key index danareksa snapshot

See important disclosure on the back of this report

Danareksa Snapshot Tuesday, 15 April 2014

From Research:

Market outlook: Banking on the coalition (Overweight) The market underwent a major correction following the legislative elections on 9 April. With the quick count indicating that PDI-P’s share of the vote was still below the important 25% level, uncertainty over Jokowi’s presidential bid mounted, sending the market into roller coaster mode. Hence, attention shifted toward the coalition process and how PDI-P would reach the critical 25% threshold needed to confirm Jokowi’s nomination. The developments over the weekend provide greater clarity on this matter. In this regard, Nasdem has formally backed PDI-P, and with this additional 7% share of the votes, PDI-P+Nasdem’s combined share surpasses the 25% threshold. As such, PDI-P is the first party with a ticket for the presidential race.

Weekly report: Volatility increases (Overweight) With the disappointment over PDI-P’s performance in last week’s elections, profit taking derailed the recent market re-rating. The market dropped more than 3% with outflows reaching Rp1.5t following the announcement of the quick count results which indicate that PDI-P’s share of the vote was still below the important 25% threshold. Property was the laggard last week (-6.6%), followed by basic industry (-2.7%) and finance (-1.7%). By contrast, commodities were the best performing sector with mining up 2.5% and agriculture up 1.3%. YTD, total inflows have already reached Rp31t.

From Today’s Headlines: (please see our analysts’ comment inside)

Coal Production Will be Down by 12% (BI) Government to increase tariff for peak hour flights (TJP)

Tin exports fell 2.5%, the price will increased (BI)

From IDX:

Cash announcement Code

Ex-Date

Date Payable

Amount (Rp)

BBNI 29-Apr-14 14-May-14 146

ITMG 29-Apr-14 14-May-14 975 PTPP 22-Apr-14 7-May-14 26 KAEF 21-Apr-14 8-May-14 10 TINS 17-Apr-14 7-May-14 56 SMBR 16-Apr-14 5-May-14 8 Listing announcement Date Term PT Eka Sari Lorena Transport

(LRNA)

15-Apr-14 IPO

Source: Stockwatch

Key Index

Close Chg Ytd Vol

(%) (%) (US$ m)

Asean - 5

Indonesia 4,865 1.0 13.8 487

Thailand 1,389 (0.0) 7.0 650

Philippines 6,590 (0.1) 11.9 123

Malaysia 1,852 (0.1) (0.8) 605

Singapore 3,215 0.5 1.5 700

Regional

China 2,132 0.0 0.7 17,972

Hong Kong 23,039 0.2 (1.1) 7,939

Japan 13,910 (0.4) (14.6) 11,095

Korea 2,004 0.4 (0.4) 3,422

Taiwan 8,857 (0.6) 2.9 2,594

India 22,629 (0.4) 6.9 473

Nasdaq 4,023 0.6 (3.7) 67,692

Dow Jones 16,173 0.9 (2.4) 6,140

Currency and Interest Rate

Rate w-w m-m ytd

(%) (%) (%)

Rupiah (Rp/1US$) 11,438 (1.2) (0.7) 6.0

SBI rate (%) 7.13 (0.0) (0.0) (0.1)

10-y Govt Indo bond 7.86 0.0 (0.1) (0.6)

Hard Commodities

Unit Price d-d m-m ytd

(%) (%) (%)

Coal US$/ton 73 n/a (1.8) (13.8)

Gold US$/toz 1,326 (0.2) (4.1) 10.0

Nickel US$/mt.ton 17,739 2.2 13.0 28.2

Tin US$/mt.ton 23,485 0.3 2.5 5.1

Soft Commodities

Unit Price d-d m-m ytd

(%) (%) (%)

Cocoa US$/mt.ton 3,067 0.2 0.1 7.2

Corn US$/mt.ton 193 0.9 5.5 21.0

Crude Oil US$/barrel 109 1.6 0.5 (1.6)

Palm oil MYR/mt.ton 2,662 (0.1) (8.9) 3.5

Rubber USd/kg 178 0.6 (8.3) (21.2)

Pulp US$/tonne 924 n/a 0.6 1.9

Coffee US$/60kg bag 117 (1.5) (7.6) 19.5

Sugar US$/MT 423 (2.9) (7.4) (5.7)

Wheat US$/mt.ton 252 (0.3) (0.8) 11.0

Source: Bloomberg

PT Danareksa Sekuritas Jl. Medan Merdeka Selatan No. 14 Jakarta 10110 Indonesia Tel (62 21) 350 9777, 350 9888 Fax (62 21) 350 1709

Our Research team and sector coverage: Agriculture: Helmy Kristanto - [email protected]; (62-21) 2955 824 Automotive: Helmy Kristanto - [email protected]; (62-21) 2955 824 Auto Component: Joko Sogie - [email protected]; (62-21) 29555 888 ext.3512 Banking: Eka Savitri - [email protected]; (62-21) 29555 888 ext. 3509 Cement: Helmy Kristanto - [email protected]; (62-21) 2955 824 Coal: Stefanus Darmagiri – [email protected]; (62-21) 29555 888 ext.3520 Construction: Joko Sogie - [email protected]; (62-21) 29555 888 ext.3512 Consumer: Helmy Kristanto - [email protected]; (62-21) 2955 824 Heavy Equipment: Stefanus Darmagiri – [email protected]; (62-21) 29555 888 ext.3520 Media: Lucky Ariesandi, CFA – [email protected]; (62-21) 29555 888 ext.3530 Metal Mining: Stefanus Darmagiri – [email protected]; (62-21) 29555 888 ext.3520 Pharmaceutical: Helmy Kristanto - [email protected]; (62-21) 2955 824 Property: Anindya Saraswati - [email protected]; (62-21) 29555 888 ext. 3506 Retail: Anindya Saraswati - [email protected]; (62-21) 29555 888 ext. 3506 Strategy: Helmy Kristanto - [email protected]; (62-21) 2955 824 Telecommunication: Lucky Ariesandi, CFA – [email protected]; (62-21) 29555 888 ext.3530 Utilities: Helmy Kristanto - [email protected]; (62-21) 2955 824 Technical Analyst: Lucky Bayu Purnomo – [email protected]; (62-21) 29555 888 ext.3508 Research Associate: Armando Marulitua – [email protected]; (62-21) 29555 888 ext.3503

