27 March 2017 Asia Pacific/Indonesia Equity Research Consumer Staples & Consumer Durables
Indonesia Consumer Survey 2017 Research Analysts THEME Ella Nusantoro 62 21 2553 7917 [email protected] Rising optimism Calvin Tjahjono
Contents Key themes from Indonesia...... ………………………………6 Key stock preferences ………………………………………………………….7 The seventh Credit Suisse Indonesia Consumer Survey……………….…10 Companies………………………………………………………………………85
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
27 March 2017
Introduction Urs Rohner, Chairman We are delighted to present the seventh edition of the Credit Suisse Research Institute's Credit Suisse Research Emerging Consumer Survey. This publication traditionally explores the growth Institute opportunities presented by the new consumer cultures developing across the emerging world, which continue to show vastly different; often more dynamic, demographic profiles compared with those of developed economies. The report reflects an ongoing collaboration between the Credit Suisse Research Institute and our research partner, the leading market research firm, Nielsen, which has delivered data from 14,000 face-to-face interviews with consumers across the emerging economies of Brazil, China, India, Indonesia, Mexico, Russia, South Africa and Turkey as a basis for our research. In this year’s edition, our findings suggest that a consumer culture within emerging markets may be developing more rapidly than anticipated: a further 10% of surveyed households have succeeded in entering middle-income territory in the past three years, creating a consumer base of 1.25 bn people across the eight countries covered by our survey alone. We find the immediate measures of consumer confidence improving from a year ago, with consumers in the major Asian economies of India, China and Indonesia reflecting the most optimistic outlook and topping our emerging consumer scorecard as we look into 2017. More than 40% of Asian consumers expect to see their financial circumstances improve in the six months ahead. We provide a special focus on several key themes within these countries, such as the consequences of the reform to the one-child policy in China or demonetisation and tax reform in India. Generally, there is a noticeable lifestyle "upgrade" under way in Asia. We further observe that pressure has eased for consumers in commodity-sensitive countries, such as Russia, South Africa and Brazil. Although considerable economic fragility and inequality among consumers remains here, a firmer growth outlook supporting commodities and reduced currency risk offers better consumer prospects for the year ahead. Interestingly, we observe the ongoing changing pattern in the spending of the emerging middle class. Spending on travel and entertainment in China is booming and reached over 10% of household income. A new theme we find at work is that of a more "conscious" consumer, focused on a more active, healthy lifestyle and one engaged with the sharing economy. Local, rather than global, companies and brands are emerging to capitalise on this trend. Also importantly, digital technology is and will continue to be the facilitator of changing consumer behaviour with more than a billion consumers yet to come online in our surveyed countries. We estimate that online retail spending can rise from a current US$1 tn to US$2.5 tn by 2025. Finally, these themes are elements of the broader rebalancing in growth that we are witnessing in the emerging world from its undue reliance on fixed investment and external trade to more domestic consumption. This provides a powerful internal dynamic to growth in the countries concerned—a feature of considerable significance should the global economic landscape become more multipolar and less globalised in nature, as is currently the debate. We hope that our analysis helps our readers better understand the nature of these dynamic economies and that you enjoy reading the 2017 Emerging Consumer Survey.
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Table of contents Focus charts and table 5
Key themes from Indonesia 6
Key stock preferences 7
The seventh Credit Suisse Indonesia Consumer Survey 10 2016 was a year full of hope...... 11 ...and improving economic growth...... 13 Rising optimism ...... 20 Time to spend! ...... 22 Indonesians are not migrating ...... 26 Automotive sector 27 Key stock ...... 27 Four-wheelers...... 27 Two-wheelers ...... 29 Food and beverages 33 Key stocks ...... 33 Unrivalled noodles consumption ...... 33 Instant noodles ...... 36 Carbonated drinks ...... 39 Bottled water ...... 40 Dairy products ...... 42 Cigarettes ...... 43 Personal care products 51 Key stocks ...... 51 Shift in spending ...... 51 Branded goods 53 Key stocks ...... 53 Fashion items are favoured ...... 53 Internet and e-commerce 62
Mobile phones 68 Key stocks ...... 68 The world at your fingertips ...... 68 Healthcare 72 Key stocks ...... 72 Improved access to state healthcare ...... 72
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Property 76 Key stocks ...... 76 Potential demand continues to be high ...... 76 Banks 82 Key stocks ...... 82 Auto interest on lower interest ...... 82 Astra International (ASII.JK / ASII IJ) 85
Indofood CBP (ICBP.JK / ICBP IJ) 87
Hanjaya Mandala Sampoerna (HMSP.JK / HMSP IJ) 89
Gudang Garam (GGRM.JK / GGRM IJ) 91
Matahari Department Store (LPPF.JK / LPPF IJ) 93
Mitra Adiperkasa (MAPI.JK / MAPI IJ) 95
PT Telkom (Telekomunikasi Indo.) (TLKM.JK / TLKM IJ) 97
XL Axiata Tbk (EXCL.JK / EXCL IJ) 99
Siloam International Hospitals (SILO.JK / SILO IJ) 101
PT Mitra Keluarga Karyasehat Tbk (MIKA.JK / MIKA IJ) 103
Kalbe Farma (KLBF.JK / KLBF IJ) 105
PT Summarecon Agung Tbk (SMRA.JK / SMRA IJ) 107
PT Bank Pembangunan Daerah Jawa Timur Tbk (BJTM.JK / BJTM IJ) 109
PT Bank Negara Indonesia (Persero) Tbk (BBNI.JK / BBNI IJ) 111
Appendix 1: Respondents' summary 113 Demographics ...... 113 Automotive ...... 117 Food and beverages ...... 118 Personal care ...... 119 Luxury goods ...... 119 Technology and internet ...... 120 Telecommunications ...... 120 Travel ...... 122 Education ...... 123 Healthcare ...... 124 Appendix 2: Indonesia macro 125
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Focus charts and table
Figure 1: Indonesia’s rank improved to second, from fourth the previous year, as optimism improves Inflation expectation Personal finances Household income Household income Time for major Rank based on five expectation history purchases sectors 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 India 3 4 1 2 3 1 3 2 5 1 1 3 2 2 1 1 1 1 Indonesia 6 7 6 3 2 2 2 1 1 2 2 1 4 4 3 3 4 2 China 4 3 5 4 1 4 5 4 3 4 4 2 3 3 2 5 2 3 Brazil 2 8 3 1 6 3 1 3 2 5 9 8 4 9 8 2 7 4 South Africa 8 9 8 7 8 5 8 6 4 9 6 4 8 6 5 9 7 5 Mexico 7 6 7 6 5 6 4 8 6 8 8 7 9 5 4 7 6 6 Turkey 1 1 2 9 6 8 9 7 8 7 5 5 7 8 7 6 5 6 Russia 9 5 4 8 9 7 7 9 7 6 7 6 6 7 6 8 9 6 Note: Ranks go from 1 (highest) to 9 (lowest). Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 2: Indonesia—State of personal finances Figure 3: Indonesia—State of personal finances over next six months (2016) over next six months (2017)
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0% < 1000 1250 1750 2500 4000 6250 8750 > 10000 < 1000 1250 1750 2500 4000 6250 8750 > 10000 Income (IDR) This survey average Income (IDR) This survey average Last survey average Last survey average
Source: Credit Suisse Emerging Consumer Survey 2016 Source: Credit Suisse Emerging Consumer Survey 2017
Figure 4: Indonesia's spending momentum 2016 vs Figure 5: Indonesia's spending momentum 2016 vs 2015 (a year ago) 2010 (seven years ago)
10 Smartphone 60 Smartphone Internet 8 access Property 50 6 Internet access Holidays 40 4 2-wheelers
30 2 Instant noodle
0 4-wheelers 20 Mobile phones 2-wheelers Cigarettes
-2 Holidays 10 Property Carbonated -4 Extra Cosmetics Mobile phones 4-wheelers drinks Instant noodle education Dairy Recorded spending in 2016 vs. 2010 0 Recorded spending Recorded spending in 2016 vs. 2015 -6 Dairy Carbonated Cosmetics TV drinks -10 TV -8 Cigarettes -10 -20 0 20 40 60 80 100 0 20 40 60 80 100 2016 respondents that own or have bought each item (%) 2016 respondents that own or have bought each item (%)
Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Credit Suisse Indonesia Consumer Survey 2017
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Key themes from Indonesia 2016 was a year full of hope... Indonesia moves to Overall, Indonesia is ranked second (behind India) within the eight emerging countries that second rank from we surveyed in 2016. This is an improvement from the fourth place in the previous year, fourth in the previous with Indonesia overtaking China which fell to third position this time, from second in the survey previous year. Despite the many challenges, we see this improvement stemming from Indonesia being more defensive compared to the other emerging countries. ...and improving economic growth Indonesia's GDP reached 5.02% in FY16, improving from 4.8% in FY15. Private consumption continued to be the largest contributor of GDP, accounting for 55%, and growing at around 5% each year. Within the sector, the largest contributor to the economy is manufacturing (21%), followed by retail (13%), agriculture (11%), construction (10%), mining (8%), among others. However, the highest growth is in the IT and financial sectors, each growing at 9% in 2016. Indonesia reached its lowest inflation in 2016 of 3.7%, from 6.4% over the past three decades. This lower inflation was driven down on the back of lower transportation costs (lower fuel costs) and food costs (lower soft commodities prices). Rising optimism The highest earners hit Compared to the other emerging countries that we surveyed, Indonesians maintained their the most, but stable for second ranking in terms of personal finances. In fact, on average, Indonesian personal those with low and finances were better off than in the previous year, even though, on average, they are still middle incomes lower compared to two years ago. We believe that this is due to still-low commodity prices, that only started to pick up in early 4Q16. Those on higher Interestingly, for Indonesians, the highest earners saw their personal finances not as great incomes experienced as in the previous year. The lower-middle income earners, however, continued to have a lower wealth similar outlook in the survey. We think that the significant shift for the highest earners could be attributed to penalty payments during the tax amnesty programme, which mostly impacted them. The first phase of the tax amnesty programme ended on 30 September 2016. Meanwhile, middle-upper income earners saw their personal finances better off. Minimum wage is now In terms of income, Indonesians are less optimistic in this survey, even though they are regulated still the most optimistic compared to the other emerging countries that we surveyed (Indonesia maintained its number one rank). This lower optimism compared with a year ago might be due to the government introducing a fixed formula (GDP growth plus inflation) for the increase in the minimum wage level starting from 2016. Thus, with inflation reaching its lowest level of 3.7%, expectations on household incomes declined. Time to spend! Time to spend! As optimism and confidence grows, Indonesians are ready for major purchases. Indonesia moved up to third position, from number four in the past two consecutive years. Smartphone and With Indonesians becoming wealthier, seeking improved lifestyles, and with growing internet access please optimism and confidence, they are spending more on discretionary items. Indonesia's GDP per capita reached US$3,643 last year, from US$2,357 in 2009. Similar to previous years, Indonesians continue to spend the most on smartphones (+9%) followed by internet access (+7%), holidays (+6%), property (+6%), two-wheelers (+5%), and instant noodles (+3%). Indonesians are not spending on TV (-8%), dairy (-6%), carbonated drinks (-5%), mobile phones (-3%), extra education (-3%), cosmetics (-3%), cigarettes (-2%), and four- wheelers (-2%). It has always been interesting that despite instant noodles and two- wheelers being highly penetrated segments, consumers still continue to spend on them.
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Key stock preferences Astra International
■ Astra’s auto business benefits from lower financing rates. Thus, in the 4W segment, it has launched new affordable models (Low Cost Green Car, or “LCGC”), while 2W market share gain has been due to new model launches and improved after-sales services.
■ Rising commodity prices should also benefit Astra, whereby those living in commodity resource-based areas have better purchasing power. HM Sampoerna
■ The largest cigarette producer in Indonesia, according to Philip Morris International estimates, is facing the challenge of lower consumption given higher prices and lifestyle changes. Its brands continue to appeal more to younger generations, those in urban areas in Java, and within the middle and higher income segments. Unilever Indonesia
■ The brand, Blue Band, continues to be the leader in margarine. The F&R (Food and Refreshment) division is a smaller portion for the company compared to Home and Personal Care (HPC), but it offers more potential upside with consumers’ growing wealth.
■ While our survey indicates a slowdown in skin care spending, the company’s abundant portfolio might continue to provide growth. Indofood CBP
■ Indomie, Sarimi, Supermie and PopMie are the main brands favoured by consumers and continue to help support the company’s free cash flow, as noodles continue to be defensive staples for Indonesians. Indomilk is gaining popularity in the dairy segment, as is Club in bottled water, while Pepsi maintained its favoured status in carbonated drinks. Gudang Garam
■ The second-largest cigarette producer, according to Philip Morris International estimates, in Indonesia is facing the challenge of lower consumption given higher prices and lifestyle changes. Its brands appeal to those in rural areas, outside Java, the middle generation and those on higher incomes. Gudang Garam Surya emerged as the most favoured brand in our survey. Matahari Department Store
■ This company is the prime beneficiary of Indonesia's rising middle-income segment. Its higher exposure to outside Java (40% of gross sales) is a catalyst for growth as the area tends to do well when commodity prices rise.
■ Nevertheless, contrary to our survey findings, Matahari's private label booked 10% higher gross sales YoY in 4Q16, boosted by better performance in its number one brand, Nevada. However, intensifying competition saw margins decline slightly during the period. Mitra Adiperkasa
■ The company continuously shows improvement following the involvement of CVC Capital Partners in the active division and General Atlantic in the F&B division. Improvements in inventory days and margins are both ahead of schedule.
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■ The company is also closing down department stores and cutting brands that are not performing to allocate more space for better performing specialty stores. We also expect the company to turn free cash flow positive by the end of the year. Siloam International Hospital
■ We continue to like the company as room for downside surprises from current levels are low after past disappointments and expansion plans would fuel additional growth. There could be upside post CVC's involvement and execution progress in light of higher-than-expected FY17 guidance. An initial look into the private equity, CVC Capital Partners’ experience underscores encouraging turnaround outcomes. Mitra Hospital
■ We continue to view the company as an attractive long-term holding due to its mid-teen growth profile, margin expansion opportunity and balance sheet optionality (Rp2.4 tn in cash). After recent weakness, the stock looks interesting at 33x 2017 EBITDA, below its historical average. Its premium valuation is supported by best-in-class margins and ROIC profile. PT Telekomunikasi Indonesia (Telkom)
■ Rising smartphone and fixed broadband data usage drove consolidated EBITDA and net profit growth of 15.7% YoY and 24.9% YoY in FY16 respectively. While TLKM is a 'consensus buy', it is slightly expensive versus regional peers. The company has outperformed the regional telecommunication sector over the past 12 months.
■ It remains the only liquid (large cap) way to invest in the successful monetisation of Indonesia's data boom. XL Axiata
■ Over the past 18 months, the company has made significant progress in strengthening its balance sheet (through both a rights issue and a tower sale) and reducing its heavy USD-denominated debt exposure. Furthermore, a return to top-line growth means that XL is now finally emerging from its investment phase. Bumi Serpong Damai
■ Last year, the company had the best pre-sales target achievement record, thanks to its focus on landed residential property. We expect that to continue this year. It also has the lowest net debt-to-equity among peers. As pre-sales were primarily landed products, earnings recognition should not be a drag on profits this year. Bank Negara Indonesia
■ Loan growth has been strong across the board generally, but it is the state-owned enterprise (SOE) corporate (one third of incremental loans) and medium commercial loans (one fifth of incremental loans), in particular, that have underpinned robust loan growth at BNI. With similar ROAs and ROEs, BNI is trading at a 27% discount to Mandiri on P/E (and a 30% discount on P/B), far ahead of its historical average of 14%. Bank Jatim
■ Bank Jatim is the regional development bank for East Java and the smallest bank by assets among the nine banks in our coverage. It is focused on the consumer (67% of loan, 87% of which is payroll loan) and commercial/SME (33%) segments. Jatim's ROA was the third highest last year at 2.4%, behind that of BCA and BRI. Superior profitability can be attributed to the higher proportion of cheaper current/saving deposits (81%), fee income and cost efficiency.
