Comprehensive Analysis of Indonesia’s Key Companies and Sectors

Broker Name: CGS International

Date of Report: December 13, 2024

Overview of Indonesia’s Market Landscape

The latest report from CGS International provides an in-depth look at Indonesia’s economic and market landscape for 2025. Amid policy shifts and uncertainties stemming from global and domestic factors, the report highlights key opportunities and challenges, sectoral outlooks, and detailed company analyses. Below is a comprehensive breakdown of the analysis.

Banks – Overweight Sector: Building New Expectations

The banking sector remains a standout, with an overweight rating supported by improving policy clarity and robust earnings growth expected in 2025. Deposit liquidity and loan growth are anticipated to be the main drivers.

Bank Negara Indonesia (BBNI)

• Loan Growth Outlook: BBNI guided for 10-12% loan growth in FY24, with actual growth at 8.8% YoY as of October 2024. For FY25, a conservative outlook is expected, especially in the small- and medium-sized segments.
• Potential for Higher Loan Yield: Recent trends indicate room for loan yield adjustments, particularly in the corporate and foreign currency loan segments.
• Funding Transformation: Initiatives such as branch transformation and the launch of the Wondr mobile app have boosted savings growth by 5.1% YTD as of October 2024.
• Target Price: Rp6,200, supported by a 16% long-term ROE and a 1.4x P/BV multiple.

Bank Rakyat Indonesia (BBRI)

• Loan Quality and Growth: BBRI’s microloan segment saw 6.4% YoY growth as of October 2024. The bank remains focused on quality disbursement, with high single-digit growth expected in 2025.
• Net Interest Margin (NIM): A potential upside is anticipated when SRBI yields decline, especially in 2H25, as BBRI currently has the lowest CASA composition among large banks.
• Credit Cost: A gradual improvement in microloan downgrades is expected, with credit costs guided at 3% for FY25.
• Target Price: Rp6,000, based on a 2.7x P/BV multiple and 19% ROE.

Bank Syariah Indonesia (BRIS)

• Growth Engine: BRIS delivered 16.8% YoY loan growth as of October 2024, driven by its gold business, which accounted for 4% of its total loan balance.
• Digital Transformation: The Byond mobile app, launched in November 2024, aims to attract low-cost savings and increase transaction volumes.
• EPS Growth: Expected to grow by 20% YoY in FY24 and continue at 20%/17% in FY25/26, supported by consumer loans and improved NIM.
• Target Price: Rp3,700, with a 3.3x P/BV multiple and 17% ROE.

Telecommunications – Neutral Sector Call

The telecommunications sector is poised for moderate growth, with core profit expected to grow by 4.7% and 6.8% YoY in 2025 and 2026, respectively. However, competition in starter packs keeps the sector’s outlook cautious.

Telkom Indonesia (TLKM)

• Dividend Yield: TLKM offers attractive yields of 6.5-7% in FY25-26.
• Catalysts: Cost synergies between Indihome and TSEL, divestment of the data center business, and reduced capex-to-revenue ratio are key drivers.
• Valuation: TLKM remains a top pick due to its attractive entry point and strong dividend potential.

Indosat (ISAT)

• Growth Drivers: ISAT benefits from easing competition and potential asset divestments, such as fiber assets.
• Challenges: Limited share liquidity could deter foreign investors.

XL Axiata (EXCL)

• Valuation and Merger Potential: EXCL is fairly valued, with potential synergies expected from its planned merger with Smartfren.

Consumer Staples – Best Positioned for Populist Programmes

The consumer staples sector is expected to benefit significantly from government initiatives such as the free meal programme, 6.5% minimum wage hike, and the 3m housing programme.

Indofood CBP Sukses Makmur (ICBP)

• Market Position: ICBP’s product mix aligns well with low-income consumers, making it a top pick in the sector.
• Supportive Trends: FMCG consumption trends, such as increased at-home dining, favor ICBP’s product portfolio.

Mayora Indah (MYOR)

• Consumer Focus: MYOR also stands to benefit from increased purchasing power among low-income households, supported by government policies.

Coal Mining – Neutral Sector Call

The coal mining sector remains neutral due to rising domestic production in Indonesia and China, despite geopolitical tensions supporting higher coal prices.

United Tractors (UNTR)

• Top Pick: UNTR benefits from its diversified operations, including heavy equipment and mining contracting services.

Healthcare – Neutral Sector Call

The healthcare sector faces challenges such as tightening insurance claims and elevated valuations, with a Neutral rating for 2025.

Medikaloka Hermina (HEAL)

• Challenges: HEAL faces slower earnings growth compared to FY24, with a projected 7-8% growth in FY25.

Mitra Keluarga Karyasehat (MIKA)

• Valuation: MIKA’s high P/E ratio of 31.7x for FY25 reflects elevated valuations in the sector.

Siloam International Hospitals (SILO)

• Patient Volume: SILO experienced a drop in insurance patient volume in 3Q24 but is expected to recover gradually.

Property – Tapering Off from a High Base

The property sector is expected to see a decline in presales growth due to a high base in FY24. However, it remains attractive due to undemanding valuations.

Pakuwon Jati (PWON)

• Growth Catalysts: PWON’s new mall openings and associated condominium projects are expected to drive 20% EPS growth in FY25.

Ciputra Development (CTRA)

• Backlog Recognition: CTRA is expected to achieve 17% EPS growth in FY25 due to its revenue backlog.

Cement – A Slow-Moving Process

The cement sector stands to benefit from Indonesia’s 3m housing programme, though its impact is yet to be factored into estimates.

Indocement Tunggal Prakarsa (INTP)

• Top Pick: INTP is well-positioned to benefit from expected growth in bag cement demand, supported by mid- to low-end economic growth.

Conclusion

CGS International’s December 13, 2024 report provides a detailed and optimistic outlook for Indonesia’s market landscape in 2025, highlighting promising opportunities across sectors and companies. Investors should consider these insights as part of their strategic decision-making process.