Our Sales team: Ermawati A. Erman - [email protected]; (62 21) 29555 888 ext. 3151 Asfarita Andalusia - [email protected]; (62 21) 29555 888 ext. 3134 Kemal A. Uno - [email protected]; (62 21) 29555 888 ext. 3124 Novrita E. Putrianti - [email protected]; (62 21) 29555 888 ext. 3128 Ehrliech Suhartono - [email protected]; (62 21) 29555 888 ext. 3132 Yunita L. Nababan - [email protected]; (62 21) 29555 888 ext. 3145 Bram Taarea – [email protected]; (62 21) 29555 888 ext. 3127 Martin Joshua - [email protected]; (62 21) 29555 888 ext. 3126 Yofi Lasini - [email protected]; (62 21) 29555 888 ext. 3133

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Market Outlook

Banking on the coalition Politic takes center stage

The market underwent a major correction following the legislative elections on 9 April.

With the quick count indicating that PDI-P’s share of the vote was still below the

important 25% level, uncertainty over Jokowi’s presidential bid mounted, sending the

market into roller coaster mode. Hence, attention shifted toward the coalition process

and how PDI-P would reach the critical 25% threshold needed to confirm Jokowi’s

nomination. The developments over the weekend provide greater clarity on this matter.

In this regard, Nasdem has formally backed PDI-P, and with this additional 7% share of

the votes, PDI-P+Nasdem’s combined share surpasses the 25% threshold. As such, PDI-P

is the first party with a ticket for the presidential race. With Jokowi’s high popularity and

this important political deal in the bag, the way is now open for further potential

coalitions with other smaller parties. In our view, the developments over the weekend

have provided short-term support for the market to gain further ground and recover last

week’s heavy losses. Nonetheless, we continue to believe that market volatility will

remain high over the short-term, especially in the absence of concrete results on the

nomination of the potential VP. On a longer-term horizon, we foresee any weakness in

the market as a buying opportunity given the potential structural changes which will

keep Indonesia’s economic momentum on track.

Less concern on macro front

Our recent marketing in Asia reveals that macro concerns are less likely to hold back an

equity market re-rating. The recent announcement of a trade surplus has helped to

restore market confidence while inflation is continuing to head south. And with the start

of the harvesting season in several regions, inflation will continue to trend down. After

MoM inflation of only 0.08% in March (vs 0.26% in February), there exists the possibility

of deflation in April, especially with the peak of the harvesting season which will ease

pressures in the high-weighting food cost component. But while the trade surplus is

encouraging, lower imports of raw materials and machinery actually paint a picture of a

slowing domestic economy. Meanwhile, the banking sector’s excess liquidity continues

to remain tight with the latest figure of Rp20tn vs Rp77.7t in 2013. As such, loans growth

will continue to fall, but this has been fully anticipated with analysts projecting 15-17%

loans growth this year.

Add defensive stocks: Telkom to our top picks

The Indonesian market continues to be the best performer in the region despite PDI-P’s

setback in the elections. Interest rate sensitive sectors dominate the best performing

sectors with property up 24.3% and finance up 18.8%, while the commodity sector

remains at the bottom. Foreign net inflows have now reached Rp30.9tn, or much higher

than the total net outflows in 2013 of Rp20.6t. We remove ASII and PTPP from our list of

top picks and, to replace them, add: 1) TLKM - as we see continued exponential growth

in the mobile data segment supported by the availability of cheaper 3G enabled

handsets and relatively stable margins for existing operations. We estimate 10% CAGR

growth in TLKM’s core net profits through 2016 on the back of surging data revenues,

and core ROE to gradually climb to 25% in 2016 from 24% in 2014; and 2) SMGR - as we

believe the stock is well-placed to benefit from potentially rapid out-of-Java

infrastructure development. While cement and construction are the best plays on

Indonesia’s infrastructure story, the former has lagged behind in terms of share price

performance.

Tuesday, 15 April 2014

OVERWEIGHT

YE14 Target 4,940 JCI Index 4,864 Market Cap. (Rp tn) 4,822 US$ (bn) 421 1Y Avg. daily T/O. (Rp bn) 5,352

US$ (mn) 468

Danareksa research reports are also available at Reuters Multex and First Call Direct and Bloomberg.

2

Market Outlook 15 April 2014

Politic takes the center stage

The market underwent a major correction following the legislative elections on 9 April.

With the quick count indicating that PDI-P’s share of the vote was still below the

important 25% level, uncertainty over Jokowi’s presidential bid mounted, sending the

market into roller coaster mode. Hence, attention shifted toward the coalition process

and how PDI-P would reach the critical 25% threshold needed to confirm Jokowi’s

nomination. Based on the latest quick count, PDI-P’s share of the votes is still below the

20% level, at 19.1%, with Golkar in second place with 14.7% of the vote and Gerindra in

third place with 11.9% of the vote. While Jokowi’s greater popularity remains

unchallenged by other candidates, PDI-P will first need to form a coalition to get a ticket

for the presidential election race.

Exhibit 1. Quick Count Result

Source: Various media, as of 11 April 2014

The developments over the weekend provide greater clarity on Jokowi’s presidential

chances. In this regard, Nasdem has formally backed PDI-P, and with this additional 7%

share of the votes, PDI-P+Nasdem’s combined share surpasses the 25% threshold. As

such, PDI-P is the first party with a ticket for the presidential race. With Jokowi’s high

popularity and this important political deal in the bag, the way is now open for further

potential coalitions with other smaller parties. In particular, enjoying solid results, the

Islamic-based parties are likely to be intensively courted by the three large nationalist

parties, PDI-P, Golkar and Gerindra.

One of major surprise from last week election would be the vote improvement for most

of Islamic party. Coalition among those parties will be sufficient to nominate president

and VP candidates.