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Figure 6: Indonesia’s stock picks Ticker Ratg Price Upside Market cap Last EPS growth (%) PE EV/EBITDA ROE (%) 6M ADTO Current* Target (%) (US$ mn) FYE (T) T+1 T+2 T+3 T+1 T+2 T+3 T+1 T+1 T+1 Automobiles & Components Astra International ASII.JK O 8,450 9,800 16 25,674 Dec-16 42 9 n.a. 15.9 14.5 n.a. 12.6 18.7 17.6 Banks 6 93,740 Dec-15 0 16 19 15.4 13.3 11.2 n.a. 15.4 Bank Central Asia BBCA.JK O 16,600 18,100 9 30,717 Dec-16 8 13 15 18.4 16.3 14.2 n.a. 18.3 19.3 Bank Danamon BDMN.JK N 4,740 4,950 4 3,376 Dec-16 48 12 12 11.5 10.3 9.2 n.a. 10.5 0.6 Bank Jabar Banten BJBR.JK U 2,200 1,650 (25) 1,585 Dec-16 43 12 10 13.0 11.6 10.6 n.a. 16.2 4.1 Bank Jatim BJTM.JK O 635 690 9 705 Dec-16 11 14 2 8.3 7.2 7.1 n.a. 16.5 2.1 Bank Mandiri BMRI.JK N 11,900 11,600 (3) 20,631 Dec-16 47 27 18 13.7 10.8 9.1 n.a. 12.9 16.6 Bank Negara Indonesia BBNI.JK O 6,900 7,800 13 9,561 Dec-16 16 19 17 9.7 8.2 7.0 n.a. 14.3 9.6 Bank Rakyat BBRI.JK O 13,150 14,500 10 24,128 Dec-16 3 20 19 11.9 9.9 8.3 n.a. 17.4 19.0 Bank Tabungan Negara BBTN.JK N 2,320 2,350 1 1,844 Dec-16 11 20 19 8.5 7.1 5.9 n.a. 14.4 2.5 BTPN BTPN.JK N 2,750 2,650 (4) 1,193 Dec-16 9 11 16 8.4 7.6 6.6 n.a. 11.4 0.0 Consumer Staples 7 81,638 Dec-15 12 7 9 32.7 30.5 28.0 20.6 27.0 Gudang Garam GGRM.JK N 65,450 74,100 13 9,451 Dec-15 9 10 14 18.2 16.5 14.4 11.7 17.8 3.9 HM Sampoerna HMSP.JK N 3,960 4,340 10 34,571 Dec-15 18 4 6 37.4 36.0 34.1 28.9 38.5 4.8 Indofood CBP ICBP.JK N 8,775 9,500 8 7,680 Dec-15 21 4 9 28.1 27.1 24.9 16.3 22.0 3.0 Indofood Sukses INDF.JK O 8,075 8,700 8 5,321 Dec-14 (3) (3) 6 18.9 19.4 18.3 8.9 14.1 5.2 Kino KINO.JK U 2,580 2,360 (9) 277 Dec-15 (36) 9 9 21.9 20.0 18.4 13.5 9.2 0.2 Unilever Indonesia UNVR.JK N 42,500 42,700 0 24,338 Dec-15 11 13 10 49.7 44.1 40.0 35.1 126.3 5.7 Healthcare 2 9,769 Dec-15 18 18 14 37.5 31.8 27.8 22.2 19.8 Kalbe Farma KLBF.JK U 1,490 1,350 (9) 5,242 Dec-14 8 16 16 31.4 27.0 23.2 20.8 22.1 2.9 Mitra Keluarga MIKA.JK O 2,580 3,110 21 2,818 Dec-15 22 15 13 54.0 46.8 41.6 38.7 20.7 1.1 Prodia PRDA.JK O 4,800 7,460 55 338 Dec-15 41 62 16 53.0 32.8 28.2 15.6 11.0 0.1 Siloam Hospitals SILO.JK O 14,050 12,840 (9) 1,371 Dec-15 33 39 13 n.m. n.m. n.m. 26.6 5.3 0.3 Media 26 4,871 Dec-15 16 11 18 20.6 18.5 15.7 13.8 23.1 MNCN MNCN.JK O 1,760 2,300 31 1,886 Dec-15 34 3 19 15.9 15.5 13.0 10.2 15.4 1.8 SCMA SCMA.JK O 2,720 3,350 23 2,985 Dec-15 3 20 17 25.3 21.1 18.0 18.0 46.8 2.7 Real Estate 33 10,849 Dec-15 4 15 21 17.5 15.2 12.5 11.7 10.7 Alam Sutera ASRI.JK N 366 450 23 540 Dec-15 49 (16) 4 8.1 9.6 9.2 12.8 12.7 1.1 Bekasi Fajar BEST.JK O 306 330 8 222 Dec-15 23 17 36 11.2 9.6 7.0 9.8 8.7 1.1 BSD BSDE.JK O 1,845 2,620 42 2,665 Dec-15 (8) 16 21 17.8 15.4 12.7 12.8 10.0 3.2 Ciputra Development CTRA.JK O 1,270 1,860 46 1,769 Dec-15 (10) 17 23 16.9 14.4 11.7 11.4 13.0 2.2 Jababeka KIJA.JK O 322 350 9 499 Dec-15 4 17 26 19.0 16.2 12.9 8.5 7.3 0.4 Lippo Karawaci LPKR.JK N 745 1,080 45 1,290 Dec-15 43 18 18 22.2 18.8 16.0 11.7 5.5 5.1 Pakuwon PWON.JK O 600 730 22 2,169 Dec-15 48 19 19 15.4 12.9 10.8 11.5 23.3 4.1 Summarecon SMRA.JK O 1,370 1,600 17 1,483 Dec-15 (67) 72 61 70.3 40.9 25.4 17.8 4.6 1.9 Surya Semesta SSIA.JK O 600 960 60 212 Dec-14 16 2 6 6.3 6.2 5.8 3.2 16.1 0.5 Retailing 14 5,496 Dec-15 19 15 14 22.5 19.6 17.1 12.6 23.1 Ace ACES.JK O 810 1,050 30 1,043 Dec-15 3 18 13 23.0 19.5 17.3 16.0 20.9 0.3 MAPI MAPI.JK O 5,800 6,400 10 723 Dec-15 443 73 59 47.5 27.5 17.3 9.3 7.7 0.4 Matahari Dept Store LPPF.JK O 14,250 16,100 13 3,121 Dec-16 11 9 8 18.5 17.0 15.7 13.2 38.4 8.8 Ramayana RALS.JK U 1,145 1,100 (4) 610 Dec-15 26 3 8 19.1 18.6 17.3 8.0 12.1 0.8 Telecommunication Services 17 42,635 Dec-15 38 26 13 21.2 16.8 14.9 7.0 21.0 Indosat ISAT.JK O 6,975 8,800 26 2,845 Dec-16 104 20 15 16.8 14.0 12.2 4.1 16.2 0.2 Protelindo TOWR.JK O 5,325 8,300 56 1,216 Dec-15 30 38 24 19.5 14.1 11.4 8.9 20.7 0.9 Telkom TLKM.JK O 4,000 4,500 13 3,063 Dec-16 1 16 13 13.2 11.4 10.1 9.6 26.2 0.1 Tower Bersama TBIG.JK O 4,090 4,750 16 30,942 Dec-16 22 10 6 17.0 15.5 14.6 6.3 26.2 24.6 XL Axiata EXCL.JK N 5,700 5,650 (1) 1,939 Dec-15 17 53 15 16.0 10.4 9.1 14.0 84.3 1.2 * Share price as of 23 March 2017, denominated in IDR. Note: O = Outperform, N = Neutral, U = Underperform, Source: Company data, Thomson Reuters, Credit Suisse estimates
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The seventh Credit Suisse Indonesia Consumer Survey Our seventh Credit We have arrived at our seventh Credit Suisse Indonesia Consumer Survey, which is part Suisse Indonesia of the Credit Suisse Research Institute’s (CSRI) Emerging Consumer Survey and Consumer Survey conducted in eight emerging countries (Brazil, China, India, Indonesia, Russia, South Africa, Turkey and Mexico). CSRI engaged The Nielsen Company, a leader in data measurement and information across a wide range of industries and regions, to conduct face-to-face interviews with nearly 14,000 participants. This survey is a comprehensive and exclusive study of the consumption patterns in each country as well as individuals' outlook about the future. The survey was conducted between mid-November and early December 2016. Ten areas: six in Java, For Indonesia, we asked 1,534 participants from ten exclusive areas, similar to the four outside Java previous surveys. The areas include six in Java (Jakarta, Bogor/Tangerang/Bekasi, Surabaya, Gresik/Lamongan/Sidoarjo, Bandung, and Kabupaten Bandung) and four outside Java (Medan, Deli Serdang, Makassar, and Gowa). These areas, in our view, sit well with Indonesia's population and economy, with around 57% and 59% of the country's GDP derived from Java, respectively, while the remaining 43% and 41% are from outside Java, in 2016, according to Indonesia's BPS (Bureau of Statistics). 66% in urban areas, Our survey respondents, similar to the previous surveys, feature 66% living in urban areas 51% female, and 72% and 34% in rural areas. Some 51% were female and 49% male. In addition, 76% of aged below 45 respondents were aged below 45, in line with Indonesia's young demographic profile. We asked each respondent a total of 86 questions divided into 12 categories: (1) general; (2) auto; (3) food and beverage; (4) personal care; (5) branded goods; (6) healthcare; (7) computers and TV; (8) mobile phones; (9) internet access; (10) property; (11) travel; and (12) education.
Figure 7: Indonesia's key economic indicators and survey profile
Source: Ministry of Finance, Central Bureau of Statistics ("BPS"), Bank Indonesia ("BI"), CEIC, World Bank, Credit Suisse estimates, Emerging Market Quarterly Q1 2017, Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 10 27 March 2017
2016 was a year full of hope... Indonesia moves up to Overall, Indonesia ranks second (behind India) within the eight emerging countries that we second ranking from surveyed in 2016. This is an improvement from being fourth in the previous year, with fourth in the previous Indonesia overtaking China which fell into third place this time from second in the previous survey year. Despite the many challenges, we see this improvement stemming from Indonesia being more defensive compared to the other emerging countries. China’s ranking declined mainly due to a fall in personal finances while expectations for inflation are rising, along with a slowdown in its economy.
Figure 8: Indonesia’s ranking improved to second from fourth in the previous year as optimism improves Inflation expectation Personal finances Household income Household income Time for major Rank based on five expectations history purchases sectors 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 India 3 4 1 2 3 1 3 2 5 1 1 3 2 2 1 1 1 1 Indonesia 6 7 6 3 2 2 2 1 1 2 2 1 4 4 3 3 4 2 China 4 3 5 4 1 4 5 4 3 4 4 2 3 3 2 5 2 3 Brazil 2 8 3 1 6 3 1 3 2 5 9 8 4 9 8 2 7 4 South Africa 8 9 8 7 8 5 8 6 4 9 6 4 8 6 5 9 7 5 Mexico 7 6 7 6 5 6 4 8 6 8 8 7 9 5 4 7 6 6 Turkey 1 1 2 9 6 8 9 7 8 7 5 5 7 8 7 6 5 6 Russia 9 5 4 8 9 7 7 9 7 6 7 6 6 7 6 8 9 6 Note: Ranks go from 1 (highest) to 9 (lowest). Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesians worry The greatest worry for Indonesians, according to our survey, is inflation, which has been most about inflation... the greatest concern since we first conducted the survey in 2011. However, compared to a year ago, Indonesians were slightly less worried as they realised that inflation was lower in the past 12 months, as seen in our survey. Indonesia's inflation in 2016 reached 3.7%, its lowest ever in the past three decades, compared to 6.4% in 2015. However, compared to the other emerging countries we surveyed, Indonesia still ranks sixth. We believe that the worry is whether this low inflation is sustainable, given that in 2017, the government plans to remove subsidies for electricity tariffs for the mid-low end household incomes, increase the liquified petroleum gas (LPG) price for the low end, and increase tariffs for auto registration licences. Our economist estimates inflation will reach 4.5% in 2017.
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Figure 9: Indonesians worry over whether inflation will move higher
90% 83% 80% 76% 72%
70% 65% 64% 64%
60%
50%
40% 31% 31% 32% 30% 24% 20% 20% 14%
10% 3% 4% 4% 3% 4% 4% 0% It will be higher than the last 12 months It will be the same as the last 12 months It will be lower than the last 12 months
2011 2012 2013 2014 2015 2016
Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 10: What level of inflation have you seen over the past 12 months on basic food and drink? % of respondents Total Area Region Age Income Urban Rural Java Ex. Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Below 1% 7% 7% 7% 7% 7% 7% 7% 6% 8% 5% 7% 18% 1%-3% 25% 27% 21% 24% 27% 25% 26% 25% 21% 20% 28% 22% 3.1%-5% 15% 17% 12% 15% 15% 18% 14% 14% 13% 10% 17% 26% 5.1%-7% 6% 6% 6% 7% 3% 6% 6% 6% 6% 6% 6% 4% 7.1%-10% 3% 4% 3% 4% 3% 2% 4% 5% 3% 3% 4% 0% Above 10% 4% 2% 6% 2% 8% 4% 4% 5% 2% 4% 4% 4% Did not notice any inflation 12% 12% 13% 13% 11% 13% 12% 12% 7% 14% 12% 10% I don't know 27% 25% 32% 28% 26% 24% 27% 29% 40% 36% 22% 16% 2015 Below 1% 5% 6% 4% 5% 6% 6% 4% 7% 3% 6% 5% 1% 1%-3% 28% 30% 26% 30% 25% 28% 29% 25% 28% 30% 29% 18% 3.1%-5% 24% 26% 20% 27% 18% 23% 27% 25% 16% 21% 24% 34% 5.1%-7% 8% 9% 7% 8% 10% 7% 9% 7% 12% 8% 9% 8% 7.1%-10% 7% 7% 5% 7% 5% 8% 7% 5% 3% 3% 8% 13% Above 10% 3% 3% 3% 4% 2% 4% 3% 3% 3% 2% 4% 6% Did not notice any inflation 12% 9% 18% 11% 15% 12% 11% 15% 10% 17% 10% 4% I don't know 12% 9% 18% 10% 18% 11% 10% 13% 27% 14% 11% 15% 2010 Below 1% 7% 8% 4% 3% 16% 5% 7% 8% 8% 5% 7% 13% 1%-3% 23% 24% 22% 16% 42% 23% 25% 20% 21% 24% 23% 5% 3.1%-5% 23% 21% 25% 26% 11% 24% 21% 22% 23% 27% 21% 35% 5.1%-7% 13% 13% 15% 16% 6% 11% 15% 15% 12% 13% 14% 17% 7.1%-10% 8% 8% 10% 11% 2% 6% 9% 9% 16% 5% 10% 13% Above 10% 7% 8% 5% 8% 3% 7% 7% 7% 5% 4% 8% 17% Did not notice any inflation 6% 7% 3% 4% 10% 8% 3% 5% 6% 5% 6% 0% I don't know 13% 12% 17% 15% 10% 16% 12% 13% 9% 18% 11% 0% * Income is on monthly basis: Low
...but otherwise In terms of personal finances, Indonesians remain optimistic with the country’s second remain optimistic ranking maintained (after India, which rose from third in the previous year). Indonesians
Indonesia Consumer Survey 2017 12 27 March 2017
also remain the most optimistic in regard to household income expectations. This said, Indonesians think that now is the time to make major purchases (third, and up from fourth in the previous year).
...and improving economic growth Indonesia's GDP reached 5.02% in FY16, improving from 4.8% in FY15. Private consumption continues to be the largest contributor of GDP, accounting for 55% and growing at around 5% each year. The second-largest contributor to the economy is investment at around 34% which grew at 4.5% in 2016, down from 6.4% in 2015. The third largest is government spending at 8% with flat growth in 2016, though this improved from - 5.3% in 2015. The lowest contributor is net exports contributing 2% to the economy with 5.1% growth in 2016 from 138.1% growth in 2015. Within the sector, the largest contributor to the economy is manufacturing (21%), followed by retail (13%), agriculture (11%), construction (10%) and mining (8%), among others. However, the highest growth is from the IT and financial sectors, each expanding 9% in 2016.
Figure 11: Indonesia’s GDP quarterly and annual growth
7.0 6.8
6.5 6.5 6.5 6.4 6.3 6.2 6.2 6.2 6.1 6.1 6.0 6.0 5.9 5.9 6.0 5.9
5.6 5.6 5.6 5.5 5.5
GDP growth (%) growthGDP 5.5
5.2 5.2 5.1 5.0 5.0 5.0 5.0 4.9 4.9 4.9 4.9 5.0 4.9 4.8 4.7 4.8
4.5
FY10 FY11 FY12 FY13 FY14 FY15 FY16
4Q10 3Q13 2Q10 3Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q10 Source: Bank Indonesia (BI)
Figure 12: GDP breakdown by segment Figure 13: GDP breakdown by sector
100% 2% 1% 0% 2% 0% 1% 2% 100%
90% 90% 18% 18% 18% 18% 18% 19% 22%
31% 32% 33% 33% 33% 80% 32% 34% 80% 4% 4% 4% 4% 5% 5% 5% 11% 10% 10% 10% 10% 70% 9% 70% 8% 4% 4% 4% 4% 4% 4% 4% 60% 12% 12% 12% 60% 12% 12% 12% 8% 14% 14% 14% 14% 14% 14% 11% 50% 50% 9% 10% 10% 10% 10% 10% 10% 40% 40% 14% 14% 14% 14% 14% 14% 13% 30% 30% 4% 4% 4% 4% 4% 4% 4% 54% 54% 55% 54% 55% 54% 55% 20% 20% 10% 23% 23% 22% 22% 22% 22% 21% 10% 0% 2010 2011 2012 2013 2014 2015 2016 0% Manufacturing Financial & insurance Wholesale & retail trade 2010 2011 2012 2013 2014 2015 2016 Construction Agriculture, forestry & fishing Transportation & storage Private consumption Government consumption Investments Net exports Mining & quarrying Information & communication Others Source: Bank Indonesia (BI) Source: Bank Indonesia (BI)
Indonesia Consumer Survey 2017 13 27 March 2017
Figure 14: GDP growth, by segment
2010 2011 2012 2013 2014 2015 2016 9.1% 8.9% 9%
7% 6.7% 6.7% 6.4% 6.2% 6.0%
5.6% 5.5% 5.5% 5.5% 5.3% 5.3% 5.0% 5.0% 5.1% 5.0% 5.0% 5.0% 4.9% 4.8% 5% 4.5% 4.4% 4.5% 4.1% 4.0%
3%
1.2% 1%
-0.1%
-1% GDP Private consumption Government expenditure Investments Source: Bank Indonesia (BI)
Figure 15: Net export growth—2010-16
Net exports (bn) Net exports growth 138% 160,000 131% 150%
140,000 100% 120,000
50% 100,000 12% 2% 5% 80,000 0% -24% 60,000 -50% 40,000 -76%
20,000 -100% 2010 2011 2012 2013 2014 2015 2016
Source: Bank Indonesia
Figure 16: GDP growth, by sector
2011 2012 2013 2014 2015 2016 13%
11%
9%
7%
5%
3%
1%
-2%
Education
Construction
fishing
Manufacturing
Information & Information
communication defence
-4% gas Electricity &
BusinessServices
Mining & quarrying & Mining
service activities service
WorkActivities
Real estate activities Realestate
Financial & insurance & Financial
Agriculture, forestry & forestry Agriculture,
remediation activities remediation
Public administration & administration Public
Accommodation & food Accommodation
waste management & management waste
Wholesale & trade Wholesale retail
Other Services Activities Services Other
Transportation & storage & Transportation sewerage, supply, Water -6% andSocial Health Human
Source: Bank Indonesia (BI)
Indonesia Consumer Survey 2017 14 27 March 2017
With Indonesia being an archipelago, each region has a different background and growth rate. Growth in Kalimantan is starting to improve along with the increase in the coal prices, as well as in Sumatra where CPO prices are starting to rise. Higher construction activity in Sulawesi area has helped growth there as well. Java is a manufacturing-based region and has seen its growth slowing down.
