Monday, 12 March 2018

Subsidy increase seen to maintain stability

The government’s plan to raise fuel subsidy has been seen in a positive light as the move is considered necessary to support people’s purchasing power in short term. Finance Minister Sri Mulyani Indrawati said the government was examining wheter it would boost the diesel fuel subsidy from Rp500 (US$40cents)/liter at present to between Rp700-1000/liter. The measure seems to be an inevitable option as it is committed to maintain electricity rate as well as subsidized gasoline Premium and subsidized diesel fuel Solar at present level amid an upward trend of global oil prices. The government is set to spend Rp94.5tr in energy subsidies in 2018 state budget, consisting of Rp46.87tr in fuel subsidies and Rp47.66tr in electricity subsidies.

Kediri airport worth Rp5tr will immediately built

The Coordinating Minister for Maritime Affairs, Luhut B. Pandjaitan estimates the development cost of Kediri Airport in East Java, which was initiated by Gudang Garam reached Rp5tr. The development fund is sources from Gudang Garam’s corporate social responsibility (CSR) budget. According to Luhut, once completed the airport will be granted to the government, and will be managed by PT Angkasa Pura II. He added that GGRM needs 500 ha of land to build the airport. Meanwhile, the Ministry of Transportation awaits recommendation from local government before issuing the determination of location (Penlok) of the airport in Kediri, East Java.

Adhi Karya’s subsidiaries to go public

Adhi Karya plans to gradually hold initial public offerings (IPOs) for its three subsidiaries from this year until 2020. PT Adhi Persada Gedung (APG) will be the first subsidiary to go public in 2018, followed  by PT Adhi Commuter Properti (ACP) and PT Adhi Persada Properti (APP) in 2019 and 2020 respectively. Adhi Karya CFO Harris Gunawan said APG would make available 30-40% of its shares to the public and the proceeds would be used for working capital and business development. Adhi also plans to spin-off ACP as an independent company before initiating the IPO. The spin-off is scheduled on 13 Apr 2018. To complete the spin-off, Adhi will need Rp2tr in funds, of which Rp1.3tr will be derived from a rights issue, while the rest will come from its internal cash.


Tuesday, 13 March 2018

Japan Bank for International Cooperation sets sights on railway project
Japanese state lender Japan Bank for International Cooperation (JBIC) has expressed its interest in financing the revitalization of the Jakarta – Surabaya railway, tabling a new option for funding the project. Indonesia expects its flagship project, developed in conjunction with its long-standing investor Japan, to cost Rp60tr (US$4.2bn). Earlier, the government raised the possibility of using a new financing scheme beyond a government-to-government (G2G) loan as initially planned. JBIC CEO Tadashi Maeda said the lender had a strong interest in participating in the project, highlighting its significance after Japan lost its bid to build the Jakarta-Bandung high speed railway to China. Maeda further claimed that JBIC’s participation would enable the project to be more financially feasible and be completed quicker.

Government to raise subsidies as oil price soars
As global oil and coal prices continue to rise, the government is set to break through the budget ceiling with a plan to raise spending on energy subsidies this year. Finance Minister Sri Mulyani Indrawati announced on Monday that the government was planning to double the subsidy on Solar-branded diesel from Rp500 (4 US cents) per liter to Rp1,000. Under the assumption that domestic demand for Solar diesel reaches 16.32m kiloliters, the subsidy increase will cost the government Rp4tr. The government has also raised the bar for PLN, which is now expected to add 24.1m new customers in the 450 VA category this year, up by 1m from the original target outlined in the 2018 state budget. With the additional customers, PLN would add another Rp4tr to its subsidy allocation. The government is set to spend Rp94.5tr on energy subsidies, with Rp46.87tr going to the fuel subsidy and another Rp47.66tr to the electricity subsidy, as outlined in the 2018 state budget. Despite the ballooning subsidy allocation, Sri Mulyani said she was still optimistic that the budget deficit would be maintained at 2.19% of the GDP. The government has decided there will be no increase in the subsidy for Premium-branded gasoline (RON 88) or the subsidized 3-kg LPG canisters.