Exhibit 2. Potential coalition party

Source: Various media, as of 11 April 2014

In the first presidential elections on 9 July, we expect there will be at least 3 pairings

since in addition to Jokowi, Golkar’s Aburizal Bakrie and Gerindra’s Prabowo Subianto

are still adamant that they want to join the race. While Jokowi is the clear favorite

according to various opinion polls, we believe the VP nomination will play a crucial part

in determining which pairing wins the elections. The names of potential VP candidates

are still being discussed by the parties in the ongoing party coalition process. Over the

weekend, as reported in the media, Jokowi suggested that the names of 5 shortlisted

PDIP

Nasdem PAN PKB PPP PKS Demokrat Hanura PKS Demokrat PKB PAN PKS PPP PBB

Golkar PKBGerindra

42.40% 40.42% 40.41% 31.69%

3


candidates had come up. While he did not provide any specific names, Jokowi did say

they came from various backgrounds including the economy, the military and politics.

Exhibit 3. Jokowi’s potential VP

Source: Various media

In our view, the developments over the weekend have provided short-term support for

the market to gain further ground and recover last week’s heavy losses. Nonetheless, we

continue to believe that market volatility will remain high over the short-term, especially

in the absence of concrete results on the nomination of the potential VP. On a longer-

term horizon, we foresee any weakness in the market as a buying opportunity given the

potential structural changes which will keep Indonesia’s economic momentum on track.

4


Easing concerns on the macro front

Our recent marketing in Asia reveals that macro concerns are less likely to hold back an

equity market re-rating. The recent announcement of a trade surplus has helped to

restore market confidence while inflation is continuing to head south. And with the start

of the harvesting season in several regions, inflation will continue to trend down. After

MoM inflation of only 0.08% in March (vs 0.26% in February), there exists the possibility

of deflation in April, especially with the peak of the harvesting season which will ease

pressures in the high-weighting food cost component.

Exhibit 4. Inflation Components

Source: Central Bureau of Statistics (BPS)

Exhibit 5. Inflation rate and 2012 base components

Source: Central Bureau of Statistics (BPS) and DRI

On the trade front, higher exports coupled with lower imports have helped turn a trade deficit into a trade surplus. With exports increasing to USD14.57b, up 0.68% m-m, and imports falling further to USD13.8b in February (-7.9% m-m), Indonesia enjoyed a USD785b trade surplus in 2014. While we still maintain our belief that volatility in trade data will continue, any disappointment on this front will be less detrimental to market confidence in the future, especially given hopes that new government policies will be successful in resolving current account imbalances. Lower imports of raw materials and machinery actually paint a picture of a slowing domestic economy. Our economists maintain their forecast of a 7.5% reference rate up to at least the end of 2014. Meanwhile, the banking sector’s excess liquidity continues to remain tight with the latest figure of Rp20tn vs Rp77.7t in 2013. In our view, this will hold back the lending activities of banks. Furthermore, the government’s huge front loading bonds issuance has also been a factor behind the current tight liquidity. As a result, banking sector loans growth fell from 22.2% in 2013 to 20% in January 2014 and

Weight

2012 Jan-14 Feb-14 Mar-14 Jan-14 Feb-14 Mar-14 Jan-14 Feb-14 Mar-14 2012 2013 2014

Foodstuffs 18.9 2.77 0.36 -0.44 11.43 9.62 7.34 0.56 0.04 -0.11 0.77 6.86 2.68

Prepared Food 16.2 0.72 0.43 0.43 7.63 7.59 7.60 0.12 0.08 0.07 1.46 1.21 1.59

Housing 25.4 1.01 0.17 0.16 6.59 5.89 5.86 0.25 0.04 0.04 1.02 1.62 1.34

Clothing 7.3 0.55 0.57 0.08 1.81 2.67 3.11 0.04 0.04 0.00 1.29 -1.09 1.20

Medical Care 4.7 0.72 0.28 0.41 4.30 3.99 4.03 0.03 0.01 0.02 0.81 1.14 1.43

Education 8.5 0.28 0.17 0.14 3.75 3.78 3.85 0.03 0.02 0.01 0.30 0.04 0.60

Transportation 19.2 0.20 0.15 0.24 13.11 13.10 13.20 0.04 0.03 0.05 0.40 -0.17 0.59

General 100.0 1.07 0.26 0.08 8.22 7.75 7.32 1.07 0.26 0.08 0.80 2.13 1.41

Food and Non-Food

Food 35.0 1.84 0.39 -0.05 9.70 8.70 7.46 0.68 0.12 -0.04 1.12 4.25 2.19

Non-Food 65.0 0.60 0.21 0.19 7.42 7.22 7.30 0.39 0.14 0.12 0.76 0.55 1.00

Core Inflation

Core Inflation 0.56 0.37 0.21 4.53 4.57 4.61 0.34 0.22 0.17 0.97 0.51 1.14

Administered Price 1.00 0.01 0.31 18.27 17.37 17.47 0.20 0.01 0.04 0.92 1.18 1.33

Volatile Food 2.89 0.32 -0.55 11.91 9.85 7.25 0.53 0.03 0.13 0.65 7.58 2.66

MoM ShareYoY Jan-Mar

5


then to 19% in February 2014. However, a slowdown in loans growth has been fully anticipated with analysts projecting 15-17% loans growth this year.

Exhibit 6. Foreign trade data

Source: Danareksa Research Institute

Another round of fuel price hikes is still very likely, we believe. With the new government to be installed in October 2014, we believe that the reallocation of subsidies will be a priority. While another increase in fuel prices would lead to higher inflation, and thus, interest rates, over the medium to longer term the impact would be positive on both the Indonesian economy and stock market. Such a move would also pave the way for potential upgrades to investment grade, which, if this happens, would be a major catalyst for stock market gains and further foreign inflows.

