Introduction
The recent victory of Donald Trump in the US presidential elections has raised several questions about its potential impact on global markets. Specifically, how will it affect Indonesia? This article delves deep into the potential repercussions on various sectors and companies within Indonesia, based on insights provided by UOB Kay Hian.
Export Flows and Trade Impact
Considering the products exported to the US, we do not see a significant slowdown. The US is Indonesia’s second-largest export destination, with exports worth US\$23.3 billion in 2023. Despite the potential imposition of a 10-20% tariff, it is unlikely to significantly impact Indonesia’s competitiveness due to the high labor costs in the US. Notably, during Trump’s first term, Indonesia’s exports to the US increased slightly by 3.65% CAGR from 2017 to 2020.
However, the biggest risk lies in the lower demand from China, Indonesia’s largest export destination. With exports worth US\$64.93 billion in 2023, any reduced exports to the US could negatively impact Indonesia’s exports to China. During Trump’s first term, Indonesia’s exports to China rose from US\$23.1 billion in 2017 to US\$31.8 billion in 2020, a 17.3% CAGR.
JCI Performance During Trump’s First Term
During Trump’s first presidency, the Jakarta Composite Index (JCI) recorded a 28.46% total return in US dollars, trailing the MSCI Asia Pacific ex-Japan, which recorded a 90.72% return. While Southeast Asian indexes suffered, Indonesia outperformed its peers, but North Asia markets delivered stronger returns.
Focus on Domestic Policy Winners
Investors are advised to focus on sectors that could benefit from the domestic policies of Prabowo’s administration. Lower interest rates could continue to benefit the banking, automobile, and real estate sectors. The technology sector should remain relatively immune, and selective exposure to the consumption sector is recommended as government policies on free lunch and real estate could boost consumption.
Top Picks and Detailed Company Analysis
Banking
Bank Negara Indonesia (BBNI)
Current Price: Rp 5,025
Target Price: Rp 6,560
Potential Upside: 30.5%
BBNI is poised to benefit from lower interest rates, which could enhance its lending capabilities and profitability. With a market cap of US\$11,911 million, the bank is expected to achieve a PE ratio of 8.5x in 2024 and 7.4x in 2025, with a PBV ratio of 1.2x and 1.1x, respectively. The return on equity (ROE) is projected to be 14.6% in 2025, with a net gearing of -62.3%.
Bank Rakyat Indonesia (BBRI)
Current Price: Rp 4,550
Target Price: Rp 5,600
Potential Upside: 23.1%
BBRI is another strong contender in the banking sector, with a market cap of US\$43,825 million. The bank is expected to achieve a PE ratio of 11.4x in 2024 and 10.4x in 2025. Its PBV ratio stands at 2.1x and 2.0x for 2024 and 2025, respectively. The ROE is forecasted to be 19.7% in 2025, with a net gearing of -23.4%.
Bank Tabungan Negara (BBTN)
Current Price: Rp 1,340
Target Price: Rp 1,740
Potential Upside: 29.9%
BBTN is well-positioned to benefit from the real estate sector’s growth, supported by Prabowo’s administration. With a market cap of US\$1,195 million, the bank’s PE ratio is projected to be 5.4x in 2024 and 4.8x in 2025. Its PBV ratio is 0.6x for both years, with an ROE of 12.4% and net gearing of -5.2% in 2025.
Property
Bumi Serpong Damai (BSDE)
Current Price: Rp 1,075
Target Price: Rp 1,440
Potential Upside: 34.0%
BSDE is expected to benefit significantly from favorable real estate policies. With a market cap of US\$1,446 million, its PE ratio is forecasted to be 6.5x in 2024 and 7.0x in 2025. The PBV ratio stands at 0.6x for both years, with an ROE of 5.5% and net gearing of 2.5% in 2025.
Ciputra Development (CTRA)
Current Price: Rp 1,190
Target Price: Rp 1,570
Potential Upside: 31.9%
CTRA is another real estate player that stands to gain from government policies. With a market cap of US\$1,402 million, the company is expected to achieve a PE ratio of 10.5x in 2024 and 9.8x in 2025. Its PBV ratio is 1.0x and 0.9x for 2024 and 2025, respectively. The ROE is projected to be 9.6% in 2025, with a net gearing of -11.1%.