Absorption of APBN expenditure improving
Finance Minister Sri Mulyani said that the absorption of state budget (APBN) spending this year has improved. As of Feb 18, the absorption of ministries and agencies (K/L) expenditures increased 25.7% yoy. The total realization of K/L expenditure up to February 28 reached Rp55.2tr or 6.5% of the 2018 state budget. The figure is increased by 25.7% compared to the same period last year of Rp43.9tr or 5.5% of the 2017 revised state budget. K/L activities which have been contracted by March 9, 2018 reached Rp60.9tr. This figure reached 29.9% of the total capex ceiling that reached Rp203.9tr.


Kimia Farma to push for acquisitions in 2018
Kimia Farma is seeking to expand aggressively this year, as it plans to acquire at least three factories to accelerate earning growth. The company had earmarked Rp3.5tr in capex this year to support both organic and inorganic business expansions, Kimia Farma president director Honesti Basyir said. Of the figure Rp2.3tr will be used to support our inorganic growth. Honesti added that Kimia Farma would acquire a pharmaceutical factory, a cosmetic factory and a factory that makes products that it had yet to produce. On Monday, the company issued the second trance of MTN worth Rp600bn. The debt paper has a coupon rate of 7.75% and a 3-year tenure. The proceeds from the note issuance will be used to support corporate expansions. Early this month, Kimia Farma spread its wings to Saudi Arabia, where it acquired a 60% stake in pharmaceutical company Dawaa Medical Limited Company, equal to 38m riyals (US$10.13m). The move was part of an effort to set up a presence in the African market in the future, Honesti said.

Adhi Karya receives payment from KAI in LRT project
After building the Greater Jakarta LRT on its own cash, Adhi Karya finally received fresh funds from the project’s investor, PT KAI. The funds disbursement has been delayed from its initial schedule in January because of administrative issues, including verification by the BPKP. The payment amounts to Rp3.42tr, excluding tax, and covers the costs of the project in the first phase from the onset until last September, when it reached 21.9% completion. The figure, however, is lower than its expectation of Rp4.2tr, due to certain issues, such as the technology and its related costs. As of March 2, the construction has reached 34% completion. Adhi Karya seeks to finish 80% of the construction, equal to Rp19tr, out of the overall contract worth Rp22.6tr for the LRT infrastructure.


S&P Cautions on Worsening Balance Sheets at Indonesian State Firms

Standard & Poor’s Global Ratings has highlighted a deterioration in the balance sheets at Indonesian state-owned enterprises involved in a government-led infrastructure push in Southeast Asia’s biggest economy. SOEs, especially those working in power and construction, have extensively borrowed to match the government development plans, causing their balance sheets to become “substantially weakened,” Xavier Jean, an analyst with S&P. The leveraging level of 20 listed and rated SOEs has increased to around an average of 5 times debt-to-EBITDA, jumping from 1 times in 2011. “This is a trend that we are keeping a close eye on because we think it’s going to persist and going to accentuate in 2018 and to the run up to the 2019 election,” Jean said. Infrastructure development is a core part of President Joko “Jokowi” Widodo’s economic agenda and is aimed at slashing high logistics costs, which are often blamed for creating bottlenecks in the economy. S&P upgraded Indonesia’s sovereign rating to investment grade in May, years after Fitch and Moody’s, on the back of structural improvements and reduced risks to the country’s fiscal position.

‘Never say never’ to cryptocurrencies going mainstream

While the Monetary Authority of Singapore (MAS) does not consider cryptocurrencies as money, there is potential for this to happen in the future, its managing director Ravi Menon said. Although the central bank’s view is that the nature and scale of cryptocurrency activities in Singapore “do not currently pose a significant risk to financial stability”, it is prepared that the situation could change and is closely watching this space with “great interest”, Mr Menon said. For example, a second generation of cryptocurrencies is emerging to address some of the challenges related to network congestion, transaction time, energy costs, money laundering risks and price stability. Besides that, “some of the best minds in the field are applying their creative energies to make cryptotokens mainstream”.