Exhibit 7. Excess Liquidity and Government Budget Realisation

Source: Danareksa Research Institute

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb 2012 2013 2014

Export (USD bn) 15.4 15.0 15.0 14.8 16.1 14.8 15.1 13.1 14.7 15.7 15.9 17.0 14.5 14.6 31.3 30.4 29.0

Export Oil & Gas 2.7 2.6 2.9 2.5 2.9 2.8 2.3 2.7 2.4 2.7 2.8 3.4 2.5 2.7 6.5 5.2 5.2

Export Non Oil and Gas (USD mn) 12.7 12.4 12.1 12.3 13.2 12.0 12.8 10.4 12.3 13.0 13.2 13.6 12.0 11.9 24.8 25.2 23.9

Import (USD mn) 15.5 15.3 14.9 16.5 16.7 15.6 17.4 13.0 15.5 15.7 15.1 15.5 14.9 13.8 29.4 30.8 28.7

Import Oil & Gas 4.0 3.6 3.9 3.6 3.4 3.5 4.1 3.7 3.7 3.5 3.9 4.2 3.6 3.5 6.5 7.6 7.0

Import Non Oil and Gas (USD mn) 11.5 11.7 11.0 12.8 13.2 12.1 13.3 9.3 11.8 12.2 11.2 11.2 11.4 10.3 22.9 23.2 21.7

Balance -0.1 -0.3 1.0 -1.7 -0.5 -0.9 -2.3 1.0 -0.8 0.0 8.0 1.5 -0.4 0.8 1.8 -0.4 0.3

Oil & Gas -1.3 -1.1 -1.0 -1.2 -0.5 -0.7 -1.9 -0.1 -1.3 -0.8 -1.2 -0.8 -1.1 -0.8 0.0 -2.4 -1.9

Exclude Oil/Gas 1.2 8.0 1.1 -0.5 0.0 -0.1 -0.5 1.0 5.0 8.0 2.0 2.3 6.0 1.6 1.9 2.0 2.2

YoY Growth

(percent)

Export -1.2 -4.3 -12.9 -8.7 -4.1 -4.4 -6.2 -6.9 -7.5 2.4 -2.3 10.2 -5.8 -3.0 7.7 -2.8 -4.4

Exclude Oil/Gas 2.4 9.0 -12.1 -2.4 8.0 -4.7 -2.8 -8.0 -6.4 2.4 -3.1 9.1 -5.8 -4.3 4.1 1.6 -5.1

Import 6.2 3.0 -8.8 -2.8 -2.2 -6.5 6.5 -5.8 1.1 -8.9 -10.5 -0.8 -3.5 -10.0 21.0 4.6 -6.7

Exclude Oil/Gas -0.4 2.6 -10.8 1.0 -2.7 -9.5 -2.3 -11.1 -0.9 -8.8 -12.8 -5.4 -1.1 -11.5 21.9 1.1 -6.3

MoM Growth

(percent)

Export (USD bn) -0.1 -2.3 0.1 -1.8 9.3 -8.5 2.2 -13.3 12.4 6.7 1.5 6.6 -14.7 0.7

Export Oil & Gas -10.6 -3.7 11.5 -13.8 16.0 -3.4 -17.9 17.4 -11.1 12.5 3.7 21.4 -26.5 6.3

Export Non Oil and Gas (USD mn) 2.4 -2.2 -2.8 1.8 7.3 -9.5 7.1 -19.1 18.6 5.6 1.5 3.0 -11.6 -0.5

Import (USD mn) -0.8 -0.9 -2.8 10.6 1.2 -6.1 11.4 -25.3 19.2 1.1 -3.3 2.0 -3.5 -7.6

Import Oil & Gas 7.0 -8.2 7.2 -7.0 -5.3 2.8 17.2 -11.2 1.2 -6.5 13.4 7.4 -15.8 -2.6

Import Non Oil and Gas (USD mn) -3.3 1.6 -5.9 16.8 3.0 -8.5 9.7 -29.7 26.3 3.4 -8.1 0.2 1.1 -9.1

Jan-Feb2013 2014

6


IDR volatility also raise, but the weakening is quite contained last week, unlike the

situation in equity market. We maintain our year end IDR forecast of Rp10,500.

Indonesia remains the best performing market supported by huge inflow ytd

Indonesia market continues to be the best performing in the region, despite the recent

set back on PDI-P slim winning. The interest rate sensitive sector dominate the top

sector performance with property up 24.3% and finance 18.8%, while the commodity

remains at the bottom. Foreign net inflow has now reached Rp30.9tn, much higher than

total net outflow in 2013 of Rp20.6t.

Exhibit 8. USD/IDR performance

Exhibit 9. USD/IDR Volatility

Source: Bloomberg, as of 11 Apr 2014


Exhibit 10. Risk Premium

Exhibit 11. CDS - 5 years



Exhibit 12. Regional Ytd performance

Exhibit 13. Sectoral Ytd performance



7


Removing ASII and PTPP, adding TLKM and SMGR

So far this year, our top picks have generated a total return of 24.52% up to 11 April

2014, with the best performing stocks such as GJTL, LSIP and WIKA generating solid

returns during their inclusion in our top pick list. Metal mining also show good progress

recent, and became the outperformer. We believe there still potential upside risk to our

current TP, and hence we still maintain INCO and TINS within our top picks at this

moment.

In this month’s monthly strategy, we have made some changes to our composition of

top picks:

Closed

ASII – since its inclusion in our list, ASII’s share price has risen 13.28% and is very close to

our TP of Rp8,050. We believe that if Jokowi does become president of Indonesia, then

some new regulations might be issued which could adversely impact the 4W sector.

Recently, the government indicated that it might forbid the use of subsidized fuel by

LCGC.

PTPP – the share price has risen 44% YTD, and at this level, we believe that the stock is

already fully valued. Furthermore, we don’t foresee any strong catalyst in the short to

medium term. The 1Q14 result is likely to be inline with our expectation.

Addition

TLKM – our analyst Lucky Ariesandi initiated coverage on telecom carrier sector with an

OVERWEIGHT call based on: 1) continued exponential growth in the mobile data

segment supported by the availability of cheaper 3G enabled handsets, 2) relatively

stable margins for existing operations, and 3) attractive valuations. TLKM is his top picks

in the sector. We estimate 10% CAGR growth in TLKM’s core net profits through 2016

on the back of surging data revenues. We also expect Telkom’s Core ROE to gradually

climb to 25% in 2016 from 24% in 2014, warranting a rerating on the stock, in our view.

At our TP of Rp2,750, the stock trades at FY14F and FY15F core PER of 17.4x and 15.8x,

which, we believe, is not excessive for a defensive stock with reasonable growth

prospects.