Figure 17: Indonesia’s GDP growth by region in 2016—Kalimantan’s is starting to improve
Source: Bank Indonesia, Indonesia Bureau of Statistics
Figure 18: Indonesia’s GDP growth by region in 2015—weak growth in Kalimantan
Source: Bank Indonesia, Indonesia Bureau of Statistics
Indonesia Consumer Survey 2017 15 27 March 2017
Figure 19: Palm oil (RM/tonne) Figure 20: Coal (US$/tonne) 3,600 115 3,400
average YTD17: 3,247.4 105 3,200
3,000 95
2,800 85 average YTD17: 83 average 2016: 2,655.2 2,600 MYR MYR ton / 75 average 2014: 2,421.9 average 2014: 70 2,400 / USD Metric ton average 2016: 66 65 2,200 average 2015: 59 average 2015: 2,165.9 55 2,000
1,800 45 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Source: Bloomberg Source: Bloomberg
Figure 21: Brent crude oil price (US$/barrel) Figure 22: Indonesia's retail fuel price (Rp/l)
115
105 average 2014: 97.5 95
85
75
USD / barrel 65
average YTD17: 55.7 55 average 2015: 54.4
45 average 2016: 45.9 35 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17
Source: Bloomberg Source: Bloomberg Inflation has reached an all-time low Indonesia’s inflation in 2016 fell to its lowest of 3.7%, from 6.4%, over the past three years. This lower inflation was driven down on the back of lower transportation costs (lower fuel costs) and food costs (lower soft commodities’ prices).
Indonesia Consumer Survey 2017 16 27 March 2017
Figure 23: Inflation in Indonesia reached an all-time low last year at 3.7%
9
8.0 8.0 7.8 8 7.1 7.1 7.1 6.8 7 6.5 6.5 6.4 6.4 6.4 6.2 6.3 5.9 6 5.4 5.1 5.1 4.8 5 4.6 4.5 4.4 4.4 4.4 4.3 4.1 4.0 3.9 4.0 4 3.6 3.7 3.7
Inflation (%) Inflation 3.5 3.3 3.0 3
2
1
0
FY13 FY10 FY11 FY12 FY14 FY15 FY16
2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q10 Source: Bank Indonesia (BI)
Figure 24: Inflation component breakdown*—significant drop in transportation and food
2013 2016 17 15.4 15
13 11.4 11
9 7.5
7 6.2 Inlfation (%) Inlfation 5.4 5.7 5 3.7 3.9 3.9 2.7 3.1 3 1.9
1 0.5 (0.7) -1 Processed food, Food Transport and finance Housing and utilities Health Education, recreation, Clothing beverages, and tobacco and sports * 2010 constant; Source: Indonesia Bureau of Statistics
Figure 25: Wheat (US$/50kg) Figure 26: Skimmed milk (US$/tonne) 9.5 5,500
5,000 8.5
4,500 7.5 4,000 average 2014: 3,752.9
6.5 3,500
USD / 50 kg 3,000
5.5 average 2014: 5.9 USD / Metric / USD Metric tonne average 2015: 5.1 2,500 average YTD17: 2,418.8 average 2015: 2,164.9 4.5 average YTD17: 4.2 2,000 average 2016: 1,978.5 average 2016: 4.3 3.5 1,500 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Source: Bloomberg Source: Bloomberg
Indonesia Consumer Survey 2017 17 27 March 2017
Figure 27: Sugar (US$/50kg) Figure 28: Corn (US$/bushel)
35 8.5
average 2014: 4 7.5 30 average 2015: 3.6 average 2016: 3.4 average YTD17: 27.2 average YTD17: 3.5 6.5 25 average 2016: 24.8
5.5 USD / bushel
20 average 2014: 21.1 USD / 50 kg 4.5
average 2015: 16.8 15 3.5
10 2.5 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Source: Bloomberg Source: Bloomberg
The highest inflation is still seen outside Java. Java itself recorded its inflation at 2.59% in 2016, down from 3.12% in 2015. Sumatra saw its inflation higher at 4.53%, from 3.05%.
Figure 29: Indonesia—2016 inflation by region
Source: Bank Indonesia Rising middle class and affluent consumers (MAC) According to Boston Consulting Group, Indonesia's population is becoming more affluent. The middle class and affluent consumers (“MAC”) population in Indonesia is expected to reach half of the entire population by 2020 from the current 37%. We believe that Indonesia offers the potential to be developed into a larger base economy given its high population base with most being of productive age. Unemployment is benign, at 5.6%, and declining. Meanwhile, Indonesia’s GDP per capita has risen to US$3,643 in 2016, from US$3,268 in 2010.
Indonesia Consumer Survey 2017 18 27 March 2017
Figure 30: Indonesia's population is growing and Figure 31: Middle class and affluent consumers are becoming more affluent prominent in Java and Sumatra
Poor Aspirant Emerging middle Rest of Indonesia Sulawesi Kalimantan 300 Middle Upper middle Affluent Sumatra Rest of Java Greater Jakarta 140 7 30 5 17 250 3 12 7 120 23 36 49 24 47 200 42 100 55 68 80 36 150 44 18 47 60
Population(millions) 34 Population Population (millions) 100 65 51 24 26 40 57
50 48 17 10 20 8 65 5 9 46 7 4 28 5 8 10 0 0 2012 2016 2020 2012 2016 2020 Source: Boston Consulting Group (BCG) Source: BCG
Figure 32: Indonesia's GDP per capita Figure 33: Average exchange rate IDR/USD
50 4000 48.6 15,000 IDR (million) USD (RHS) average 2014: 11,869 3900 average 2015: 13,377 45.7 14,500 average 2016: 13,314 3780 45 3756 3800 average YTD17: 13,337 42.5 14,000 3682 3643 3700
3574 40 38.9 3600 13,500
3500 35.6 3398 13,000
35 3400 USD / IDR 3268 33.0 12,500 3300
29.7 12,000 30 3200
3100 11,500
25 3000 2010 2011 2012 2013 2014 2015 2016 11,000 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Source: Bank Indonesia (BI) Source: Bank Indonesia (BI)
Figure 34: Consumer Confidence index Figure 35: Retail Sales index
125 220
CCI February 2017: 117.1 210 120 213
200 115 190
110 180
170 105
160
100 150
140 95 Jan-14 Jan-15 Jan-16 Jan-17 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Source: Bank Indonesia (BI) Source: Bank Indonesia (BI)
Indonesia Consumer Survey 2017 19 27 March 2017
Figure 36: Bank Indonesia rate Figure 37: Unemployment rate in Indonesia
8.0 12%
11.2% 11% 7.5 10.3% 9.9% 10% 9.5%
7.0 9.1% 9.1% 9% 8.4% 8.1% 7.9% 8% 6.5 7.5% 7.1% 7%
6.0 6.1% 6.2% 6.2% 6.0% 6.1% 5.9% 6% 5.6%
5.5 5%
Mar-11 Mar-15 Mar-10 Mar-12 Mar-13 Mar-14 Mar-16
2006 2015 2000 2001 2002 2003 2004 2005 2007 2008 2009 2010 2011 2012 2013 2014 2016
Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-10 Source: Bank Indonesia (BI) * Employment rates are as at August of every full year Source: Indonesia Bureau of Statistics
Rising optimism The highest earners hit Compared to the other emerging countries that we surveyed, Indonesians were still the most, stable for the second in terms of personal finances. In fact, on average, Indonesian personal finances low and middle income are better off than in the previous year, even though, on average, they are still lower than two years ago. We believe that this is due to the still-low commodity prices, that only started to pick up in early 4Q16. Interestingly, for Indonesians, the highest earners are seeing weaker personal finances versus the previous year. Lower-middle income earners, however, retained a somewhat similar trend in the survey. We think that the significant shift for the highest earners could be attributed to penalty payments during the tax amnesty programme, which are mostly impacting them. The first phase of the tax amnesty programme ended on 30 September 2016. Middle-upper income earners saw their personal finances better off.
Figure 38: Indonesia—state of personal finances Figure 39: Indonesia—state of personal finances over next six months, 2016 over next six months, 2017
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0% < 1000 1250 1750 2500 4000 6250 8750 > 10000 < 1000 1250 1750 2500 4000 6250 8750 > 10000 Income (IDR) This survey average Income (IDR) This survey average Last survey average Last survey average
Source: Credit Suisse Emerging Consumer Survey 2016 Source: Credit Suisse Emerging Consumer Survey 2017
Indonesians are less optimistic about their income than last year, according to our survey, even though they are still the most optimistic compared to the other emerging countries that we surveyed (Indonesia maintains its No.1 rank). The reduced optimism compared to
Indonesia Consumer Survey 2017 20 27 March 2017
a year ago, in our view, could be attributed to Government of Indonesia's introduction of a fixed formula (GDP growth plus inflation) to determine the percentage increase in minimum wage starting from 2016; thus with inflation reaching its lowest level at 3.7% in 2016, expectations on household income declined.
Figure 40: Indonesians are less optimistic about their household income in the last 12 months* Total Area Region Age Income % of respondents Urban Rural Java Ex-Java 18-29 30-45 46-55 56-65 Low Mid High 2016 Down to flat 59% 57% 64% 55% 68% 59% 57% 64% 62% 75% 54% 47% Flat to +10% 31% 34% 26% 35% 21% 31% 33% 29% 30% 20% 35% 31% More than +10% 10% 10% 10% 10% 11% 11% 11% 7% 8% 6% 11% 23% 2015 Down to flat 57% 54% 63% 58% 56% 57% 54% 63% 62% 72% 52% 33% Flat to +10% 30% 31% 27% 28% 33% 31% 31% 27% 21% 23% 33% 33% More than +10% 13% 15% 10% 14% 11% 12% 14% 10% 17% 5% 15% 35% 2010 Down to flat 64% 62% 68% 65% 62% 60% 66% 63% 76% 70% 59% 46% Flat to +10% 26% 27% 23% 26% 27% 28% 25% 27% 19% 24% 29% 35% More than +10% 10% 10% 8% 9% 12% 11% 9% 9% 5% 6% 13% 19% * Question: To what extent has your household income changed in the last 12 months? Note: Income is on monthly basis: Low
Figure 41: Indonesians are also expecting lower future household income than a year ago * Total Area Region Age Income* % of respondents Urban Rural Java Ex-Java 18-29 30-45 46-55 56-65 Low Mid High 2016 Down to flat 43% 43% 41% 42% 44% 41% 42% 47% 46% 54% 39% 33% Flat to +10% 37% 36% 38% 37% 37% 37% 37% 35% 41% 32% 38% 33% More than +10% 20% 20% 20% 21% 19% 22% 21% 18% 13% 13% 23% 34% 2015 Down to flat 39% 35% 46% 38% 41% 37% 38% 41% 50% 54% 34% 19% Flat to +10% 34% 35% 33% 32% 40% 36% 34% 35% 25% 31% 36% 37% More than +10% 27% 30% 21% 30% 19% 27% 28% 24% 25% 15% 30% 43% 2010 Down to flat 37% 36% 39% 36% 39% 37% 37% 33% 49% 44% 28% 36% Flat to +10% 38% 38% 39% 40% 33% 37% 37% 42% 37% 37% 41% 21% More than +10% 25% 27% 21% 23% 28% 26% 26% 25% 14% 19% 30% 43% * Question: In what way do you expect your household income to change in the next 12 months? *Income is on monthly basis: Low
Indonesia Consumer Survey 2017 21 27 March 2017
Figure 42: Minimum wage increase over the years in Indonesia
National minum wage (IDR) YoY growth 20% 2,075,529
2,000,000 1,933,633
1,703,617
1,506,238 1,500,000 15% 1,296,908
1,088,903 988,829 1,000,000 908,825 841,530 745,709 672,428 10% 603,327
500,000
0 5% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E
Source: Ministry of Labour Time to spend! As optimism and confidence grow, it appears Indonesians are ready to make major purchases. Indonesia's rank among the countries surveyed has moved up to No. 3, from No. 4, in the past two consecutive years—this is true, particularly in the rural area and in Java, and for the middle- and higher-income earners. However, the optimism is yet to reach the 2010 level.
Figure 43: In your opinion, is now a good time to make a major purchase? – Area 2016 2015 2010 % of respondents Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Excellent time 2% 2% 1% 2% 2% 5% 6% 4% 5% 6% 6% 7% 5% 6% 7% Good time 34% 33% 34% 35% 30% 30% 31% 28% 29% 31% 50% 48% 54% 55% 39% Not such a good time 60% 60% 61% 59% 63% 59% 57% 61% 59% 58% 40% 40% 39% 36% 48% A bad time 5% 5% 5% 4% 5% 7% 6% 7% 7% 5% 4% 5% 3% 4% 6% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 44: In your opinion, is now a good time to make a major purchase? – Age 2016 2015 2010 % of respondents Total 18-29 30-45 46-55 56-65 Total 18-29 30-45 46-55 56-65 Total 18-29 30-45 46-55 56-65 Excellent time 2% 1% 2% 2% 2% 5% 5% 5% 6% 4% 6% 6% 6% 6% 6% Good time 34% 37% 31% 35% 30% 30% 28% 33% 27% 25% 50% 53% 49% 50% 45% Not such a good time 60% 57% 63% 60% 61% 59% 59% 56% 62% 64% 40% 38% 40% 39% 45% A bad time 5% 5% 5% 3% 6% 7% 7% 6% 6% 8% 4% 3% 5% 4% 4% Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 22 27 March 2017
Figure 45: In your opinion, is now a good time to make a major purchase? – Income* 2016 2015 2010 % of respondents Total Low Mid High Total Low Mid High Total Low Mid High Excellent time 2% 1% 1% 6% 5% 3% 6% 6% 6% 5% 7% 4% Good time 34% 29% 35% 47% 30% 32% 29% 27% 50% 46% 53% 68% Not such a good time 60% 64% 59% 44% 59% 57% 59% 65% 40% 44% 36% 21% A bad time 5% 6% 4% 3% 7% 8% 6% 2% 4% 5% 3% 7% * Income is on monthly basis: Low
Smartphones and With Indonesians getting wealthier and seeking to lead a better lifestyle, on top of their internet access growing optimism and confidence, they are spending more on discretionary items. continue to be the most Indonesia's per capita GDP reached US$3,643 last year, from US$2,357 in 2009. Similar important items that to the previous years, Indonesians continue to spend the most on smartphones (+9%) Indonesians are followed by internet access (+7%), holidays (+6%), property (+6%), two-wheelers (+5%), spending on and instant noodles (+3%). Indonesians are not spending on TV (-8%), dairy (-6%), carbonated drinks (-5%), mobile phones (-3%), extra education (-3%), cosmetics (-3%), cigarettes (-2%), and four-wheelers (-1%). Interestingly, despite the high penetration of instant noodles and two-wheelers, consumers continue to spend on these items. Over the last seven Based on our survey, 2016 saw the highest spending momentum growth over the last years, consumers are seven years. Our survey captured Indonesians' increasing interest in buying smartphones switching to (+55%), internet access (+37%) and mobile phones (+17%), in line with their growing discretionary items wealth, changing lifestyle, and technological advancement. This is followed by the spending increase on two-wheelers (+16%) and property (+13%) as financing for both has become more affordable. On the other hand, the areas on which consumers have been spending less and less over the last seven years are cigarettes (-13%), followed by cosmetics (-10%) and dairy (-8%).
Figure 46: Indonesia's spending momentum in 2016 Figure 47: Indonesia's spending momentum in 2016 vs 2015 (a year ago) vs 2010 (seven years ago)
10 Smartphone 60 Smartphone Internet 8 access Property 50 6 Internet access Holidays 40 4 2-wheelers
30 2 Instant noodle
0 4-wheelers 20 Mobile phones 2-wheelers Cigarettes
-2 Holidays 10 Property Carbonated -4 Extra Cosmetics Mobile phones 4-wheelers drinks Instant noodle education Dairy Recorded spending in 2016 vs. 2010 0 Recorded spending Recorded spending in 2016 vs. 2015 -6 Dairy Carbonated Cosmetics TV drinks -10 TV -8 Cigarettes -10 -20 0 20 40 60 80 100 0 20 40 60 80 100 2016 respondents that own or have bought each item (%) 2016 respondents that own or have bought each item (%) Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Credit Suisse Indonesia Consumer Survey 2017
Maximum use of Interestingly, while spending on smartphones and internet access continues to rise, the internet is for use of internet in Indonesia is mostly to access social media (39%) and instant messaging accessing social media (25%), rather than to shop online (4%). While this is also true for most of the other emerging countries that we surveyed, Indonesia ranks the highest on this parameter. This might be one of the reasons as to why e-commerce in Indonesia is yet to pan out as fast as other countries have. Another possible reason for the country's still-low internet penetration (less than 50%) is higher cost. Despite coming from a lower base comparison, the rise of internet penetration definitely offers significant potential.
