STRATEGY RESEARCH | Indonesia

November 25, 2015

Indonesia Strategy
Every Cloud Has A Silver Lining

More positive on the market, with catalysts expected from

2016 economic & earnings recoveries. Index target at 6,000,
14.9x FY17 P/E. Top picks: AALI, ACES, ASII, BBRI, BSDE,
GGRM, JSMR, LPCK, TLKM & WSKT.
Worst case already priced in. Expect further economic &
earnings improvements in 4Q15/2016.
Further monetary easing possible in 1Q16.

More positive
We have turned more positive on the market as we believe the
worst case has been priced in. Our index target is 6,000, 14.9x
2017 P/E or 1SD above its 6-year mean. We like interest-ratesensitive, infrastructure, cigarette and telecommunication sectors.
Our top picks are AALI, ACES, ASII, BBRI, BSDE, GGRM, JSMR, LPCK,
TLKM and WSKT.

Analyst
Isnaputra Iskandar
(62) 21 2557 1129
isnaputra.iskandar@maybank-ke.co.id
JCI vs MSCI
5,600

900

5,400

860

5,200

820

5,000

780

4,800

740

4,600

700

4,400

660

4,200

620

4,000
Nov-13

Mar-14

Jul-14

Nov-14

Jakarta Composite Index - (LHS)

Mar-15

Jul-15

580

MSCI Asia ex JP - (RHS)

Gradual recovery
GDP growth stabilised at 4.73% in 3Q15. We anticipate an uptick to
4.86% in 4Q15. IDR has been stable and we expect no big bang on
the currency from any Fed rate hike. On corporate earnings, we
forecast earnings recovery to continue in 4Q15 and 2016. We
forecast market EPS to grow 11% YoY in 2016, led by domestic
sectors.

Further monetary easing possible

Following a 50bp cut in the reserve requirement in the last
monthly meeting, we think BI will start cutting its benchmark rate
in 1Q16, given high real rates and lower external risks. A total cut
of 50bps is possible in 2016, in our view. ASII, banks and property
stocks should benefit.

Long-term outlook intact

We believe the economic outlook is still positive. The government
continues to promote infrastructure projects, with 2.4% of GDP set
aside in 2016 budget. It is also trying to simplify the investmentlicensing process. Regulated annual minimum-wage increases,
which are based on GDP growth and inflation, should be positive
for investment climate. AALI, BEST, KLBF, LPPF, MAPI, and RALS will
be beneficiaries.
Ticker
1 AALI IJ
2 ACES IJ
3 ASII IJ
4 BBRI IJ
5 BSDE IJ
6 GGRM IJ
7 JSMR IJ
8 LPCK IJ
9 TLKM IJ
10 WSKT IJ
Total 60 cos
Total 60 cos

Rating

Mkt cap*

Price**

TP**

BUY
2,110
BUY
944
BUY
18,722
BUY
19,919
BUY
2,366
BUY
7,238
BUY
2,508
BUY
399
BUY
21,569
BUY
1,402
(simple average)
(aggregate)

18,250
750
6,300
11,000
1,675
51,250
5,025
7,800
2,915
1,735

24,000
850
7,500
13,000
2,100
60,000
6,500
11,000
3,300
2,200

P/E (x)
P/BV (x)
Yield (%) EPS growth (%)
ROE (%)
+/- to
TP (%) 2015F 2016F 2015F 2016F 2016F 2015F 2016F 2015F 2016F
31.5
44.6
17.4
2.4
2.2
0.9
-74.2
156.1
5.5
12.9
13.3
22.9
20.2
4.5
3.8
0.7
1.3
13.2
19.8
18.8
19.0
15.8
13.5
2.4
2.2
2.9
-15.7
17.1
15.5
16.5
18.2
11.0
10.4
2.3
2.0
2.7
1.8
5.7
23.2
20.8
25.4
13.0
12.1
1.7
1.5
0.9
-35.0
7.2
12.9
12.3
17.1
17.8
15.6
2.7
2.4
2.0
3.0
14.6
15.1
15.4
29.4
25.9
19.6
3.2
2.9
1.6
-5.9
31.9
12.4
14.7
41.0
5.6
5.5
1.5
1.2
0.0
15.8
2.7
26.7
21.5
13.2
17.8
16.1
3.7
3.3
2.0
12.8
10.5
21.0
20.2
26.8
23.9
19.9
2.2
2.4
0.5
59.3
47.8
9.0
12.0
17.4
14.2
3.7
2.5
3.2
9.8
24.2
18.1
17.8
15.1
13.6
2.4
2.4
2.2
6.8
10.9
16.1
16.3

Pricing as of 20 November 2015

* In USD; ** in IDR
Source: Bloomberg & Maybank KE

SEE PAGE 17 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Strategy Research

Economic update
The economy has started to improve. Although still vulnerable to internal
and external shocks, we believe that the worst is behind us and has been
factored in by the market.

GDP growth stabilising

The economy grew 4.73% YoY in 3Q15, below the governments estimate of
4.85%. Still, it didnt deteriorate from 1Q15s +4.71% and 2Q15s +4.67%.
Rising government spending and investments were behind the slight
improvement. Government spending grew 6.56% YoY in 3Q15, beating
2Q15s 2.13% YoY. The increase was felt in domestic cement sales, which
started to grow MoM in August. Investments grew 4.62% YoY in 3Q15, also
higher than 2Q15s 3.69%. Even though 3Q15 FDI was still down 0.8% YoY, it
was up 0.4% QoQ. Another GDP component, non-profit institutions serving
households, grew 4.62% YoY, an improvement over 2Q15s 3.69%.
The same could not be said about household consumption, exports and
imports. Household consumption grew 4.96% YoY, relatively in line with
2Q15s 4.97%. The effects were felt in car and motorcycle sales, down
17.7% and 11.0% YoY in 3Q15. Exports declined another 0.69% YoY
(2Q15: -0.09% YoY), following persistently lower commodity prices. Imports
were down 6.11% YoY (2Q15: -6.98% YoY) due to the domestic economic
slowdown and weakening currency.
Figure 1: GDP stabilised in 3Q15

Figure 2: 3Q15 GDP breakdown

Imports, 19.9%

7.00%
6.00%

Household
consumption,
55.0%

Exports, 20.7%

5.00%
4.00%
3.00%
2.00%
1.00%

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q13

2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

0.00%

Government
spending,
9.8%

Investments,
33.3%

Source: Bloomberg

Source: BPS

Figure 3: Domestic cement sales started to grow in August

Figure 4: Stable FDI in 3Q15

Mn tonnes

Non-profit
institutions
serving
household,
1.1%

(USDm)

7.00

8,000

6.00

7,000
6,000

4.00

5,000

3.00

4,000

2.00

3,000

1.00

2,000

0.00

1,000

Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15

5.00

Monthly sales
Source: Bloomberg & Maybank KE

November 25, 2015

12-month MA

1Q12

3Q12

1Q13

Primary Sector

3Q13

1Q14

Secondary Sector

3Q14

1Q15

3Q15

Tertiary Sector

Source: Investment Coordinating Board

Strategy Research
Figure 5: Domestic 4W sales

Figure 6: and 2W sales

Units

Units

120,000

800,000
700,000

100,000

600,000

80,000

500,000

60,000

400,000
300,000

40,000

200,000

20,000

100,000

Monthly sales

12-month MA

Monthly sales

Source: Bloomberg & Maybank KE

Jan15

Sep15

May14

Jan13

Sep13

May12

Jan11

Sep11

May10

Jan09

Sep09

May08

Jan07

Sep07

May06

Jan05

Sep05

May04

Jan03

Sep03

Jan15

Sep15

May14

Jan13

Sep13

May12

Jan11

Sep11

May10

Jan09

Sep09

May08

Jan07

Sep07

May06

Jan05

Sep05

May04

Jan03

Sep03

12-month MA

Source: Bloomberg & Maybank KE

Figure 7: More than 50% of exports are commodities

Figure 8: Oil prices remain weak

Oil & gas

10%

USD/bbl
140

Hard
commodities
26%

120
100
80
60
40
20

Manufacture
products
46%

Nov-15

Sep-15

Oct-15

Aug-15

Figure 10: CPO prices are propped up by El Nino

Sep-15

Figure 9: Coal prices have been heading south

Jul-15

Source: Bloomberg

Jul-15

Source: BI & Maybank KE

Aug-15

Jun-15

May-15

Apr-15

Mar-15

Feb-15

Jan-15

Dec-14

Nov-14

Oct-14

Sep-14

Aug-14

Jul-14

Jun-14

Apr-14

May-14

Mar-14

Jan-14

Feb-14

0
Soft
commodities
18%

MYR/tonne
3,100

USD/tonne
90.0
85.0
80.0
75.0
70.0
65.0
60.0
55.0
50.0
45.0
40.0

2,900
2,700
2,500
2,300
2,100
1,900
1,700

Source: Global coal

Nov-15

Oct-15

Jun-15

Apr-15

May-15

Feb-15
Mar-15

Jan-15

Dec-14

Nov-14

Oct-14

Sep-14

Jul-14

Aug-14

Jun-14

Apr-14

May-14

Jan-14

Feb-14
Mar-14

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

Mar-14

Jan-14

1,500

Source: Bloomberg

Growth to resume in 4Q15

Our economist, Juniman (juniman@bankbii.com), expects the economy to
improve by 4.86% YoY in 4Q15. The recovery would be led by higher
government capex and economic stimulus. It should be further supported
by better commodity prices and exports, along with improvements in the
US and European economies.