SMGR – we believe that SMGR is well positioned for the potential rapid ex Java

infrastructure development. While both cement and construction are the best play on

infrastructure story in Indonesia, the former has been lagging behind in term of share

price performance, which we believe mainly attributed to slow down in property

demand, the biggest consumer of cement domestically. Nonetheless, we believe that

there should be rotational play into cement, especially as most of construction company

valuation have surged substantially, and has priced in most of the potential positive

outcome.

Exhibit 14. Average daily transactions

Exhibit 15. Foreign fund flows

Source: IDX, as of 11 Apr 2014


8


Exhibit 15. Top picks holding period return

Exhibit 16. Top picks Ytd performance vs upside potential

Source: Bloomberg and Danareksa Sekuritas, as of 11 Apr 2014


Exhibit 17. Top picks YTD performance and upside


Exhibit 18. Winners within our coverage

Exhibit 19. Losers within our coverage



9


Exhibit 20. Danareksa universe performance, YTD

Source: Bloomberg and Danareksa Sekuritas, as of 11 April 2014

Company Code Rating YTD, % Company Code Rating YTD, %

Adhi Karya ADHI HOLD 85.76 PP London Sumatra LSIP BUY 14.25

Waskita Karya WSKT HOLD 69.14 Salim Ivomas Pratama SIMP BUY 14.10

Surya Semesta Internusa SSIA BUY 57.14 Gajah Tunggal GJTL BUY 13.10

Pembangunan Perumahan PTPP BUY 44.40 Indocement INTP HOLD 13.00

Bank Tabungan Negara BBTN BUY 41.95 Astra International ASII BUY 12.87

Ace Hardware ACES BUY 35.59 Astra Agro Lestari AALI HOLD 10.36

Wijaya Karya WIKA BUY 34.18 United Tractors UNTR HOLD 10.13

Bank Rakyat Indonesia BBRI BUY 31.72 Selamat Sempurna SMSM HOLD 9.57

Jasa Marga JSMR BUY 25.40 Indofood INDF HOLD 9.09

Vale Indonesia INCO BUY 24.91 Mitra Adi Perkasa MAPI HOLD 9.09

Bank Negara Indonesia BBNI BUY 24.56 Semen Indonesia SMGR BUY 8.30

Alam Sutera ASRI BUY 24.42 Telkom TLKM BUY 7.67

Bank Mandiri BMRI BUY 23.57 Nippon Indosari Corpindo ROTI BUY 7.35

Holcim SMCB HOLD 21.76 Sampoerna Agro SGRO BUY -0.25

Timah TINS BUY 21.56 Aneka Tambang ANTM HOLD -0.92

Ramayana RALS HOLD 21.23 Indofood CBP ICBP BUY -2.70

Kalbe Farma KLBF BUY 20.80 BW Plantation BWPT BUY -3.01

Hexindo Adiperkasa HEXA HOLD 20.47 Bukit Asam PTBA HOLD -4.90

Lippo Karawaci LPKR BUY 20.33 XL Axiata EXCL HOLD -7.21

Perusahaan Gas Negara PGAS BUY 17.88 Indosat ISAT HOLD -7.23

Unilever UNVR HOLD 17.40 Adaro Energy ADRO BUY -7.34

Metropolitan Land MTLA BUY 17.11 Indo Tambangraya Megah ITMG HOLD -10.88

Mandom TCID BUY 16.81 Multistrada Arah Sarana MASA HOLD -19.23

Bank Central Asia BBCA HOLD 15.63 Harum Energy HRUM HOLD -21.64

Bumi Serpong Damai BSDE BUY 15.50

Weekly Report Volatility increases With the disappointment over PDI-P’s performance in last week’s elections, profit taking derailed the recent market re-rating. The market dropped more than 3% with outflows reaching Rp1.5t following the announcement of the quick count results which indicate that PDI-P’s share of the vote was still below the important 25% threshold. After PDI-P’s quick move to form a coalition, market confidence was gradually restored, but we continue to believe that market volatility will remain high in the short term, especially in the absence of concrete results on the nomination of potential VP. Property was the laggard last week (-6.6%), followed by basic industry (-2.7%) and finance (-1.7%). By contrast, commodities were the best performing sector with mining up 2.5% and agriculture up 1.3%. YTD, total inflows have already reached Rp31t.

High market volatility Market was in roller coaster mode last week, plummeted down more than 3% post the quick count release which highlighted PDI-P vote still below the 25% threshold. After a quick move from PDI-P to form coalition, market confidence was gradually restored. With Nasdem, which hold 7% vote, is forming coalition with PDI-P, Jokowi nomination will go through. Market has regained most of the lost in last two trading days and Indonesia market was only down 0.9% w-w. However, we continue to believe that market volatility will remain high in the short term, until there would be more concrete results of the party coalition as well as VP nomination. The next key catalyst would be VP announcement of Jokowi which could take place as soon as next week. It is reported that Jokowi has shortlisted its potential VP into 5 candidates which came from various background such as economist, military and politicians. Securing ticket to join presidential race is one thing, but PDI-P will also need to secure enough backing in the parlianment, a situation which will critically be needed for Jokowi’s future program to eventuate. YTD, Indonesia market continues to stand in the pole position, up 12.7% in IDR term and 18.9% in USD term, closely followed by Philippines’ 12% return ytd. 1Q14 results announcement by end of this months would also ordain the sustainability of the current market’s re-rating. Over the medium to longer term, we believe that Indonesia will undergo potential structural changes, especially with a removal of fuel subsidy which would pave the way for potential lifting into investment grade.

Property and finance remains at the top; while commodity at the opposite side With uncertainty post the quick count results, profit taking activity dominates last week, mainly on sector which has performed well ytd. Property was the laggard last week down 6.6%, followed by basic industry -2.7% and finance -1.7%. On the contrary, the commodities were the best performing sector with mining up 2.5% and agriculture 1.3%. Despite last week’s shake up, property and finance sectors remain as the best performing ytd, while commodities still on the bottom two. Last week’s profit taking can still re-occur in the short term until we would have more clarity on political coalition front. We now add defensive counter TLKM into our top pick list.

