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| BFI Finance Offer IDR 500 billion Bonds |
Surya Internusa Ready to Release MTN USD 300 Million
PT Surya Semesta Internusa, Tbk (SSIA), through its subsidiary, SSIA International Pte Ltd, plans to issue medium-term notes in various currencies (multi-currency medium-term notes program).
MTN (multi-currency medium-term notes program) will be released gradually to a maximum value of SGD 300 million or larger than the original plan which is worth SGD 200 million were traded on the Singapore stock exchange (SGX).
The emission values from the first series MTN estimated around IDR 658 billion - IDR 1.6 trillion, equivalent to 20-50% of the company's equity as of June 2015 amounted to Rp 3.29 trillion.
Funds from issuance of MTN will be fully used for land acquisition. As of September 2015, the company has acquired land area of 298 ha in Subang, West Java.
Indonesia Economics Update, 27 Nov 2015
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| Indonesia Economics Update, 27 Nov 2015 |
- Indosat Ooredoo’s “collaborations to enable education for all”
- Tower Bersama push for tower rental business
- Waskita Karya secured IDR27.9trn new contract
- Garuda ready for USD500mn expansion
- Pakuwon Jati received IDR2.73trn marketing sales
- Unilever opens IDR2trn Oleochemical Plant in North Sumatera
GOVERNMENT BONDS
Ex Benchmark SUN Auction Close Lastly 2015. The government offered FR0053 (5.6 years) and FR0056 (10.8 years) at auction on Tuesday (1/12) next week, or the last SUN auction in 2015. For the record, the two series respectively are ex benchmark 10-year and 15-year in 2011 ago. The Government tried to increase outstanding, and create good liquidity; as two of the series will serve as a new benchmark 5-year and 10-year period of 2016.
Since June 2015, the government re-actively offer FR0053 to investors, either through auction of government securities, debt switch, as well as private placement, push this outstanding series of Rp 20.6 trillion (May 2015) to Rp 55.5 trillion (October 2015) , By comparison, outstanding new 5-year benchmark is currently still under outstanding FR0069 (benchmark 5-year currently) are worth a total of Rp 60.7 trillion. The same is done by the government against the new benchmark 10-year FR0056.
Based on data IDX as of October 2015, outstanding FR0056 Rp 41.4 trillion, only 33% of the total outstanding FR0070 (benchmark 10-year currently) are valued at Rp 125 trillion. The low outstanding, potentially making the government continues to aggressively offer FR0053 and FR0056 are in the auction - auction SUN 2016. At the last auction of government securities in 2015, the government also offers FR0073 (15.5 years) or the new benchmark 15-year period of 2016.
ASF bonds and 45% ADMF Dominance Secondary Transactions.Trading activity yesterday again looked deserted with the value of transactions decreased 33% to Rp 305 billion. Bonds Astra Sedaya Finance (ASF) and Adira Finance (ADMF) dominate transactions in the secondary market yesterday with a total volume of transactions reached Rp 138 billion (45% of total market volume) of the total 7 series traded. In addition, buying back make TAXI 12:25% yield in 2019 plummeted to the level of last week's 12:42% after touching 16.77%.
Meanwhile, the decline in yields seen in other most-traded bond is 8.75% AKRA 2019 fell 24bps to 10:51% level. For the record, AKRA 8.75% in 2019 (o / s Rp 877 billion) are actively traded bonds including during this November with a frequency of 35 times. While bonds series AKRA AKRA series B is 8.40% in 2017 (o / s USD 623 billion), based on data IDX, have never traded in the secondary market during the month of November.
Bima Finance Coupon Offer Up to 14.5%.Milky Multi Finance offers a coupon of between 13% and 14.5% for the first phase continuous bonds worth Rp 150 billion, which will be released in the near future. Bonds that have earned the rank of Valuation BBB is offered in two series that Serie A with a tenor of 1 year is offered with a coupon of 13% -13.5%, while series B tenor of 3 years is offered with a coupon of 14% -14.5%.