November 25, 2015

Strategy Research
Figure 11: Budget absorption at 60% in 9M15

Figure 12: GDP to start recovering in 4Q15

70%

5.10%
60%

60%

5.04%

5.00%

50%

4.90%
39%

40%

4.86%

4.80%

30%

4.73%

4.72%
4.67%

4.70%
19%

20%

4.60%

10%

4.50%

0%

4.40%
1Q15

1H15

9M15

1Q15

Source: Ministry of Finance & Maybank KE

2Q15

3Q15

4Q15F

2016F

Source: BPS & Maybank KE

More stable IDR

The currency has been stable since the beginning of October. It does not
seem at risk of being tossed and turned by any rate hike by the Fed in
December. Its stability is helped, among other things, by an improving CAD
to 1.9% of GDP in 3Q15, down from 2Q15s -2.0% and 3Q14s -3.0%. Bank
Indonesia (BI) estimates that CAD will end the year at 2% of GDP.
Figure 13: Volatility is back to pre-October levels

Figure 14: A more stable currency

2.0%

IDR/USD

1.8%

15,000

1.6%

14,500

1.4%

14,000

1.2%

13,500

1.0%

13,000

0.8%

12,500

0.6%

Source: Bloomberg & Maybank KE

Source: Bloomberg

Figure 15: A trade surplus helps..

Figure 16:..as is a better CAD

Nov-15

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

Mar-15

Jan-15

Nov-15

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

11,000

Mar-15

0.0%

Feb-15

11,500

Jan-15

0.2%

Feb-15

12,000

0.4%

USD m
6,000

USD m
4,000

4,000

3,000

2,000

2,000

(4,000)

(1,000)

Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
Jan-13
May-13
Sep-13
Jan-14
May-14
Sep-14
Jan-15
May-15
Sep-15

(2,000)

(2,000)
(3,000)
Source: Bloomberg

November 25, 2015

Mar-08
Jul-08
Nov-08
Mar-09
Jul-09
Nov-09
Mar-10
Jul-10
Nov-10
Mar-11
Jul-11
Nov-11
Mar-12
Jul-12
Nov-12
Mar-13
Jul-13
Nov-13
Mar-14
Jul-14
Nov-14
Mar-15
Jul-15

1,000

(6,000)
(8,000)
(10,000)
(12,000)
Source: Bloomberg

Strategy Research
Figure 17: Foreign ownership remains high in bond markets

110

Source: Bloomberg & Maybank KE

Sep15

Jan15

May15

Sep14

Jan14

May14

Sep13

Jan13

May13

-10
Sep12

Sep-15

Jan-15

May-15

Sep-14

Jan-14

May-14

Sep-13

Jan-13

May-13

Sep-12

Jan-12

May-12

Sep-11

Jan-11

May-11

Sep-10

Jan-10

May-10

Cumulative Foreign net buy (sell) since Jan10

10

Jan12

100

30

May12

200

50

Sep11

300

70

Jan11

400

May11

500

(IDR tn)

90

Sep10

45%
40%
35%
30%
25%
20%
15%
10%
5%
0%

Jan10

600

May10

SBI (BI certificate) owned by non resident (LHS)

SBN (Govt bond) owned by non resident (LHS)
% Foreign ownership/Total outstanding (RHS)

(IDR tn)

Figure 18: Foreign flows into equity markets

Source: Bloomberg

Low inflation + stable currency = lower rate?

Low inflation on the cards

Following Septembers deflation, Octobers CPI contracted another 0.08%

MoM, but up 6.25% YoY. So far, since the beginning of the year, the YoY
inflation has been stable at 6.3-7.3%. We believe the year-end YoY
inflation could be below 4% due to, among other things, high base effect.
Assuming the next two months inflation comes in at 0.5-1.0%, year-end
inflation could be 3.2-3.7%.
Our house currently forecasts 3.2% vs the BIs 3.6%. The likelihood of a
3.2% year-end rate is quite good, as MoM inflation in December is usually
less than Lebaran-month inflation. Inflation in July, the month of Lebaran
this year, was 0.9%.

Widening gap

With the BI rate at 7.5% and YoY inflation of 6.3% in October, the real
benchmark rate was 1.2%. If inflation ends the year at 3.2-3.7%, the real
rate could reach 3.7-4.2%.
But such a high rate may not be sustainable. Monthly real rates in the last
six years averaged only 1.0%. Although there were times when the rate
breached 3.0%, as in Mar 2000 and Aug 2014, its high levels were not
sustainable, lasting, in fact, only one month.
The direction of inflation is more important for BI, in our view, than
prevailing inflation. Having said that, we think there is upside to our
internal forecast of no-rate cut. We think BI might act either by end-2015
or the beginning of 1Q16.
There might be some concerns that IDR volatility could be an obstacle for
the rate cut, especially with the Fed has indicated a possible rate hike in
December. We are not much concerned on this because the guidance by
the Fed should be able to manage market expectation and should not be a
surprise factor when the rate is finally raised. On top of that, the latest
data suggests that IDR volatility (based on 5-day moving average) has
declined significantly in the last couple of weeks and we expect the
volatility to remain stable, if not decline.

November 25, 2015

Strategy Research
Figure 20: Real rates could be higher by year-end

CPI (LHS)

YoY inflation

Real benchmark rate

Sep-15

Jan-15

May-15

Sep-14

Jan-14

-2.0%

MoM inflation (RHS)

Source: Bloomberg

0.0%

May-14

Sep-15

Jan-15

May-15

Sep-14

Jan-14

May-14

Sep-13

Jan-13

May-13

Sep-12

Jan-12

May-12

Sep-11

Jan-11

May-11

Sep-10

Jan-10

May-10

-1.0%

Sep-13

-0.5%

0.0

2.0%

Jan-13

0.0%

20.0

May-13

0.5%

40.0

4.0%

Sep-12

1.0%

Jan-12

60.0

6.0%

May-12

1.5%

Sep-11

2.0%

80.0

8.0%

Jan-11

2.5%

100.0

10.0%

May-11

3.0%

Sep-10

3.5%

120.0

Jan-10

140.0

May-10

Figure 19: CPI & MoM inflation

Nominal benchmark rate

Source: Bloomberg & Maybank KE

Beneficiaries of declining rates

A lower benchmark rate in Indonesia should be positive for ASII, banks and
property companies, at least for sentiment.
ASII should benefit as 60-70% of its 2Ws and 4Ws are sold through
credit. Lower rates are not only good for its automotive division but also
financial services. Note that in 9M15 earnings from automotive and
financial services divisions accounted for 60% of ASIIs earnings.
Banks costs of funds could drop and NIMs temporarily improve, from a
time lag in adjusting lending rates. Among the big banks, BBRI has the
most time deposits in its customer deposits, followed by BBNI, BMRI and
BBCA.
Property companies tend to benefit as mortgages account for a chunk
of their sales, except for SMRA. BSDE has the highest exposure of 40%,
followed by BKSL (36%), CTRA (35%), LPKR (21%), ASRI (21%) and SMRA
(5%).
Figure 21: Time deposits to total deposits
50%
45%

Figure 22: Payment methods

Company

45%
40%

40%

37%

35%
30%

25%

25%

ASRI
BKSL
BSDE
CTRA
LPKR
SMRA

Mortgage
21%
36%
40%
35%
21%
6%

Cash
instalments
54%
51%
50%
57%
59%
80%

Full cash
25%
13%
10%
8%
20%
14%

Source: Companies & Maybank KE

20%
15%
10%
5%
0%
BBRI

BBNI

BMRI

BBCA

Source: Companies & Maybank KE

Lower reserve requirement: indication of an easing policy

At its last monthly meeting, BI kept its benchmark rate at 7.5% but
lowered its reserve requirement by 0.5% to 7.5%. We took this to suggest:
1) policy prudence, in view of a looming Fed rate hike in the near term;
and 2) its understanding of the need for monetary easing to stimulate the
economy.