Foreign inflows continue with daily turnover increasing further Foreign outflows have become a rare occurrence in Indonesia’s equity market, but this wasn’t the case last Thursday when foreign investors took out Rp1.45t from the market, post the disappointing PDI-P performance. Judging from the massive inflows in the days before the 9 April election - when foreign inflows reached Rp32tn - those outflows were relatively insignificant by comparison. Before the election, inflows were massive, totaling Rp3.7t (7-8 April), mainly fuelled by heightened expectations that PDI-P would win the elections by a large margin. YTD, total inflows have already reached Rp31t.

Quant model limitation The special event is one of the limitations of our Quant model. While last week we predicted that the market would still be in positive territory, the quick count results proved otherwise. For the week ahead, we foresee a potential rebound in the banking and property sectors. Potential weakness may be seen in several sectors such as coal, retail and consumer, which we predict to move in red territory. Please see the details on page 5-6 of this report.

Tuesday, 15 Apr 2014

OVERWEIGHT

Danareksa research reports are also available at Reuters Multex and First Call Direct and Bloomberg.

Helmy Kristanto

(62-21) 2955 5824

[email protected]

Armando Marulitua

(62-21) 2955 5817

[email protected]

Foreign Fund Flow

Ytd Regional Market Performance

Ytd Sector Performance

2

Weekly Report 15 April 2014

Exhibit 1. Regional weekly performance

Exhibit 2. Regional YTD performance



Exhibit 3. Sector weekly performance

Exhibit 4. Sector YTD performance



Exhibit 5. Average daily transactions

Exhibit 6. Foreign fund flows



3


Exhibit 7. Regional market valuation

Exhibit 8. JCI Valuation


Source: Danareksa Sekuritas, as of 11 Apr 2014

Exhibit 9. USD/IDR performance

Exhibit 10. CDS - 5 years



Exhibit 11. Danareksa bonds yield index

Exhibit 12. Country risk premium



4


Exhibit 13. Top picks weekly performance

Exhibit 14. Top picks Ytd performance and upside



Exhibit 15. Winners within our coverage

Exhibit 16. Losers within our coverage



Exhibit 17. Weekly Reports Wrap

Source: Danareksa Sekuritas

Danareksa Quant Model

6


DQM model commentary:

Last week market performance moved on red territory unlike our model expectation in previous week report. This is mainly dragged down by deep weakening in banking and

property sectors following unfavorable result of PDIP in parliament election. As we have mentioned in our preliminary report regarding the limitation in our models, such

subsequent event was not recognized by our model. However, after taking into account the result of general election, our model suggest potential strengthen on JCI this week

underpinned by potential rebound on Banking and property sectors. Potential weakness also shown by several sectors such as coal, retail and consumer which we predict would

move in red territory. Please see the detail on the table.

In the interest of timeliness, this product was not edited

Coal Production Will be Down by 12% (BI)

Coal production that has been targeted at 430 million tons this year is potentially be down by 12% to only 360

million tons. This is because small companies licensed IUP (Mining Permit) will shut down their business due to the

expected increase in coal mining royalties by 13.5%. Production of small companies (IUP) is estimated at 50-60

million tons per year.

Government to increase tariff for peak hour flights (TJP)

The government is planning to introduce higher navigation charges for planes that fly during peak hours in a bid to

ease air traffic congestion at the country’s main international airports. The new plan is now being discussed by

Airnav Indonesia. The new plan will offer different navigation charges for flights in peak hours and those in non-

peak times.

Tin exports fell 2.5%, the price will increased (BI)

The volume of tin ingot exports from Indonesia during March fell 2.5% compared to the same period the previous

year. The decline in exports from Indonesia as the world’s largest exporter of tin bars is expected to continue the

price rally. TINS predict tin prices could go up to US$26,000 per tons in the middle of a global deficit of tin bars.

Equity Valuation

Price Mkt Cap

Rating Price (Rp) Target Rp Bn 2013 2014 2015 2013 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2014

Danareksa Universe 2,726,382 155,178 180,424 205,102 257.4 299.3 340.2 16% 14% 15.1 13.3 12.7 11.3 2.9 2.5 20.1

Auto 327,307 19,844 23,420 28,676 363.5 429.0 525.3 18% 22% 14.0 11.4 11.6 9.9 2.5 2.2 19.5

Astra International BUY 7,700 8,050 311,723 19,417 21,600 26,760 480 534 661 11% 24% 14.4 11.6 12.1 10.3 2.7 2.3 42.8 19.9

Gajah Tunggal BUY 2,010 2,550 7,004 120 1,455 1,406 35 417 404 1091% -3% 4.8 5.0 5.2 4.6 1.0 0.8 45.5 22.6

Multistrada HOLD 315 390 2,893 43 86 161 5 10 18 100% 80% 31.5 17.5 8.5 6.8 0.7 0.8 45.7 2.1

Selamat Sempurna HOLD 3,950 3,350 5,687 264 279 349 183 194 243 6% 25% 20.4 16.3 10.7 8.8 5.1 4.3 9.5 26.4

Banks 851,527 64,296 72,268 81,733 631.2 709.4 802.3 12% 13% 11.8 10.4 2.5 2.1 20

BCA HOLD 11,250 10,800 277,369 14,254 15,741 17,856 579 631 716 9% 13% 17.8 15.7 NA NA 3.7 3.1 NA 22.6

BNI BUY 4,950 5,400 92,311 9,058 10,319 11,807 486 553 633 14% 14% 9.0 7.8 NA NA 1.7 1.4 NA 20.0

BRI BUY 9,775 10,300 241,141 21,218 23,830 26,641 860 966 1,080 12% 12% 10.1 9.1 NA NA 2.5 2.1 NA 27.2

Bank Tabungan Negara BUY 1,250 1,400 13,206 1,562 1,794 2,061 149 171 197 15% 15% 7.3 6.3 NA NA 1.0 0.9 NA 14.7

Bank Mandiri BUY 9,750 10,500 227,500 18,204 20,584 23,368 780 882 1,001 13% 13% 11.1 9.7 NA NA 2.2 1.9 NA 21.8

