive month, although at the slowest rate since January, owing to decreased demand. (Trading Economics, BRIDS Economic Research)

 

S&P Global Re-Affirming Indonesia Credit Rating at BBB

S&P Global re-affirmed Indonesia credit rating at BBB on the back of lower inflation, quicker fiscal consolidation, faster growth in GDP/Capita, manageable debt, and solid consumption growth.

  • S&P acknowledge that Indonesia GDP/Capita level still below investment grade peers, but the growth of the per capita income is still higher than median. They also expect the fiscal deficit in 2023 only at 2.3%, while the long-term deficit at 2.4%.
  • The main challenge, according to S&P, is to increase the narrow base of Gov't Revenue. It is pivotal in managing interest payment per revenue below 15% and Debt/GDP below 40%
  • Indonesia returned to the position of Upper Middle-Income Country (UMIC) due to an increase in GNP per capita to USD4.580 in 2022, or a 9.8% increase from the previous year (USD4.170), despite many pressures and global uncertainty. (BRIDS Economic Research)

 

CORPORATE

July 2020 Gapki: Exports and Domestic consumption improved

CPO production reached 4.2mn tons (-2.1% yoy -6.2% mom) while exports of CPO inched down by -3.2%yoy and -2.8%mom in Jul20 to 656k tons, with refined product exports at 2.5mn tons (+10.5% yoy and +18.2% MoM). Domestic consumption stood at 1.4mn tons (-0.6% yoy and +7.3% MoM) driven by higher FAME absorption. The final stocks for Jul 20 reached 3.6mn tons (+2.9% YoY, -8.3%MoM). China and Middle East exports surged +43% MoM and 65% MoM, respectively, to 629k tons for China in Jul20 while Middle East exports reached 273k tons in Jul20. (GAPKI)

 

ASII Business Portfolio Expansion

Astra international has revealed that the company has invested IDR509 bn. towards the healthcare business through telemedicine, Halodoc in March and April 2021. Recently, ASII also expands its business portfolio through purchase of Mandarin Oriental Hotel worth USD 85 mn. (~IDR 1.3 tn.). This transaction carried out by Astra Land acquiring all Mandarin Oriental Holdings BMV shares. (Kontan)

 

BMRI Collaborates with Kredivo and KrediFazz to Distribute Credit of IDR 1 tn

BMRI collaborates with PT Kredivo Finance Indonesia (Kredivo) and fintech P2P lending provider KrediFazz to distribute credit with a channeling scheme worth IDR 1 tn. According to BMRI, the collaboration with Kredivo and KrediFazz is in line with BMRI's business strategy to present solutions to financial needs, especially for urban communities. (Investor Daily)

 

HMSP Revises Loan Facility worth IDR 14 tn to Philip Morris

HMSP has renewed its loan facility agreement with Philip Morris Finance worth IDR 14.08 tn. Philip Morris Finance engaged in funding and cash management activities for Philip Morris International (PMI), which holds 92.5% of HMSP’s shares. The amendment was made to accommodate the discontinuation of the LIBOR rate as of June 30, 2023. (Bisnis)

 

MDKA has Prepared Funds to Pay Off Bonds of IDR 726.35 bn

MDKA disclosed that it has prepared funds for the repayment of principal and the 12th interest payment of the Merdeka Copper Gold Sustainable Bonds Phase I Year 2020 series B. According to MDKA, these bonds will mature on July 30, 2023, with a principal amount of series B bonds of IDR726.35 bn with a fixed interest rate of 10.5% per annum. (Emitennews)