November 25, 2015

Strategy Research
Liquidity in the banking sector is not tight, even though interbank rates
keep moving up (Figure 23), because 1) loan growth remains positive
(Figure 24) and 2) interbank loans are not a significant portion of banks
portfolios. We think easing the reserve requirement could increase
liquidity. The BI seems to be signalling that there should greater currency
stability before rates are cut. With an improving economy and year-end
inflation potentially falling below 3%, we expect a rate cut in 1Q16.
Figure 23: Interbank rates remain high

Figure 24: Loans grew ~11% YoY in September

9.0

30%

8.5

25%

8.0

100%
90%
80%
70%

20%

60%

7.5
15%

1-month
Source: Bloomberg

3-month

10%

6-month

LDR (RHS)

Sep-15

Jan-15

May-15

Sep-14

May-14

Jan-14

Sep-13

Jan-13

May-13

Sep-12

Jan-12

May-12

0%

Sep-11

0%
Jan-11

5.5

20%

May-11

5%

30%

Sep-10

6.0

40%

Jan-10

10%

Jan-14
Jan-14
Feb-14
Mar-14
Apr-14
May-14
Jun-14
Jul-14
Aug-14
Aug-14
Sep-14
Oct-14
Nov-14
Dec-14
Jan-15
Feb-15
Mar-15
Mar-15
Apr-15
May-15
Jun-15
Jul-15
Aug-15
Sep-15
Oct-15
Oct-15

6.5

50%

May-10

7.0

Loan growth (LHS)

Source: BI & Myabank KE

2016 budget: unwavering commitment to infrastructure

Not much different

The 2016 state budget is not much different from 2015s in its size, sources
of income, budget allocations and budget deficit. The budget is IDR2,096t,
up 5.6% YoY. Revenue target is IDR1,823t, up 3.5% YoY. Some 84.9% of this
will come from taxes and customs duties. The budget deficit is set at
IDR273t, or 2.2% of GDP.
The government continues to allocate money to core productive sectors.
Its infrastructure budget is IDR314t, up 8.0% YoY to form 15.0% of its total
budget or 2.4% of GDP. The budget for subsidies continues to slide, down
13.1% YoY to IDR201t.

November 25, 2015

Strategy Research
Figure 25: 2016 budget not much different from 2015
2015 (APBNP)

2016 (APBN)

Change

5.7%
12,500
5.0%
6.2%
60
825
1,221

5.3%
13,900
4.7%
5.5%
50
830
1,155

-0.4%
11.2%
-0.3%
-0.7%
-16.7%
0.6%
-5.4%

1,762
1,758
1,489
269
3
1,984
1,320
796
524
232
156
137
665
223
1.9%

1,823
1,821
1,547
274
2
2,096
1,326
784
541
201
183
157
770
273
2.2%

3.5%
3.5%
3.9%
1.8%
-39.4%
5.6%
0.4%
-1.4%
3.3%
-13.1%
17.8%
14.7%
15.9%
22.7%
0.3%

ASSUMPTIONS
GDP growth
Exchange rate, IDR/USD
Inflation
SPN 3-month rate
Oil price, USD/barrel
Oil lifting, 000 bpd
Gas lifting, 000 boepd
STATE BUDGET, IDR t
A. REVENUES (IDRt)
I. Domestic revenues
I.1. Tax & customs
I.1. Non-tax & customs
II. Grants
B. EXPENDITURES (IDRt)
I. Central government
I.1. K/L (Kementerian & Lembaga)
I.1. Non K/L
I.1.a. Subsidies
I.1.b. Interest payments
I.1.c. Others
II. Tranfers to regions & village funds
C. SURPLUS (DEFICIT)
Deficit to GDP
Source: Ministry of Finance and Maybank KE

Figure 26: Infrastructure budget remains high

Infra budget/total
budget

16.0%

14.6%

Figure 27: at over 2% of GDP

Infrastructure
budget, IDR t
15.0%
350

14.0%

300

12.0%
10.0%

8.0%

9.8%
7.6%

9.4%

250

9.5%

8.7%

200
150

6.0%

3.0%
2.5%

2.0%
1.5%

4.0%

100

1.0%

2.0%

50

0.5%

0.0%

0.0%

2010

2011

2012

2013

Source: Ministry of Finance & Maybank KE

Infra budget /
GDP

2014

2015F

2016F

1.3%

2010

1.5%

2011

1.7%

1.6%

1.7%

2012

2013

2014

2.5%

2.4%

2015F

2016F

Source: Ministry of Finance & Maybank KE

Realistic or not?

Given the low achievements this year, is the 2016 budget realistic? 10M15
revenue from taxes and customs was still less than 60% of the 2015 target
of IDR1,758t. Without expenditure cuts of at least 7%, we believe the
deficit could top 2.5% of GDP this year, way above the governments target
of 1.9%.
The government has launched or will be launching stimulus measures
aimed at meeting its 2016 budget target and pump-priming the economy in
general. Initiatives include, among other things: 1) a tax amnesty, with the
supporting law to be finalised by end-2015; 2) a lower tax for asset
revaluation; 3) potential cuts in income tax for individuals; and 4)
prefunding of infrastructure projects which should be positive to stimulate
the economy and accelerate economic recovery, in our view.
On tax revenues from the tax amnesty and asset revaluation, the
government targets IDR60tn and IDR10tn, respectively. The figure suggests
2.2% and 0.4% of GDP in our estimate. Our conversations with a couple of
state-owned listed companies suggest that they are interested in
November 25, 2015

Strategy Research
participating in the asset revaluation programme, enticed by its lower tax
rates. Meanwhile, the effectiveness of the tax amnesty will partly depend
on government guarantees that the assets brought into Indonesia will not
be exposed to future lawsuits, in our view.
Figure 28: YTD tax income is less than 60% of the target
1,400

1,294

Tax income
Customs
Non-tax & customs
Grants
Total
Expenditure
Budget deficit
Budget deficit/GDP

1,200
1,000
800

773

Figure 29: implying the state deficit will blow up without

capex cuts

758

600

400

2015F 2015 (APBNP)

1,099
1,294
176
195
269
269
3
3
1,547
1,762
1,984
1,984
437
223
3.7%
1.9%

Source: Ministry of Finance & Maybank KE

200
0
YTD Oct 2014

YTD Oct 2015

Target 2015

Source: Ministry of Finance

Economic stimulus
In order to stimulate the economy, the government has launched six
economic packages. Some policies, like those on investments, will have a
long-term impact, in our view.
Figure 30: Economic stimulus attempted by the government so far this year
No Economic stimulus
1 Simplification of investment processes (including tax holidays and tax
incentives) in Indonesia. There are also incentives for special economic
zones.
2 Lower income tax rate for exporters who deposit their money in
Indonesia.

Potential impact and stock(s) affected

Positive for Indonesia's investment competitiveness in the long term.