Cement 200,400 11,334 11,294 11,336 656 654 656 0% 0% 17.7 17.7 11.3 10.5 3.4 3.1 20.3

Holcim HOLD 2,800 2,300 21,456 952 1,274 1,465 124 166 191 34% 15% 16.8 14.6 9.4 8.5 2.1 1.9 31.7 12.9

Indocement HOLD 22,950 21,300 84,484 5,012 4,839 5,215 1,362 1,315 1,417 -3% 8% 17.5 16.2 11.1 9.7 3.5 3.2 net cash 21.1

Semen Indonesia BUY 15,925 17,500 94,459 5,370 5,180 4,657 905 873 785 -4% -10% 18.2 20.3 12.1 12.0 3.9 3.6 22.1 22.8

Construction 68,831 3,017 4,168 4,462 154 213 228 38% 7% 16.5 15.4 8.8 7.7 3.3 2.8 21.1

Jasa Marga BUY 6,025 7,100 40,970 1,335 2,196 2,175 196 323 320 65% -1% 18.7 18.8 11.6 10.4 3.9 3.5 106.5 22.1

Wijaya Karya BUY 2,265 2,100 13,907 588 690 830 96 112 135 17% 21% 20.2 16.8 8.9 7.3 3.6 3.1 net cash 19.2

Pembangunan Perumahan BUY 1,775 1,750 8,595 421 553 634 87 114 131 32% 15% 15.5 13.6 6.4 5.5 3.6 3.0 27.1 25.2

Adhi Karya HOLD 2,975 1,830 5,359 343 360 415 190 200 231 5% 16% 14.9 12.9 6.4 5.8 3.2 2.7 48.1 23.2

Waskita Karya HOLD 715 470 6,887 331 369 408 34 38 42 12% 11% 18.8 17.0 8.4 7.6 2.6 2.3 net cash 14.8

Consumer 436,186 12,342 14,833 16,573 166 199 223 20% 12% 29.4 26.3 17.9 15.8 7.7 6.9 27.5

Indofood CBP BUY 10,000 13,050 58,310 2,225 2,949 3,671 382 506 630 33% 25% 19.8 15.9 12.4 9.8 4.0 3.5 net cash 21.7

Indofood HOLD 7,225 7,050 63,439 2,504 3,191 3,368 285 363 384 27% 6% 19.9 18.8 9.4 8.5 2.6 2.4 31.8 13.5

Kalbe Farma HOLD 1,520 1,350 71,250 1,922 2,471 2,921 41 53 62 29% 17% 28.7 24.5 19.1 16.0 6.5 5.7 net cash 24.3

Unilever HOLD 30,750 28,300 234,623 5,353 5,775 6,047 702 757 792 8% 5% 40.6 38.8 28.8 27.5 49.6 48.0 3.4 128.2

Nippon Indosari Corpindo BUY 1,140 1,400 5,770 178 268 350 35 53 69 50% 31% 21.5 16.5 12.4 9.6 5.6 4.4 43.1 29.1

Mandom BUY 13,900 13,600 2,795 160 180 216 796 893 1,075 12% 20% 15.6 12.9 9.2 8.1 2.2 2.0 28.2 14.7

Heavy Equipment 82,380 5,116 5,730 6,601 1,119 1,254 1,444 12% 15% 14.4 12.5 6.5 5.7 2.1 1.9 15.4

Hexindo Adiperkasa HOLD 3,930 3,175 3,301 282 348 381 335 414 453 24% 9% 9.5 8.7 7.3 6.4 1.2 1.3 18.7 13.2

United Tractors BUY 21,200 23,300 79,079 4,834 5,382 6,220 1,296 1,443 1,667 11% 16% 14.7 12.7 6.5 5.7 2.2 2.0 net cash 15.6

Mining 145,004 8,400 11,464 13,993 134 183 223 36% 22% 12.6 10.4 6.0 5.5 1.5 1.6 12.4

Adaro Energy BUY 1,010 1,220 32,306 2,370 3,167 3,241 74 99 101 34% 2% 10.2 10.0 4.4 4.1 1.0 1.1 45.8 10.1

Timah BUY 2,080 2,025 10,469 515 625 706 102 124 140 21% 13% 16.8 14.8 7.8 6.5 2.0 1.9 net cash 12.4

Vale Indonesia BUY 3,480 3,400 34,578 396 1,009 1,239 40 102 125 155% 23% 34.3 27.9 11.2 10.5 1.8 2.0 net cash 5.2

Aneka Tambang HOLD 1,125 1,000 10,731 410 1,063 2,281 43 111 239 159% 115% 10.1 4.7 11.8 8.0 0.8 0.7 40.8 8.4

Bukit Asam HOLD 9,750 11,050 22,465 1,826 2,113 2,595 793 917 1,126 16% 23% 10.6 8.7 7.0 5.6 2.3 2.0 net cash 23.3

Indo Tambangraya Megah HOLD 25,325 30,000 28,615 2,373 2,863 3,281 2,100 2,534 2,904 21% 15% 10.0 8.7 4.6 4.3 2.6 2.8 net cash 25.9

Harum Energy HOLD 2,160 2,850 5,840 510 624 649 189 231 240 22% 4% 9.4 9.0 2.6 3.0 1.5 1.5 net cash 15.9

Plantation 82,777 3,210 5,089 6,144 105 166 201 59% 21% 16.3 13.5 8.5 7.2 2.2 2.0 14.2

Astra Agro Lestari HOLD 27,750 24,700 43,699 1,834 2,527 2,918 1,165 1,604 1,853 38% 15% 17.3 15.0 9.9 8.7 4.1 3.8 net cash 25.0

Sampoerna Agro BUY 1,995 2,200 3,771 119 251 379 63 133 201 111% 51% 15.0 9.9 7.4 6.7 1.3 1.2 52.1 9.2

BW Plantation BUY 1,315 1,380 5,880 182 372 575 42 83 128 97% 54% 15.9 10.3 8.7 6.2 2.5 2.0 106.4 16.9

PP London Sumatra BUY 2,250 2,130 15,351 688 946 995 101 139 146 37% 5% 16.2 15.4 9.5 8.4 2.1 2.0 net cash 13.8

