FROM EQUITY RESEARCH DESK

IDEA OF THE DAY

Indosat Ooredoo Hutchison: KTAs from meeting with CFO: setting foundations for more revenue diversification (ISAT.IJ Rp 10,175; BUY; TP Rp 13,300)

IOH aims to grow inline with its spectrum holdings and sees new merger to result in more efficiencies; Starlink will complement market.  

IOH key priority is the investments in distribution while it aims to improve profitability at the micro level amid its expansion in ex-Java.

Maintain Buy rating with TP Rp13,300. IOH adds more growth layers with higher contribution from B2B investing in GPUs and 5G.

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Siloam International Hospitals: Sustaining robust operational metrics in FY24F (SILO.IJ Rp 2,420 ; BUY; TP Rp2,900)

SILO’s 1Q24 performance continued to reflect its efforts in prioritizing higher intensity cases, a trend we expect to persist through 2Q-4Q24.

We lower our FY24F net profit est. by 17% due to one-off expenses but expect FY24F core net profit growth to remain solid (+27%yoy).

We maintain our Buy rating with a TP of Rp2,900; our gross estimate of possible future impairment risk should range between Rp102-153bn.

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RESEARCH COMMENTARY

BBBNI Apr24 Results

• BBNI reported net profit of Rp6.9tr in 4M24 (+2% yoy), supported by 19% lower provisions offsetting the 6% decline in PPOP. The NP forms 31% of our FY24F and the consensus, similar to the 33% achievement in 4M23.  
• PPOP declined 6% despite the 13% increase in other operating income and manageable opex at 1%. This is mainly due to the 10% lower NII amid the 13% yoy loans growth, as the NIM declined 83bps yoy to 4.0% in 4M24.
• In Apr24, sequential CoF remained flat at 3.3%, but the EA yield declined by 32bps, causing the NIM to drop to sub 4%. Compared to last year, Apr24’s NIM compression mainly came from a higher CoF (+63bps yoy) while the EA yield remained relatively flat.
• The 19% lower provisions in 4M24 and the 13% increase in loans resulted in a lower CoC of 1.0% (-33bps yoy). The CIR rose 160bps due to the lower NII, although the opex was flat.
• BBNI`s Apr24 NP of Rp1.6tr was 30% mom lower (from Mar24’s high base) but still grew by 2% yoy thanks to the lower provisions.
• Loans grew by 2% mom to Rp702tr (+13% yoy) while deposits grew by 6% mom to Rp819tr (+12% yoy) driven by CA, which grew by 11% mom (c. Rp32tr). (Victor Stefano & Naura Reyhan Muchlis – BRIDS)

BMRI Apr24 Results

• BMRI reported net profit of Rp15.1tr in 4M24 (+3% yoy) with 3% yoy PPOP growth and relatively flat (+1% yoy) provisions. The NP forms 27% of our FY24F and the consensus, similar to the 29% achievement in 4M23.  
• NII grew by 5% yoy in 4M24, supported by brisk loans growth (+22%) and a slightly higher EA yield (+14bps), offsetting the 59bps increase in the 4M24 CoF. NIM stood at 5.0% in 4M24 (-31bps yoy) or at the lower end of the newly revised guidance of 5.0-5.3% (from 5.3-5.5% previously).
• Provisions were relatively low in Apr24 (-20% mom, -9% yoy), resulting in relatively flat 4M24 provisions (+1%). The CoC was down 16bps to 0.9% in 4M24 as loans grew by 22% yoy.  
• CIR was slightly higher (+21bps) in 4M24 due to a modest increase in opex (+4% yoy) and marginally lower other operating income (-2%).
• Despite the mom slightly lower CoF to 2.7% (-7bps mom), Apr24’s NIM was 11bps lower compared to the previous month due to the 16bps decrease in the EA yield.  
• In Apr24, BMRI reported net profits of Rp3.9tr (-1% mom, +10% yoy), relatively inline with the PPOP growth of -4% mom but +8% yoy.
• From the 1Q24 high base, loans still grew by 2% mom to Rp1,134tr (+22% yoy) while deposits remained flat mom at Rp1,235tr (+15% yoy). (Victor Stefano & Naura Reyhan Muchlis – BRIDS)