Positive for the currency as the policy will add dollar supply in the
domestic market. Mining companies such as ADRO, ANTM, INCO, ITMG
and PTBA could be the biggest beneficiaries.
3 Lower retail energy prices (LPG, subsidised diesel and Pertalite).
Positive for purchasing power, especially among low-income people.
Companies which sell products to the mass market, such as RALS, INDF,
GGRM, to benefit.
4 Lower non-subsidised diesel prices
Coal companies (ADRO & ITMG) will be big beneficiaries of lower diesel
prices. PTBA will also benefit but not as much.
5 Cuts in electricity prices and incentives for consumption during certain Positive for SMGR, INTP, INDF.
periods.
6 Lower jet fuel prices
More competitive domestic jet fuel prices. GIAA will be a big
beneficiary as 35-40% of its costs are fuel-related.
7 Lower upstream gas prices through distribution efficiencies and lowering Positive for PGAS as it will remove overhang on potential cuts of its
governments revenue portion.
distribution tariffs by the government.
8 Setting annual minimum-wage increases based on inflation and
Positive as it will reduce investment uncertainties and provide wageeconomic growth.
cost visibility to corporates. Companies that stand to benefit include
those with a high proportion of labour costs such as AALI, LPPF, MAPI,
KLBF and RALS. Industrial land companies such as DMAS and BEST should
also gain.
9 Discount on income tax for asset revaluation if it is done until end of
Positive, especially for highly-geared companies such as the Bakrie
2016. The normal tax rate is 10%, but it can be lowered to 3% (if done group which includes BUMI & VIVA. Telco companies, especially TLKM,
until end of 2015), 4% (if done in 1H16) and 6% (if done in 2H16).
and two others with high debts (ISAT, EXCL), could be candidates of
asset-revaluation programme.
10 Removal of double taxation for REITs issued in Indonesia.
More REIT listings in Indonesia with SMRA, PWON, LPKR being potential
candidates.
Source: Bappenas and Maybank KE

November 25, 2015

Strategy Research

Earnings growth
Bottomed out
We think that corporate earnings bottomed out in 2Q15. We understand
that 3Q15 earnings, based on the companies we cover which have reported
results, were still down 2% YoY. Only banking, mining and telco earnings
grew YoY. However, the contractions in 3Q15 were better than 1Q15s 10.1% and 2Q15s -8.6%, suggesting the worst is over.
Figure 31: Earnings bottomed out in 3Q15

Figure 32: A handful of sectors posted growth

15%

11%
10%
5%

3%

4%
1%

0%
1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

-5%
-10%
-10%

3Q15
-2%

-9%

-15%
Source: Companies & Maybank KE

Source: Companies & Maybank KE

Where could we miss, come next year?

We expect earnings to recover in 2016, in line with the economy. We are
eyeing growth of 7% in 2015 and 11% in 2016 vs consensus estimates of -9%
and +14%. But as 9M15 market EPS was still down 7% YoY, we think 2015
growth could range between -5% and 0%. This would be below our forecast
with the potential culprits being the consumer, banking, infrastructure
(especially PGAS) and property sectors.
For 2016, market EPS could grow 11% YoY on the back of almost all
sectors, except cement, in our view. This is because recent years
oversupply is likely to persist. If 2015-16 EPS growth turns out to be 5% and
5-10% below our forecasts respectively, our 2016 earnings estimates could
be cut by 13-17%.
Figure 33: YoY earnings growth
Automotive
Cement
Consumer
Commodity
Financial services
Infrastructure
Property
Telco
Others
Market

1Q15

2Q15

3Q15

9M15

2015F

-16%
-4%
-10%
-57%
6%
-27%
18%
-44%
11%
-10%

-20%
-26%
-3%
2%
-10%
-24%
-46%
134%
15%
-9%

-16%
-22%
-2%
-19%
5%
-45%
-70%
90%
36%
-2%

-17%
-18%
-5%
-31%
1%
-32%
-34%
21%
21%
-7%

-16%
-16%
31%
-42%
11%
11%
17%
14%
12%
7%

9M15 2015F
-2%
-2%
-41%
9%
-11%
-43%
-50%
7%
8%
-11%

2016F
17%
1%
27%
27%
14%
37%
27%
16%
19%
11%

Source: Companies & Maybank KE

November 25, 2015

10

Strategy Research

Index target and valuation

Index target and top picks
We set our new index target at 6,000, or 16.0-14.9x 2016-17 P/Es. Our
target is based on 1SD above the markets 6-year P/E mean of 14.0x.
During a recovery, the JCI can trade at up to 2SD above its mean.
We are OVERWEIGHT on the interest-rate-sensitive automotive, banking
and property sectors, as well as infrastructure and telecommunications.
We are NEUTRAL on cement, commodities, consumer and retailers. Our top
picks are AALI, ACES, ASII, BBRI, BSDE, GGRM, JSMR, LPCK, TLKM and
WSKT.

Figure 34: Top picks and valuations

NoTicker

Rating

Mkt cap*

Price**

TP**

1 AALI IJ
2 ACES IJ
3 ASII IJ
4 BBRI IJ
5 BSDE IJ
6 GGRM IJ
7 JSMR IJ
8 LPCK IJ
9 TLKM IJ
10 WSKT IJ
Total 60 cos
Total 60 cos

BUY
2,110
BUY
944
BUY
18,722
BUY
19,919
BUY
2,366
BUY
7,238
BUY
2,508
BUY
399
BUY
21,569
BUY
1,402
(simple average)
(aggregate)

18,250
750
6,300
11,000
1,675
51,250
5,025
7,800
2,915
1,735

24,000
850
7,500
13,000
2,100
60,000
6,500
11,000
3,300
2,200

P/E (x)
P/BV (x)
Yield (%) EPS growth (%)
ROE (%)
+/- to
TP (%) 2015F 2016F 2015F 2016F 2016F 2015F 2016F 2015F 2016F
31.5
44.6
17.4
2.4
2.2
0.9
-74.2
156.1
5.5
12.9
13.3
22.9
20.2
4.5
3.8
0.7
1.3
13.2
19.8
18.8
19.0
15.8
13.5
2.4
2.2
2.9
-15.7
17.1
15.5
16.5
18.2
11.0
10.4
2.3
2.0
2.7
1.8
5.7
23.2
20.8
25.4
13.0
12.1
1.7
1.5
0.9
-35.0
7.2
12.9
12.3
17.1
17.8
15.6
2.7
2.4
2.0
3.0
14.6
15.1
15.4
29.4
25.9
19.6
3.2
2.9
1.6
-5.9
31.9
12.4
14.7
41.0
5.6
5.5
1.5
1.2
0.0
15.8
2.7
26.7
21.5
13.2
17.8
16.1
3.7
3.3
2.0
12.8
10.5
21.0
20.2
26.8
23.9
19.9
2.2
2.4
0.5
59.3
47.8
9.0
12.0
17.4
14.2
3.7
2.5
3.2
9.8
24.2
18.1
17.8
15.1
13.6
2.4
2.4
2.2
6.8
10.9
16.1
16.3

Pricing as of 20 November 2015

* In USD; ** in IDR
Source: Bloomberg & Maybank KE

1. Astra Agro Lestari (AALI IJ). After a disappointing 2015, 2016 should be
much better, from a potential big drop in production triggered by severe
droughts, forest fires and prolonged smog. These may boost CPO prices.
Lesser production is also expected from smallholders, which own 43% of
Indonesias planted areas. These farmers cut their fertiliser usage this year
following lower margins. As the sectors bellwether with the highest
liquidity and market cap in the sector, AALIs share price will likely react
first to any positive sentiment. In addition, its plantations are welldispersed, with only 40% located in the severely affected areas. Rupiah
stability should also shield it from huge forex losses.

Figure 35: AALI vs JCI

2. Ace Hardware (ACES IJ). Maintain BUY and IDR850 TP. We believe
cannibalisation risks will ease from a normalisation of store openings. We
also expect lower financing costs next year along with lower debt.
Competition is milder for home improvement and lifestyle retail segment
than for other non-food segments such as fashion and electronics. Even
with more moderate expansion, we expect ACES to retain its dominance. It
operated 116 stores as of Sep 2015 vs IKEAs one and DIB Pongs 13, mainly
in Greater Jakarta. The stocks 20.6x 2016 P/E is at a 10.4% discount to its
3-year mean of 23x.

Figure 36: ACES vs JCI

32,000
30,000
28,000
26,000
24,000
22,000
20,000
18,000
16,000
14,000
12,000

6,000
5,500

5,000
4,500
4,000

AALI (LHS)

Nov-15

Jul-15

Sep-15

May-15

Jan-15

Mar-15

Nov-14

Jul-14

Sep-14

May-14

Jan-14

Mar-14

3,500

JCI (RHS)

Source: Bloomberg

1,100

6,000

1,000

5,500

900
800

5,000

700

4,500

600
4,000

500

ACES (LHS)

Sep-15

Nov-15

Jul-15

Mar-15

May-15

Jan-15

Sep-14

Nov-14

Jul-14

Mar-14

May-14

3,500

Jan-14

400

JCI (RHS)

Source: Bloomberg

November 25, 2015

11

Strategy Research
3. Astra International (ASII IJ). Maintain BUY and IDR7,500 TP. Its stock
retreat of more than 25% since its March peak has likely factored in weak
automotive demand. Domestic 4W and 2W sales bottomed out in Jun-Jul
and have been improving with new models. We forecast earnings growth of
17.1% and 17.4% for 2016-17, led by its automotive, financing and
plantation units.