Indonesia Consumer Survey 2017 23 27 March 2017
Figure 48: Social media is the main purpose for needing internet access
45 Indonesia Mexico Russia Brazil Turkey India China 39 40
35 33
30 27 26 25 25 25 24 22 21 21 21 19 19 19 20 18 18 17 18 17 % of respondents of % 15 15 15 14 14 13 12 11 11 11 11 11 10 10 10 9 9 10 8 8 7 7 6 6 6 5 4 5 3 4 3 2 2 2 1 1 1 - 0 0 - Social network Music & videos Instant messaging Gaming Banking Shopping Travel Other
Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 49: Internet penetration in Indonesia is the lowest among other countries… Figure 50: ...but it has outgrown in the last six years
20% 60% 54% 51% Indonesia 50% 15% India 40% 40% South Africa Brazil 10% Mexico 29% 30% Turkey 5%
Russia Internet penetration 20% Internet Internet penetration growth 15% China 14% 9% 0% 10% 45% 55% 65% 75% 85% 95%
0% -5% 2010 2011 2012 2013 2014 2015 2016 Internet penetration Size of the bubble represents each country's size of population relative to one another Source: Credit Suisse Indonesia Consumer Survey 2017 : Represents country's population relative to one another. Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia differs from While the other emerging countries that we surveyed prefer to spend more on fashion others apparel (65%), holidays (60%), perfumes (49%), and shoes (45%) among others, Indonesians, on the other hand, would like to spend more on holidays (70%), instant noodles (64%), bottled water (62%), and dairy (50%), among others. Only 48% of the Indonesians we surveyed would prefer to spend on fashion apparel and only 42% on perfumes. We believe that this is because Indonesians are still planning to spend more on basic items (staples) than discretionary items, when it comes to allocating their spending, with the exception of holiday.
Indonesia Consumer Survey 2017 24 27 March 2017
Figure 51: Indonesians would want to spend more on holidays and staples 80%
70% 65% 60% 57% 60%
49% 49% 50% 45%
38% 40% 36% 33%
30% 26%
19% 19% 16% 20% 15% 15% 14%
10% 6% 5% 3% 3% 70% 64% 62% 50% 48% 42% 37% 35% 26% 21% 19% 17% 16% 11% 11% 5% 3% 2% 2% 1%
0%
Car
Dairy
Tablet
Holiday
Watches
Jewellery
Perfumes
Motorbike
Education
Cigarettes
Sport shoes
Smartphone
Bottledwater
NotebookPC
Leathergoods
Mobilephones
Instantnoodles
Fashionapparel
Desktopcomputer Carbonateddrinks Indonesia 2016 Indonesia 2010 2016 emerging market average
* Instant noodle – emerging market average consists of only two countries: Indonesia (64%) and India (51%) ** Motorcycle – emerging market average consists of only Indonesia (26%). Source: Credit Suisse Indonesia Consumer Survey 2017
Spending on food This is in line with food being the largest component in Indonesians' monthly spending increased basket, much higher than the average eight emerging countries that we surveyed. According to our survey, spending on food accounted for 35% of the total spending in Indonesia in 2016, up from 32% in the previous year; followed by spending on housing and public utilities at 8%, down from 11% in the previous year. Savings dropped to only 8% of the total, from 12% in the previous year.
Figure 52: 32% of monthly spending by Indonesians was on food in 2015… Figure 53: …and it increased to 35% in 2016
Indonesian monthly spending Overall survey average Indonesian monthly spending Overall survey average 40% 40% 35%
35% 32% 35% 31% 30% 30%
24% 25% 25%
20% 20%
15% 15% 12% 11%
10% 10% 8% 8%
5% 5% 4% 4% 3% 4% 3% 5% 3% 5% 3% 2% 1% 1% 1% 1%
0% 0%
HPC
HPC
Food
Food
Other
Other
Autos
Autos
Savings
Savings
Clothing
Clothing
Education
Education
Healthcare
Healthcare
Travel & Travel
Travel & Travel
Taxes
Taxes
Housing & Housing
Housing & Housing
Public Utilities Public
Entertainment
Public Utilities Public
Entertainment
Property & Local & Property Property & Local & Property
Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Credit Suisse Indonesia Consumer Survey 2017
Savings declined With the decline in savings, Indonesia's rank remains the lowest among the emerging countries we surveyed. Savings only accounts for 10.3% of total income—versus China's (which remains the highest) 40.7%—followed by Russia's 24.1% and Turkey's 21%.
Indonesia Consumer Survey 2017 25 27 March 2017
Figure 54: China has the highest savings Figure 55: Indonesia's savings percentage in total percentage in total income income declined in 2016
45% 16% 40.7% 14.8% 40% 14% 35% 12.2% 12.3% 11.6% 12% 30% 10.8% 10.4% 10.3% 24.1% 25% 10% 21.0% 20% 8% 13.9% 15% 12.2% 11.3% 10.5% 10.3% 6%
Savings as % of incomeof % as Savings 10% Savings as % ofincome Savingsas% 5% 4%
0% 2%
India
Brazil
Africa China
South 0%
Russia Turkey Mexico 2010 2011 2012 2013 2014 2015 2016 Indonesia Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Company data, Credit Suisse estimates Indonesians are not migrating In Indonesia, fewer people are interested in migrating, compared to those in China and India. In fact, the number of people not migrating has increased. Some 15% Indonesians migrated in 2016 as compared to 19% in China and 36% in India. However as a percentage to total population, Indonesians were the highest to move in order to earn a better income (92%), compared to those in China (69%) and India (86%).
Figure 56: Fewer Indonesians are migrating
Migrated Did not migrate Moved to earn better income 100% 93% 92% 86% 90% 79% 80% 69% 70% 66%
60%
50%
40% 64%
30% 76% 74% 81% 81% 20% 36% 85% 24% 26% 10% 19% 19% 15% 0% 2015 2016 2015 2016 2015 2016 China India Indonesia Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 26 27 March 2017
Automotive sector Key stock Astra International
■ Astra’s auto business benefits from lower financing rates; thus in the four-wheeler (4W) market, the company is likely to gain by launching new affordable models (the likes of low cost green car, or “LCGC”), while its two-wheeler (2W) market share gain is dependent on new model launches and improvement in after-sales services.
■ Rising commodity prices should also benefit Astra, as people living in commodity resource-rich areas have better purchasing power. Four-wheelers According to Indonesia Auto Association (Gaikindo), Indonesia's 4W sales reached 1.06 mn in 2016, up 5% YoY—the first year of positive growth after declining for three years from the peak of 1.2 mn units in 2013-14. The improvement, we believe, could be attributed to a few factors: (1) lower financing rates, (2) launching of new affordable models, (3) increase in commodity prices, and (4) a better macroeconomic environment than 2015. Last year, about 20% of the auto sector’s sales were contributed by low-cost green cars (LCGC), which were priced below Rp150 mn/unit (US$12k). Astra launched two seven- seater LCGCs (Toyota Calya and Daihatsu Sigra) in 2H16, which have been well accepted in the market. Overall, we remain positive on Indonesia's structural story as 4W penetration has only reached 5% as compared to its ASEAN peers' 10-15%.
Figure 57: Indonesia has lower 4W penetration than Figure 58: …but, historically, sales pick up with peers… higher coal prices
40% 120% 35% 100% 35% 30% 80% 30% 27% 60%
25% 40% 20% 20% 0% 15% -20% 10% 10% -40% 5%
5%
Apr-16 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16 2% Aug-10 1% 0% Coal Price YoY 3mma 4W sales YoY PH IN ID TH TW KR MY
Source: CEIC Source: Bloomberg, Gaikindo (Indonesia 4W Association)
Our survey indicates that while Indonesia's 4W penetration remained low at 6% (a slight decline from 7% in the previous survey), interestingly, there is a shift in the ownership profile. The 4W ownership in rural areas declined from 6% in 2015 to 4% in 2016; however, in urban areas, it increased to 8% from 7% in the previous year. The increase in urban ownership in 2016 was driven by buyers who live outside Java—they might have benefited from higher commodity prices (palm oil and coal).
Indonesia Consumer Survey 2017 27 27 March 2017
Compared to our previous surveys, we observed higher confidence among the respondents on a probable purchase of 4W within the next twelve months (11%) than the previous year (8%), or seven years ago when we started out (7%). We believe the increased optimism to purchase 4W is due to: (1) cheaper financing driven by lower rates and extension of loan tenor; (2) more affordable LCGC models (the likes of Toyota Calya and Daihatsu Sigra, which were launched last year); and (3) a modest recovery in the economy. And according to our survey, the increase is mostly on the back of the low- income segment at 8% of our respondents—up from 6% in 2015, and 3% in 2010.
Figure 59: Increased confidence in the low-income segment to buy a 4W Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Ownership 6% 8% 4% 6% 7% 4% 6% 11% 8% 1% 7% 30% Probability of purchase in 12M Potentially yes 11% 11% 10% 13% 8% 10% 12% 11% 8% 8% 12% 18% Unsure 38% 39% 36% 52% 49% 39% 35% 37% 43% 37% 38% 28% Potentially no 51% 50% 54% 35% 44% 50% 53% 52% 49% 54% 50% 53% 2015 Ownership 7% 7% 6% 7% 6% 6% 7% 5% 9% 3% 7% 25% Probability of purchase in 12M Potentially yes 8% 9% 7% 9% 8% 9% 8% 11% 4% 6% 9% 16% Unsure 28% 29% 27% 61% 68% 27% 29% 29% 30% 30% 27% 31% Potentially no 63% 62% 66% 30% 24% 65% 63% 60% 66% 64% 64% 53% 2010 Ownership 6% 6% 5% 6% 6% 3% 7% 6% 10% 1% 8% 50% Probability of purchase in 12M Potentially yes 7% 8% 6% 6% 8% 4% 8% 10% 6% 3% 10% 38% Unsure 26% 27% 23% 66% 69% 30% 23% 25% 24% 23% 27% 42% Potentially no 67% 65% 71% 27% 22% 66% 69% 65% 71% 74% 63% 21% * Income is on monthly basis: Low
Indonesia Consumer Survey 2017 28 27 March 2017
Figure 60: Astra gained market share in 2016 on the back of LCGCs
Astra 4W Honda 70%
60%
50%
40%
30%
20%
10%
0% May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16
Source: Company data,
Figure 61: Toyota maintained its market leader in 4W, gaining back some of its lost market share Total Area Region Age Income % of respondents Urban Rural Java Ex-Java 18 - 29 30-45 46-55 56-65 Low Mid High 2016 Toyota 41% 40% 42% 37% 56% 46% 37% 39% 40% 31% 43% 50% Honda 28% 25% 33% 31% 15% 23% 29% 32% 40% 26% 29% 29% Daihatsu 10% 12% 4% 10% 9% 11% 10% 10% 0% 21% 6% 7% Nissan 4% 2% 6% 4% 3% 0% 7% 3% 0% 0% 5% 0% BMW 2% 2% 1% 2% 3% 3% 1% 3% 0% 3% 2% 0% Mazda 2% 2% 3% 3% 0% 5% 1% 0% 0% 3% 2% 7% Others 14% 16% 10% 14% 15% 12% 14% 13% 20% 18% 12% 7% 2015 Toyota 23% 17% 37% 19% 36% 12% 36% 20% 17% 14% 26% 21% Honda 22% 24% 18% 22% 24% 24% 18% 24% 33% 21% 21% 36% Daihatsu 10% 12% 5% 11% 6% 8% 12% 8% 17% 3% 13% 7% Nissan 5% 7% 3% 6% 3% 4% 2% 12% 17% 3% 7% 0% BMW 8% 11% 3% 9% 6% 10% 8% 8% 0% 14% 8% 0% Mazda 3% 4% 0% 4% 0% 6% 0% 0% 17% 7% 1% 7% Others 28% 25% 34% 29% 24% 35% 24% 28% 0% 38% 24% 29% 2010 Toyota 52% 49% 58% 45% 63% 43% 50% 63% 63% 52% 51% 60% Honda 15% 14% 19% 15% 17% 17% 15% 15% 13% 23% 13% 10% Daihatsu 10% 13% 3% 15% 2% 11% 13% 4% 0% 3% 13% 0% Nissan 3% 3% 3% 4% 2% 3% 5% 0% 0% 3% 2% 10% BMW 2% 1% 3% 1% 2% 0% 2% 0% 13% 3% 1% 0% Mazda 1% 0% 3% 0% 2% 3% 0% 0% 0% 3% 0% 0% Others 18% 20% 11% 21% 13% 23% 15% 19% 13% 13% 19% 20% * Income is on monthly basis: Low
Indonesia Consumer Survey 2017 29 27 March 2017
of 2W. In our view, 2017’s sales are better as the increase in commodity prices has historically been positive for 2W sales.
Figure 62: 2W sales tend to improve with commodity prices, including coal price… Figure 63: …as well as CPO prices
Coal Price YoY 3mma 2W sales YoY CPO Price YoY 3mma 2W sales YoY 120%
60% 100%
80% 40%
60%
20% 40%
20% 0%
0%
-20% -20%
-40%
-40%
Jun-10 Jun-11 Jun-12 Jun-13 Jun-14 Jun-15 Jun-16
Dec-09 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Dec-16
Jun-13 Jun-10 Jun-11 Jun-12 Jun-14 Jun-15 Jun-16
Dec-14 Dec-10 Dec-11 Dec-12 Dec-13 Dec-15 Dec-16 Dec-09 Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
2W penetration at 89% was at its highest level since we started this survey in 2010. Interestingly, those who own more than one motorcycle dropped from 37% in 2015 to 29% in 2016. Moreover, penetration outside the Java region increased to 88% , from 81% in the previous year; according to AISI (Indonesia Motorcycle Association) 2W sales declined 10% YoY in 2016. This phenomenon, we believe, indicates that the secondary market is becoming more active as well as competitive in terms of pricing. Our conclusion is also supported by the increase in average motorcycle ownership to four years, from 3.7 years in the previous year’s survey. Contrary to the survey result for 4W, the respondents were not as keen to purchase a 2W in the next 12 months: the respondents declined slightly from 28% to 26%. We believe this could mean two things: (1) the economy in the lower stratum of the society has not really picked up, while inflation surprises on the upside further impede purchasing power, or (2) 2W penetration is already too high.
