ASII

Background

Based on World Bank in third quarter of 2013 Indonesia’s economic growth in 2014 was expected increase 5.6 % up. With dominant domestic consumption and stable politic atmosphere economic growth of Indonesia is still promising. Its challenge may have come from high inflation rate, foreign exchange rate, oil subsidies and high interest rate.

The result of president election in Indonesia at 2014 will affect the economic indicator in second semester of 2014. Investor seems to wait its result before take investment decision as each president has each program in economic development and policy.  

Government allocated much money to subsidies energy consumption especially for oil consumption. The import of diesel contributed to the trade deficit is much. Expert expected government to emphasize energy conversion policy to reduce it. The combination diesel and biodiesel could be a good option for energy conversion policy.  Based on Indonesian Palm oil association, 34 % of the nationwide palm oil biodiesel is absorbed domestically and the rest is exported. Indonesia has largest Palm tree plantations.

In other hand, government encourages people to use Low Cost Green Car to reduce subsidized oil consumption. Low Cost Green Car is vehicle with lower fuel consumption and friendly for environment. For household, gas is good alternative fuel.

Manufacture Industry

Manufacture industry in 2008 – 2012 has compound annual growth rate at 9.4 % (at current price). The investment in manufacture industry has been still growing as the increase in demand for products.

Transport Equipment and machinery sector

The industry has average growth rate at 9 % in 2008 – 2012 (at the current price). Government put development in infrastructure as one of important strategy to reach targeted economic growth. Loan to Value policy should also to be fixed with concerning in purchasing power of consumer.

Heavy equipment for mining and exploration is slowing down as the lower growth in quarrying sector. Its growth rate is slowing down since 2009 -2010. Due to decline in commodity price, commonly major company in mining and heavy equipment is experiencing decrease in its revenue in 2014.

But there are other commodities that increase in its price such as nickel.

Astra international

With low competitiveness in Indonesia, major player such as Astra International could lead the market share in several years for several products. The group has six major business, those are automotive, financial services, agribusiness, and Infrastructure and Information technology. The key drivers of its growth are automotive segment and heavy equipment and mining sector which is each contribution to revenue are 56.3 % for automotive and 26.3 % for heavy equipment and mining.

Net sales	%
109,154.0	56.3
13,867.0	7.2
51,012.0	26.3
12,675.0	6.5
7,843.0	4.0
2,261.0	1.2

In 2013 the group expands its business in automotive, infrastructure and property.

Company	Acquisition	Divestment
Astratel Nusantara and subs	Pelabuhan Pe-
	najam buana -
	Taka
Astra Otoparts	PT. Pakoakuina	15% share
	(51% owned)
Astra Int Group	2.4 hectare land
	for office tower
	& residential
	apartment
Suryaraya Prawira		100% share
Brahmayasa Bahtera		40% share

The group has subsidiary in financial services sector such as Bank Permata, Komatsu Astra Finance (KAF),Surya artha nusantara. Its contribution to group’s revenue is 7.2 % of total revenue.

Astra Int group does good synergy in operating its six business portfolio. The group deposits its biggest cash bank in bank permata amounting to 2.6 trillion and it also has biggest time deposit in bank permata amounting to 5.3 trillion in December 2013.

The group also does the same thing with its portfolio in infrastructure business. Astratel Nusantara did acquisition of penajam buana taka port in east Kalimantan in order to support its business in the area includes palm plantation sector, mining and heavy equipment sector. The purchase of the port is also having purpose to get revenue from other non-group businesses such as oil and gas.

The product of automotive subsidiary of the group are Toyota, Daihatsu, isuzu, UD Trucks,BMW and Peugeot and etc for wholesale car. Meanwhile the product of motorcycle is only Honda. Toyota is market leader in Indonesia for car and Honda lead market share of motorcycle in Indonesia.  Toyota owns more than 35 % of total market share and Honda has more than 60 % of total market share.

More vehicles mean more oil for its fuel. Government will allocated more subsidized gasoline and diesel as the increase of automotive product sold. In other hand that means the government has to provide more infrastructures for vehicle.

Year	Real  Growth	Sales Growth
2009	5.4	1.5
2010	6.9	31.0
2011	6.5	26.0
2012	6.1	15.7
2013	5.6	3.1
2014E	5.6	5.7

Based the data at above it can be taken an estimation of sales of 2014. It will grow at 5.7 % up. The correlation between real growth rate and sales growth is very significant which is at 0.9. Within adjusting the real growth at same level 5.6 %, the sales growth will be at 5.7 %.