Figure 37: ASII vs JCI

9,000

6,000

8,500
5,500

8,000
7,500

5,000

7,000
6,500

4,500

6,000
5,500

4,000

5,000

Nov-15

Jul-15

Sep-15

May-15

Jan-15

ASII (LHS)

Mar-15

Nov-14

Jul-14

Sep-14

May-14

Jan-14

3,500

Mar-14

4,500

JCI (RHS)

Source: Bloomberg

Figure 38: BBRI vs JCI

14,000

6,000

13,000

5,500

12,000

11,000

5,000

10,000

4,500

9,000
8,000

4,000

7,000

BBRI (LHS)

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

3,500

Jan-14

6,000

Mar-14

4. Bank Rakyat Indonesia (BBRI IJ). We believe managements attention

to loan quality should protect its balance sheet. BBRI has managed to keep
its NPLs and special-mention loans stable at 2.2% and 6.9% respectively.
Whats more encouraging are the increase in its NPL coverage to 150% in
9M15 from 142% in 6M15. BBRI should be able to maintain this ratio in
2016-17, provided there are no major setbacks in the economy. With EPS
growth set to improve in 2016-17 to 5.7% and 6.8% from 2015s 1.8%, it
remains one of our top BUYs with a TP of IDR13,000, at 12.3x FY16 P/E and
2.4x P/BV.

JCI (RHS)

Source: Bloomberg

Figure 39: BSDE vs JCI

2,400

6,000

2,200

5,500

2,000
1,800

5,000

1,600

4,500

1,400
4,000

1,200

BSDE (LHS)

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

3,500

Jan-14

1,000

Mar-14

5. Bumi Serpong Damai (BSDE IJ). Maintain BUY with a TP of IDR2,100, at

a 35% discount to RNAV. BSDE remains our top pick among residential
property developers as its assets have monetisation potential. During an
economic slowdown, we prefer developers with strong balance sheets such
as BSDE. Its main appeal is its huge land bank in BSD City, Greater Jakarta,
where we believe BSDE can continue to capitalise on urbanisation. The
company is also expanding in other cities to diversify its portfolio.

JCI (RHS)

Source: Bloomberg

Figure 40: GGRM vs JCI

65,000

6,000

60,000

5,500

55,000

5,000

50,000

4,500

45,000

GGRM (LHS)

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

3,500

May-14

4,000

35,000

Jan-14

40,000

Mar-14

6. Gudang Garam (GGRM IJ). Reiterate BUY with a TP of IDR60,000, at 18x

FY16 P/E on the back of potential industry growth and shifts in consumer
preference. GGRMs valuation also appears undemanding at a 60% discount
to peer HMSPs 36x P/E. We expect GGRM to raise its ASPs again towards
year-end to pass on part of the excise-tax increase next year. We estimate
ASP increases of 10-12% YoY pa for 2015-16, which should protect its EBIT
margins. Easing pressure on the IDR and milder inflation are also expected
to improve affordability and cigarette sales. We project a volume decline
of 5.2% YoY in 2015, before a 0.2% YoY recovery next year.

JCI (RHS)

Source: Bloomberg

November 25, 2015

12

Strategy Research
7. Jasa Marga (JSMR IJ). Earnings should grow by double digits again in
2016, from tariff adjustments in an even year. Upside could stem from
higher-than-expected traffic volume, as the company is constructing more
than 312km of new roads. Most will be completed in 2018. With
government-intervention risks subsiding, we expect a share-price recovery.
Maintain BUY with a DCF-based TP of IDR6,500.

Figure 41: JSMR vs. JCI

7,500

6,000

7,000

5,500

6,500

6,000

5,000

5,500

4,500

5,000
4,500

4,000

4,000

Nov-15

Jul-15

Sep-15

May-15

Jan-15

JSMR (LHS)

Mar-15

Nov-14

Jul-14

Sep-14

May-14

Jan-14

3,500

Mar-14

3,500

JCI (RHS)

Source: Bloomberg

Figure 42: LPCK vs JCI

13,000

6,000

11,000

5,500

9,000

5,000

7,000

4,500

5,000

LPCK (LHS)

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

3,500

May-14

4,000

1,000

Jan-14

3,000

Mar-14

8. Lippo Cikarang (LPCK IJ). Maintain BUY and IDR11,000 TP, at a 51%
discount to RNAV. Orange County is its unique development in an industrial
estate, buffering Lippo Cikarang from the property slowdown. The
company is set to sell five towers of apartments in 2015. Recently, it also
signed a cooperation agreement with Mitsubishi to part-develop USD100m
of projects in Orange County.

JCI (RHS)

Source: Bloomberg

Figure 43: TLKM vs. JCI

3,100

6,000

2,900

5,500

2,700
2,500

5,000

2,300

4,500

2,100
4,000

1,900

TLKM (LHS)

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

3,500

Jan-14

1,700

Mar-14

9. Telekomunikasi Indonesia (TLKM IJ). Benign competition has allowed

the telco to raise cellular tariffs and sustain its market leadership. FY16
revenue could grow by double digits, in our estimation. This would be led
by data growth with the continued migration from 2G to 3G, low
smartphone penetration, early adoption of 4G LTE and considerably lower
data tariffs than the regional. Data is expected to compensate for
saturation in its legacy business. On top of that, net gearing is the lowest
in the sector. Maintain BUY and IDR3,300 TP, at 6.4x FY16 EV/EBITDA.

JCI (RHS)

Source: Bloomberg

Figure 44: WSKT vs. JCI

2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0

6,000
5,500

5,000
4,500
4,000

WSKT (LHS)

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

Jan-14

3,500

Mar-14

10. Waskita Karya (WSKT IJ). WSKT has the strongest capital structure to
support a robust new-order target of IDR30t for 2015. YTD new orders
already amount to IDR25t. WSKT has been aggressively participating in key
projects not only as contractor but also as majority/minority investor. It
was recently appointed by the government to build a IDR7t Light Rail
Transit system in Palembang, South Sumatra. With a soaring order book,
we are eyeballing an earnings CAGR of 34% for 2016-2017. Our TP of
IDR2,200 is set at 25x 2016 P/E, in line with the sector.

JCI (RHS)

Source: Bloomberg

November 25, 2015

13

Strategy Research
Valuation
At 4,500, the index trades at 12.0x 2016 P/E and 2.1x 2016 P/BV. These
are 1SD below its 6-year mean. If 2015-16 market EPS contracts 5% and
grows 10% respectively, the market would trade at 13.7x P/E, pretty much
in line with its 6-year mean.

PER

Source: Bloomberg & Maybank KE

November 25, 2015

-1x SD

PBV

1x SD

Sep-15

Jan-15

May-15

Sep-14

Jan-14

6-year mean

May-14

Sep-13

Jan-13

Sep-15

May-15

Jan-15

Sep-14

Jan-14

6-year mean

May-14

Sep-13

Jan-13

May-13

Sep-12

Jan-12

1x SD

May-12

Sep-11

Jan-11

May-11

Sep-10

Jan-10

May-10

10.0

May-13

11.0

Sep-12

12.0

Jan-12

13.0

May-12

14.0

Sep-11

15.0

Jan-11

16.0

May-11

2.9
2.8
2.7
2.6
2.5
2.4
2.3
2.2
2.1
2.0

Jan-10

PBV, x

17.0

Sep-10

Figure 46: and P/BV

PER, x

May-10

Figure 45: JCIs P/E

-1x SD

Source: Bloomberg & Maybank KE

14

Strategy Research

Risks to our view

Although we believe the economy has bottomed out, the following could
upset our forecasts, among others:
1. IDR volatility. Currency volatility remains the largest risk, especially
for foreign investors. Potential rate hikes by the Fed and uncertain Chinese
policies are among the variables. We believe BI has an eye on currency
volatility before potentially easing its monetary policy further.
2. Subdued global economies. We dont expect global economies to
recover strongly in 2016. Commodities account for more than 50% of
Indonesias exports while 20-25% of its GDP is commodity-related. Also, a
global economic slowdown could hurt domestic consumption, which is the
largest GDP component.
3. Uneven economic recovery. Our expected economic recovery in 4Q15
may not be smooth, given shaky global economies and uncertainties in tax
collection and budget spending.
4. Almost similar budget. 2016 state budget is not significantly different
from 2015 in terms of size, allocations, deficit and sources of revenue.
Execution remains key for effective economic stimulus.