Indonesia Consumer Survey 2017 30 27 March 2017
Figure 64: Two-wheeler ownership demographics Total Area Region Age Income % of respondents Urban Rural Java Ex-Java 18-29 30-45 46-55 56-65 Low Mid High 2016 Ownership % respondents 89% 89% 87% 89% 88% 89% 91% 83% 85% 81% 92% 93% Number of 2W(s) per household 1 Motorbike % owners 71% 69% 76% 73% 67% 70% 74% 71% 65% 83% 67% 49% > Motorbike % owners 29% 31% 24% 27% 33% 4% 5% 4% 4% 17% 33% 51% Period purchased Years ago 4.1 4.1 3.9 4.0 4.2 3.6 4.3 4.6 4.3 4.1 3.9 3.9 Ownership turnover Years 5.3 5.5 5.0 5.1 5.3 4.8 5.6 6.1 5.1 4.5 5.7 5.4 Probability of purchase in 12M Potentially yes % respondents 26% 26% 24% 27% 22% 24% 28% 26% 21% 27% 26% 27% Unsure % respondents 41% 42% 39% 39% 46% 43% 39% 34% 47% 39% 41% 20% Potentially no % respondents 34% 32% 36% 34% 32% 33% 32% 40% 32% 34% 33% 53% 2015 Ownership % respondents 84% 85% 82% 86% 81% 86% 86% 77% 81% 74% 89% 91% Number of 2W(s) per household 1 Motorbike % owners 63% 63% 64% 63% 63% 62% 71% 51% 57% 81% 55% 63% > Motorbike % owners 37% 37% 36% 37% 37% 10% 6% 10% 9% 19% 45% 37% Period purchased Years ago 3.7 3.7 3.7 3.6 3.9 3.4 3.8 3.9 4.7 4.1 3.6 3.3 Ownership turnover Years 5.7 5.8 5.5 5.7 5.5 4.9 5.9 6.5 7.2 5.1 6.2 5.3 Probability of purchase in 12M Potentially yes % respondents 28% 28% 26% 26% 31% 28% 31% 27% 14% 26% 29% 23% Unsure % respondents 27% 27% 28% 28% 27% 26% 27% 29% 31% 30% 25% 35% Potentially no % respondents 45% 45% 45% 46% 42% 46% 42% 44% 55% 44% 46% 42% 2010 Ownership % respondents 73% 74% 70% 72% 74% 73% 72% 80% 63% 61% 85% 92% Number of 2W(s) per household 1 Motorbike % owners 71% 69% 76% 72% 69% 69% 77% 61% 67% 84% 61% 73% > Motorbike % owners 29% 31% 24% 28% 31% 8% 6% 9% 4% 16% 39% 27% Period purchased Years ago 3.3 3.3 3.2 3.1 3.3 3.2 3.3 3.2 3.5 3.2 3.3 3.4 Ownership turnover Years 5.6 5.4 6.0 5.5 6.1 4.9 5.8 6.6 5.9 5.4 6.1 6.2 Probability of purchase in 12M Potentially yes % respondents 25% 28% 21% 26% 24% 23% 29% 21% 25% 19% 30% 55% Unsure % respondents 30% 29% 31% 35% 19% 29% 29% 36% 24% 30% 29% 27% Potentially no % respondents 45% 43% 48% 39% 57% 48% 41% 43% 51% 51% 41% 18% * Income is on monthly basis: Low
Indonesia Consumer Survey 2017 31 27 March 2017
Figure 65: Honda maintains market leadership, gaining more market share than last year Total Area Region Age Income % of respondents Urban Rural Java Ex-Java 18 - 29 30-45 46-55 56-65 Low Mid High 2016 Honda 59% 56% 64% 64% 46% 56% 60% 62% 60% 60% 60% 38% Yamaha 36% 39% 29% 32% 45% 37% 35% 34% 32% 32% 36% 56% Suzuki 5% 4% 5% 3% 8% 6% 4% 4% 5% 6% 4% 3% Kawasaki 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Others 1% 1% 2% 1% 1% 1% 1% 1% 3% 2% 0% 3% 2015 Honda 57% 53% 64% 62% 43% 51% 59% 61% 62% 58% 55% 65% Yamaha 36% 39% 28% 31% 47% 40% 34% 30% 32% 34% 37% 33% Suzuki 6% 6% 6% 5% 8% 7% 6% 6% 4% 5% 7% 0% Kawasaki 1% 1% 1% 1% 1% 1% 1% 1% 0% 1% 1% 0% Others 1% 1% 1% 1% 0% 1% 0% 2% 1% 2% 1% 2% 2010 Honda 50% 48% 54% 54% 42% 46% 54% 48% 53% 50% 50% 45% Yamaha 33% 36% 28% 31% 37% 35% 30% 39% 24% 32% 34% 18% Suzuki 13% 12% 14% 11% 17% 15% 12% 7% 18% 15% 11% 27% Kawasaki 2% 2% 2% 2% 1% 2% 1% 2% 4% 1% 2% 9% Others 2% 2% 3% 2% 3% 2% 2% 4% 2% 3% 2% 0% * Income is on monthly basis: Low
Indonesia Consumer Survey 2017 32 27 March 2017
Food and beverages Key stocks Indofood CBP
■ Indomie, Sarimi, Supermie and PopMie are the main brands that are favoured by consumers, and continue to help support the company’s free cash flow—as noodles continue to be defensive staples for Indonesians. Indomilk is gaining popularity in the dairy segment, as does Club in bottled water, while Pepsi maintains its favoured status in carbonated drinks. Unilever Indonesia
■ The brand Blue Band continues to be the leader in margarine. The F&R (Food and Refreshment) division is a smaller portion for the company than the HPC (Home and Personal Care) one, but it offers more upside potential given the growing wealth of consumers. HM Sampoerna
■ The largest cigarette producer in Indonesia is facing the challenge of lower consumption, given higher prices and changes in lifestyle. Its brands continue to appeal more to the younger generation, and those in urban areas (in Java) and within middle- and higher-income segments. Gudang Garam
■ The second-largest cigarette producer in Indonesia is facing the challenge of lower consumption, given higher prices and changes in lifestyle. Its brands appeal to people living in rural areas, outside Java, the middle-aged generation, and the higher-income segment. Gudang Garam Surya came out to be most favoured brand in our survey. Unrivalled noodles consumption Instant noodles Consumption of instant noodles continues to remain high at 94%, with the urge to consume more also remaining high at 64% of total respondents. This is the highest among the other staples that we surveyed (carbonated drinks, bottled water, dairy products, and cigarettes), and higher than a year ago of 58% of total respondents that wanted more noodles. The popularity of noodles remains across the board, even though in urban areas it is getting more popular than in rural. We believe this might be due to the launch of premium noodle brands (Real Meat by Indofood and Bakmi Mewah by Mayora Group), which are targeting a niche market. Noodles are popular across all generations, even though the younger generation tends to consume more than the older. While it is consumed broadly across all income segments, there is a shift towards lower consumption by the middle- and higher-income segments, although their level of consumption remains high. We still believe that for Indonesians noodles are basic staples, such as rice, as they are filling and the most affordable source of carbohydrates; the lower-income segment is seen to be more defensive with the consumption trend. Carbonated drinks Consumption of carbonated drinks declined to 61% of total respondents, from 66% in the previous year. This is at a similar level to seven years ago, when we started our consumer survey. Those that would likely want to consume more is somewhat maintained, at 58%. The popularity of carbonated drinks remains in urban areas and in Java, mostly by the younger generation, and among the middle and higher-income segment. Bottled water
Indonesia Consumer Survey 2017 33 27 March 2017
Bottled water, seen both as convenient and healthier (than carbonated drinks), continues be popular with 88% of the respondents, rising from 82% when we first did the survey seven years ago. Popularity remains in urban areas, across all generations, but mostly towards the younger generation and across all income segments, even though we saw higher consumption for the higher-income segment. Dairy products To our surprise, consumption of dairy products (includes sweet condensed milk, liquid milk, margarine, and cheese) fell to 70% of respondents, from 76% a year ago, and 78% in 2010. Consumers seem to prefer bottled water to dairy products. Interestingly, the decline in the consumption of dairy products is mostly in urban areas and in Java, while outside Java, consumption of dairy products increased to 71% of total respondents, from 63% in the previous year. The highest consumption of dairy products remains with the younger generation and the middle-income segment, while we observe the most decline in the high-income segment. Cigarettes According to our survey, cigarette consumption in Indonesia declined to 51% of total respondents, from 57% in the previous year, and 64% in 2010. This is in line with the industry volume as reported by Philip Morris International—that volume was down 1% to 316 bn sticks in FY16. The decline in cigarette consumption, according to our survey, was mostly in Java (from 58% of respondents in 2015, to 50% in 2016), while the outside Java region was stable. Those in rural areas saw the most decline (-7%) as compared to those in urban (-5%), which leads us to believe that the decline in consumption is due to: (1) affordability—as cigarette prices continue to rise and are getting more expensive, which is why the low income segment saw a 4% decline, (2) shift towards healthier lifestyle—we saw a 6% decline for the middle- and higher-income segment, and a decline in the younger generation as well.
Figure 66: Consumption of food and beverages—by area 2016 2015 2010 % of respondents Total Urban Rural Java Ex-Java Total Urban Rural Java Ex-Java Total Urban Rural Java Ex-Java Instant noodles -in the past 3 months 94% 95% 92% 95% 91% 95% 94% 97% 97% 91% 96% 97% 95% 98% 93% -more in the next 12 months 64% 62% 69% 68% 55% 58% 58% 57% 64% 43% 63% 65% 59% 62% 63% Carbonated drinks -in the past 3 months 61% 67% 50% 62% 57% 66% 69% 61% 67% 64% 60% 64% 52% 62% 54% -more in the next 12 months 58% 37% 36% 36% 38% 57% 39% 32% 40% 28% 56% 41% 25% 34% 41% Bottled water -in the past 3 months 88% 93% 77% 92% 77% 89% 93% 83% 95% 77% 82% 86% 74% 85% 76% -more in the next 12 months 62% 62% 62% 68% 49% 58% 62% 51% 67% 36% 51% 57% 39% 50% 55% Dairy products -in the past 3 months 70% 75% 63% 70% 71% 76% 81% 67% 81% 63% 78% 82% 69% 78% 76% -more in the next 12 months 50% 50% 50% 52% 45% 49% 52% 44% 57% 32% 53% 58% 41% 50% 58% Cigarettes -in the past 3 months 51% 51% 51% 50% 53% 57% 56% 58% 58% 53% 64% 65% 62% 67% 56% -more in the next 12 months 35% 33% 39% 35% 35% 34% 34% 34% 37% 25% 40% 43% 35% 41% 39% Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 34 27 March 2017
Figure 67: Consumption of food and beverages—by age and income 2016 2015 2010 Age Income Age Income Age Income % of respondents 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High Instant Noodles -in the past 3 months 96% 95% 90% 85% 93% 94% 84% 96% 97% 91% 89% 93% 96% 99% 96% 97% 95% 92% 95% 97% 100% -more in the next 12 months 65% 66% 60% 58% 66% 64% 60% 58% 58% 57% 57% 57% 56% 76% 62% 63% 61% 62% 62% 64% 60% Carbonated drinks -in the past 3 months 73% 62% 45% 27% 55% 63% 64% 75% 68% 55% 37% 61% 69% 61% 69% 61% 44% 36% 53% 66% 75% -more in the next 12 months 43% 39% 27% 15% 33% 37% 52% 41% 39% 29% 16% 35% 37% 37% 38% 39% 28% 19% 31% 40% 70% Bottled water -in the past 3 months 91% 88% 86% 72% 80% 90% 96% 94% 89% 86% 80% 80% 93% 99% 86% 82% 78% 70% 77% 87% 95% -more in the next 12 months 63% 64% 61% 54% 61% 63% 78% 58% 58% 58% 54% 49% 60% 83% 52% 52% 50% 45% 46% 57% 75% Dairy products -in the past 3 months 74% 73% 65% 56% 61% 74% 68% 79% 79% 68% 63% 68% 80% 72% 81% 80% 70% 58% 73% 82% 95% -more in the next 12 months 53% 51% 44% 43% 47% 51% 50% 51% 50% 44% 45% 42% 53% 56% 55% 55% 46% 36% 46% 59% 75% Cigarettes -in the past 3 months 49% 53% 51% 49% 52% 51% 52% 56% 61% 52% 48% 56% 57% 58% 67% 65% 59% 51% 62% 67% 40% -more in the next 12 months 33% 38% 32% 35% 36% 35% 38% 33% 35% 35% 28% 33% 33% 42% 43% 40% 38% 30% 38% 43% 35% * Income is on monthly basis: Low
Figure 68: Indonesians prefer domestic brands, except for carbonated drinks…
2010 2011 2012 2013 2014 2015 2016 100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0% Instant noodles Cigarettes Dairy product Bottled water Carbonated drinks Question: Which brands of goods have you purchased in the last three months? Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 35 27 March 2017
Figure 69: …this is more or less true for all income segments
2010 2011 2012 2013 2014 2015 2016 100% 100% 99% 99% 99% 99% 100% 97% 97% 97%97% 98%97% 93% 92% 89% 88% 90% 86% 83% 79% 80% 75% 76% 73%
70% 64%
60% 57%
50%
40%
30%
20% 11% 8% 10% 8% 3% 4% 0% 0% Low Mid High Low Mid High Low Mid High Low Mid High Low Mid High Instant noodles Bottled water Cigarettes Dairy product Carbonated drinks
Question: Which brands of goods have you purchased in the last three months? * Income is on monthly basis: Low
At the same time, Indonesians prefer brands that are well recognised. The highest preference for non-major brands is among carbonated drinks, whose popularity is the lowest compared to other staples (instant noodles, dairy products, and bottled water). Non-major cigarette brands are also popular, given that the major brands are pricier. We classify non-major brands as those outside of the big four cigarette producers (HM Sampoerna, Gudang Garam, Djarum, and BAT Indonesia). Meanwhile, in bottled water, fewer respondents prefer non-major brands, but we believe that this might be skewed, given that the brand "Aqua" (by Danone) is identical to bottled water. Figure 70: Indonesians' preference for non-major brands 2010 2011 2012 2013 2014 2015 2016 30%
25%
20%
15%
10%
5%
0% Bottled water Carbonated drinks Cigarettes Dairy products Instant noodles
Source: Credit Suisse Indonesia Consumer Survey 2017
Instant noodles Consumption of instant noodles continues to remain high at 94%, with the urge to consume more also remaining high at 64% of total respondents. This is the highest among the other staples that we surveyed (carbonated drinks, bottle water, dairy products, and cigarettes), and higher than a year ago of 58% of total respondents who wanted more noodles.
Indonesia Consumer Survey 2017 36 27 March 2017
Popularity of noodles remains across the board, even though in urban areas they are getting more popular than in the rural. We believe this might be due to the launch of premium noodle brands (Real Meat by Indofood and Bakmi Mewah by Mayora Group), which target a niche market. Noodles are popular across all generations, even though the younger generation tends to consume more than the older. While it is broadly consumed across all income segments, there is a shift to lower consumption from the middle and higher-income segments, although their level of consumption remains high. For Indonesian,s we continue to believe that noodles are basic staples, such as rice, as they are filling and the most affordable source of carbohydrates—the lower income segment is seen to be more defensive with the consumption trend.
Figure 71: Consumption of instant noodles—by area 2016 2015 2010 % of respondents Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java -in the past 3 months 94% 95% 92% 95% 91% 95% 94% 97% 97% 91% 96% 97% 95% 98% 93% -more in the next 12 months 64% 62% 69% 68% 55% 58% 58% 57% 64% 43% 63% 65% 59% 62% 63% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 72: Consumption of instant noodles—by age and income 2016 2015 2010 Age Income Age Income Age Income % of respondents 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High -in the past 3 months 96% 95% 90% 85% 93% 94% 84% 96% 97% 91% 89% 93% 96% 99% 96% 97% 95% 92% 95% 97% 100% -more in the next 12 months 65% 66% 60% 58% 66% 64% 60% 58% 58% 57% 57% 57% 56% 76% 62% 63% 61% 62% 62% 64% 60% * Income is on monthly basis: Low
Indomie is the most Popularity of the No. 1 instant noodle brand, “Indomie”—manufactured by Indofood CBP, popular instant noodle while the brand is owned by parent company, Indofood Sukses—continued to rise, to 40% brand of total respondents, from 37% in the previous year. Its popularity remains across the board. In the urban area Indomie's popularity is growing, as well as outside the Java region. Its popularity has risen the most among the older generation and lower- and middle-income segments. We think that the variety of products that the company continuously launched has helped make consumers sticky with the brands. In addition to Indomie, Indofood Sukses also owns brands like Supermie, Sarimi, and Pop Mie, which were liked by a combined 64% of our total respondents, up from 62% in the previous year.
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Figure 73: Indofood's recently launched noodle products Date Product 17-Oct-16 Supermi Chicken Opor 16-May-16 Indomie Bite Mie -three flavours: pizza barbeque, seaweed, tempura 16-May-16 Indomie Real Meat -two flavours: chicken mushroom, beef rendang 1-Feb-16 Indomie soupy flavor with no soup -two flavours: ayam bawang (garlic chicken broth), soto 15-Oct-15 Indomie My Noodlez -first instant noodles made for children -three flavours: salmon teriyaki, seaweed, pizza cheese 18-Jun-15 Pop Mie Curry -two flavours: milk curry, cheese curry 18-Feb-15 Supermi Rasa Sop Buntut (oxtail soup flavor) Sarimi Mie Goreng Rasa Pecel (with crunchy peanut sauce) Sarimi Mie Goreng Rasa Sate Ayam (chiken satay) 17-Sep-14 Indomie Kuliner Indonesia series -Indomie Goreng Dendeng Balado -Indomie Soto Lamongan 6-Feb-14 Sarimi Isi 2 Rasa Ayam Bawang (garlic chicken broth) Sarimi Isi 2 Rasa Baso Sapi (beef meatballs) 16-Jan-14 Indomie Iga Penyet 14-Nov-13 Indomie Taste of Asia series - Indomie Tom Yum (Thailand style) -Indomie Bulgogi (Korean style) -Indomie Laksa (Singapore style) 13-Oct-13 Supermi Rasa Semur Ayam 8-Jun-13 New Pop Mie - relaunch 7-Jun-13 Sarimi Isi 2 Goreng Rasa Ayam Kremes Sarimi Rasa Soto Koya Jeruk Nipis 6-Jun-13 Indomie Goreng Cabe Ijo 1-Jun-13 Indomie Goreng Rendang Source: Indofood CBP website
Mie Sedap remains the The brand “Mie Sedap”, owned by the unlisted Wings Group, maintained its second second preferred brand position, with 28% of total respondents, up from 26% in the previous year. The brand is liked mostly in rural areas and outside Java, across all age groups—particularly it is more popular with the younger generation, but mostly among lower- and middle-income segments. This is the difference between Mie Sedap and Indomie. Indomie is mostly liked in urban areas and in Java, across all age groups, but it is mostly popular among the older generation, and across all income levels, but mostly among the middle- and higher-income segments. Smaller brands have The rise in popularity of both Indomie and Mie Sedap comes at the expense of smaller become less preferred brands. Each Sarimi and Supermie are liked by 9% of our total respondents, down from 10% in the previous year, while other small brands combined only account for 8% of the total respondents, down from 12% last year. Popularity of cup The exception is Pop Mie, a cup noodle brand saw an increase to 6% of total respondents, noodle rising from 5% in the previous year, and has doubled from 3% in 2010, when we first did the survey. Pop Mie is liked by those living in urban areas, in Java, among the younger generation (due to convenience), and the higher income segment (due to higher pricing as compared to the packed noodle). This can be a good indication that consumers are getting wealthier, and thus seeking convenience.