Sales growth in 2013 is decline from 15.7 in to 3.1. The economic slowing down and tight monetary policy may have encouraged people to delay their spending.

Ratio analysis
ROE	2012	2013	2014	2015	2016
Net Profit margin	12.1	11.5	11.4	11.4	11.3
Asset Turn Over	103.2	90.6	87.0	78.3	71.5
ROA	12.5	10.4	9.9	8.9	8.1
Financial Leverage	256.0	254.9	219.5	208.6	200.9
ROE	31.9	26.6	21.8	18.6	16.2
Net sales	188,053.0	193,880.0	204,931.2	215,177.7	225,936.6
Gross profit	62,155.0	67,329.0	71,166.8	74,725.1	78,461.3
CFO		43,117.0	52,041.3	51,811.1	53,027.1
Net Addition		37,458.0	9,694.0	10,246.6	10,758.9
Free Cashflow		5,659.0	42,347.3	41,564.5	42,268.2

It is used adjustment in 2014, the company will allocate 5 % of revenue in its capital expenditure. The sales growth will be at 5.7 % as the result of investment in previous year. The sales growth in 2015-2016 is in 5 % with assumption capital expenditure will be at 5 % sales.

P G

Procter and Gamble Company is operating in 180 countries and region all over the world. Its key driver in generating its cash flow is its business territory at USA which is more than 39 percent of its worldwide total sales. The largest segment in its revenue is coming up from Fabric care and home care which is 32 % of total revenue. The second segment is beauty product which is at 24 % of sales.

According to IMF, economic growth of USA is predicted at 2 % It means the company has good opportunity to grow better. The last sales growth in 2012-2013 is 0.6 percent. The company categorizes its territory in to five major areas which are North America, Western Europe, Asia, Latin America and CEEMEA.

	2011	2012	2013
North America	41.0	39.0	39.0
western Europe	20.0	19.0	18.0
Asia	16.0	18.0	18.0
Latin America	9.0	10.0	10.0
CEEMEA	14.0	14.0	15.0

Segments	Percentage
Fabric Care and Home Care	32
Beauty	24
Grooming	9
Healthcare	15
Baby care and Family care	20

Forecast of Net sales

There is a significant correlation between its Capital expenditure and net sales. With in simple analysis we could find its correlation is more than 0.7 which means indicating strong correlation. Based on data of economic growth of USA in 2008 -2012 and data of its worldwide net sales in 2008 -2012, there is strong correlation between economic growth of USA and its net sales. It could be concluded that USA economy still having strong influence to its revenue.

If I used CAGR of Capital expenditure in 2008 – 2012, I find its CAGR is at 6 %. Within assumption of 6 % growth of its capex in 2014, I make assumption that its worldwide sales will grow 2 % up. In another factor IMF has prediction that US economy will grow 2 percent.

The forecasting of financial condition between in 2012-2016 is as the following table:

ROE 2012 2013 2014 2015 2016 Net Profit margin 13.0 13.5 13.5 13.3 13.1 Asset Turn Over 63.3 60.4 55.9 51.4 47.7 ROA 8.2 8.2 7.5 6.8 6.2 Financial Leverage 208.5 204.6 193.0 186.8 182.1 ROE 17.2 16.8 14.5 12.7 11.3 2013 2014 2015 2016 CFO 8071.0 10254.8 10425.7 10580.5 Net Addition of Fixed Asset -3087.0 -4208.4 -4292.5 -4378.4 Free Cash Flow 4984.0 6046.4 6133.2 6202.1

From table at above the assumption of free cash flow in 2016 is forecasted to 6202.1, the result is calculated with steady net sales growth at annually in 2 % from 2014 until 2016 and capital expenditure is  at 5% net sales in 2014-205. 

The company is mature and it is the market leader in almost all segments and its territory. It causes its sales growth very low in 0-2 percent in the last five years.

The CEO encourages all employees to make innovation as in his book in Game Changer. The company tends to decrease its employee in several years. In 2008 the number of employee was 135,000. It was decreased in to 121,000 people. The company looks using more technology and more outsourcing to reduce cost and enhance its profit.

All products and its manufacture process are protected with patent and license. Its good will and intangible assets in 2013 are more than 60 percent of its total asset. That means trade mark and its patent right are valuable asset for the company as their trademarks are market leader in each segment.

UNVR

Background

Indonesia’s economy has consistent growth in its public consumption and investment. 97 % of its GDP is contributed by its domestic economy. The World Bank forecasted that Indonesia’s economy will grow 5.3 % in its report at quarter 3/2013. Its domestic economy consists of public consumption which is at 55 % of GDP and investment which is at 34 % of GDP.