November 25, 2015

15

Strategy Research
Research Offices
REGIONAL

HONG KONG / CHINA

INDONESIA

Sadiq CURRIMBHOY
Regional Head, Research & Economics
(65) 6231 5836 sadiq@maybank-ke.com.sg

Howard WONG Head of Research

(852) 2268 0648
howardwong@kimeng.com.hk
Oil & Gas - Regional

Isnaputra ISKANDAR Head of Research

(62) 21 2557 1129
isnaputra.iskandar@maybank-ke.co.id
Strategy Metals & Mining Cement

Benjamin HO
(852) 2268 0632 benjaminho@kimeng.com.hk
Consumer & Auto

Rahmi MARINA
(62) 21 2557 1128
rahmi.marina@maybank-ke.co.id
Banking & Finance

WONG Chew Hann, CA

Regional Head of Institutional Research
(603) 2297 8686 wchewh@maybank-ib.com
ONG Seng Yeow
Regional Head of Retail Research
(65) 6231 5839
ongsengyeow@maybank-ke.com.sg

Jacqueline KO, CFA

(852) 2268 0633 jacquelineko@kimeng.com.hk
Consumer Staples & Durables

TAN Sin Mui

Director of Research
(65) 6231 5849 sinmui@kimeng.com.hk

Ka Leong LO, CFA

(852) 2268 0630 kllo@kimeng.com.hk
Consumer Discretionary & Auto

ECONOMICS

Mitchell KIM
(852) 2268 0634 mitchellkim@kimeng.com.hk
Internet & Telcos

Suhaimi ILIAS
Chief Economist
Singapore | Malaysia
(603) 2297 8682 suhaimi_ilias@maybank-ib.com
Luz LORENZO
Philippines
(63) 2 849 8836
luz_lorenzo@maybank-atrke.com
Tim LEELAHAPHAN
Thailand
(66) 2658 6300 ext 1420
tim.l@maybank-ke.co.th
JUNIMAN
Chief Economist, BII
Indonesia
(62) 21 29228888 ext 29682
Juniman@bankbii.com

Osbert TANG, CFA

(86) 21 5096 8370
osberttang@kimeng.com.hk
Transport & Industrials
Stefan CHANG, CFA
(852) 2268 0675
stefanchang@kimeng.com.hk
Technology
Steven ST CHAN
(852) 2268 0645 stevenchan@kimeng.com.hk
Banking & Financials - Regional
Warren LAU
(852) 2268 0644
warrenlau@kimeng.com.hk
Technology Regional

STRATEGY

INDIA

Sadiq CURRIMBHOY
Global Strategist
(65) 6231 5836 sadiq@maybank-ke.com.sg

Jigar SHAH Head of Research

(91) 22 6623 2632 jigar@maybank-ke.co.in
Oil & Gas Automobile Cement

Willie CHAN
Hong Kong / Regional
(852) 2268 0631 williechan@kimeng.com.hk

Anubhav GUPTA
(91) 22 6623 2605 anubhav@maybank-ke.co.in
Metal & Mining Capital Goods Property

MALAYSIA

Vishal MODI
(91) 22 6623 2607 vishal@maybank-ke.co.in
Banking & Financials

WONG Chew Hann, CA Head of Research

(603) 2297 8686 wchewh@maybank-ib.com
Strategy
Desmond CHNG, ACA
(603) 2297 8680
desmond.chng@maybank-ib.com
Banking & Finance
LIAW Thong Jung
(603) 2297 8688 tjliaw@maybank-ib.com
Oil & Gas Services- Regional
ONG Chee Ting, CA
(603) 2297 8678 ct.ong@maybank-ib.com
Plantations - Regional
Mohshin AZIZ
(603) 2297 8692 mohshin.aziz@maybank-ib.com
Aviation - Regional Petrochem
YIN Shao Yang, CPA
(603) 2297 8916 samuel.y@maybank-ib.com
Gaming Regional Media
TAN Chi Wei, CFA
(603) 2297 8690 chiwei.t@maybank-ib.com
Power Telcos
WONG Wei Sum, CFA
(603) 2297 8679 weisum@maybank-ib.com
Property
LEE Yen Ling
(603) 2297 8691 lee.yl@maybank-ib.com
Building Materials Glove Ports Shipping
CHAI Li Shin, CFA
(603) 2297 8684 lishin.c@maybank-ib.com
Plantation Construction & Infrastructure
Ivan YAP
(603) 2297 8612 ivan.yap@maybank-ib.com
Automotive Semiconductor Technology
Kevin WONG
(603) 2082 6824 kevin.wong@maybank-ib.com
REITs Consumer Discretionary
LIEW Wei Han
(603) 2297 8676 weihan.l@maybank-ib.com
Consumer Staples
LEE Cheng Hooi Regional Chartist
(603) 2297 8694
chenghooi.lee@maybank-ib.com
Tee Sze Chiah Head of Retail Research
(603) 2297 6858 szechiah.t@maybank-ib.com
Cheah Chong Ling
(603) 2297 8767 chongling.c@maybank-ib.com

November 25, 2015

Aurellia SETIABUDI
(62) 21 2953 0785
aurellia.setiabudi@maybank-ke.co.id
Property
Pandu ANUGRAH
(62) 21 2557 1137
pandu.anugrah@maybank-ke.co.id
Infra Construction Transport Telcos
Janni ASMAN
(62) 21 2953 0784
janni.asman@maybank-ke.co.id
Cigarette Healthcare Retail
Adhi TASMIN
(62) 21 2557 1209
adhi.tasmin@maybank-ke.co.id
Plantations
Anthony LUKMAWIJAYA
(62) 21 2557 1126
anthony.lumawijaya@maybank-ke.co.id
Aviation

PHILIPPINES
Luz LORENZO Head of Research
(63) 2 849 8836
luz_lorenzo@maybank-atrke.com
Strategy
Utilities Conglomerates Telcos
Lovell SARREAL
(63) 2 849 8841
lovell_sarreal@maybank-atrke.com
Consumer Media Cement
Rommel RODRIGO
(63) 2 849 8839
rommel_rodrigo@maybank-atrke.com
Conglomerates Property Gaming
Ports/ Logistics

Abhijeet KUNDU
(91) 22 6623 2628 abhijeet@maybank-ke.co.in
Consumer

Katherine TAN
(63) 2 849 8843
kat_tan@maybank-atrke.com
Banks Construction

Neerav DALAL
(91) 22 6623 2606 neerav@maybank-ke.co.in
Software Technology Telcos

Michael BENGSON
(63) 2 849 8840
michael_bengson@maybank-atrke.com
Conglomerates

SINGAPORE

Jaclyn JIMENEZ
(63) 2 849 8842
jaclyn_jimenez@maybank-atrke.com
Consumer

Gregory YAP
(65) 6231 5848 gyap@maybank-ke.com.sg
SMID Caps
Technology & Manufacturing Telcos
YEAK Chee Keong, CFA
(65) 6231 5842
yeakcheekeong@maybank-ke.com.sg
Offshore & Marine
Derrick HENG, CFA
(65) 6231 5843 derrickheng@maybank-ke.com.sg
Transport Property REITs (Office)
Joshua TAN
(65) 6231 5850 joshuatan@maybank-ke.com.sg
REITs (Retail, Industrial)
John CHEONG, CFA
(65) 6231 5845 johncheong@maybank-ke.com.sg
Small & Mid Caps Healthcare
TRUONG Thanh Hang
(65) 6231 5847 hang.truong@maybank-ke.com.sg
Small & Mid Caps

Suttatip PEERASUB
(66) 2658 6300 ext 1430
suttatip.p@maybank-ke.co.th
Media Commerce
Sutthichai KUMWORACHAI
(66) 2658 6300 ext 1400
sutthichai.k@maybank-ke.co.th
Energy Petrochem
Termporn TANTIVIVAT
(66) 2658 6300 ext 1520
termporn.t@maybank-ke.co.th
Property
Jaroonpan WATTANAWONG
(66) 2658 6300 ext 1404
jaroonpan.w@maybank-ke.co.th
Transportation Small cap