Consumer
Cisarua Mountain Dairy (CMRY)
Current Price: Rp 5,325
Target Price: Rp 6,000
Potential Upside: 12.7%
CMRY, with a market cap of US\$2,685 million, is expected to continue benefiting from increased consumption driven by government policies. The company’s PE ratio is projected to be 29.1x in 2024 and 24.9x in 2025. The PBV ratio stands at 6.4x and 5.4x for 2024 and 2025, respectively. The ROE is forecasted to be 22.2% in 2025, with a net gearing of -57.7%.
Retail
Aspirasi Hidup Indonesia (ACES)
Current Price: Rp 830
Target Price: Rp 1,200
Potential Upside: 44.6%
ACES, with a market cap of US\$903 million, is well-positioned to benefit from increased consumption and favorable retail policies. The company’s PE ratio is projected to be 16.6x in 2024 and 14.9x in 2025. The PBV ratio stands at 2.2x and 2.0x for 2024 and 2025, respectively. The ROE is forecasted to be 12.7% in 2025, with a net gearing of -23.2%.
Technology
GOTO Gojek Tokopedia (GOTO)
Current Price: Rp 61
Target Price: Rp 86
Potential Upside: 41.0%
GOTO, with a market cap of US\$4,658 million, is expected to remain relatively immune to the broader market fluctuations. The company’s PE ratio is not available, but its PBV ratio stands at 2.0x and 2.1x for 2024 and 2025, respectively. The ROE is negative at -111.0%, with a net gearing of -65.6%.
Automobile
Astra International (ASII)
Current Price: Rp 5,000
Target Price: Rp 5,800
Potential Upside: 16.0%
ASII, with a market cap of US\$12,864 million, is expected to benefit from lower interest rates, which could boost automobile sales. The company’s PE ratio is projected to be 6.6x in 2024 and 6.5x in 2025. The PBV ratio stands at 1.0x and 0.9x for 2024 and 2025, respectively. The ROE is forecasted to be 17.3% in 2025, with a net gearing of 20.5%.
Negative Recommendations
Adaro Energy Indonesia (ADRO)
Current Price: Rp 3,920
Target Price: Rp 2,800
Potential Downside: -28.6%
ADRO, with a market cap of US\$7,663 million, is expected to face challenges due to the negative outlook on the coal sector. The company’s PE ratio is projected to be 5.9x in 2024 and 7.1x in 2025. The PBV ratio stands at 1.1x and 1.0x for 2024 and 2025, respectively. The ROE is forecasted to be 25.7% in 2025, with a net gearing of -25.9%.
Indo Tambangraya Megah (ITMG)
Current Price: Rp 25,425
Target Price: Rp 21,500
Potential Downside: -15.4%
ITMG, with a market cap of US\$1,826 million, is also expected to face headwinds in the coal sector. The company’s PE ratio is projected to be 5.3x in 2024 and 6.0x in 2025. The PBV ratio stands at 1.0x and 0.9x for 2024 and 2025, respectively. The ROE is forecasted to be 26.7% in 2025, with a net gearing of -44.6%.
Vale Indonesia (INCO)
Current Price: Rp 3,730
Target Price: Rp 3,800
Potential Upside: 1.9%
INCO, with a market cap of US\$2,498 million, is expected to remain relatively stable. The company’s PE ratio is projected to be 26.3x in 2024 and 19.8x in 2025. The PBV ratio stands at 0.9x for both years. The ROE is forecasted to be 11.2% in 2025, with a net gearing of -26.9%.
Sector Ratings
The sector ratings provided by UOB Kay Hian are as follows:
- Automobile: OVERWEIGHT
- Banking: OVERWEIGHT
- Cement: MARKET WEIGHT
- Coal: UNDERWEIGHT
- Consumer: MARKET WEIGHT
- Healthcare: OVERWEIGHT
- Mining: MARKET WEIGHT
- Plantation: OVERWEIGHT
- Property: OVERWEIGHT
- Retail: OVERWEIGHT
- Technology: OVERWEIGHT
- Telecommunications: OVERWEIGHT
Conclusion
In conclusion, while Trump’s presidency may introduce certain challenges, especially in the context of trade with China, there are sectors and companies within Indonesia that are well-positioned to benefit from domestic policies and favorable market conditions. Investors should focus on these opportunities while being cautious of potential risks in the coal sector.