Wednesday, 14 March 2018

Car sales down by 1.5%
Domestic car sales on Feb 2018 decreased by 1.5% into 93,737 units from 95,163 units on previously. While, car sales also declined by 2.3% month on month. The declined in Avanza wholesale was as a part of Toyota Astra’s strategy to keep the balance of supply and demand. Further in the retail market, Toyota managed to sell 27,772 units in Feb, accumulating 56,267 units year to date. According to Gaikindo as Feb 2018, car sales grew by 4.5% into 189,712 units. Hence, in 2018 Gaikindo aimed to have 2% improvement in car sales into 1.1mn. Meanwhile, Mitsubishi succeed to replace Daihatsu on the second place in terms of market share.

Coal price rules revised
Under the decision of Ministry of Energy and Mineral Resources (MEMR) No.1410K/30/MEM/2018, new price (DMO) will be effective since 12 March 2018 until 31 December 2019.
WIKA Realty will release 25% stake in April
Wijaya Karya Realty plans to release about 25% of shares to the public through an IPO. As planned, the company will listing its shares on IDX in April 2018. Director of Indonesian Stock Exchange (IDX) company assessment, Samsul Hidayat said, currently WIKA Realty’s asset value reaches Rp2tr. Based on Investor Daily’s records, this year, WIKA Realty is working on 12 projects with an investment value of trillions of rupiah. The projects that been working on include landed house, apartment and a recurring project. President Director of WIKA Realty, Agung Saladin said, the company’s current recurring income percentage is 8.46%, and will be increased to 12%.

Go-Jek to facilitate micro-credit for SMEs
Homegrown ride-hailing app Go-Jek will facilitate small and medium enterprises (SMEs), which serve as its Go-Food merchants, to gain access to subsidized micro-credit (KUR) through Bank Negara Indonesia (BNI). Go-Jek will cater first to eligible SMEs based on their transaction history on its digital platform, Go-Pay before confirming their willingness to access the loans. It will then funnel a maximum of Rp25m (US$1,750) of loans to suitable candidates who will not be required to provide any collateral. BNI Small Business Division Chief Bambang Setyatmojo said the company is aiming to disburse Rp1.5tr in KUR to Go-Food merchants who own mostly micro business.

Pakuwon Jati will launch 1 new project
Pakuwon Jati will only launch 1 new project in Surabaya this year. The apartment will be launch in April 2018 with 370 units and price start from Rp2tr. Pakuwon Jati allocates capex of Rp2tr for project construction and development in 2018. The company is targeting marketing sales will reach Rp2.6tr, which 70% come from apartment project. The figure is in-line with company’s target and realisation of marketing sales last year. Moreover, sales and recurring income contributes 50% each to company’s revenue.

Total Bangun Persada booked new contract of Rp280bn
Total Bangun Persada has booked new contract of Rp280bn in Jan-Feb 2018 period. The number accounted for 7% of its new contract target of Rp4tr this year. The new contract includes construction of office, hotel, and apartment. The company has secured construction of hotel in Bengkulu worth of Rp75bn. TOTL also eyes carry over contract amounting to Rp4.77tr. The company plans to expand its property business by developing 7,000sqm of its land in Bumi Serpong Damai (BSD), Tangerang.


Garuda Indonesia: Reprofiling debt, to issue US$750m bonds.

Garuda Indonesia (GIAA) intends to improve the profile of short and long term debt by issuing global bonds amounting to US$750m by 2023. Currently, GIAA has short-term debt of US$1.08b and long-term debt of US$636m. The company stated that the debt reprofiling strategy is intended to have the outstanding balance of long-term debt no lesser than the short-term debt, so that firm’s operations are not burdened by short-term debt.


Total Bangun booked new contracts Rp280b in Jan-Feb ‘18.