VIETNAM
LE Hong Lien, ACCA
Head of Institutional Research
(84) 8 44 555 888 x 8181
lien.le@maybank-kimeng.com.vn
Strategy Consumer Diversified Utilities
THAI Quang Trung, CFA, Deputy Manager,
Institutional Research
(84) 8 44 555 888 x 8180
trung.thai@maybank-kimeng.com.vn
Real Estate Construction Materials
Le Nguyen Nhat Chuyen
(84) 8 44 555 888 x 8082
chuyen.le@maybank-kimeng.com.vn
Oil & Gas
NGUYEN Thi Ngan Tuyen, Head of Retail Research
(84) 8 44 555 888 x 8081
tuyen.nguyen@maybank-kimeng.com.vn
Food & Beverage Oil&Gas Banking
TRINH Thi Ngoc Diep
(84) 4 44 555 888 x 8208
diep.trinh@maybank-kimeng.com.vn
Technology Utilities Construction
PHAM Nhat Bich
(84) 8 44 555 888 x 8083
bich.pham@maybank-kimeng.com.vn
Consumer Manufacturing Fishery
NGUYEN Thi Sony Tra Mi
(84) 8 44 555 888 x 8084
mi.nguyen@maybank-kimeng.com.vn
Port operation Pharmaceutical
Food & Beverage
TRUONG Quang Binh
(84) 4 44 555 888 x 8087
binh.truong@maybank-kimeng.com.vn
Rubber plantation Tyres and Tubes Oil&Gas

Arabelle MAGHIRANG
(63) 2 849 8838
arabelle_maghirang@maybank-atrke.com
Banks

THAILAND
Maria LAPIZ Head of Institutional Research
Dir (66) 2257 0250 | (66) 2658 6300 ext 1399
Maria.L@maybank-ke.co.th
Consumer Materials Ind. Estates
Sittichai DUANGRATTANACHAYA
(66) 2658 6300 ext 1393
Sittichai.D@maybank-ke.co.th
Services Sector Transport
Yupapan POLPORNPRASERT
(66) 2658 6300 ext 1395
yupapan.p@maybank-ke.co.th
Oil & Gas
Sukit UDOMSIRIKUL Head of Retail Research
(66) 2658 6300 ext 5090
Sukit.u@maybank-ke.co.th
Mayuree CHOWVIKRAN
(66) 2658 6300 ext 1440
mayuree.c@maybank-ke.co.th
Strategy
Padon VANNARAT
(66) 2658 6300 ext 1450
Padon.v@maybank-ke.co.th
Strategy
Surachai PRAMUALCHAROENKIT
(66) 2658 6300 ext 1470
Surachai.p@maybank-ke.co.th
Auto Conmat Contractor Steel

16

Strategy Research
APPENDIX I: TERMS FOR PROVISION OF REPORT, DISCLAIMERS AND DISCLOSURES
DISCLAIMERS
This research report is prepared for general circulation and for information purposes only and under no circumstances should it be considered or intended as
an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that values of such securities, if any, may fluctuate
and that each securitys price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental
ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and
volume-related information extracted from the relevant jurisdictions stock exchange in the equity analysis. Accordingly, investors returns may be less than
the original sum invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment
advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read
this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment
strategies discussed or recommended in this report.
The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank
Investment Bank Berhad, its subsidiary and affiliates (collectively, MKE) and consequently no representation is made as to the accuracy or completeness of
this report by MKE and it should not be relied upon as such. Accordingly, MKE and its officers, directors, associates, connected parties and/or employees
(collectively, Representatives) shall not be liable for any direct, indirect or consequential losses or damages that may arise from the use or reliance of this
report. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice.
This report may contain forward looking statements which are often but not always identified by the use of words such as anticipate, believe, estimate,
intend, plan, expect, forecast, predict and project and statements that an event or result may, will, can, should, could or might
occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us
and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking
statements. Readers are cautioned not to place undue relevance on these forward-looking statements. MKE expressly disclaims any obligation to update or
revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrence
of unanticipated events.
MKE and its officers, directors and employees, including persons involved in the preparation or issuance of this report, may, to the extent permitted by law,
from time to time participate or invest in financing transactions with the issuer(s) of the securities mentioned in this report, perform services for or solicit
business from such issuers, and/or have a position or holding, or other material interest, or effect transactions, in such securities or options thereon, or other
investments related thereto. In addition, it may make markets in the securities mentioned in the material presented in this report. MKE may, to the extent
permitted by law, act upon or use the information presented herein, or the research or analysis on which they are based, before the material is published.
One or more directors, officers and/or employees of MKE may be a director of the issuers of the securities mentioned in this report.
This report is prepared for the use of MKEs clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in
whole or in part in any form or manner without the prior express written consent of MKE and MKE and its Representatives accepts no liability whatsoever for
the actions of third parties in this respect.
This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state,
country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. This report is for distribution only
under such circumstances as may be permitted by applicable law. The securities described herein may not be eligible for sale in all jurisdictions or to certain
categories of investors. Without prejudice to the foregoing, the reader is to note that additional disclaimers, warnings or qualifications may apply based on
geographical location of the person or entity receiving this report.
Malaysia
Opinions or recommendations contained herein are in the form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental
ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia
Securities Berhad in the equity analysis.
Singapore
This report has been produced as of the date hereof and the information herein may be subject to change. Maybank Kim Eng Research Pte. Ltd. (Maybank
KERPL) in Singapore has no obligation to update such information for any recipient. For distribution in Singapore, recipients of this report are to contact
Maybank KERPL in Singapore in respect of any matters arising from, or in connection with, this report. If the recipient of this report is not an accredited
investor, expert investor or institutional investor (as defined under Section 4A of the Singapore Securities and Futures Act), Maybank KERPL shall be legally
liable for the contents of this report, with such liability being limited to the extent (if any) as permitted by law.
Thailand
The disclosure of the survey result of the Thai Institute of Directors Association (IOD) regarding corporate governance is made pursuant to the policy of the
Office of the Securities and Exchange Commission. The survey of the IOD is based on the information of a company listed on the Stock Exchange of Thailand
and the market for Alternative Investment disclosed to the public and able to be accessed by a general public investor. The result, therefore, is from the
perspective of a third party. It is not an evaluation of operation and is not based on inside information. The survey result is as of the date appearing in the
Corporate Governance Report of Thai Listed Companies. As a result, the survey may be changed after that date. Maybank Kim Eng Securities (Thailand) Public
Company Limited (MBKET) does not confirm nor certify the accuracy of such survey result.
Except as specifically permitted, no part of this presentation may be reproduced or distributed in any manner without the prior written permission of MBKET.
MBKET accepts no liability whatsoever for the actions of third parties in this respect.
US
This research report prepared by MKE is distributed in the United States (US) to Major US Institutional Investors (as defined in Rule 15a-6 under the
Securities Exchange Act of 1934, as amended) only by Maybank Kim Eng Securities USA Inc (Maybank KESUSA), a broker-dealer registered in the US
(registered under Section 15 of the Securities Exchange Act of 1934, as amended). All responsibility for the distribution of this report by Maybank KESUSA in
the US shall be borne by Maybank KESUSA. All resulting transactions by a US person or entity should be effected through a registered broker-dealer in the US.
This report is not directed at you if MKE is prohibited or restricted by any legislation or regulation in any jurisdiction from making it available to you. You
should satisfy yourself before reading it that Maybank KESUSA is permitted to provide research material concerning investments to you under relevant
legislation and regulations.
UK
This document is being distributed by Maybank Kim Eng Securities (London) Ltd (Maybank KESL) which is authorized and regulated, by the Financial Services
Authority and is for Informational Purposes only. This document is not intended for distribution to anyone defined as a Retail Client under the Financial
Services and Markets Act 2000 within the UK. Any inclusion of a third party link is for the recipients convenience only, and that the firm does not take any
responsibility for its comments or accuracy, and that access to such links is at the individuals own risk. Nothing in this report should be considered as
constituting legal, accounting or tax advice, and that for accurate guidance recipients should consult with their own independent tax advisers.

