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ASII - 4Q19 Update

REMAIN CAUTIOUS!

In 2019, ASII booked a revenue of Rp237T, declined by -0.9% (Y/Y) from Rp239T in 2018, but the figures represented 99% of our FY19 estimate. Gross profit also slipped by -1.0% (Y/Y) to Rp50T, which indicates there were no significant GPM erosion, and in line with our FY19 forecast at 98.3%. Bottom line, net profit rose by +0.2% (Y/Y) to Rp21.7T (104.3% of FY19 estimate).

 

IN HOPES OF FASTER ECONOMIC GROWTH

Automotive segment fell -2.3% (Y/Y) to Rp104.8T from Rp107.3T, which was caused by lower car sales to 536,402 units from 582,446 units (-8.0% Y/Y). As the revenue growth dropped at a slower pace than that of car sales, we calculated there was an increase in ASP around +5% (Y/Y) last year. In January 2020, however, industry wholesales reached around 80,000 units, lower than the figures in the same period last year at 82,000 units. Although we expect ASII’s automotive segment to post better result this year at Rp112.5T, we remain cautious with the escalating geopolitical tensions, in addition to the global health issue that has been lingering since the end of last year, that could possibly slow down global economic growth. Perhaps the growing uncertainties have been partially toned down by the government’s accommodating policy, which saw the BI rate cut by 25 bps to 4.75% last month, hopefully boosting credit distribution.

 

MUTED COMMODITY-BASED BUSINESS, YET OTHERS REMAIN SUPPORTIVE

UNTR and AALI reported revenues of Rp84.4T (-0.2% Y/Y) and Rp17.5T (-8.5% Y/Y), respectively, as a result of soft commodity prices, particularly coal and CPO last year. But financial service, infrastructure, IT, and property segments all grew positively. Going forward, due to bearish coal environment this year, the outlook for heavy machinery sales may remain muted; but for HEMCE segment itself, we hope its gold mine business could act as a cushion. While for agriculture segment, we also expect price recovery this year following the government’s plan to implement B30 policy that may increase demand. 

 

BNLI TRANSACTION SHOULD SPUR THIS YEAR’S NET PROFIT

We expect ASII to record a net profit of Rp28T this year, spurred by potential BNLI transaction gain of Rp8.4T, according to our calculation, which stood at 1.77x of BNLI’s BV although it is subject to change. Excluding the one-time gain, we estimate ASII to report a net profit of Rp22.7T this year, supported by car sales and CPO price recovery, as well as better financial service performance on the back of lower interest rate. 

 

VALUATION

We maintain our BUY recommendation with slightly adjusted 12-month target price of Rp7,200/share (previous TP: Rp7,460/share), as we estimate slower-than-expected car sales growth going forward. TP reflects 12-month P/E and P/B of 11.4x and 1.3x, respectively. 

Thu March 5Th, 2020

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