Total Bangun Persada succeeded in booking new contracts of Rp280b, which is 7% of its new contracts target for 2018, during Jan-Feb 18. The new contracts came from the construction of office, hotel and apartment projects. Besides targeting to record Rp4t in new contracts in 2018, TOTL is also aiming to book carryover contracts of Rp4.77t. As a result, the firm has set capex amounting to Rp50b for the purchase of project tools and IT.


Japanese, Indonesian colleges jointly open language center

Japan’s Kanda University of International Studies has opened a Japanese-language and cultural learning center at a college in Indonesia in conjunction with the 30th anniversary of the private school’s establishment and the 60th anniversary of diplomatic ties between the two nations. The Kanda/Atma Jaya Japan Center, established at Atma Jaya Catholic University of Indonesia based on an 18-year partnership between the two colleges, currently provides a 10-week program at a fee of 1.35m rupiah ($98) or above to five businesspersons and two students. At a launch event in Jakarta, Kuniya Sakai, president of the Japanese university in Chiba Prefecture, east of Tokyo, said he always tells students to respect and love people and culture when learning languages, adding that “in that way, we can stay away from war and create world peace.”



Thursday, 15 March 2018

Indosat preparing for two expansionary ventures; sales target still conservative.

Indosat (ISAT) has provided Rp7t capex, of which 80% will be used to expand its LTE network outside of Java and 20% to develop its MyIM3 client application. As for sales target, ISAT conservatively projects low-single-digit sales growth of 0-5% yoy in 2018.


Telkom revenue and earnings saw double-digit growth in 2017.

Telekomunikasi Indonesia (TLKM)booked 2017 revenue growth of Rp128.25t, up by 10.25% yoy from Rp116.33t. Revenue consists of telephone revenue amounting to Rp43.91t, interconnection revenue of Rp5.17t, data revenue of Rp68.53t, and others at Rp8.76t. Gross profit also jumped 12.1% yoy to Rp43.93t in 2017 vs Rp39.19t in 2016. As a result, net profit showed 14.43% yoy growth to Rp22.14t in 2017 vs Rp19.35t in 2016.


Adhi Karya is targeting the LRT operation test in May 2019

Adhi Karya targets the operation of the Jabodetabek LRT phase 1 to take place on May 1, 2019. Currently, overall project development progress reaches 34.5%. The Jabodetabek LRT phase 1 includes three tracks with a total length of 44.4 km.

Pertamina gets additional Rp5tr from diesel subsidy
Pertamina will get additional fund  of Rp5tr with the government plan to increase diesel subsidy to Rp500/liter. However, the company will still bear some of the burden of the government’s policy which is not to raise the fuel price until the end of 2019. Finance Director Arif Budiman said, if subsidy increase to Rp500/liter with volume of 16m kl, Pertamina could get Rp7.8tr with tax. Minus the tax, it may be around Rp5tr. With subsidy increase Rp500/liter, then the diesel subsidy will be Rp1,000/liter. While the price difference of subsidized diesel and the economic price reaches Rp1,500-Rp1,800 per liter.

Shortfall is still haunting
Tax revenue trends throughout the year showed signs of improvement. However, the risk of shortfall is still high. According to Finance Ministry’s data, the realization of non-oil &  gas tax revenues during Jan 1 – Mar 7, 2018 was recorded at Rp156.8tr, growth 19% compared to the same period last year of Rp131.7tr. This positive performance was triggered by non-oil & gas income tax revenues of Rp88.7tr or an increase of 20.26% yoy and value added tax of Rp67tr or up 18.37%.

Coal to remain dominant in power generation
The Energy and Mineral resources Ministry announced it had approved and launched state electricity procurement business plan (RUPTL) for 2018-2027 period. PLN plans the development of new power plants with a total capacity of 56,024MW by 2027, down significantly from the 77,900MW stated in the previous plan for the 2017-2026 period. The 2017-2026 business plan was based on assumptions that Indonesia’s economy would grow 6.17% annually and electricity sales would climb by 8.3% per year. PLN has revised its economic growth assumption to 6.1% and its electricity sales growth to 6.86%. The company has scrapped the allocation for new coal-fired facilities by around 5,000MW, gas-fueled and combined-cycle plants by 10,000MW and renewable projects by 6,600MW. Energy and Mineral Resources Minister Ignasius Jonan said the most important thing for the government was to increase the renewable energy portion in the energy mix for electricity generation from 12% in 2017 to 23% in 2025, while the coal portion was set to fall from 57.2% in 2017 to 54.4% in 2025.

