by Harry Su
Senior
Associate Director
Head of
Research
Bahana
Securities
(published also at The Jakarta Post daily)
The Indonesian market’s volatility is currently
confronting triple whammies in the form of:
1. Scaled-back QE, 2. IDR weakness and 3. Higher interest rates. These factors have caused a 10% market
pullback since its recent peak at 5,215.
Note that back in 2005 and 2008 when the government implemented fuel
price hikes the index corrected 12% and 16% respectively over a period of one
month.
At this stage of the cycle, we advise investors to
begin accumulating stocks at around the 4,500-4600 level with the view of
adding to positions in the event the market would overshoot on the way down.
According to our technical analyst, the market could head to 4,200.
With 4% IDR depreciation ytd and the prospect of
higher interest rates on the back of planned fuel price increases, we have implemented
sensitivity analysis to gauge the overall impact on the overall market as well
as on individual stocks under our coverage.
On the market as a whole, our study shows that every
1% interest rate hike, EPS growth for the market would drop by 0.7ppt,
reflecting 7.5% y-y growth from 8.2% currently (ceteris paribus). We note that the market is more sensitive to
IDR depreciation (i.e. every 1% weaker local currency = 1.1ppt lower market EPS
growth), partly as listed Indonesian companies, since the Asian 1998 financial
crisis, have undergone balance sheet repair with 2013 market net gearing of
just 31.9%, down from 38.5% in 2012.
Exhibit 1 shows the full impact of IDR depreciation
combined with increased interest rates. From this list, and taking into account
their respective fundamentals, we have come up with our top 10 non-financial picks
(exhibit 2). On financials, we note that even a previous safe haven like BBCA
is confronting challenges if interest rates were to go up due to: 1. High
exposure on fixed rate mortgages and 2. High LDR resulting in the bank having
to reprice time deposits from 3.25% to 5%.
On the non-financial stocks, we are turning more
positive on CPO plays given IDR deprecation with AALI and ANJT as our top
plantation picks. PGAS is another
defensive name we like, particularly given 14% drop since the market’s recent
peak on 20 May 2013. Over the same
period, our other top picks have seen an average 7% drop over the same period.
Happy trading!
Exhibit1. Sensitivity on IDR depreciation and interest rate, net impact
Ticker
|
Sensitivity on
net profit
for@1% IDR Depreciation (%)
|
Sensitivity on
net profit
for @1% interest rate hike (%)
|
Total
|
Ticker
|
Sensitivity on
net profit
for@1% IDR Depreciation (%)
|
Sensitivity on
net profit
for @1% interest rate hike (%)
|
Total
|
TINS
|
5.2
|
(0.3)
|
4.9
|
CTRP
|
0.1
|
(1.7)
|
(1.6)
|
LSIP
|
2.6
|
1.8
|
4.4
|
ADRO
|
0.0
|
(1.6)
|
(1.6)
|
AALI
|
3.4
|
0.2
|
3.6
|
BJBR
|
0.0
|
(1.6)
|
(1.6)
|
UNTR
|
2.6
|
0.8
|
3.4
|
CPIN
|
(1.7)
|
0.0
|
(1.7)
|
PTBA
|
0.5
|
2.6
|
3.1
|
BBKP
|
0.0
|
(1.7)
|
(1.7)
|