November 25, 2015

17

Strategy Research
DISCLOSURES
Legal Entities Disclosures
Malaysia: This report is issued and distributed in Malaysia by Maybank Investment Bank Berhad (15938-H) which is a Participating Organization of Bursa
Malaysia Berhad and a holder of Capital Markets and Services License issued by the Securities Commission in Malaysia. Singapore: This material is issued and
distributed in Singapore by Maybank KERPL (Co. Reg No 197201256N) which is regulated by the Monetary Authority of Singapore. Indonesia: PT Kim Eng
Securities (PTKES) (Reg. No. KEP-251/PM/1992) is a member of the Indonesia Stock Exchange and is regulated by the BAPEPAM LK. Thailand: MBKET (Reg.
No.0107545000314) is a member of the Stock Exchange of Thailand and is regulated by the Ministry of Finance and the Securities and Exchange Commission.
Philippines: Maybank ATRKES (Reg. No.01-2004-00019) is a member of the Philippines Stock Exchange and is regulated by the Securities and Exchange
Commission. Vietnam: Maybank Kim Eng Securities JSC (License Number: 71/UBCK-GP) is licensed under the State Securities Commission of Vietnam.Hong
Kong: KESHK (Central Entity No AAD284) is regulated by the Securities and Futures Commission. India: Kim Eng Securities India Private Limited (KESI) is a
participant of the National Stock Exchange of India Limited (Reg No: INF/INB 231452435) and the Bombay Stock Exchange (Reg. No. INF/INB 011452431) and is
regulated by Securities and Exchange Board of India. KESI is also registered with SEBI as Category 1 Merchant Banker (Reg. No. INM 000011708) US: Maybank
KESUSA is a member of/ and is authorized and regulated by the FINRA Broker ID 27861. UK: Maybank KESL (Reg No 2377538) is authorized and regulated by
the Financial Services Authority.

Disclosure of Interest
Malaysia: MKE and its Representatives may from time to time have positions or be materially interested in the securities referred to herein and may further
act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment
banking services, advisory and other services for or relating to those companies.
Singapore: As of 25 November 2015, Maybank KERPL and the covering analyst do not have any interest in any companies recommended in this research report.
Thailand: MBKET may have a business relationship with or may possibly be an issuer of derivative warrants on the securities /companies mentioned in the
research report. Therefore, Investors should exercise their own judgment before making any investment decisions. MBKET, its associates, directors, connected
parties and/or employees may from time to time have interests and/or underwriting commitments in the securities mentioned in this report.
Hong Kong: KESHK may have financial interests in relation to an issuer or a new listing applicant referred to as defined by the requirements under Paragraph
16.5(a) of the Hong Kong Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission.
As of 25 November 2015, KESHK and the authoring analyst do not have any interest in any companies recommended in this research report.
MKE may have, within the last three years, served as manager or co-manager of a public offering of securities for, or currently may make a primary market in
issues of, any or all of the entities mentioned in this report or may be providing, or have provided within the previous 12 months, significant advice or
investment services in relation to the investment concerned or a related investment and may receive compensation for the services provided from the
companies covered in this report.

OTHERS
Analyst Certification of Independence
The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of
the research analysts compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
Reminder
Structured securities are complex instruments, typically involve a high degree of risk and are intended for sale only to sophisticated investors who are capable
of understanding and assuming the risks involved. The market value of any structured security may be affected by changes in economic, financial and political
factors (including, but not limited to, spot and forward interest and exchange rates), time to maturity, market conditions and volatility and the credit quality
of any issuer or reference issuer. Any investor interested in purchasing a structured product should conduct its own analysis of the product and consult with its
own professional advisers as to the risks involved in making such a purchase.
No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior consent of MKE.

Definition of Ratings
Maybank Kim Eng Research uses the following rating system
BUY
Return is expected to be above 10% in the next 12 months (excluding dividends)
HOLD
Return is expected to be between - 10% to +10% in the next 12 months (excluding dividends)
SELL
Return is expected to be below -10% in the next 12 months (excluding dividends)

Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only
applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment
ratings as we do not actively follow developments in these companies.

November 25, 2015

18

Strategy Research
Malaysia
Maybank Investment Bank Berhad
(A Participating Organisation of
Bursa Malaysia Securities Berhad)
33rd Floor, Menara Maybank,
100 Jalan Tun Perak,
50050 Kuala Lumpur
Tel: (603) 2059 1888;
Fax: (603) 2078 4194

Stockbroking Business:

Level 8, Tower C, Dataran Maybank,

No.1, Jalan Maarof
59000 Kuala Lumpur
Tel: (603) 2297 8888
Fax: (603) 2282 5136

Philippines
Maybank ATR Kim Eng Securities Inc.
17/F, Tower One & Exchange Plaza
Ayala Triangle, Ayala Avenue
Makati City, Philippines 1200
Tel: (63) 2 849 8888
Fax: (63) 2 848 5738

Singapore
Maybank Kim Eng Securities Pte Ltd
Maybank Kim Eng Research Pte Ltd
50 North Canal Road
Singapore 059304

Maybank Kim Eng Securities

(London) Ltd
5th Floor, Aldermary House
10-15 Queen Street
London EC4N 1TX, UK

Tel: (65) 6336 9090

Tel: (44) 20 7332 0221
Fax: (44) 20 7332 0302

Hong Kong

Indonesia

New York
Maybank Kim Eng Securities USA
Inc
777 Third Avenue, 21st Floor
New York, NY 10017, U.S.A.
Tel: (212) 688 8886
Fax: (212) 688 3500

India

Kim Eng Securities (HK) Ltd

Level 30,
Three Pacific Place,
1 Queens Road East,
Hong Kong

PT Maybank Kim Eng Securities

Plaza Bapindo
Citibank Tower 17th Floor
Jl Jend. Sudirman Kav. 54-55
Jakarta 12190, Indonesia

Kim Eng Securities India Pvt Ltd

2nd Floor, The International 16,
Maharishi Karve Road,
Churchgate Station,
Mumbai City - 400 020, India

Tel: (852) 2268 0800

Fax: (852) 2877 0104

Tel: (62) 21 2557 1188

Fax: (62) 21 2557 1189

Tel: (91) 22 6623 2600

Fax: (91) 22 6623 2604

Thailand
Maybank Kim Eng Securities
(Thailand) Public Company Limited
999/9 The Offices at Central World,
20th - 21st Floor,
Rama 1 Road Pathumwan,
Bangkok 10330, Thailand
Tel: (66) 2 658 6817 (sales)
Tel: (66) 2 658 6801 (research)

South Asia Sales Trading

London

Vietnam
Maybank Kim Eng Securities Limited
4A-15+16 Floor Vincom Center Dong
Khoi, 72 Le Thanh Ton St. District 1
Ho Chi Minh City, Vietnam
Tel : (84) 844 555 888
Fax : (84) 8 38 271 030

Saudi Arabia
In association with

Anfaal Capital
Villa 47, Tujjar Jeddah
Prince Mohammed bin Abdulaziz
Street P.O. Box 126575
Jeddah 21352
Tel: (966) 2 6068686
Fax: (966) 26068787

North Asia Sales Trading

Kevin Foy
Regional Head Sales Trading
kevinfoy@maybank-ke.com.sg
Tel: (65) 6336-5157
US Toll Free: 1-866-406-7447

Andrew Lee
andrewlee@kimeng.com.hk
Tel: (852) 2268 0283
US Toll Free: 1 877 837 7635

Malaysia

Thailand

Rommel Jacob
rommeljacob@maybank-ib.com
Tel: (603) 2717 5152

Tanasak Krishnasreni
Tanasak.K@maybank-ke.co.th
Tel: (66)2 658 6820

Indonesia
Harianto Liong
harianto.liong@maybank-ke.co.id
Tel: (62) 21 2557 1177

New York

India

Andrew Dacey
adacey@maybank-keusa.com
Tel: (212) 688 2956

Manish Modi
manish@maybank-ke.co.in
Tel: (91)-22-6623-2601

Vietnam

Philippines

Tien Nguyen

Keith Roy
keith_roy@maybank-atrke.com
Tel: (63) 2 848-5288

thuytien.nguyen@maybank-kimeng.com.vn

Tel: (84) 44 555 888 x8079

November 25, 2015

www.maybank-ke.com | www.maybank-keresearch.com

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