The entire proceeds will be used for working capital. Bima Finance remain focused to deliver a portfolio of financing with 60% financing and 40% used car financing a used motorcycle. Although it bears the BBB rating, but the company believes the bonds will be absorbed by the insurance company that has partnered with the company.
Government sixth stimulus : Incentives For Special Economic Zones
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| Incentives For Special Economic Zones |
The Government continues to push through with its policy packages by launching its sixth stimulus, which mainly consists of three main policies. In our view, the stimulus given for Special Economic Zones (SEZ), which includes tax holidays up to 25 years, continues to highlight the Government’s determination to further attract investment into Indonesia.
- Tax incentive for SEZ. Currently, there are eight SEZ in Indonesia that are sector specific ie each one is based in an area of its primary resources ranging from tourism, mining and fisheries to logistic and international port. In the sixth policy stimulus, the government would provide tax holidays in order to further garner more investment into SEZ. For investments > IDR1trn, the government is expected to provide tax holidays that range between 20-100% for 10-25 years, while for investment between IDR500bn to 1trn would get similar tax holidays for 5-15 years. If the investment is not within the sector specific, the Government would still provide tax allowance of 30% for six years. All of tax incentives are in addition to the current incentives in SEZ such as the exemption on import tax, value-added tax (VAT) and luxury tax. The government is also planning to allow foreigners to purchase landed property in these locations. Overall, we believe that the new incentive increases the attractiveness on investments into Indonesia.
- Water supply regulatory change. The Government would also amend the water supply regulation, which would subsequently be considered as a public service. This would result in all the water supply businesses and authority going back to the Government. While this appears to contradict attracting new investments, these changes are necessary to comply with the recent verdict of the Constitutional Court. However, the Government has assured private companies with existing water treatment licenses that they could still continue with their businesses until the new regulation is formalised. Nonetheless, there is still a risk for more restrictive regulations going forward, which could negatively impact the ready-to-drink businesses of consumer companies such as Indofood CBP (ICBP IJ, BUY, TP: IDR16,300) and Unilever (UNVR IJ, NR).
- Further, streamline in bureaucracy. In the continuation of the first deregulation policy, the Government is expected to further streamline the importation process for drugs and its raw material to be less than 1 hour. This would positively impact pharmaceutical companies and hospitals sectors such as Kalbe Farma (KLBF IJ, NR), Mitra Keluarga (MIKA IJ, BUY, TP: IDR3,150), and Sarana Meditama (SAME IJ, BUY, TP: IDR3,300).
- The winner of the sixth stimulus policy would be Kawasan Industri Jababeka (KIJA IJ, NR), which currently has two projects in SEZ – Tanjung Lesung (Banten) and Morotai (North Maluku) – with a combined total development area of 2,647ha (gross). KIJA has signed a memorandum of understanding (MOU) with seven investors (three local and four foreign companies) to develop the Tanjung Lesung SEZ earlier this year. Meanwhile, the company has also partnered with some 20 Taiwanese investors to develop Morotai with an estimated development cost of up to IDR6.8trn covering an area of 1,200ha.
- We also see the progression of the Government’s support to further develop the SEZ by resolving their inadequate infrastructure. Based on data from Ministry of Public Works, infrastructure plans in the eight SEZ locations have been tendered and signed in 2015, except for Tanjung Lesung. Nonetheless, the Government has committed to build a connecting toll road from Jakarta-Merak to Tanjung Lesung. Work on the 80km stretch of road, which expected to be completed within three years of the tender, should start next year.
- 3Q15 GDP is below expectation. The Central Bureau of Statistic released 3Q15 GDP which saw slight growth improvement to 4.73% vs 4.67% in 2Q15 and 4.72% in 1Q15. However, the figure was below both Central bank expectation of 4.85% and consensus’ 4.80%, and continues to highlight the slow pace of economic improvement. We would expect for a stronger stimulus from the Government, especially on measures to propel economic activity in the short- to medium-term. The Government is now running at higher risk of a budget deficit, especially as tax collection still fell short of its target, reaching only 57% up to mid-Oct. With government spending likely to intensify in the 4Q15, the risk of a further budget deficit expansion is increasing. As such, it is likely that the Government might not be able to fully meet its initial spending target, but we opine that the situation has rather been expected, especially with slower progress earlier this year. What is more important, in our view, is for a visible improvement in spending pattern in 4Q15, that is more critical and can improve confidence of the Government in realising infrastructure development going forward. Our economist envisages the Indonesian economy to grow at 4.9% YoY in 2H15, faster than 4.7% YoY in the 1H. This is on the assumption of strong government spending and strong investments. For the full year, we maintain our real GDP forecast and expect a more moderate pace of growth of 4.8% in 2015, compared with 5% in 2014.
