FROM EQUITY RESEARCH DESK

IDEA OF THE DAY

Merdeka Copper Gold: Lowering our FY24-25F estimates on higher interest expenses; possible upside for TB Copper (MDKA.IJ Rp 2,460; BUY; TP Rp 3,100)

• We slash our FY24-25F net profit estimates by -74%/-62% to reflect higher-than-expected interest expenses and the 1Q24 net loss.
• The mgmt expects Wetar to only breakeven in FY24 despite posting a positive cash margin in 1Q24. This implies higher costs in 2Q24 onwards.
• We maintain our Buy rating with an unchanged TP of Rp3,100 on upside potential from growth projects, but prefer its subsidiary MBMA.

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Macro Strategy: Navigating Market Inertia

• Global rate cuts are gradually unfolding with several prominent central banks cutting rates. Bank of England is next in line.
• A potential change in tone at this week’s FOMC with the latest data pointing toward further moderation in growth factors.
• A weaker IDR and sluggish growth momentum continue to weigh on overall market sentiment, and this could protract market inertia.

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RESEARCH COMMENTARY

4W May24 Data

• 4W wholesales in May24 reached 71.2k (+47% mom). Thus, 5M24 wholesales reached 334.9k (-21% yoy, 39%/30% of our/Gaikindo estimate). While our estimate is inline with the May seasonality, Gaikindo’s number is a miss). Despite many long weekends in May24, the number of working days was more in May24 than in Apr24, which helped the 5M24 number to be better on a mom basis.
• 4W retail sales reached 361.6k in 5M24 (-14% yoy). The rolling 3M car retail sales data indicates that there is less likely overstock on the dealer side, as retail sales (May24 3M’s rolling figure at 98.7k) have continued to be stronger than wholesales (93.7k) since early this year. We also observe that discounts in May24 were less aggressive compared to Apr24 across several brands.
• Toyota and Daihatsu sales in May24 improved by 56% mom, higher than the industry growth. This implies ASII gained market share in May24 (on a mom basis). To note, ASII’s average market share in Jan-Apr 24 stood at 56%.

Comments: Neutral on this data release. The data trend is widely expected (strong mom, yet still weak on a yoy basis). We expect a better sales trend in 2H24F due to BYD delivery (expected at the end of Jun24) and more new model releases (possibly Toyota and several new Chinese brands in GIIAS Jul24). We reiterate our Neutral call on ASII with a TP of Rp 5,100. (Richard Jerry, CFA & Christian Sitorus – BRIDS)

INCO Rights Issuance

• 603mn new shares, equal to 6.07% of current outstanding shares at Rp3,050/share, with max. proceeds of Rp1.84tn.
• 8,233:500 Ratio or 16.5:1 ratio of old to new shares.
• Vale Canada, SMM, and Vale Japan will transfer their rights to MIND ID to execute. Following the RI, the share ownership composition will be: MIND ID 34.4%, Vale Canada 34.3%, SMM 11.6%, and the Public 19.7%.
• Proceeds will be used for: Rp1.1tn for mining infrastructure in Pomalaa, Rp335bn for the continuation of mining area development in Pomalaa, and Rp15bn for the purchase of mining equipment. The remainder will be allocated for raw materials and spare parts purchases.
• INCO targets 70.8kt of production in FY24 (vs. our estimate of 70kt). (Timothy Wijaya – BRIDS)

KTA ACES analyst meeting – 10 June 2024:

• At the recent AGM, ACES changed the company’s name to PT Aspirasi Hidup Indonesia.
• May24 sales were good (waiting for SSSG data next week).
• Online sales (mostly from RupaRupa, Miss Aces) provided a 10-11% contribution, targeted to reach 20% ahead.
• Ytd new stores: 5 Ace Hardware and 2 Ataru stores. Will open more stores in 2H24.
• ACES injects Rp30bn to PT Omni Digitama Internusa (ODI - which manages RupaRupa) to maintain its 30% stake and acquire Kawan Lama Inovasi (KLV) worth Rp43bn to comply with the government regulation to separate the importing and retailer companies.
• Strategy: Will focus on strengthening communications (through localized promotions and media channels for new cities), improve the customer’s journey (adding inspirational spots for cooking, a chatbot for better services), maximize customer loyalty (hyper personalization using technology, cohesive membership) and omnichannel investment. This will help the company to predict on-demand products. (Natalia Sutanto & Sabela Nur Amalina – BRIDS)

Poultry - 1st week of June 2024 Price Update

• After bottoming at Rp16k/kg, livebird prices rebounded to Rp17.5k/kg. The weekly avg. declined to Rp17k from the average of Rp18.5k in the previous week, a 5% decrease.
• There is no new data on DOC, which has remained at Rp9k/chick since mid-May.
• Local corn prices have remained relatively stable at Rp4.7k/kg since mid-May.
• After reaching a peak of US387/t last month, soybean meal (SBM) prices have seen a significant decline, now hovering around US$355-360/t during the first week of June. The 1st week Jun24 average stands at US$360/t, marking a -2% mom and -11% yoy decrease. (Victor Stefano & Wilastita Sofi – BRIDS)

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