Salim Ivomas Pratama BUY 890 970 14,077 388 994 1,277 25 63 81 156% 29% 14.2 11.0 6.2 5.3 1.0 0.9 35.3 7.1

Property 71,682 6,273 5,777 6,366 87 80 88 -8% 10% 12.4 11.3 8.8 7.9 1.9 1.7 16.5

Alam Sutera BUY 555 770 10,905 1,286 1,658 1,877 65 84 96 29% 14% 6.6 5.8 6.6 5.9 1.6 1.3 46.3 26.6

Bumi Serpong Damai BUY 1,540 1,960 26,945 2,432 1,896 1,996 139 108 114 -22% 5% 14.2 13.5 10.5 10.0 2.1 1.8 net cash 15.4

Metropolitan Land BUY 455 600 3,449 233 345 421 31 45 56 45% 24% 10.1 8.1 7.4 5.8 1.7 1.4 21.6 18.5

Surya Semesta Internusa BUY 915 870 4,305 726 776 804 154 165 171 7% 4% 5.5 5.4 3.1 2.6 1.4 1.2 net cash 28.9

Lippo Karawaci BUY 1,130 1,040 26,078 1,596 1,102 1,268 74 51 59 -31% 15% 22.2 19.3 12.3 10.7 2.1 2.0 28.4 9.3

Telco 298,565 12,456 15,757 18,943 109 137 165 27% 20% 18.9 15.8 5.0 4.2 2.9 2.7 16.2

XL Axiata HOLD 4,920 5,500 41,990 1,033 (430) 768 121 (50) 90 -142% -279% (97.7) 54.7 7.5 5.5 2.9 2.8 117.4 -2.9

Indosat BUY 3,810 4,500 20,703 (2,782) 728 905 (512) 134 167 -126% 24% 28.4 22.9 3.4 2.9 1.2 1.2 116.8 4.4

Telkom BUY 2,340 2,650 235,872 14,205 15,459 17,270 147 159 171 8% 8% 14.7 13.7 4.9 4.3 3.3 3.1 net cash 23.5

Utility 129,086 7,713 9,219 8,573 318 380 354 20% -7% 14.0 15.1 8.7 8.8 4.3 4.3 31.4

PGN BUY 5,325 6,000 129,086 7,713 9,219 8,573 318 380 354 20% -7% 14.0 15.1 8.7 8.8 4.3 4.3 net cash 31.4

Retail 32,636 1,176 1,404 1,702 45 54 66 19% 21% 23.2 19.2 12.4 10.4 3.8 3.3 17.3

Mitra Adi Perkasa HOLD 5,950 6,350 9,877 330 419 526 199 252 317 27% 26% 23.6 18.8 9.8 8.4 3.5 3.0 78.5 16.0

Ramayana HOLD 1,310 1,240 9,296 413 477 574 58 67 81 16% 20% 19.5 16.2 11.1 9.2 2.7 2.5 net cash 14.4

Ace Hardware HOLD 785 750 13,463 433 508 602 25 30 35 17% 18% 26.5 22.4 17.8 14.8 5.6 4.6 net cash 23.2

ROENet profit, Rp bn EPS (Rp) EPS Growth PER (x) EV / EBITDA (x) PBV (x) Net Gearing

The leaders on Danareksa coverage

Price as on

Code 14-Apr-14 11-Apr-14 Chg, % w-w, % m-m, % YTD, % Rating

Timah TINS

2,080

1,945

6.9

7.2

20.9

30.0 BUY

Wijaya Karya WIKA

2,265

2,120

6.8

(9.2)

(9.0)

43.4 BUY

Adhi Karya ADHI

2,975

2,805

6.1

(6.3)

(2.5)

97.0 HOLD

Pembangunan Perumahan PTPP

1,775

1,675

6.0

(6.8)

(2.7)

53.0 BUY

Gajah Tunggal GJTL

2,010

1,900

5.8

(4.5)

(18.8)

19.6 BUY

Vale Indonesia INCO

3,480

3,310

5.1

14.1

37.0

31.3 BUY

Selamat Sempurna SMSM

3,950

3,780

4.5

(7.1)

8.8

14.5 HOLD

Waskita Karya WSKT

715

685

4.4

(8.3)

(10.6)

76.5 HOLD

Aneka Tambang ANTM

1,125

1,080

4.2

(1.7)

1.8

3.2 HOLD

Nippon Indosari Corpindo ROTI

1,140

1,095

4.1

(0.9)

(0.9)

11.8 BUY

Sources: Bloomberg

The laggards on Danareksa coverage

Price as on

Code 14-Apr-14 11-Apr-14 Chg, % w-w, % m-m, % YTD, % Rating

Tower Bersama TBIG

6,050

6,175

(2.0)

(1.6)

(0.8)

4.3 BUY

Ace Hardware ACES

785

800

(1.9)

(3.1)

4.0

33.1 BUY

Indosat ISAT

3,810

3,850

(1.0)

(4.4)

(4.8)

(8.2) HOLD

Mitra Adi Perkasa MAPI

5,950

6,000

(0.8)

(5.9)

(14.7)

8.2 HOLD

Indo Tambangraya Megah ITMG

25,325

25,400

(0.3)

4.8

4.2

(11.1) HOLD

Multistrada Arah Sarana MASA

315

315 -

0.3

(3.7)

(19.2) HOLD

Mandom TCID

13,900

13,900 -

2.2

(13.1)

16.8 BUY

Adaro Energy ADRO

1,010

1,010 -

4.1

4.1

(7.3) BUY

Sampoerna Agro SGRO

1,995

1,995 -

(7.0)

(1.7)

(0.2) BUY

Salim Ivomas Pratama SIMP

890

890 -

(1.7)

(5.3)

14.1 BUY

Sources: Bloomberg

Disclaimer The information contained in this report has been taken from sources which we deem reliable. However, none of P.T.

Danareksa Sekuritas and/or its affiliated companies and/or their respective employees and/or agents makes any

representation or warranty (express or implied) or accepts any responsibility or liability as to, or in relation to, the

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The information contained in this report is not be taken as any recommendation made by P.T. Danareksa Sekuritas

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In considering any investments you should make your own independent assessment and seek your own professional

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