Source : RHB OSK Indonesia Research Institute
Economics Update, 26 Nov 2015
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| Economics Update, 26 Nov 2015 |
- MNC exits, Waskita acquired 38.5% stake at Waskita MNC Transjawa Toll Road
- Rukun Raharja aim USD2.12mn power plant projects
- Dwi Kemasindo aims IDR400bn for retail expansion
- Kino Indonesia IPO priced in lower range
- Medco signed USD200mn term facility agreement Cars sales is estimated to grow 5% YoY in 2016
- Bank Rakyat Indonesia facing a flat growth in 9M15
- Nippon Indosari is optimistic 20% YoY sales growth to be achieved
- Timah sets aside USD87m capex, embarks on radioactive mineral business
- Vale booked earnings of USD51.9m
- Investment realization to exceed full-year target
- World Bank predicts economy to grow by 4.8% in 3Q15
- Summarecon Agung announced that they are canceling the plan to release some of their assets to their subsidiary, Summarecon Investment Property (SIP). The assets that were about to be sold are Mall Kelapa Gading 1, 2, 3, and 5, including Pop Hotel Kelapa Gading, La Piazza, and Gading Food City. The total value of the sale of these assets reached IDR6.19trn.
- Pembangunan Perumahan revised down its revenue target to IDR15,6trn (25.5% YoY) from initial target of IDR19.2trn (54.4% YoY). Our revenue estimate is around IDR16.5trn (+33.2% YoY), around six percent higher than company’s new target of IDR15.6trn (25.5%YoY). Supported by its property business, private projects and plenty of government projects ahead, PTPP’s order book is set to grow by 29% CAGR between FY14 and FY17F.
- Summarecon Agung : New concept in Serpong and Bekasi. A week after the Bandung launch, Summarecon would launch a new residential concept in Serpong and Bekasi, Condovilla. Condovilla is a vertical home concept (low-rise apartment) where each block comprises a total of 20 units that are housed in a five storey complex. It is expected to launch 350 of such units called Rainbow Springs in Serpong and the same number of units in Bekasi (The Primrose). Each project has secured about 150 bookings for the first 100 units offered in Phase 1. Sales from both projects are expected to generate about IDR1.4trn, assuming a 100% take up rate.
Bonds Update : Government Retail Bonds Please Portions Rupiah and Foreign Exchange Reserves Down $ 1 billion in October
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| Bonds Update |
Government Retail Bonds Please Portions Rupiah.
The Government will issue retail bonds next year as much as 4 times, consisting of 2 times the retail bonds (ORI) and 2 times the Islamic bonds or sukuk retail (Sukri). This plan is one of the strategies issuance of Government Securities (SBN) next year. For the record, retail sukri series 7 (SR007) issued by the government in late February with an indicative target of Rp 20 trillion, rationing posted a turnover of up to Rp 21.97 trillion.
While ORI012 September issue worth Rp 27.4 trillion, or exceeded the indicative target of Rp 20 trillion. Government assess, with high holdings of government bonds by the Indonesian people themselves, will reduce the volatility of the bond market. The volatility of the bond market next year will also be reduced by the deepening of the market conducted by Bank Indonesia (BI), and the Financial Services Authority (FSA). As for attracting foreign investors, the government chose to issue global bonds, euro bonds, and samurai bond.
Foreign Net Buy Throughout October Rp 5.39 trillion.
Starting the fourth quarter, foreign investors back into the market of government securities (GS). Based on data from the Directorate General of Finance and Risk Management (DJPPR) notes, foreign net buy round in October 2015 reached Rp 5.39 trillion. This value is rising, having previously posted a net foreign outflow of Rp 14.1 trillion in the third quarter.