Steady economy is accompanied by relatively stable inflation and healthy demographic structure with high productive age number. With that strength of Indonesia’s economy, public consumption and investment are expected continue to grow as the key driver of economic growth.

Inflation rate vs. BI Rate

Inflation rate (yoy) in 2013 is at 7.25 %, this is higher than previous year which was at 4.3 %.in order to control inflation rate government increase BI Rate at 7.5 %. With regression analysis we could find the correlation between BI rate and inflation rate in 2007-2013 with t-stat at 3.9 or bigger than 2. If BI rate is still 7.5 %, it will reduce the inflation rate from 7.25 % in to 6.90 %.

Once the inflation rate decline usually investor will expect central bank to reduce its BI rate. And people will be expected to increase their public consumption and investment.

UNVR

 UNVR is one of the favorite stocks in IHSG. In fundamental analysis, UNVR has a consistent growth in the several years as low competitiveness in Indonesia. The foreign investment such as UNVR is able to be a market leader easier. In the period of 2007 – 2013, the company has Compound annual growth rate (CAGR) at 16.1 % in its net sales. With regression analysis between non oil and gas manufacturing and net sales of the company, the possible sales growth in 2014 is at 16.1 % higher than its sales in 2013 which was at 12.7 %.

With possible lower inflation rate in 2014, public consumption will be higher. BI Rate is possible not changing and the inflation rate may have been reduced. People tend to increase its consumption include consumer goods, house hold product, food and beverage.

Good news from UNVR, the company has no long term debt. That means the company has strong internal source of fund. The company has good liquidity. 

Forecast

I used lattes CAGR to make simple assumption in sales of 2014. CAGR of 2007 -2013 is at 16.1 %. I made assumption that sales will experience consistent growth in 2014 – 2016. I took gross profit margin at 51.3 % of sales. I used assumption that the company will spend 5 % of its net sales for capital expenditure and it will be still used its short term loan as its source of fund to finance its asset.

The key ratio in 2012-2016 of its forecasting is as the following list

Ratio analysis
Net Profit margin	16.8	16.0	16.0	16.0	16.1
Asset Turn Over	227.8	230.4	175.4	145.5	126.8
ROA	38.3	36.8	28.1	23.3	20.4
Financial Leverage	302.0	313.7	203.9	171.2	155.7
ROE	115.7	115.4	57.4	40.0	31.7
Net Sales	27,303,248.0	30,757,435.0	35,678,624.6	41,387,204.5	48,009,157.3
CFO		5,751,738.0	6,616,947.3	7,539,803.3	8,747,675.8
Net Add fixed asset		1,031,438.0	1,537,871.8	1,783,931.2	2,069,360.2
Free Cash Flow		4,720,300.0	5,079,075.6	5,755,872.1	6,678,315.5

               

PGN -PGAS

Macroeconomic

According to the World Bank in 3/2013 the economic growth of Indonesia will grow at 5.3 %. The nation is still having good expectation for investment. Our economic growth is driven by larger domestic consumption that contributes more than 50 % of total GDP. The challenges are still at our inflation rate, current account deficit and currency exchange rate.

One of vulnerable thing in Indonesia is the capital inflow from abroad that could change currency rate and capital market index level. Our market capitalization is only 60 % of GDP. This is lower than others nations at south East Asia such as Malaysia at 270 %, Thailand at 170 % and Philippines at 140 %.  The majority of Capital inflow from global market seems act as speculative investor which tends to invest in short time. They seem investing money not based on fundamental analysis but they tend to use technical analysis. As sample commonly emerging market does not have good stability in politic, especially in election year.  They could differentiate their stock value with derivative transaction to beat rupiah exchange rate down or up.

In other side the capital inflow could also as a good sign that the circumstances in Indonesia will be better then they will do profit taking once their stock price increase.  

In May 2014, the IHSG index exceeds level of 5000, huge capital inflow amounting to USD 184 million gets inside to Indonesia through capital market. The impact to our economic is not too significant but I think investor will remove their money if the politic circumstances will not be stable in the future especially after president election party. The rupiah exchange rate may decline.  

In global industry the oil price is affected by its production. Commonly the production of oil is affected by geopolitical issues in Middle East such as Iran, Israel, Persian Gulf and etc.

Another problem in Indonesia is our policy in subsidized oil that spends a lot of cost. If the subsidized oil is suddenly no longer exists the inflation rate will jump. in order to anticipate the condition Government has been done energy conversion from oil in to gas. Public transportation is starting to use gas as its fuel.

Based on data in the 2008 -2012 Indonesia was a net importer of oil which means its consumption exceeds its production. It was inversely with natural gas industry in Indonesia which is experiencing surplus. The production exceeds our consumption.