BBYB Bank Only Apr24 Results

• BBYB reported net losses of Rp25bn in Apr24, wiping out its 1Q24 net profits. In 4M24, BBYB NP turned to negative Rp11bn (still a huge improvement from net losses of Rp137bn in 4M23).  The improvement in 4M24 profitability was driven by a higher NIM, which stood at 20.1% in 4M24 (+238bps yoy), supported by both higher yields and a lower CoF in addition to lower opex (-6%), partly offset by 17% higher provisions.
• The monthly reversal to net losses in Apr24 reflects 16% mom lower NII (from both a lower loan balance and lower EA yield) offsetting the lower CoF and lower opex.
• Despite the improvement in the CoF to 6.1% in Apr24 (-20bps mom, -14bps yoy), the NIM was lower due to the lower EA yield and lower LDR from declining loan balances.
• Loans declined 5% mom to Rp8.9tr (-17% yoy) as the bank`s disbursement through Akulaku Finance is still on pause (inline with our previous expectation). (Victor Stefano & Naura Reyhan Muchlis – BRIDS)

HRUM 1Q24 headline earnings – net profit misses from other expenses, despite better-than-expected EBITDA

• HRUM reported 1Q24 Net Profit of US$1mn (-99% yoy/ -98% qoq), forming only 0.5%/ 1% of BRIDS' and consensus estimates. The sharp decline in earnings reflects the impact of -US$38.5mn in other expenses, which mainly comprise of a -US$30.7mn change in the fair value of WMI and a -US$5.5mn change in the fair value of investments (REPT Battero, Sunny Metals).  
• 1Q24 EBITDA came in at US$92mn (-45% yoy/+20% qoq), forming 33% of BRIDS' and 29% of the consensus forecast, hence above expectations (vs. the average 1Q achievement of 19%).
• 1Q24 revenues reached US$266 million (-10% yoy/ -6% QoQ), forming 19% of the consensus forecast (inline).
• Overall, better-than-expected 1Q24 EBITDA and revenue suggests resilient operational performance (pending operational data), but this is clouded by the additional negative surprises in other expenses.(Erindra Krisnawan – BRIDS)

Nickel update: Nornickel’s biannual outlook is out with a more positive tone

• Cutting oversupply expectations from 190kt to 100kt in FY24-25 due to a significant underestimation of nickel use in China and Indonesia’s stainless-steel demand.
• Higher nickel use driven by SS (+6% yoy), alloys (+9% yoy), special steel (+10% yoy), and batteries (+11% yoy), with PCAM demand rising +15% yoy.
• Noticeably, demand in the petrochemical segment has been very resilient, with YTD growth at c.+14% yoy, while the battery segment continues to provide significant demand growth.
• LME’s COTR has shifted to a net long position for the first time in April 2024 since May 2023.
• China has been underreporting actual SS production (e.g., Tsingshan’s 2023 output was +500kt above expectation), suggesting other major producers might have done the same as NPI inventories are lower than estimates.
• A robust SS market is seen through higher 1Q24 exports from China (+17% yoy to 1.1Mt) and imports (+32% yoy to 0.6Mt) from higher Indonesian output.
• Meanwhile, domestic production of SS 200 and 300 series grew +4%/+11% yoy.
• Indonesian SS production rose +26% yoy and exports grew +33% yoy driven by Tsingshan and Delong’s production recovery.
• Indonesian NPI production is expected to grow to 1.6Mt (+13% yoy) and 1.7Mt (+9%yoy) in FY24-25, while Chinese output is expected to fall to 330kt (-15% yoy) and 270kt (-18% yoy) in FY24-25.
• China’s class-1 output is expected to grow to 341kt (+37% yoy) and 378kt (+11% yoy) in FY24-25, while Indonesia could see output of 46kt and 58kt in FY24-25.