Capital inflow of foreign investors in line with the appreciation of rupiah 6.98% month on month (mom) from Rp 14 653 per US dollar to Rp 13 684 per US dollar at the end of October 2015. The banking sector also increases holdings in government securities, rose to Rp 11.35 trillion; then insurance Rp 3.56 trillion; and retail investors increased to Rp 23.68 trillion.
The dominance of short tenor bonds 72% Transaction Weekend.
Activity in the secondary market is still quiet yesterday with the volume of transactions recorded only Rp 448 billion with trading frequency 64 times out of 27 series transacted. Investors were active in short-term bonds (<1 year) who dominated the weekend trade value volume reached 323 billion or 72% of total transactions. Bonds and bond finance companies top rating SOE maturities of 1 year to be the target of investors yesterday.
Astra Sedaya Yield 9.50% in 2016 down 15 bps to a level of 9.29% to the value of the volume of Rp 24 billion. While the price of Jasa Marga, 8.70% in 2016 also increased the yield fell by 47 bps to 8.75% by volume position of Rp 80 billion. Bonds with the highest volume recorded yesterday by MFIN 10.50% in 2016 with a transaction volume of up to Rp120 billion and yield increased 33 bps to 9.52%.
PT Sumarecon Agung Tbk issuing Bonds.
PT Sumarecon Agung Tbk issuing bonds II with a target total funds raised amounted to Rp 3 trillion by the end of this year. In PUB II, the Company will issue bonds first stage at a maximum of Rp 500 billion a tenor of 5 years with offering period will be made on November 9 to 24 and allotment on 14 December and registered on December 17, 2015. These bonds have earned an A + rating from PT Rating Agency Indonesia or Valuation effects.
Foreign Exchange Reserves Down $ 1 billion in October.
Bank Indonesia (BI) reported that Indonesia's foreign exchange reserves fell to USD 1 billion to USD 100.7 billion as of end October 2015 from the end of September 2015 in the position of USD 101.7 billion. This decline is relatively smaller than the decline in international reserves in September 2015 were down USD 3.6 billion to USD 101.7 billion. Foreign exchange reserves at the end of October 2015 was enough to cover 7.1 months of imports or 6.6 months of imports and government foreign debt payments.
Media Highlights, 25 Nov 2015
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| Media Highlights, 25 Nov 2015 |
- Government signed three dam projects worth IDR1.8trn
- Indosat and Erajaya team up on retail business
- United Tractors cut capital expenditure for 2016
- Jakarta Setiabudi to expand outside Java
- MNC Investama to allocate IDR1trn for expansion
- Modern Internasional aim for IDR1.2trn sales in 2016 Sorini Agro Asia to release shares to institutional investors
Media Highlights, 24 Nov 2015
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| Media Highlights, 24 Nov 2015 |
At Summarecon Bandung’s premiere launch last Saturday, all 400 units were fully sold out in less than five hours, with total estimated sales value of c.IDR600bn-700bn. Maintain BUY with an unchanged IDR1,710 TP (15% upside). While the generated sales value is below the company’s initial target of IDR800bn, the event saw more than 1,000 registered buyers, pointing to a bright future for the Bandung projects.
- PTPP realized plan to acquire HKM
- Tower Bersama ready to allocate IDR1trn
- Wijaya Karya explore USD200m contract in Saudi Arabia, Philippines, and Aljazeera
- Kimia Farma seeks 15% growth
- Budget deficit slightly down to 2.46% Indonesia to miss coal production target
Bank Indonesia predicted GDP growth of 4.8-4.9% in 4Q
Bank Indonesia (BI) predicted Indonesia’s economy to grow at 4.8-4.9% yoy in 4Q which in turn will bring the total growth in 2015 at 4.7-4.8%. BI also mentioned that the growth in 3Q improved only slightly as the private investment in non building sector remained soft. In addition, BI also projected the inflation to reach 0.13% mom in November and 0.5% in December. As a result, the inflation will be below 3% yoy in end of 2015.