SGRO
|
3.4
|
(0.5)
|
2.9
|
BBTN
|
0.0
|
(1.7)
|
(1.7)
|
BBCA
|
0.0
|
2.5
|
2.5
|
ADHI
|
0.5
|
(2.2)
|
(1.7)
|
BMRI
|
0.0
|
2.2
|
2.2
|
JPFA
|
(1.5)
|
(0.2)
|
(1.7)
|
SIMP
|
4.0
|
(1.9)
|
2.1
|
UNVR
|
(1.5)
|
(0.2)
|
(1.7)
|
BSDE
|
0.0
|
2.0
|
2.0
|
JCI
|
(1.1)
|
(0.7)
|
(1.8)
|
ANTM
|
1.5
|
0.4
|
1.9
|
BWPT
|
2.3
|
(4.1)
|
(1.8)
|
ANJT
|
0.0
|
1.7
|
1.7
|
CMNP
|
(0.3)
|
(1.5)
|
(1.8)
|
SSIA
|
1.5
|
0.1
|
1.6
|
ACES
|
(2.5)
|
0.4
|
(2.1)
|
CASS
|
1.6
|
0.0
|
1.6
|
TELE
|
(1.8)
|
(0.3)
|
(2.1)
|
BBNI
|
0.0
|
1.3
|
1.3
|
ICBP
|
(3.4)
|
0.9
|
(2.5)
|
SMRA
|
(0.5)
|
1.8
|
1.3
|
ROTI
|
(2.2)
|
(0.3)
|
(2.5)
|
ITMG
|
0.0
|
1.2
|
1.2
|
BBRI
|
0.0
|
(2.5)
|
(2.5)
|
HRUM
|
0.0
|
1.1
|
1.1
|
BDMN
|
0.0
|
(2.6)
|
(2.6)
|
TOTL
|
(0.2)
|
1.3
|
1.1
|
APLN
|
(0.7)
|
(2.5)
|
(3.2)
|
PGAS
|
0.0
|
1.0
|
1.0
|
WINS
|
0.0
|
(3.5)
|
(3.5)
|
WIKA
|
(0.5)
|
1.4
|
0.9
|
JSMR
|
0.1
|
(3.7)
|
(3.6)
|
BEST
|
0.5
|
0.3
|
0.8
|
IMAS
|
(1.8)
|
(2.0)
|
(3.8)
|
SCMA
|
(0.0)
|
0.5
|
0.5
|
PTPP
|
(0.8)
|
(3.0)
|
(3.8)
|
LPCK
|
(0.1)
|
0.5
|
0.4
|
EXCL
|
(1.0)
|
(3.2)
|
(4.2)
|
ASRI
|
0.1
|
0.2
|
0.3
|
MAIN
|
(4.0)
|
(0.3)
|
(4.3)
|
ASII
|
1.4
|
(1.2)
|
0.2
|
HERO
|
(2.3)
|
(2.1)
|
(4.4)
|
RALS
|
(2.1)
|
2.2
|
0.1
|
PSAB
|
0.0
|
(4.7)
|
(4.7)
|
INTP
|
(0.9)
|
1.0
|
0.1
|
RANC
|
(4.5)
|
(0.5)
|
(5.0)
|
WSKT
|
(2.1)
|
1.9
|
(0.2)
|
ERAA
|
(4.9)
|
(0.3)
|
(5.2)
|
SMGR
|
(0.8)
|
0.2
|
(0.6)
|
MAPI
|
(4.8)
|
(1.1)
|
(5.9)
|
LPKR
|
1.3
|
(1.9)
|
(0.6)
|
GZCO
|
1.7
|
(7.7)
|
(6.0)
|
INCO
|
0.0
|
(0.6)
|
(0.6)
|
KIJA
|
(3.0)
|
(3.1)
|
(6.1)
|
KLBF
|
(1.8)
|
1.1
|
(0.7)
|
BORN
|
0.0
|
(6.7)
|
(6.7)
|
CTRA
|
(0.7)
|
(0.1)
|
(0.8)
|
GJTL
|
(5.9)
|
(1.5)
|
(7.4)
|
GIAA
|
0.0
|
(0.9)
|
(0.9)
|
TOWR
|
(3.9)
|
(4.1)
|
(8.0)
|
BJTM
|
0.0
|
(0.9)
|
(0.9)
|
BTPN
|
0.0
|
(8.0)
|
(8.0)
|
AKRA
|
(1.5)
|
0.4
|
(1.1)
|
BTEL
|
(5.2)
|
(4.5)
|
(9.7)
|
TSPC
|
(2.5)
|
1.4
|
(1.1)
|
ASSA
|
0.4
|
(10.8)
|
(10.4)
|
INDF
|
(3.1)
|
1.6
|
(1.5)
|
MEDC
|
0.0
|
(10.8)
|
(10.8)
|
TLKM
|
(0.9)
|
(0.7)
|
(1.6)
|
BUMI
|
0.0
|
(19.1)
|
(19.1)
|
GGRM
|
(0.7)
|
(0.9)
|
(1.6)
|
ISAT
|
(17.9)
|
(24.0)
|
(41.9)
|
Source: Bahana estimates
Exhibit 2. Top
10 picks, 2014F valuation
Mkt cap.
|
Price
|
TP
|
Upside
|
EPS gwt.
|
PE
|
P/BV
|
Yield
|
ROE
|
|
(USDm)
|
(IDR)
|
(IDR)
|
(%)
|
(%)
|
(x)
|
(x)
|
(%)
|
(%)
|
|
PGAS
|
13,596
|
5,400
|
6,800
|
26
|
2.1
|
14.5
|
4.8
|
3.9
|
38.2
|
INTP
|
8,335
|
21,800
|
25,300
|
16
|
16.1
|
12.5
|
2.8
|
2.4
|
24.8
|
AALI
|
3,427
|
20,950
|
24,000
|
15
|
31.3
|
13.3
|
3.1
|
3.7
|
25.0
|
BSDE
|
3,326
|
1,830
|
2,125
|
16
|
27.5
|
11.3
|
2.6
|
1.4
|
25.5
|
SMRA
|
1,910
|
2,550
|
3,200
|
25
|
22.1
|
18.8
|
4.0
|
1.1
|
23.5
|
ASRI
|
1,735
|
850
|
1,360
|
60
|
16.8
|
9.4
|
2.3
|
2.7
|
27.3
|
WIKA
|
1,464
|
2,300
|
3,200
|
39
|
28.2
|
18.7
|
4.1
|
1.5
|
24.0
|
BEST
|
720
|
720
|
1,190
|
65
|
24.4
|
7.1
|
2.0
|
2.8
|
35.8
|
ANJT
|
485
|
1,400
|
1,650
|
18
|
10.5
|
7.5
|
9.7
|
0.0
|
12.7
|
CASS
|
178
|
820
|
1,010
|
23
|
16.3
|
11.8
|
3.0
|
0.9
|
28.6
|
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