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Figure 74: Indomie, followed by Mie Sedap, remains as the most popular brand in instant noodle Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Indomie 40% 43% 36% 42% 36% 40% 39% 41% 47% 38% 41% 42% Mie Sedap 28% 25% 34% 26% 33% 28% 29% 28% 26% 29% 28% 18% Sarimi 9% 8% 12% 9% 10% 8% 10% 8% 9% 11% 8% 12% Supermi 9% 9% 9% 9% 9% 9% 9% 9% 9% 8% 9% 12% Popmie 6% 7% 3% 7% 2% 7% 6% 4% 2% 4% 6% 12% Others 8% 9% 6% 7% 9% 8% 7% 10% 7% 10% 7% 3% 2015 Indomie 37% 39% 33% 40% 30% 37% 37% 36% 38% 35% 38% 41% Mie Sedap 26% 24% 31% 25% 30% 26% 27% 27% 26% 29% 26% 18% Sarimi 10% 10% 11% 10% 11% 9% 11% 9% 11% 10% 9% 16% Supermi 10% 10% 10% 10% 10% 9% 10% 10% 10% 12% 9% 8% Popmie 5% 6% 3% 5% 3% 5% 5% 5% 2% 3% 6% 6% Others 12% 12% 12% 10% 15% 12% 11% 13% 13% 12% 12% 11% 2010 Indomie 37% 40% 31% 41% 30% 38% 36% 39% 37% 36% 39% 39% Mie Sedap 29% 26% 35% 28% 31% 30% 28% 29% 36% 32% 27% 24% Sarimi 7% 5% 10% 8% 5% 6% 8% 7% 7% 8% 6% 4% Supermi 12% 11% 13% 11% 13% 11% 12% 12% 11% 12% 12% 6% Popmie 3% 4% 1% 4% 2% 4% 3% 2% 1% 2% 5% 6% Others 12% 13% 9% 8% 19% 12% 12% 11% 8% 11% 12% 20% * Income is on monthly basis: Low
Carbonated drinks Consumption of carbonated drinks declined to 61% of total respondents, from 66% in the previous year. This is at the similar level seven years ago, when we first did the survey. Those that would likely want to consume more is somewhat maintained, at 58%. The popularity of carbonated drinks remains in the urban area and in Java, mostly by the younger generation, and among the middle- and higher-income segments.
Figure 75: Consumption of carbonated drinks—by area 2016 2015 2010 % of respondents Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java -in the past 3 months 61% 67% 50% 62% 57% 66% 69% 61% 67% 64% 60% 64% 52% 62% 54% -more in the next 12 months 58% 37% 36% 36% 38% 57% 39% 32% 40% 28% 56% 41% 25% 34% 41% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 76: Consumption of carbonated drinks—by age and income 2016 2015 2010 Age Income Age Income Age Income % of respondents 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High -in the past 3 months 73% 62% 45% 27% 55% 63% 64% 75% 68% 55% 37% 61% 69% 61% 69% 61% 44% 36% 53% 66% 75% -more in the next 12 months 43% 39% 27% 15% 33% 37% 52% 41% 39% 29% 16% 35% 37% 37% 38% 39% 28% 19% 31% 40% 70% * Income is on monthly basis: Low
The popularity of products from Coca-Cola Amatil remains, with a combined 76% of the total respondents consuming Coca-Cola, Sprite, and Fanta, as compared to 70% in the previous year. However, this is still below the 83% it had in 2010 when we first did the survey. Coca-Cola has seen a slight increase in preference at 28%, well liked in both urban and rural areas, mostly in Java, for most of the lower-income segment.
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Sprite and Fanta were liked by 24% of the total respondents, each—up from 22% and 21%, respectively, in the previous year. Sprite is liked in rural areas, outside Java, mostly among the lower- and middle-income segment. Fanta, on the other hand, is liked mostly by the higher-income segment, and is popular in urban areas and in Java. Interestingly, Big Cola (manufactured by Spain-based AjeGroup) continues to see popularity decline—to 12% from 16% in the previous year, from its peak of 20% in 2014. While its popularity came from being cheaper than Coca-Cola in a larger volume, this might not have sustained, when Coca-Cola started offering promotions as well. Pepsi Cola, on the other hand, remains at 4% in popularity. It continues to be the fifth ranked, and it is manufactured by PT Pepsi-Cola Indobeverages, a joint-venture between Indofood CBP and Japan-based Asahi Group Holdings.
Figure 77: Coca-Cola continues to dominate in carbonated drinks Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Coca-Cola 28% 28% 28% 29% 26% 29% 24% 7% 2% 30% 28% 28% Sprite 24% 22% 32% 23% 29% 23% 21% 6% 2% 25% 24% 21% Fanta 24% 25% 21% 25% 22% 24% 21% 5% 2% 23% 25% 27% Big Cola 12% 12% 13% 11% 14% 12% 10% 3% 1% 15% 11% 8% Pepsi Cola 4% 5% 2% 4% 3% 5% 3% 1% 0% 2% 4% 3% Others 8% 9% 5% 8% 6% 7% 22% 78% 93% 5% 8% 13% 2015 Coca-Cola 27% 28% 26% 28% 24% 28% 25% 8% 2% 27% 28% 23% Sprite 22% 21% 26% 22% 23% 22% 21% 6% 3% 24% 22% 20% Fanta 21% 21% 21% 20% 23% 21% 20% 6% 3% 17% 23% 23% Big Cola 16% 15% 18% 14% 19% 15% 15% 5% 1% 22% 13% 14% Pepsi Cola 4% 4% 2% 4% 4% 4% 4% 1% 0% 2% 4% 6% Others 10% 11% 8% 11% 8% 9% 15% 75% 91% 9% 10% 15% 2010 Coca-Cola 30% 31% 27% 29% 34% 23% 23% 6% 2% 29% 31% 41% Sprite 22% 21% 25% 22% 23% 16% 18% 4% 1% 23% 21% 21% Fanta 31% 30% 34% 31% 30% 25% 23% 5% 2% 33% 28% 35% Big Cola 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Pepsi Cola 4% 5% 2% 4% 3% 4% 2% 0% 0% 4% 5% 0% Others 13% 13% 12% 15% 9% 32% 33% 85% 94% 12% 15% 3% * Income is on monthly basis: Low
Figure 78: Consumption of bottled water—by area 2016 2015 2010 % of respondents Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java -in the past 3 months 88% 93% 77% 92% 77% 89% 93% 83% 95% 77% 82% 86% 74% 85% 76% -more in the next 12 months 62% 62% 62% 68% 49% 58% 62% 51% 67% 36% 51% 57% 39% 50% 55% Source: Credit Suisse Indonesia Consumer Survey 2017
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Figure 79: Consumption of bottled water—by age and income segment 2016 2015 2010 Age Income Age Income Age Income % of respondents 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High -in the past 3 months 91% 88% 86% 72% 80% 90% 96% 94% 89% 86% 80% 80% 93% 99% 86% 82% 78% 70% 77% 87% 95% -more in the next 12 months 63% 64% 61% 54% 61% 63% 78% 58% 58% 58% 54% 49% 60% 83% 52% 52% 50% 45% 46% 57% 75% * Income is on monthly basis: Low
The brand “Aqua” is also identical with bottled water in general. As such, it is not a surprise that the brand remains the most popular in our survey, with 53% of the respondents, up from 50% in the previous year, even though it is still lower than 2010's 56%. We believe that over the past seven years, more brands have been introduced in the market, such as Pure Life (by Nestlé), Le Minérale (by unlisted Mayora Group), and the recently launched Mandalika Eco Water (a joint venture of PT Wijaya Karya), among others. Aqua is known across the nation and consumed by all income segments; however, it is the most preferred by the older generation, which we believe is due to the familiarity of the name itself. The second preferred brand, Club, is manufactured by a joint-venture between Indofood CBP and Japan-based Asahi Group Holdings. The brand has consistently gained popularity after it was acquired. In 2010, only 10% of our respondents favoured the brand, and it improved to 13% in 2015 and to 15% in 2016. We think that the strong distribution that it has (through sister company, Indomarco, under Indofood Sukses) has helped widen the penetration of Club nationwide. Our survey indicated that Club is popular mostly outside the Java region, and mostly among the younger generation, and for the lower- and middle-income segments. Interestingly, VIT (by unlisted PT Tirta Investama) is the No. 3 preferred brand for bottled water. It is liked by 14% of the total respondents, up from 12% in the previous year. VIT is preferred in urban areas and in Java, across all generations, among the higher-income segment.
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Figure 80: Club increase in popularity in the bottled water, although Aqua remains the most popular Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Aqua 53% 50% 61% 50% 66% 54% 51% 54% 62% 53% 53% 52% Club 15% 15% 14% 13% 21% 15% 15% 14% 12% 15% 15% 13% Vit 14% 15% 11% 16% 6% 13% 14% 15% 14% 14% 14% 20% 2 Tang 4% 4% 4% 5% 2% 4% 4% 4% 3% 5% 3% 4% Ron 88 3% 3% 3% 4% 0% 3% 4% 3% 2% 4% 3% 1% Others 11% 12% 7% 12% 5% 10% 13% 10% 7% 9% 11% 10% 2015 Aqua 50% 51% 48% 46% 66% 50% 52% 46% 51% 47% 51% 62% Club 13% 14% 12% 13% 14% 14% 12% 14% 14% 12% 14% 10% Vit 12% 12% 12% 13% 10% 13% 11% 13% 13% 13% 12% 12% 2 Tang 5% 4% 5% 5% 2% 4% 5% 5% 5% 5% 4% 5% Ron 88 4% 4% 3% 5% 0% 4% 4% 3% 3% 6% 3% 0% Others 16% 14% 20% 18% 8% 15% 16% 18% 13% 17% 16% 12% 2010 Aqua 56% 56% 55% 52% 67% 56% 56% 57% 54% 58% 54% 58% Club 10% 10% 11% 9% 14% 10% 10% 12% 13% 9% 10% 19% Vit 10% 10% 10% 12% 5% 9% 11% 11% 11% 9% 11% 3% 2 Tang 7% 6% 9% 9% 3% 7% 8% 5% 7% 7% 7% 6% Ron 88 4% 4% 3% 5% 0% 4% 3% 4% 5% 5% 3% 0% Others 13% 13% 12% 14% 11% 14% 13% 11% 11% 11% 14% 13% * Income is on monthly basis: Low
Figure 81: Consumption of dairy products—by area 2016 2015 2010 % of respondents Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java -in the past 3 months 70% 75% 63% 70% 71% 76% 81% 67% 81% 63% 78% 82% 69% 78% 76% -more in the next 12 months 50% 50% 50% 52% 45% 49% 52% 44% 57% 32% 53% 58% 41% 50% 58% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 82: Consumption of dairy products—by age and income 2016 2015 2010 Age Income* Age Income* Age Income* % of respondents 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High -in the past 3 months 74% 73% 65% 56% 61% 74% 68% 79% 79% 68% 63% 68% 80% 72% 81% 80% 70% 58% 73% 82% 95% -more in the next 12 months 53% 51% 44% 43% 47% 51% 50% 51% 50% 44% 45% 42% 53% 56% 55% 55% 46% 36% 46% 59% 75% * Income is on monthly basis: Low
Frisian Flag, or better known locally as “Susu Bendera” (by unlisted PT Frisian Flag Indonesia) and Indomilk (by PT Indolakto, a susbsidiary of Indofood CBP) continue to be head-to-head as being the most favoured brands within the dairy product segment. Frisian
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Flag is favoured by 24% of the total respondents, up from 23% in 2016. We believe that respondents are mostly referring to its sweet condensed milk product, which is preferred by the low-income segment, across all ages. It remains popular in rural areas and outside Java. Indomilk is the second most favoured brand within the dairy product, with 22% of the total respondents, up slightly from 21% in 2015. In addition to sweet condensed milk, Indolakto also manufactures liquid milk and ice cream. The product is more popular in Java rather than outside Java, in rural areas, across all ages and mostly among the lower-income segment. The third most favoured brand is Susu Ultra (by PT Ultrajaya), which is still liked by 15% of the respondents. It is favoured in urban areas, in Java, across all ages, particularly among the younger generation, and across all income segments, particularly the middle income. Nestlé is ranked the fourth favoured brand with 9% respondents, up slightly from 8% in the previous year. It is liked in the urban area, outside Java, among the younger generation, and within the middle- and high-income segments. As the survey also includes margarine, Blue Band is the most popular brand in the category. It is owned by Unilever, and favoured by 7% of the total respondents, the middle-income segment, across all ages, and in Java.
Figure 83: Susu Bendera remains the most favoured product in the dairy products category Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Frisian Flag 24% 22% 32% 21% 36% 24% 24% 28% 24% 33% 22% 19% Indomilk 22% 21% 24% 23% 18% 22% 22% 20% 24% 25% 20% 20% Milk Ultra 15% 16% 12% 17% 8% 16% 15% 15% 12% 13% 16% 14% Nestlé 9% 10% 7% 9% 12% 10% 9% 8% 7% 8% 10% 13% Blue Band 7% 7% 6% 7% 4% 6% 6% 9% 8% 4% 8% 6% Others 23% 24% 19% 23% 22% 22% 23% 20% 26% 17% 24% 27% 2015 Frisian Flag 23% 21% 29% 20% 30% 22% 24% 24% 22% 22% 23% 27% Indomilk 21% 19% 28% 25% 12% 22% 20% 23% 26% 23% 22% 15% Milk Ultra 15% 16% 13% 17% 11% 17% 16% 13% 7% 15% 15% 14% Nestlé 8% 8% 7% 7% 10% 9% 8% 7% 5% 7% 8% 9% Blue Band 7% 8% 3% 7% 7% 7% 7% 8% 10% 6% 7% 8% Others 25% 27% 20% 23% 30% 24% 26% 24% 30% 26% 25% 27% 2010** Frisian Flag 34% 31% 44% 31% 42% 33% 34% 40% 38% 42% 30% 19% Indomilk 19% 17% 24% 21% 13% 19% 18% 20% 21% 21% 17% 13% Milk Ultra 12% 13% 9% 11% 12% 13% 12% 9% 8% 10% 12% 19% Nestlé 10% 11% 7% 11% 9% 11% 10% 9% 9% 8% 12% 13% Blue Band 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Others 25% 28% 17% 25% 24% 24% 26% 22% 25% 19% 29% 37% * Income is on monthly basis: Low
Cigarettes According to our survey, cigarette consumption in Indonesia declined to 51% of the total respondents surveyed, from 57% in the previous year, and 64% in 2010. This is in line with the industry volume as reported by Philip Morris International that volume was down 1% to 316 bn sticks in FY16.
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The decline in cigarette consumption, according to our survey, is mostly in Java (from 58% of respondents in 2015, to 50% in 2016), while outside Java it is stable. Those in rural areas saw the most decline (-7%) as compared to those in urban (-5%), which leads us to believe that the decline in consumption is due to: (1) affordability, as cigarette prices continue to rise and are getting more expensive, which is why the low-income segment saw a 4% decline, (2) shift towards a healthier lifestyle—a 6% decline for the middle- and higher-income segments, and a decline among the younger generation as well.
Figure 84: Consumption of cigarettes—by area 2016 2015 2010 % of respondents Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java -in the past 3 months 51% 51% 51% 50% 53% 57% 56% 58% 58% 53% 64% 65% 62% 67% 56% -more in the next 12 months 35% 33% 39% 35% 35% 34% 34% 34% 37% 25% 40% 43% 35% 41% 39% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 85: Consumption of cigarettes—by age and income level 2016 2015 2010 Age Income Age Income Age Income % of respondents 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High -in the past 3 months 49% 53% 51% 49% 52% 51% 52% 56% 61% 52% 48% 56% 57% 58% 67% 65% 59% 51% 62% 67% 40% -more in the next 12 months 33% 38% 32% 35% 36% 35% 38% 33% 35% 35% 28% 33% 33% 42% 43% 40% 38% 30% 38% 43% 35% * Income is on monthly basis: Low
For the first time, cigarette volumes in Indonesia declined in 2016, even though between 2010 and 2016, volumes still saw less than 4% CAGR. We believe that this is due to a combination of: (1) weaker purchasing power, (2) cigarette prices getting more expensive due to continuous hike in excise duty as well as GoI's guidance on the minimum retail price (MRP), and (3) changes in consumer lifestyle towards a healthier life.
Figure 86: Indonesia's cigarette volumes
340 12% Volume Yoy growth (RHS) 320 320 314 316 10% 308 CAGR FY10 - FY16: 3.6% 302 300 8%
280 280 6%
255 260 251 4% 247 238 240 2% 229
217 220 0%
200 -2% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Phillip Morris International Estimates, based on the market share data from Nielsen Retail Audit, internal sales data, other estimates, and publicly reported data by industry players
Indonesia’s cigarette market is unique as it is mostly kretek (clove) cigarettes. And clove is mostly grown in Indonesia, and Indonesia is the biggest user of clove in the world. Kretek cigarettes are made with a blend of tobacco, clove, and other flavours (sauces). An estimated 94% of cigarettes sold in Indonesia are kretek, while the remaining 6% are white cigarettes (or SPM=Sigaret Putih Mesin) that are mostly dominated by the multinational companies such as Philip Morris International and British American Tobacco.
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There are two types of kretek cigarettes, based on how they are made. One is hand-rolled (SKT=Sigaret Kretek Tangan), and the other is machine-made (SKM=Sigaret Kretek Mesin). The notable difference between the two is that SKM has filter, and SKT does not; therefore, SKT is stronger in flavour and has higher tar and nicotine content. There are two types of SKM: (1) SKM FF (full-flavoured), and (2) SKM LTLN (low-tar, low-nicotine); SKM LTLN has a milder taste—thus a lower tar and nicotine content than SKM FF. SKT accounts for around 18% of total cigarettes sold in Indonesia, whereas SKM FF around 33%, and SKM LTLN accounts for around 43% in 2016, according to Philip Morris International estimates. As SKT is more labour-intensive, GoI ruled that the tax is cheaper at Rp345/stick for tier 1 (large producers, producing more than 2 bn sticks annually), compared to SKM which is taxed at Rp530/stick for tier 1 (producing more than 3 bn sticks annually) or SPM at Rp555/stick. In addition, the GoI also charges an additional 10% regional tax on excise duty and 9.1% VAT (calculated based on banderole prices). GoI also regulates the minimum retail prices (MRP) whereas for tier 1 in the SKT category, the minimum is at Rp1,215/stick, Rp1,120/stick for SPM and Rp1,030 for SKT. Most of the cigarettes sold in Indonesia fell into the tier 1 category; thus, this is in line with our survey that the same brands continue to dominate the sector.