Media Highlights, 23 Nov 2015
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| Media Highlights, 23 Nov 2015 |
- Semen Indonesia sales grow by 11.5%
- Dua Putra received stellar response for IPO
- Indorama sets aside USD60mn for Indonesia and Uzbekistan Expansion
- Mayora to open factory in China.
- BI projected trade balance deficit to USD6bn
- Bank Indonesia predicted GDP growth of 4.8-4.9% in 4Q
Bank Indonesia Hold Interest Rates
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| Bank Indonesia Hold Interest Rates |
Bank Indonesia kept its benchmark rate at the level of 7.5% yesterday with the deposit facility rate at the level of 5.5% and the lending facility was also set at the same level of 8%. It became the tenth month Bank Indonesia to hold interest rates after the last cut of 25 bps in February. Nowadays, the opportunity to cut interest rates again looks small because the pressure rupiah, and the uncertainty of external conditions.
BI reiterated that the central bank's current focus is to stabilize the rupiah by optimizing monetary operations. Rupiah weakened to Rp 13 748 per US dollar Tuesday. On the other hand, Bank Indonesia also back believes that the pressure is now more mainstream rupiah due to external pressures like-planned increase in the Fed Funds Rate.
Lending Is Not Going down, in the middle Relaxation The Minimum Reserve Requirement
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| Lending Is Not Going down, in the middle Relaxation The Minimum Reserve Requirement |
In addition to setting the benchmark interest rate (BI rate) on Tuesday (17/11), the Board of Governors of Bank Indonesia (RDGBI) also lowered the minimum reserve requirement primary rupiah from 8% to 7.5% of third party funds. The purpose of this GWM relaxation, to boost credit growth. Meanwhile, the banking sector rate, it has the potential to widen the relaxation of lending space, but its effectiveness has not been a direct impact on the reduction in financing interest.
bank lending selective, relaxation GWM make a positive sentiment for the market Government Securities (SBN), both Government Securities (GS) and Shariah Securities (SBSN / Sukuk). High liquidity reserve requirement as a decrease of 50 bps, will make the banking sector look for investment alternatives, the post portion of this sector had declined below Rp 400 trillion. Based on data from the Directorate General of Finance and Risk Management (DJP2R), bank ownership in the SBN Rp 398.6 trillion per 13 November 2015, the lowest in three weeks. For the record, the banking sector is the second-largest share after foreign investors in government securities.
In addition, bank lending constraints facing the lending that is not necessarily down; as speculation increase in the Fed Funds Rate (FFR) makes BI keep its benchmark interest rate to survive on the same level within a period of 10 months. For information, shut down in 2015, investors will be presented 3 auctions (tentative) final, that is: as much as 2 auction debt securities and 1 switch
Capital Expenditure (Capex) Definition
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| Capital Expenditure (Capex) |
Capital Expenditure (Capex) are costs that are used by companies to acquire or increase of fixed assets or physical assets such as property, industrial buildings or equipment.
While in another explanation states that the capital expenditure is the expenditure that can generate profits in the future and will be accounted for as a capital expenditure and not as a cost. In general, every company will allocate capital expenditure in its budget.
Diasatas of simple understanding can be concluded that the capital expenditure is very important for the development and growth of the company. For companies likely always allocates capital expenditure in its budget.
If a company does not allocate CapEx, most likely over time its performance will also drop. For example PT. Banget economy is a company engaged in the leasing of vehicles, and, therefore, the company must allocate the cost to maintain the quality and the rejuvenation of the vehicle so that the vehicle leasing can provide the best service.
If the PT. Banget economy does not allocate costs to preserve the quality and the rejuvenation of the vehicle then surely the leased vehicle has a quality that is not always in good condition so it will be more and our earnings will decrease.
Then from the illustration above we can conclude that CapEx is very influential for a company to maintain or increase profits.Usually budgeted apex of profits generated by the company after that if there are remaining profit will be distributed to shareholders as dividends.
Capex is not necessarily derived from the results of the company's profits or internal funds but can also be funded by other parties such as bank loans, issuance of debt securities, asset securitization, etc.
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