Error
  • SERVER_CONNECT_FAILED, failed to open stream: php_network_getaddresses: getaddrinfo failed: Name or service not known
  • SERVER_CONNECT_FAILED,
  • SERVER_CONNECT_FAILED,
  • SERVER_CONNECT_FAILED,
  • SERVER_CONNECT_FAILED,
  • SERVER_CONNECT_FAILED,
  • SERVER_CONNECT_FAILED,
Close
< December 2018 >
Mon
Tue
Wed
Thu
Fri
Sat
Sun
 
 
 
 
 
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
 
 
 
 
 
 

Stock Index
Bahana Securities

18 Dec 2018 | 01:40 WIB
INDEX
SCORE
POIN
%
Last 1 day
Last 1 day
Last 1 day
Last 1 day
Last 1 day
Last 1 day

Currencies
Bahana Securities

18 Dec 2018 | 01:40 WIB
KURS
BUY
SELL

Second-quarter corporate earnings: The good, the bad & the ugly

This time around, corporate earnings season for the 2Q16 has been much slower than in the past with only 64% of the stocks under our coverage has reported their financial performances.

Based on the 65 companies that have reported 2Q16 earnings, the aggregate operating profit y-y growth has reached 10.1% (exhibit 1), compared to our estimate of 16.5% y-y growth. On the bottom line, 2Q16 aggregate net profit growth has been stronger at 13.5% y-y, but slightly lower than our estimate of 15.9% y-y growth.

Worth pointing out that both operating and net profit have shown strong rebound compared to the earnings contractions experienced back in 2Q15. On the top line, the overall market thus far booked 5.9% y-y sales growth, up from 4.0% y-y in 2Q15.

With result improvements across the board, we retain our positive view on the index with our 2016-end target of 5,600, before rising to 6,600 in 2017, assuming further interest rate cuts and stronger IDR, backed by a successful tax amnesty scheme. Thus far, turnout at the tax amnesty socialization venues have been much stronger than expected, suggesting solid interest and paving the way for a thriving program implementation.

On stock picks, on the back of our expectations of lower interest rates ahead, we continue to recommend that investors be more overweight in interest-rate-sensitive stocks. Sector wise, thus far the good sectors have been largely in line with our expectations with the poultry sector leading the way while banks being the only one that has surprised on the upside.

On poultry, the sector experienced strong 2Q16 DOC (average: IDR4,763/chick) and broiler prices (average: IDR17,468/kg) resulting in both CPIN and MAIN booking higher-than-expected 2Q16 earnings. Beyond 2Q16, July 2016 DOC prices remained solid at IDR4,823/chick as the industry is still expecting the third parent stock culling to be implemented in September 2016. The culling should eliminate the remaining oversupply condition in the DOC market.

On infrastructure, last year’s low base due to ministerial restructuring has resulted in a strong earnings rebound, helped also by budget disbursement acceleration, which we expect to persist into 3Q16 and beyond. For the telco sector, benefits from solid data growth and continued rational pricing should allow for well-supported margins in 2Q16 to persist going forward.

Within the consumer space, the discretionary sector performed better than staples, in line with our expectations due to the Lebaran season. The performances of the retailers in 2Q16 were solid on average helped by early 2016 Lebaran season with LPPF, RALS and MPPA as the main beneficiaries. On the staples side, we expect a more positive sentiment ahead given falling oil prices, which should be supportive of margins on lower commodity prices.

In cement, a slight rebound materialized, helped by improved demand due to higher infrastructure spending. However, we retain our Underweight stance for now on increased production capacity by new and existing players that have created greater competition, especially in Java, which is hurting companies’ margins.

For plantations, we see that the companies posted better earnings compared to 1Q16, as the 2Q16 average CPO price slightly increased to USD669.75/mt, +3.6% q-q or +1.3% y-y, also helped by the lowest Malaysian inventory level during the period.

On the property sector, most of the stocks experienced deterioration on slow revenue recognition given previous years’ weak pre-sales, flat ASP growth and the government’s aggressive taxation drive, which dampened buying appetite as well as margins. The sector was also hampered by wait-and-see approach by investors prior to the tax amnesty implementation. Looking ahead, we see some support for the sector stemming from lower BI rates and LTV loosening, however.

In the auto sector, despite being in the ugly category, the growth had actually improved than last year’s and last quarter’s growth levels on the back of improved ASII’s sales volumes and margins. However, financial services and plantation subsidiaries proved to be a drag on the company’s performance. IMAS, however, booked poor quarterly results on weak auto sales and margin.

On coal, we saw improving prices in 2Q16, up 2% q-q to USD52.1/mt, which led to improved earnings performance for coal miners. PTBA booked 14% q-q earnings growth to IDR379bn followed by improved profitability margin, while HRUM reported higher-than-expected results with 61% q-q earnings growth to USD2.1mn mt. On the operating front, both PTBA and ADRO reported higher domestic demand with PTBA booking 17% q-q domestic sales growth, while ADRO reported 8% y-y growth in 1H16. In 2H16, we expect PTBA and ADRO to have lower strip ratios amid supportive coal prices which should generate improved result performances.

❮ Back to previous page