FROM EQUITY RESEARCH DESK

IDEA OF THE DAY

Macro Strategy: The Amalgam of Catalysts

• While not immediately creating an ideal situation, the recent positive developments help counter the prolonged negative sentiment.
• Sustained market momentum requires key macroeconomic improvements; but twin deficits and tight liquidity add risk catalysts.
• Bank Indonesia intervention will provide a buffer for liquidity, with its ownership in SBN now the highest, surpassing banking’s.

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RESEARCH COMMENTARY

Healthcare - Sight Investments Announced a Tender Offer for a 45% Stake in Siloam Hospitals @Rp2,850/share (Total Value Rp16.68tr)

• According to the company's recent disclosure, Sight Investments Pte Ltd just announced a tender offer for the purchase of a 45% stake in Siloam Hospitals (SILO IJ). This will potentially bring Sight Investments’ ownership in Siloam to 55.4%, as they previously completed a transaction to purchase a 10.4% stake from PT Megapratama Karya Persada (PT MKP), an LPKR-related entity.
• Sight Investments is a Singapore-based investment holding company, which is controlled by CVC Capital Partners Asia VI Limited.
• From the disclosure, the current shareholding structure of Siloam is: PT MKP 39.17%, Sight Investments 10.40%, Prime Health Company (CVC) 26.18%, the Public 24.06% (including Marubeni’s shares of 4.99%). The VTO price offered implies FY24F/FY25F EV/EBITDA of 13.5/10.0x vs. the regional average of 17.6/16.3x.

 

Comment: We think the deal would be generally positive for the development of Siloam's operations going forward, as CVC could bring their broad experience investing in healthcare companies across the globe, being even more impactful on Siloam. Some hospitals in CVC’s portfolio are:

 

• Elsan Hospital France - Hospitals network in France (135+ hospitals)
• Mehilainen Finland - 56% - Hospital services in Finland (57 medical centers and 11 hospitals)
• Phuong Chau Hospital - 60% - Maternity hospitals in Vietnam (4 hospitals)
• Hellenic Healthcare Group - 97% - Hospitals network in Greece (9 hospitals)
• Sogo Medical Japan - 100% - Consultation for hospital management, construction, and med practices
• Medivet Pet Hospital - UK, Germany, Spain Pet Hospitals Network (Ismail Fakhri Suweleh - BRIDS)

 

Poultry - Slight adjustment in reference prices and additional DOC reference prices

• After relaxing livebird (LB) prices to Rp23,000-25,000/kg (from Rp21,000-23,000 in 2022) in May24, the NFA issued regulation No 06/2024 and set the new reference price at Rp25,000/kg.
• Hence, the previous relaxation of reference prices will no longer be valid, as the new NFA regulation (No 06/2024) will amend the NFA regulation (No 05/2022). 
• In the new regulation, the NFA also set the reference price for DOC broilers at Rp7,000-11,000/chick, up from Rp5,500-6,500/chick in the previous NFA regulation (not mentioned in the relaxation letter). Local corn reference prices remained unchanged from the previous relaxation letter at Rp5,800/kg.
• Based on recent data, the new reference prices will provide upside potential to the commercial farming business, as the reference price of Rp25,000/kg is above the current livebird price of Rp20,000/kg. On the other hand, the feedmill business will potentially be negatively affected as the current corn price stands at Rp4,400/kg, below the reference price of Rp5,800/kg.
• However, we continue to believe that the reference prices have a minimal impact on the price volatility in the market. Historical data shows that the market prices often deviate from their respective reference prices. (Victor Stefano & Wilastita Sofi - BRIDS)

Poultry – 4th week of June 2024 Price Update

• Livebird prices rose slightly to Rp20.5k/kg (+1.5% wow) in the last week of June.  However, the monthly avg. price declined to Rp19k/kg from Rp21k/kg in May24 (-9% mom, -15% yoy).
• Theres no new data on DOC, and the latest price remained high at Rp8.7k/chick.
• The local corn price continued its steady decline, falling to Rp4.4k/kg in the last week of June (from Rp4.7k/kg in early June). The Jun24 avg. local corn price declined slightly to Rp4.5k/kg from Rp4.7/kg in May24 (-4.4% mom).
• Soybean meal (SBM) prices remained relatively stable, hovering at around US$360-370/t during the entire month of Jun24. The average price in Jun24 stood at US$363/t (-2% mom, -11% yoy).
• Despite the potentially lower LB prices in July, partly due to the Suro month, we remain positive on margins, supported by both lower local corn and SBM costs. (Victor Stefano & Wilastita Sofi - BRIDS)

MARKET NEWS

MACROECONOMY

China’s Caixin Manufacturing PMI Rose to 51.8 in Jun24

China's Caixin Manufacturing PMI rose to 51.8 in Jun24, the highest level since May21, up from 51.7 in May24. Output grew at the fastest pace in two years. While foreign sales continued to expand, the decline in employment eased. Input prices rose the most in two years, and selling prices increased for the first time in six months. This contrasts with the NBS PMI, which contracted for the second consecutive month. (Trading Economics)

 