WIKA aims for Rp1.54tr profits this year
Wijaya Karya is aiming to increase its profits at a double-digit rate this year after its bottom line hit an all-time high last year. The company is relying on new contracts from its subsidiaries. WIKA Corporate Secretary Puspita Anggraeni said company is targeting to book Rp1.54tr in net profit this year. In order to boost its profits, WIKA will work on obtaining new contracts in all sectors. She added the company eyes Rp57.25tr in new contracts throughout this year. WIKA’s subsidiary WIKA Realty plans to carry out an initial public offering and sell 25% of its shares in April. The proceeds will be used to support its business expansion.


Rescue plan for Indonesia insurer Bumiputera falls through

A rescue plan for Indonesian life insurer Bumiputera has collapsed after it failed to agree with Evergreen Invesco – its planned white knight – over the size of a capital injection. Evergreen had been due to acquire a holding company for Bumiputera, which has more liabilities than assets and operates under the control of Indonesia’s Financial Services Authority (OJK), by raising billions of dollars through a rights issue. Financial authorities have been keen to resolve Bumiputera’s woes without government funds, scarred in part by the public furore that erupted over a taxpayer bailout of lender Bank Century in 2008. Evergreen had wanted to inject capital in stages into the planned holding company for century-old insurer over a 14-year period, Adhie Massardi, a Bumiputera manager, told Reuters, adding that the life insurer had wanted a sizable amount of funding immediately.

Financial rivalry between Hong Kong, Singapore gets heated

For decades, Hong Kong and Singapore have engaged in a more or less friendly competition for financial supremacy in Asia. This week, the rivalry got unusually heated. “We don’t normally as an organisation dignify remarks made by competitors with a response, but I thought today I’d make an exception to that rule,” Mr Ashley Alder, chief executive of Hong Kong’s Securities and Futures Commission (SFC), said at a public forum. Mr Alder proceeded to push back against the idea, reportedly raised by a Singapore Exchange (SGX) executive during a marketing trip to Hong Kong last week, that China’s government has “some influence” over the city’s regulator. Mr Alder said Hong Kong has an “arms-length” relationship with policy makers in Beijing and any suggestion that the SFC is “under the influence” is “totally false”. “I don’t think it was very adult,” Mr Alder said of the executive’s comment.



Friday, 16 March 2018


President Jokowi pushes for loan growth.

President Jokowi is demanding that banks be more aggressive with driving loan growth as lending grew by only 8.4% yoy in 2017, below the national target of 9-12%. Meanwhile, 2017’s banking capital adequacyratio (CAR) reached 23.26%, above the minimum standard of 12%. This year, Indonesia’s Financial Services Authority projects bank loansgrowth at around 12%, in-line with the GDP growth target of 5.4%.

Trade Balance: Trade deficit of US$116m in Feb 18.

The Central Bureau of Statistics (BPS) posted a Feb 18 trade deficit of US$116m. As a result, Indonesia has been experiencing a trade deficit in the past three months (Dec 17: US$220m, Jan 18: US$756m). As of Jan-Feb 18, trade deficit came in at US$872m, compared to the trade surplus of US$2.7b in Jan-Feb 17.

Metland and Keppel land will continue collaboration
Metropolitan Land (MTLA) and Keppel Land Indonesia are planning to do a joint operation after the success of its previous landed residential project in 2016, titled the Riviera. On the first phase, the project sold out all 151 units in the first day. On the second phase, it aims to sell another 141 units. Both developers are confident that the second phase will follow the success of the first phase.

