FROM EQUITY RESEARCH

 
     

Oil & Gas: Oil on fire (OVERWEIGHT)

The possibility of petroleum supply disruptions and slower-than-expected replenishment of SPR inventory may act to sustain oil prices at high levels (above USD70/bbl), in our view. Against such a backdrop, we continue to like MEDC (Buy, TP IDR1,900) as our top pick in the sector.

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MARKET NEWS

 
       

MACROECONOMY

Indonesian Ministry of Agriculture will limit Import of Garlic to 650k tonnes by 2024

The Ministry of Agriculture planned to limit imports of garlic to 650k tonnes by 2024 to safeguard local garlic producers. It will give domestic producers who go above and beyond the required planting programme more import quota. (CNBC)

 

US Retail Sales Rose 3.8% YoY in September 2023

US Retail Sales rose 3.8% y-y/0.7% m-m in September 2023, way above the consensus at 0.3% m-m. Excluding Gas/Auto, retail sales still rose 0.6% m-m, above expectation at 0.1%. The data continue to show robust consumption by US consumer, higher prices in September may also play a role as the data is not adjusted for inflation. (Trading Economics)

 

CORPORATE

ADHI Received a New Contract Worth IDR1.4tn to Build Fertilizer Plant

ADHI earned a new contract worth IDR1.4tn for the construction project of Pupuk Sriwidjaja’s (Pusri) fertilizer plant in Palembang, South Sumatra. The project will be carried out by ADHI through a consortium with Wuhan Engineering Company, with a portion of 15.1% for ADHI and 84.9% for Wuhan. The total contract value of the project amounted to IDR9.5tn. (Bisnis)

 

FREN – Announcement for rights issue RI, max. amount raise up to Rp11.7 trillion. Grooming for merger?

From disclosure:

  • Smartfren will put forward in its next EGMS slated for 24 November 2023 the approval of right issue with potential to raise max. Rp11.7 trillion.
  • One objective for RI is to optimize the level of debt - gearing ratio, and net debt/EBITDA, as per disclosure. Current net gearing ~1.6x and ND/ann. EBITDA ~5.0x

 

Comment:

  • As we metioned in our recent note, the fastest way for FREN to deleverage is for principal shareholders to add more share capital. Additionally we recalled that Hutch3 (prior to its merger with Indosat) deleveraged its balance sheet with a share capital increase of Rp47tn and converted all its debt to equity, becoming debt-free and a more attractive merger target.

 

  • As we noted previously, we believe the conditions have matured for another telco merger to take place. The market position of FREN has not materially improved vs. 2yrs ago, and company continues to be heavily leveraged, whilst significant investments need to be made going forward.

 

  • There is a significant difference in the valuations between no.3 and no.4 players, but this can be bridged if we consider the backing of Sinarmas group ICT ecosystem.

EXCL post IOH merger, we reckon has significant less displacement factor in the market. Additionally the FREN spectrum will be great fit for EXCL. (Niko – BRIDS)

 

Recent related notes:

https://link.brights.id/brids/storage/28073/20230926-Telco.pdf

https://link.brights.id/brids/storage/27740/20230906-Telco.pdf

 

INCO Recorded Nickel Production Growth of 18% (YoY) as of September 2023

INCO recorded a nickel production growth of 18% (YoY) throughout January-September 2023. Furthermore, INCO aims to reach its production target of 70,000 tons this year. In 3Q23, INCO produced 17,953 tons of nickel matte. As of September 2023, INCO has produced a total of 51,644 tons (+18% YoY) of nickel matte. (Bisnis)

 

INTP Acquires All of Semen Grobogan Shares

INTP and its subsidiary, PT Dian Abadi Perkasa, signed an agreement to acquire all of Semen Grobogan Shares. Semen Grobogan has a production capacity of 1.8 million tons of clinker and 2.5 million tons of cement per year with raw material inventory for the next 50 years. The takeover value of all shares of Semen Grobogan is less than 20% of INTP’s equity. (Bisnis)

 

INTP – Cement Market Update September 2023

  • Domestic cement market grew +4.4% YoY in September. Non-Java bag market grew (+6.3%) while in Java it contracted (-4.2%). Bulk market in both Java (+4.8%) & outside Java (+26.4%) grew.
  • INTP’s volume grew +2.3% YoY supported from outside Java growth while overall Java market was pressured.
  • As the bag market has been crowded more with recent addition of economical brand from other players.
  • On the other side, INTP’s bulk market in Java maintains its growth especially in overall Western Java with increasing market share from 48.8% (9M2022) to 53.3% (9M2023). 
  • October is usually the highest cement volume for the year, however, last year the demand dropped in October & November mainly due to price increase of subsidized fuel at the end of September 2022, in which soon after, impacted to higher transportation costs.
  • With dry weather & stable subsidized fuel price since, this October could be the highest cement demand for 2023. (Company)equity.jpg

    PANI Earned Marketing Sales of IDR1.7tn Throughout 3 Quarters

    PANI earned marketing sales of IDR1.7tn throughout 3 quarters, 82% of the IDR2.1tn target set by the company for the year 2023. PANI’s marketing sales growth is relatively stable on a QoQ basis. In 3Q23, PANI recorded marketing sales of IDR611bn. The marketing sales were contributed mainly by commercial land plots, commercial products, including shophouses, SOHO, warehouses, followed by residential sales. (Bisnis)