The gas consumption will be higher at the future as our government policy would like to reduce its subsidy in oil consumption. The natural gas industry will take more portions in producing energy and fuel consumption for public transportation.

Perusahaan Gas Negara

The revenue of the company in 2013 is 16.3 % higher compared to previous year. The gross profit margin is lower than 2012 from 57 in to 47 percent. The decline may be caused by gas price. Because of that net profit margin and EBITDA decline.

The majority of the revenue is from sale the natural gas to its client. PGN buys gas from pertamina and its join operation company to other company. In May 2013, the company buy asset of oil and gas property through its subsidiary SEI in ketapang, bangkanai and ujung pangkah. In 2012 its asset of oil and gas property is zero. PGN starts to act as gas exploration and production in 2013.

PGN has huge amount of cash and restricted cash, it is suitable with the nature of business of oil and Gas Company which is usually having huge of cash, depletion and depreciation and also huge tax.

The revenue in the future will be higher than 16 % as its acquisition in three blocks at java and Kalimantan. I just did stress test that revenue increase 5 % and the capital expenditure is 5 % of sales the company will reach similar earning per share at 0.04 the same as earning per share in 2012. I used same gross margin, activity ratio and I did adjustment the company will pay the short term debt off in 2013. If you are interested to my model, you could send sms to me.

The company has short term debt in bank Sumitomo Mitsui and bank of Tokyo Mitsubishi, the each amount is USD 200 million and USD 100 million.

  

               

BBRI

Economic condition of 2014

Indonesia seems stable in its economic growth in 2014, according to the expert it will be at range of 5.8- 6.2. It is slower than economic growth in 2013 which was forecasted at 5.7 % up. Indonesia has good competitive advantage in its economic, this is stable and this is supported by more than 50 % domestic consumption.

As long as people have strong ability in buying goods and the inflation rate is better, the condition will be better. BI rate is at 7.5 %, it is predicted that it will be higher at 2014. The deficit of current account which is contributed by oil and gas sector as main contributor make the central bank keep BI rate at the point.

The current account deficit will be still high in 2014. The lack of government policy in oil and gas sector increases its business risk and the similar problem is also occurred in biodiesel conversion policy in a mixture of diesel. It is difficult to reduce trade deficit in diesel imports. The crisis at Ukraine will trigger higher oil price and finally will increase inflation rate. Higher its rate will force central bank keep Bi rate still high.

76 % of imports are raw material items which means our consumption is not matching with domestic raw material either its number or availability.

I think if industry produce goods which are supported with more local raw material the trade deficit will be able to be reduced.

Central Bank has changed its required reserve from 5 % in to 8 %. With higher reserve, the banks are expected safer. Based on data 2013 credit growth is at 22.2 % yoy in October 2013, this is slower than its growth with 23.1 % on September 2013. This regulation increases its barrier to entry for new comers who have to have more capital to establish Bank.

Bank Rakyat Indonesia

The company still concerns in its core business, the credit retail segment. The micro segment is at 30.7 % of total loan although this is smaller than the retail banking. Since they have launched TerasBRI, its network and product development has been better. TerasBRI as the part of its micro strategic has increased both micro Loan and micro deposit significantly in 2012. Micro segment is designed for personal customer with competitive product such as Kredit Usaha Rakyat and Kupedes as the lending product and simpedes as funding product.

The company expanded its micro infrastructure with 5000 BRI units, 1,778 TerasBRI and 350 mobile TerasBRI.

In 2012 the loan of the company is at IDR 362 trillion. It increases 22.9 % higher than loan in 2011.  Based its loan composition in 2012, the biggest loan of its loan is retail segment with 42 % of total loan. I took rediction the loan will increase 19 % higher with increase of interest income at 20 % in 2014.

In 2008-2012 The company have good loan to deposit ratio, good capital adequacy ratio and low Non performing loan. The asset has average growth at 22.5 % in 2008-2012. The other good news is its average growth of fund from third party in 2008-2012 is at 27.45 %.

As the economic growth in 2014 is predicted in lower rate because of the election schedule in the year, I forecast the placement with bank Indonesia will be higher than 2013 at 20 % increase.

I took prediction that EPS will increase to 1.026, 1,357, 1,543 with consecutive growth 2014-2016 at 20%,25 %, 20%. In 2015 the loan assessment will at 25 % as the optimistic condition of new government.

As long as government could decrease deficit  in current account  inflation rate and Bi rate will be stable.      

If you are interested to my forecasting of BBRI you could send sms 081217596612.