Figure 87: Indonesia excise tax regulation* Type Tier Annual output (sticks) MRP (Rp/stick) Tax/stick (Rp) Old New Price Old New Chg Old New Chg SKM I > 2 bn >3 bn Above Rp1,120 1,000 1,120 12.0% 480 530 10.4% (machine-made, kretek cigarettes) II < 2 bn <3 bn Above Rp820 740 820 10.8% 340 365 7.4% Below Rp655, max at Rp820 590-740 655-820 10.8%-11.0% 300 335 11.7% SPM I > 2 bn >3 bn Below at Rp1,030 930 1,030 10.8% 495 555 12.1% (machine-made, white cigarettes) II < 2 bn <3 bn Above Rp900 800 900 12.5% 305 330 8.2% Below Rp900, max at Rp585 505-800 585-900 12.5%-15.8% 255 290 13.7% I > 2 bn >2 bn Above Rp1,215 1,115 1,215 9.0% 320 345 7.8% Below Rp1,215, min at Rp860 775-1,115 860-1,215 9.0%-11.0% 245 265 8.2% SKT II 350 mn - 2 bn 500 mn - 2 bn Above Rp730 605 730 20.7% 155 165 6.5% (hand-rolled, kretek cigarettes) Rp470-Rp730 430-605 470-730 9.3%-20.7% 140 155 10.7% IIIA 50 mn - 350 mn 10 mn - 500 mn Min price at Rp465 400 465 16.3% 90 100 11.1% IIIB < 50 mn <10 mn Min price at Rp400 370 400 8.1% 80 80 0.0% * Based on Ministry of Finance Decree No. 147/PMK.010/2016, signed on 30 September 2016 and effective starting 1 January 2017 Source: Ministry of Finance
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Figure 88: Most cigarettes fall under the tier 1 category
160 149 150 9M15 9M16 140
120
100
80 billion sticks billion 60
40 27 24 15 16 20 13 12 11 10 7 7 1 1 2 2 2 2 4 3 1 1 - Tier I Tier II Unranked Tier I Tier II Unranked Tier I Tier II Tier IIIA Tier IIIB Unranked SKM SPM SKT
Source: Nielsen Retail Audit Results. Philip Morris International estimates
The excise tariff regulation is commonly revised once a year, even though it does not mean that the GoI cannot revise it during the course of the year. Excise tax revenue accounts for around 10% of the total tax revenue, whereas GoI is targeting Rp157 tn in 2017, or a 7% increase YoY. The majority of the excise tax revenue (98%) is derived from selling cigarettes, while alcoholic drinks account for the remaining 2% of the total.
Figure 90: Excise tax contributes around 10% to total Figure 89: Indonesia excise tax revenue tax revenue
180 35% 12.0% 11.7% Excise Tax (Rptn) YoY Chg (RHS)
160 30% 11.0% 11.0% 10.9% 10.5% 140 10.4% 10.3% 25% 10.2% 10.1% 120 10.0% 9.7% 20% 9.6% 9.4% 9.2% 9.1% 9.3% 100 9.1% 9.1% 15% 9.0% 8.8% 80
10% 60 8.0% 7.8%
5% 40 7.0% 20 0%
0 -5% 6.0%
2002 2004 2001 2003 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
2001 2012 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2013 2014 2015 2016
2015*
2017E 2015* 2017E * Number is adjusted for one-off items * Number is adjusted for one-off items Source: Ministry of Finance Source: Ministry of Finance Favouring machine-made full-flavoured (SKM FF) SKM FF favoured most According to our survey, SKM FF continues to be the most popular type of cigarette, which in the rural areas… is being favoured by 42% of the respondents, up from 35% in the previous year. SKM LTLN and SKT, on the other hand, are slightly lower at 30% and 17%, respectively. Surprisingly, SKM FF gained much in rural areas, where it is favoured by 48% of our respondents, up from 35% in the previous year, while SKM LTLN and SKT are each favoured by 19% of the respondents, down from 24% and 21%, in the previous year survey, respectively.
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…among the middle Interestingly, in the previous year, SKM FF was favoured by the older generation (56-65 aged population years old); however, in 2016, this shifted to those in the age group of 30-55 years. It is still mostly popular in Java with 45% of the respondents liking it, up from 38% in the previous year, even though preference outside Java has also increased to 35%, from 28% in the previous year. Largest gainer since If we compared to 2010, when we first did the survey, the largest gainer is SKM LTLN—it 2010 is SKM LTLN was favoured by only 22% of the respondents then and increased to 30% in 2016, followed by SKM FF, from 39% to 42%. The preference remains—SKM LTLN is preferred by those living in urban areas, outside Java, as well as among the younger generation and the high-income segment. The loser is SKT SKT, on the other hand, it the least favoured kretek cigarette; it was initially favoured by 28% of the respondents in 2010, and that plummeted to 17% in 2016. The shift in preference, we believe is due to the taste preference, as SKT has the highest tar and nicotine among kretek cigarettes. As such, it is no surprise that SKT is still preferred by the older generation, in rural areas and outside Java, mostly among the lower- and middle- income segments.
Figure 91: Cigarette consumption—by cigarette type Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 SKM FF 42% 38% 48% 45% 35% 36% 47% 45% 34% 45% 40% 41% SKM LTLN 30% 35% 19% 28% 34% 43% 26% 17% 9% 22% 32% 41% SKT 17% 16% 19% 21% 10% 9% 14% 31% 47% 18% 18% 10% White 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Others 11% 10% 14% 7% 21% 11% 13% 8% 10% 14% 11% 7% 2015 SKM FF 35% 35% 35% 38% 28% 33% 36% 34% 42% 35% 36% 28% SKM LTLN 31% 35% 24% 27% 42% 42% 29% 18% 5% 27% 33% 24% SKT 18% 17% 21% 23% 7% 10% 19% 33% 34% 20% 17% 26% White 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Others 16% 13% 20% 12% 24% 15% 16% 16% 19% 18% 14% 22% 2010 SKM FF 39% 38% 41% 40% 33% 37% 40% 41% 29% 40% 37% 25% SKM LTLN 22% 26% 14% 17% 36% 34% 17% 7% 10% 20% 25% 33% SKT 28% 27% 29% 33% 15% 20% 31% 34% 44% 27% 29% 17% White 4% 5% 2% 4% 3% 4% 4% 5% 0% 3% 5% 17% Others 7% 4% 14% 5% 13% 5% 7% 13% 17% 10% 4% 8% * Income is on monthly basis: Low
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Sampoerna A-Mild is Compared to the previous year’s survey, those in urban areas continue to prefer preferred in urban Sampoerna A-Mild the most with 24% of the respondents liking it, up from 19%. This is areas followed by Gudang Garam Surya (18%), Dji Sam Soe (12%), Djarum Super (11%), and Gudang Garam FIM (9%). In 2010, however, those in urban areas preferred Dji Sam Soe (20%), Sampoerna A-Mild (16%), Djarum Super (14%), Gudang Garam FIM (12%) and Gudang Garam Surya (10%). Gudang Garam Surya Meanwhile, those in rural areas prefer Gudang Garam Surya the most, with 27% of the is preferred in rural respondents, up from 13% in the previous year. This is followed by Sampoerna A-Mild (13% areas of respondents), Djarum Super (11%), Gudang Garam FIM (10%). The preference in rural areas differs from the previous year, whereby Sampoerna A-Mild was preferred then, followed by Djarum Super and Gudang Garam Surya with 13% respondents each, and Gudang Garam Filter and Dji Sam Soe with 9% respondents each. Compared to 2010, those in rural areas prefer either Gudang Garam Surya or Djarum Super, with 15% respondents each, followed by Dji Sam Soe (11%), Gudang Garam FIM (10%), Sampoerna A-Hijau (8%), while Sampoerna A-Mild is only favoured by 7% of the respondents. Two brands dominate The preference among brands in Java is more balanced than that outside Java. The gap in outside Java: between the two top brands and the rest is wide. Outside Java, Gudang Garam Surya is Gudang Garam Surya the most favoured brand, with 32% of the respondents, up from 25% in the previous and Sampoerna A-Mild survey, followed by Sampoerna A-Mild, with 24% of the respondents. The next favoured brands are Dji Sam Soe and Clas Mild, each favoured by 8% of the respondents. Meanwhile in Java, Sampoerna A-Mild is the most favoured brand, with 19% of the respondents, followed by Gudang Garam Surya and Djarum Super, with 16% each. Gudang Garam Filter is the fourth favoured brand with 12% of the respondents, and Dji Sam Soe is next with 11%. Compared to 2010, Gudang Garam Surya was the leading brand outside Java, with 24% of the respondents, followed by Sampoerna A-Mild (18%), Dji Sam Soe (14%), Clas Mild (12%), and Gudang Garam FIM (8%). While in Java, Djarum Super was the most favoured brand, with 20% of the respondents, followed by Dji Sam Soe (18%), Gudang Garam FIM (13%), Sampoerna A-Mild (12%), Gudang Garam Surya (7%), and Sampoerna A-Hijau (6%). Sampoerna A-Mild The younger generation (between 18 and 29 years) continues to favour Sampoerna A-Mild appeals to the younger (29% of the respondents). Next is Gudang Garam Surya with 18% of the respondents and generation Gudang Garam FIM with 11% of the respondents. This is followed by Djarum Super with 8% of the respondents, while Dji Sam Soe, Sampoerna U-Mild, and Clas Mild are favoured by 6% of the respondents each. The middle generation The middle generation (between 30 and 55 years) prefers Gudang Garam Surya, followed preference shifted to by Sampoerna A-Mild, Djarum Super, Dji Sam Soe, and Gudang Garam FIM. However, Gudang Garam Surya compared to 2010, this generation's preference has shifted, whereas in 2010, Dji Sam Soe was the most favoured, followed by Gudang Garam Filter, Gudang Garam Surya and Djarum Super. The older generation Meanwhile, the older generation (56 to 65 years) prefers Gudang Garam Surya and Dji Sam favoured Gudang Soe, with 21% of the respondents each. This is followed by Djarum Coklat with 17% of the Garam Surya and Dji respondents, and Sampoerna A-Hijau (9%), and Gudang Garam FIM (7%). Compared to Sam Soe 2010, where the preference for Dji Sam Soe among the older generation was much larger, at 25% of the respondents, followed by Djarum Super (13%) and Djarum Coklat (10%). Middle and high According to our survey, Sampoerna A-Mild (31% respondents) and Gudang Garam Surya income segments (28%), and Dji Sam Soe (10%) appeal to the high-income segment, as these brands are favoured Sampoerna A- pricier than the others. This is similar to the previous year’s survey and 2010's. The Mild, while the low- middle-income segment also favours Sampoerna A-Mild (23%) and Gudang Garam Surya income segment (21%), even though in 2010, Dji Sam Soe was the most favoured for this segment. The favoured Gudang low-income segment favoured Gudang Garam Surya (22% respondents), followed by Garam Surya Sampoerna A-Mild and Djarum Super, with 14% of the respondents each, while in 2010, Djarum Super was the most favoured for this segment.
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Figure 92: Gudang Garam Surya (SKM FF) is favoured, followed by Sampoerna A-Mild (SKM LTLN) Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Gudang Garam Surya 21% 18% 27% 16% 32% 18% 23% 25% 21% 22% 21% 28% Sampoerna A Mild 20% 24% 13% 19% 24% 29% 19% 11% 3% 14% 23% 31% Djarum Super 11% 11% 11% 16% 1% 8% 16% 11% 7% 14% 10% 7% Dji Sam Soe 10% 12% 6% 11% 8% 6% 8% 19% 21% 8% 10% 10% Gudang Garam Filter 9% 9% 10% 12% 2% 11% 8% 10% 7% 9% 9% 7% Sampoerna Hijau 4% 3% 7% 5% 2% 2% 5% 7% 9% 5% 4% 0% U Mild 4% 4% 3% 5% 1% 6% 4% 3% 0% 1% 5% 3% Clas Mild 3% 4% 1% 1% 8% 6% 2% 1% 3% 4% 3% 3% Djarum Coklat 3% 2% 6% 5% 0% 1% 2% 4% 17% 5% 3% 0% Others 13% 12% 16% 9% 22% 14% 14% 10% 12% 17% 12% 10% 2015 Gudang Garam Surya 15% 16% 13% 11% 25% 10% 17% 17% 25% 13% 16% 12% Sampoerna A Mild 18% 19% 16% 15% 24% 26% 16% 8% 3% 15% 20% 14% Djarum Super 10% 9% 13% 14% 1% 12% 11% 8% 3% 13% 9% 6% Dji Sam Soe 10% 11% 9% 13% 5% 6% 10% 18% 20% 10% 10% 12% Gudang Garam Filter 9% 9% 9% 12% 1% 11% 7% 9% 14% 9% 9% 10% Sampoerna Hijau 4% 3% 5% 5% 1% 2% 4% 8% 2% 4% 3% 10% U Mild 4% 4% 2% 5% 1% 3% 5% 4% 0% 1% 5% 2% Clas Mild 6% 6% 4% 2% 14% 7% 5% 4% 0% 6% 5% 6% Djarum Coklat 4% 3% 6% 5% 0% 2% 4% 7% 10% 6% 3% 4% Others 20% 19% 24% 18% 27% 21% 21% 18% 22% 23% 19% 24% 2010 Gudang Garam Surya 12% 10% 15% 7% 24% 9% 13% 15% 8% 14% 10% 25% Sampoerna A Mild 14% 16% 7% 12% 18% 22% 10% 2% 6% 11% 16% 25% Djarum Super 15% 14% 15% 20% 0% 17% 14% 10% 13% 16% 13% 0% Dji Sam Soe 17% 20% 11% 18% 14% 12% 20% 22% 25% 14% 21% 17% Gudang Garam Filter 12% 12% 10% 13% 8% 9% 13% 16% 8% 10% 14% 0% Sampoerna Hijau 5% 3% 8% 6% 1% 4% 6% 3% 4% 5% 4% 0% U Mild 1% 1% 0% 1% 2% 1% 0% 1% 0% 1% 1% 0% Clas Mild 4% 5% 3% 1% 12% 6% 3% 3% 4% 4% 4% 8% Djarum Coklat 5% 4% 9% 7% 0% 4% 5% 8% 10% 7% 4% 0% Others 16% 14% 21% 14% 22% 15% 15% 21% 21% 19% 13% 25% * Income is on monthly basis: Low
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Figure 93: The top three largest cigarette producers combined favoured by 85% of the total respondents Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 HM Sampoerna 39% 43% 29% 40% 35% 43% 35% 40% 33% 29% 42% 45% Gudang Garam 30% 27% 37% 29% 34% 29% 31% 34% 28% 31% 30% 34% Djarum 16% 14% 19% 22% 2% 10% 19% 16% 26% 21% 14% 7% Bentoel 1% 1% 1% 1% 0% 1% 1% 1% 0% 1% 0% 3% Others 15% 15% 14% 8% 29% 17% 14% 9% 14% 18% 14% 10% 2015 HM Sampoerna 36% 37% 33% 37% 31% 38% 35% 37% 25% 30% 38% 38% Gudang Garam 24% 25% 21% 23% 27% 21% 24% 26% 39% 22% 25% 22% Djarum 17% 15% 21% 23% 2% 17% 18% 15% 17% 21% 16% 12% Bentoel 2% 3% 1% 2% 1% 3% 2% 2% 0% 3% 2% 0% Others 21% 20% 24% 14% 38% 22% 21% 20% 19% 24% 19% 28% 2010 HM Sampoerna 40% 45% 29% 42% 37% 43% 41% 33% 35% 34% 47% 58% Gudang Garam 23% 23% 25% 20% 32% 19% 26% 31% 17% 24% 23% 25% Djarum 22% 20% 26% 29% 2% 23% 21% 19% 27% 24% 19% 0% Bentoel 3% 3% 2% 2% 5% 4% 2% 2% 0% 4% 2% 0% Others 11% 9% 18% 6% 24% 10% 10% 15% 21% 14% 8% 17% * Income is on monthly basis: Low
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Personal care products Key stocks Unilever Indonesia
■ While our survey indicates a slowdown in skin care spending, the company’s abundant portfolio might continue to provide growth. Kino Indonesia
■ Our survey indicates reduced spending on skin care, one of the company’s product portfolios. We see the decline is in Java, which is its focus market. Shift in spending For Indonesians, spending on personal care is relatively stable at around 5% of monthly spending, according to our survey. However, we see a shift in spending from cosmetics and skin care, to feminine hygiene and tissue. Spending on cosmetics and skin care is declining, from 62% of respondents in 2010, to 55% in 2015 and 52% in 2016. The decline is seen mostly among the younger and oldest generations, in the low-income segment, while that in the middle generation and the high-income segment is maintained. Nevertheless, the younger generation is the biggest spender in this category. On the other hand, spending for feminine hygiene and tissue is rising. For feminine hygiene, it was from 81% in 2010, to 82% in 2015 and 84% in 2016, and for tissue, it was from 50% in 2010 to 57% in 2015, and 56% in 2016. Tissue is also mostly consumed by the younger generation, and the high-income segment. For cosmetics and skin care, our survey indicates that the decline is seen in Java, while outside Java, it is improving. For feminine hygiene, Java is stable, while improvement is seen outside Java and in urban areas. And for tissue, Java is seen declining, and improving outside Java.