Semen Indonesia allocates capex budget of Rp2.5tr for 2018
Semen Indonesia is allocating a total capex budget of Rp2.5tr in 2018, lower than 2017’s budget of Rp6tr. Out of this year’s total capex, Rp1tr will be used for maintenance purposes, and another Rp1.5tr will be used to build a new packing plant in Maluku and Bengkulu. It plans to use internal cash flow to fund the capex needs.

Toyota Rush sales, Upbeat
Toyota Astra Motor (TAM) recorded sales of “All New Rush” to dealers during the first 2 months of this year increased 11.3% to 6.991 units. Sales of the All New Rush also increased (month-to-month) in February 2018. TAM recorded “New Rush” wholesales in the first month of this year 3,416 units and in the second month of 3,575 units. Until the end of February, according to Henry Tanoto, Vice President of TAM, the vehicle order (SPK) of Rush is already over 22,000, up to 23,000.

Bank of Singapore seeks to expand its family office business

Bank of Singapore, the private bank of Oversea-Chinese Banking, is looking to expand its family office business as the city-state rolls out the red carpet for wealthy investors. “We are seeing increasing demand for families moving into the next generation to set a proper structure in place to manage family wealth,” Chief Executive Officer Bahren Shaari said. “Singapore is promoting that, to let families use it as a base to manage their investment activities globally.” Bank of Singapore’s expansion will heighten competition with European firms like UBS Group AG and Credit Suisse Group AG, who’ve long dominated this space. Singapore family offices had average assets under management of US$857m (S$1.1bn) in 2017, nearly double the Asia-Pacific average of US$445m, according to a survey of 262 such offices in a UBS/Campden report.

Singapore still world’s costliest city

Singapore is the world’s most expensive city for the fifth straight year in the Economist Intelligence Unit’s latest Worldwide Cost of Living report, with Paris and Zurich tied for second place. Asia Pacific and European destinations dominated the ranks of costliest cities identified in the report released this week. Tokyo and Osaka were conspicuous in their absence from the top 10, edged out by low inflation. As recent as 2013, Tokyo was the world’s costliest city to live in. The Japanese capital dropped seven places to 11th over the past year. Hong Kong, last year’s second-most expensive city, slipped to fourth place. Sydney rose four notches to break into the top 10, with Oslo, Geneva, Zurich and Copenhagen also climbing the list compiled from a survey of 160 items across 133 countries. Car ownership was a factor behind Singapore’s top ranking. However, the report noted that the city-state remains significantly cheaper than its peers in terms of household goods and hiring domestic help.

BlueSG sees more than 20,000 rentals in less than 3 months

More than 9,000 people have registered for Singapore’s first electric car-sharing service BlueSG in its first few months with the service seeing more than 20,000 rentals as at Feb 28, less than three months after it launched on Dec 12 last year. BlueSG’s managing director Franck Vitte said that the company had seen “overwhelming demand” for more stations and cars, and was working actively with relevant agencies towards this. “The exceptional response from the public proves that BlueSG is very well adapted to Singapore and appreciated by its residents,” he said. The company deployed 80 cars with 32 charging stations on Dec 12, 2017, and plans to roll out a 1,000-strong electric vehicle fleet and 2,000 charging points by 2020.

Police granted permits for St Patrick’s Day celebrations

The police said it has granted a permit for a St Patrick’s Day procession on Sunday — without any restrictions on the playing of musical instruments — on the basis that the festival is celebrated in Singapore as a “secular, cultural event”. Organisers also have to comply with the condition that there should be no religious elements or paraphernalia displayed or used at the event, the police reiterated the decision had been questioned by some who noted that the event has religious roots. The St Patrick’s Day Parade took place from 3pm to 5pm on Sunday, along a 300m stretch of pedestrian walkways in Boat Quay. There were no road or lane closures. It was held in conjunction with the St Patrick’s Day Street Festival organised in the vicinity over the weekend. A Public Entertainment Licence had been issued by the police for the festival.