Indonesia Inflation Rose 2.51% yoy in Jun24

Inflation rose 2.51% yoy or -0.08% mom in Jun24, lower than our estimate/cons expectations of 2.77%/2.74%. The yearly figure is a 9-month low. June's monthly deflation was preceded by deflation in May. The deflation stemmed from a fall in major volatile food prices amid Idul Adha. This led to lower volatile food inflation, which fell to 5.96% yoy, nearing the government's target of 5%. Core inflation dipped to 1.9% yoy (compared to May's 1.93%), with gold jewelry remaining the top contributor. Administered prices rose by 1.68% (compared to May's increase of 1.52%), driven by increases in the prices of machine-made cigarettes (SKM) and higher air transport tariffs. Both SKM and gold jewelry have been among the top contributors to inflation over the past six months. (BPS)

 

Indonesia’s Manufacturing PMI Fell to 50.7 in Jun24

Indonesia’s Manufacturing PMI still expanded in Jun24, although at the softest pace in a year. S&P reported that Indonesia’s June PMI fell to 50.7 from 52.1 in May. Output and new orders growth slowed while the production increase rate dropped to a 14-month low. Export sales remained weak with export business down for the fourth consecutive month. (S&P)

CORPORATE

BBCA Obtained OJK’s Approval for The Merger of Two of its Subsidiaries

BBCA obtained OJK’s approval for the merger of two of its subsidiaries, BCA Finance (BCAF) and BCA Multi Finance (BCAMF). As such, BCAF and BCAMF will hold a General Meeting of Shareholders to obtain approval from their respective shareholders. Both companies are engaged in the same field, namely the Multi finance industry, but BCAF currently focuses on 4W financing, while BCAMF prioritizes 2W financing. After the merger, all BCAMF’s rights and obligations will be fully transferred to BCAF and BCAF will become the surviving entity (Investor Daily)

 

BYD and Harmony Auto Opened a Dealership in Central Jakarta

BYD Motor Indonesia, together with Harmony Auto, officially opened the BYD Harmony Sudirman dealer in the Sudirman area, Central Jakarta, on June 30, 2024. Previously, the two business entities had opened a dealership in Cilandak, South Jakarta. According to BYD, the Sudirman dealership is in a very strategic location because it is accessible by various modes of public transport, and it is located close to office centers, government buildings, and shopping centers. (Kontan)

 

DOID Completed the Acquisition of Atlantic Carbon Group

DOID, through American Anthracite SPV I, LLC, a controlled company of PT Bukit Makmur Internasional (BUMA International), has completed the strategic acquisition of Atlantic Carbon Group, Inc. (ACG) with a transaction value of US$122.4mn. According to DOID, this acquisition ensures ownership of four Ultra-High-Grade (UHG) anthracite mines in Pennsylvania, United States, and positions the company as a key player in the global UHG anthracite market, which is crucial for the production of low-carbon steel. (Kontan)

 

INCO's Revenue and Net Profits Plummeted in 1Q24

INCO's top line and bottom line fell in 1Q24. The company recorded US$229.9mn in revenue (-36.7% yoy). The decline in revenue reflects lower sales to related parties, Vale Canada Limited (VCL) and Sumitomo Metal Mining Co. Ltd (SMM). INCO's sales to VCL and SMM fell by 36.7% yoy and 36.5% yoy, respectively. INCO also recorded a loss on fair value recognition of derivative assets of US$12.9mn. In 1Q24, INCO booked net profits of US$6.2mn (-96.3% yoy). (Kontan)

 

PGAS Prepares a Natural Gas Network in IKN

PGAS is building a natural gas network in IKN. The gas network (Jargas) will be utilized in various vertical residences and landed houses, which are official residences for ministers and employees at IKN. The 1st stage is expected to be operational in August 2024. In addition to the development of Jargas in IKN, Pertamina is also preparing the Pertamina Sustainable Energy Center, which includes the Pertamina Sustainability Academy, Pertamina Training Institute, and Pertamina Research and Innovation Center for Sustainable and Low Carbon Technologies. (Kontan)

 

TOWR’s Business Entity Completed the Acquisition of a 90% stake in IBST

TOWR, through its business entity PT iForte Solusi Infotek (iForte), completed the acquisition of 90.1% of the shares in IBST via a tender offer process. The acquisition price was set at Rp2,813 per IBST common share, for a total consideration of approximately Rp3.42tr for a 90.1% stake. Following the completion of this transaction, iForte will conduct a mandatory tender offer. (Company)

 

UNTR Targets Nickel Ore Sales of 1.6Mt

UNTR targets nickel ore sales of 1.6Mt in 2024. According to UNTR, Stargate is still producing nickel ore because the smelter is still under construction. UNTR expects demand for nickel to increase to around 3,390 k tons in 2027. The battery sector will drive high growth in nickel demand in the future, although currently the volume is still relatively small. (Bisnis)

 

VinFast Officially Markets Electric Cars in Indonesia

VinFast started marketing the VF 5 model at a price of Rp310mn in the Indonesian market. However, through the battery rental scheme, the product price is only Rp242mn. Battery rental fees with a mileage of less than 1,500 km are set at Rp990,000/month, a distance of less than 3,000 km at Rp1.41mn/month, and a distance of more than 3,000 km at Rp2.36mn/month. VinFast also provides a warranty of up to 7 years or 160,000 km. An 8-year battery warranty is also offered with unrestricted mileage. (Bisnis)