Comment: Nornickel has become more positive on its outlook compared to its last report in December, inline with our view as the SS market seems to be stronger than expected which we believe should be the main catalyst moving forward. A key point to watch out for is the NPI price as it has recently broken above US$12,000/ton. Reiterate our OW rating on the sector. (Timothy Wijaya - BRIDS)

Seabank Apr24 Results

• In 4M24, Seabank recorded net profits of Rp73.9bn (+358% yoy) due to a significant 35% fall in provisions and 21% yoy loans growth, which also lowered its CoC to 19.2% (-1,566bps yoy).
• The CoF improved to 4.6% (-88bps yoy) as the bank lowered its deposit rates. Although it resulted in a 15% yoy decline in customer deposits, the LDR was still reported at a healthy level of 75%.
• Despite the improvement in the CoF, NIM fell to 17.7% (-372bps yoy) as the EA yield declined to 21.6% (-458bps yoy), which coupled with a CIR of 30.4% (+1,245bps yoy) resulted in a 31% yoy decrease in PPOP.
• In Apr24, NP grew to Rp22.3bn (+27% mom, +741% yoy), driven by a lower CoC of 17.6% (-235bps mom, -1,790bps yoy).
• NIM was recorded at 17.0% (-15bps mom, -296bps yoy) in Apr24, due to a decline in the EA yield to 20.7% (-45bps mom, -392bps yoy) and despite the decline in the CoF to 4.4% (-28bps mom, -85bps yoy).
• The CIR surged to 35.3% (+714bps mom, +1,721bps yoy) due to an increase in opex to Rp157.7bn (+25% mom, +63% yoy).
• On a monthly basis, loans and customer deposits declined 3% and 4%, respectively.
• Compared to FY23, the CoF improved 53bps. However, this did not offset the 321bps lower EA yield, which resulted in a 269bps lower NIM in 4M24. On the other hand, the CoC improved by 914bps in 4M24.(Victor Stefano & Naura Reyhan Muchlis – BRIDS)

MARKET NEWS

MACROECONOMY

BPS to Announce May’s Inflation at 11am

BPS will announce May’s inflation at 11am. We expect the headline inflation rate to cool to 2.95% y-y on the back of lower volatile inflation. Core inflation is expected to accelerate to 1.95% y-y from 1.82%. (BRIDS)

 

The Fed's Preferred Inflation Measure Rose 0.2% mom in Apr24

US Core PCE, the Fed’s preferred inflation gauge, rose 0.2% mom in Apr24, the lowest in 2024. On an annual basis, it rose 2.8% yoy. The overall PCE rose 0.3% mom/2.7% yoy. (Bloomberg)

 

SECTOR

National Food Agency to Extend Rice HET Relaxation

The National Food Agency (NFA) has extended the Highest Retail Price (HET) for premium and medium rice in various regions to help overcome food supply and price challenges. The policy was stated in a letter to rice stakeholders Number 160/TS.02.02/K/5/2024 dated 31 May 2024. The relaxation is based on the region, with premium rice now costing in the range of Rp14,900-Rp15,800/kg (vs Rp13,900-Rp14,800/kg), medium rice in the range of Rp12,500-Rp13,100/kg (vs Rp10,900-11,800/kg. The relaxation is part of the government's efforts to combat global commodity price fluctuations and climate change. (Kontan)

 

Pertamina to Hold the Non-Subsidized Fuel Prices in Jun24

Pertamina decided not to change the selling price of non-subsidized fuel oil (BBM) for Jun24 due to rising world oil prices and a weakening rupiah exchange rate against the US dollar. The non-subsidized fuel prices are for Pertamax (Rp12,950/liter), Pertamax Green 95 (Rp13,900/liter), Pertamax Turbo (Rp14,400/liter), Delphi (Rp14,550/liter), and Pertamina Dex (Rp15,100/liter). (Kontan)

 

CORPORATE

MTEL Prepares Rp2.1tr for Tower and Fiber Optic Acquisition

MTEL has prepared Rp2.1tr for inorganic expansion. The funds are for the acquisition of towers and fiber optics, but the largest will be in fiber optics because the towers are in a consolidation period. The expansion funds are included in the capital expenditure budget throughout 2024 of Rp5.4tr. (Kontan)