Figure 94: Shift in spending on cosmetics and skin care towards feminine hygiene and tissue 2016 2015 2010 % of respondents Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Cosmetics and skin care In the past 3 months 52% 54% 47% 50% 55% 55% 57% 50% 58% 47% 62% 65% 57% 63% 60% More in the next 12 months 35% 36% 34% 36% 35% 34% 35% 31% 38% 23% 37% 40% 32% 28% 34% Feminine hygiene In the past 3 months 84% 86% 80% 84% 82% 82% 82% 81% 84% 77% 81% 85% 73% 78% 74% More in the next 12 months 56% 57% 55% 59% 51% 48% 48% 49% 53% 37% 48% 53% 37% 35% 42% Tissue In the past 3 months 56% 63% 43% 59% 49% 57% 64% 45% 62% 46% 50% 57% 36% 57% 47% More in the next 12 months 39% 42% 34% 42% 34% 35% 40% 27% 42% 20% 27% 33% 16% 27% 29% Source: Credit Suisse Indonesia Consumer Survey 2017
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Figure 95: Younger generation is the largest spender 2016 2015 2010 Age Income Age Income Age Income % of respondents 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High Cosmetics and skin care In the past 3 months 58% 54% 44% 27% 45% 54% 52% 62% 55% 45% 38% 52% 57% 52% 70% 62% 50% 44% 60% 65% 63% More in the next 12 months 35% 40% 36% 31% 33% 36% 36% 34% 38% 36% 23% 29% 35% 43% 37% 45% 34% 31% 37% 37% 38% Feminine hygiene In the past 3 months 93% 93% 66% 33% 78% 86% 85% 93% 89% 62% 32% 75% 86% 74% 96% 86% 54% 24% 78% 85% 85% More in the next 12 months 62% 61% 48% 27% 54% 57% 50% 50% 55% 38% 22% 39% 51% 62% 56% 51% 30% 17% 45% 52% 46% Tissue In the past 3 months 61% 58% 49% 39% 44% 59% 79% 63% 58% 50% 40% 47% 63% 55% 53% 50% 49% 33% 37% 62% 79% More in the next 12 months 41% 41% 38% 29% 34% 40% 54% 38% 36% 29% 27% 28% 38% 48% 30% 26% 29% 18% 20% 35% 50% * Income is on monthly basis: Low
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Branded goods Key stocks Matahari Department Store
■ The company is a prime beneficiary of Indonesia's rising middle income segment. Its higher exposure to the region outside Java (40% of gross sales) is a catalyst for growth as the area tends to do well with the rise in commodity prices
■ Nevertheless, contrary to our survey findings, Matahari's private label booked 10% higher gross sales YoY in 4Q16, boosted by better performance of its No. 1 brand, Nevada. However, intensifying competition saw margins decline slightly during the period. Mitra Adiperkasa
■ The company has continuously shown improvement following the involvement of the private equity, CVC Capital Partners, in the active division and General Atlantic in the F&B division. Improvement in inventory days and margins are both ahead of schedule.
■ The company is also closing down department stores and cutting brands that are not performing to allocate more space for better performing specialty stores. We also expect the company to turn free cash flow positive by the end of the year. Ramayana Lestari Sentosa
■ The company is likely to face headwinds this year on the back of higher inflation and subsidy cuts by the government. Earnings growth is expected to be relatively soft with its inability to increase product pricing Fashion items are favoured Our survey indicates that there is a significant decline in purchases and expectations to purchase branded goods, in line with the decline in Indonesia’s aggregate income and savings. We believe the decline is mostly in rural areas, with the exception of fashion items. Of the five segments of branded goods (fashion, leather, sport shoes, jewellery, perfumes, watches) that we surveyed, fashion remains the type that people want to purchase the most with 48% of the respondents planning to purchase fashion items in the next three months. Note, however, this is lowered from 56% in 2015 and 77% in 2010. Interestingly, the respondents of our survey outside Java show positive momentum, which we believe is on the back of rising commodity prices. A high 52% of the respondents outside Java do have plans to purchase a fashion item, with 43% of the respondents outside Java having purchased a fashion item in the last three months. This is higher than last year, at 45% and 38% of the respondents, respectively. Of the other branded items, perfume is the other category that Indonesians purchased. 39% of the respondents had purchased perfume in the past 12 months, but it was down from 47% in the previous year’s survey, particularly in rural areas and in Java. Sport shoes also saw lower purchases, with 15% of the respondents, as compared to 23% in the previous year’s survey, and 31% in 2010. Plans on future purchases are also declining. This is mostly in rural areas, which saw a significant drop. Leather purchases saw a decline, with 13% of the respondents, from 17% in the previous year’s survey. The decline was mostly in rural areas and in Java.
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Jewellery also saw a decline, with 10% of the respondents having made purchases in the last twelve months. We believe that the investment factor associated with jewellery purchases might be one of the key reasons. There is a significant decline in rural areas and in Java. Watches also saw a significant decline to 9% of the respondents, from 19% in 2015 and 12% in 2010. Rural areas saw the most decline.
Figure 96: Perfume and fashion items are most favoured among the branded goods 2016 2015 2010 % of respondents Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Fashion Purchased in the last 3 months 38% 42% 31% 36% 43% 43% 49% 32% 45% 38% 63% 63% 62% 66% 55% Planning to purchase in next 12 months 48% 48% 48% 47% 52% 56% 61% 46% 60% 45% 77% 76% 79% 80% 72% Leather Purchased in the last 3 months 13% 16% 7% 12% 15% 17% 20% 12% 19% 12% n.i n.i n.i n.i n.i Planning to purchase in next 12 months 17% 18% 15% 14% 25% 22% 24% 19% 26% 13% n.i n.i n.i n.i n.i Sport shoes Purchased in the last 3 months 15% 18% 9% 14% 17% 23% 27% 15% 25% 18% 31% 34% 25% 36% 21% Planning to purchase in next 12 months 19% 22% 15% 19% 22% 29% 31% 23% 32% 22% 31% 35% 24% 36% 20% Jewellery Purchased in the last 12 months 10% 11% 8% 9% 11% 15% 18% 11% 17% 12% 16% 17% 14% 18% 11% Planning to purchase in next 12 months 16% 16% 17% 16% 19% 19% 21% 15% 19% 17% 18% 21% 12% 20% 13% Perfumes Purchased in the last 12 months 39% 44% 29% 40% 37% 47% 51% 39% 50% 40% 36% 41% 27% 41% 26% Planning to purchase in next 12 months 42% 47% 32% 42% 41% 50% 54% 43% 54% 41% 37% 42% 28% 42% 27% Watches Purchased in the last 12 months 9% 11% 6% 6% 16% 19% 22% 13% 18% 21% 12% 13% 9% 10% 15% Planning to purchase in next 12 months 11% 12% 10% 8% 18% 21% 23% 15% 20% 21% 11% 13% 8% 11% 12% Source: Credit Suisse Indonesia Consumer Survey 2017 Branded item spending continued to disappoint Indonesia continues to underperform while India continues to outpace the emerging market average. Furthermore, the spending outlook for 2017 also does not look exciting with only jewellery and perfumes coming close to the emerging market average.
Figure 97: Indonesia's historical spending on branded goods has underperformed EM average Figure 98: Indonesians preferred less branded items
50% 70% 66% Indonesia Emerging market average
45% 60%
40% 50% 47% 44% 39% 48% 37% 37% 35% 37% 37% 36% 40% 34% 42% 30% 31% 31% 30% 28% 25% 27% 17%
24% 20% 15% 20% 19% 21% 17% 16% 10% 15% 11% 2010 2011 2012 2014 2015 2016
Emerging markets average India Indonesia 0% Fashion Leather Sport shoes Jewelry Perfumes Watches Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Credit Suisse Indonesia Consumer Survey 2017
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Figure 99: Appetite for branded goods consumption declined in 2016
90% 2010 2015 2016 80% 77%
70%
60% 56% 50% 48% 50% 42% 40% 37% 31% 29% 30% 22% 21% 19% 18%19% 20% 17% 16% 11% 11% 10%
0% Fashion Perfumes Sport shoes Leather Jewellery Watches
Source: Credit Suisse Indonesia Consumer Survey 2017 High-income segment recovering The high-income segment is the only segment that showed improvement during our survey. This is in line with our thesis that the lower-income segment will face purchasing power erosion as the government cuts subsidies and inflation accelerates. The higher- income segment, however, has mostly participated in the tax amnesty and now whitened their money and should be ready to spend. The higher-income bracket should also be the first beneficiary of a commodity price rally as miners and planters tend to wait for a stable commodity price environment before hiring more workers to increase production.
Figure 100: The high-income segment is the only segment recovering in branded goods consumption 60% 2010 2015 2016 53%
50% 46%
38% 40% 38% 37% 35% 36% 34% 35% 35% 31% 29% 29% 30% 29% 29% 28% 30% 26% 27% 26% 27% 26% 24% 24% 24% 23% 23% 22% 20% 20% 17%
10%
0% Bought Will buy Bought Will buy Bought Will buy Bought Will buy Bought Will buy Java Ex Java Low Mid High Cities Income
Source: Credit Suisse Indonesia Consumer Survey 2017 Preference tilting towards foreign products with the passage of time… There is a clear shift in preference from domestic items to foreign items in the high income bracket. Take the example of fashion, 29% of the respondents preferred local products in 2010 but only 25% preferred local products in 2016 as there are many new foreign brands
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(take the example of Uniqlo, HnM) at reasonably affordable prices. Sport shoes also tell the same story. There were only 4% of the respondents who preferred local branded sport shoes in 2016, down from 8% in 2010, with many new foreign brands entering the market (such as sport shoes brand: New Balance).
Figure 101: Indonesians' preference for foreign brands 2010 2015 2016 % plan to purchase Low Mid High Low Mid High Low Mid High Fashion domestic brand 11% 20% 29% 28% 28% 31% 25% 32% 25% foreign brand 89% 80% 71% 72% 72% 69% 75% 68% 75% Leather domestic brand n.i n.i n.i 30% 25% 38% 31% 40% 53% foreign brand n.i n.i n.i 70% 75% 63% 69% 60% 47% Sport shoes domestic brand 9% 8% 8% 8% 7% 11% 6% 18% 4% foreign brand 91% 92% 92% 92% 93% 89% 94% 82% 96% Jewellery domestic brand 0% 0% 0% 2% 3% 8% 11% 14% 18% foreign brand 100% 100% 100% 98% 97% 92% 89% 86% 82% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 102: Percentage of people preferring unbranded goods
2010 2011 2012 2013 2014 2015 2016 90%
80%
70%
60%
50%
40%
30%
20%
10%
0% Fashion apparels Leather goods Sportshoes Jewelry Watches
Source: Credit Suisse Indonesia Consumer Survey 2017 Lower income people's foreign brand awareness increases over time We have seen from our survey that people in the lower income bracket developed better foreign brand awareness over time, except for jewellery where people in general are inclined to buy domestic products over time. The arrival of foreign fashion brands, such as Uniqlo and HnM, has increased the brand awareness of our respondents, especially in the lower-income segment, where 75% of them answered they would prefer to purchase a foreign fashion brand. This number was up from 72% in 2015 and was at a high of 89% in 2010.
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Figure 103: We observe increased awareness in foreign brands 2010 2015 2016 % plans to purchase Low Mid High Low Mid High Low Mid High Fashion -domestic brand 11% 20% 29% 28% 28% 31% 25% 32% 25% -foreign brand 89% 80% 71% 72% 72% 69% 75% 68% 75% Leather -domestic brand n.i n.i n.i 30% 25% 38% 31% 40% 53% -foreign brand n.i n.i n.i 70% 75% 63% 69% 60% 47% Sport shoes -domestic brand 9% 8% 8% 8% 7% 11% 6% 18% 4% -foreign brand 91% 92% 92% 92% 93% 89% 94% 82% 96% Jewelry -domestic brand 0% 0% 0% 2% 3% 8% 11% 14% 18% -foreign brand 100% 100% 100% 98% 97% 92% 89% 86% 82% * Income is on monthly basis: Low
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Figure 104: Which brand of fashion goods will you most likely purchase in the next 12 months? Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Levi's 11% 10% 14% 9% 15% 14% 10% 5% 6% 13% 9% 15% Nevada 7% 8% 4% 6% 8% 7% 7% 5% 2% 4% 7% 18% Zara 5% 7% 2% 6% 5% 5% 6% 3% 9% 6% 5% 8% Gucci 5% 6% 4% 5% 6% 5% 6% 4% 9% 5% 6% 3% Calvin Klein 5% 5% 3% 4% 6% 5% 4% 5% 9% 4% 5% 8% Unbranded 12% 10% 16% 15% 5% 10% 13% 12% 17% 14% 11% 3% Others 55% 55% 57% 55% 56% 54% 55% 65% 49% 54% 57% 44% 2015 Levi's 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Nevada 27% 26% 28% 28% 22% 25% 28% 27% 29% 27% 27% 26% Zara 5% 6% 5% 6% 4% 6% 5% 6% 2% 5% 6% 6% Gucci 4% 5% 4% 4% 6% 5% 5% 2% 4% 4% 4% 8% Calvin Klein 4% 5% 2% 4% 5% 4% 5% 3% 1% 5% 4% 0% Unbranded 20% 17% 31% 21% 17% 17% 21% 26% 29% 21% 20% 18% Others 39% 42% 30% 37% 45% 43% 36% 37% 34% 39% 39% 43% 2010 Levi's 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Nevada 10% 12% 7% 8% 15% 13% 9% 7% 3% 7% 13% 9% Zara 1% 1% 0% 1% 1% 1% 1% 1% 0% 0% 1% 3% Gucci 4% 4% 2% 4% 3% 4% 3% 3% 8% 3% 4% 9% Calvin Klein 2% 3% 1% 2% 3% 3% 2% 2% 3% 2% 3% 0% Unbranded 47% 40% 63% 53% 35% 40% 51% 52% 65% 56% 39% 23% Others 35% 40% 27% 32% 43% 38% 35% 35% 22% 30% 40% 57% * Income is on monthly basis: Low
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Figure 105: In your opinion, are any of the following fashion goods brands worth paying more for? Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Levi's 9% 8% 12% 8% 13% 10% 7% 10% 12% 11% 9% 9% Nevada 4% 5% 3% 4% 5% 4% 5% 5% 3% 4% 4% 9% Zara 5% 6% 2% 5% 3% 6% 4% 3% 7% 5% 5% 3% Gucci 8% 9% 7% 8% 8% 7% 9% 12% 3% 8% 8% 9% Calvin Klein 7% 8% 6% 7% 10% 8% 7% 6% 9% 5% 8% 13% Unbranded 3% 2% 5% 4% 1% 3% 3% 5% 2% 6% 2% 3% Others 63% 62% 64% 64% 60% 62% 65% 59% 64% 61% 64% 56% 2015 Levi's 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Nevada 21% 21% 22% 22% 17% 20% 21% 24% 23% 19% 22% 17% Zara 4% 4% 5% 5% 3% 6% 3% 3% 3% 5% 5% 2% Gucci 6% 6% 7% 7% 5% 6% 7% 6% 4% 6% 6% 9% Calvin Klein 6% 6% 5% 6% 6% 7% 5% 4% 4% 6% 6% 4% Unbranded 5% 3% 12% 5% 6% 4% 5% 9% 7% 6% 4% 5% Others 57% 60% 48% 56% 63% 56% 59% 54% 57% 58% 56% 62% 2010 Levi's 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Nevada 9% 9% 8% 8% 12% 10% 9% 8% 4% 8% 10% 7% Zara 1% 1% 0% 1% 1% 1% 1% 1% 0% 0% 1% 2% Gucci 6% 6% 6% 5% 7% 6% 6% 6% 2% 5% 6% 12% Calvin Klein 5% 6% 3% 4% 6% 6% 4% 2% 4% 4% 6% 5% Unbranded 9% 7% 14% 13% 3% 8% 10% 10% 11% 15% 5% 0% Others 70% 71% 68% 69% 72% 69% 70% 73% 79% 67% 73% 73% * Income is on monthly basis: Low
Indonesia Consumer Survey 2017 59 27 March 2017
Figure 106: Which brand of sport shoes will you most likely purchase in the next 12 months? Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Adidas 30% 27% 38% 31% 27% 31% 27% 32% 60% 35% 28% 31% Nike 18% 20% 14% 20% 15% 22% 16% 13% 0% 15% 19% 19% Converse 8% 9% 4% 9% 6% 10% 6% 8% 0% 15% 6% 8% Bata 7% 8% 6% 9% 5% 8% 7% 6% 20% 7% 7% 12% Reebok 4% 4% 3% 3% 5% 4% 4% 2% 0% 4% 3% 8% Unbranded 2% 1% 4% 2% 1% 0% 4% 0% 0% 3% 2% 0% Others 31% 31% 31% 26% 42% 25% 36% 40% 20% 21% 35% 23% 2015 Adidas 24% 24% 25% 24% 24% 26% 24% 19% 22% 24% 24% 30% Nike 17% 18% 14% 18% 13% 19% 16% 15% 11% 17% 18% 7% Converse 3% 4% 0% 3% 2% 4% 2% 0% 0% 1% 3% 4% Bata 11% 11% 13% 11% 12% 8% 12% 16% 26% 13% 11% 4% Reebok 6% 6% 7% 7% 5% 7% 6% 6% 7% 4% 7% 11% Unbranded 9% 6% 17% 8% 11% 7% 11% 10% 4% 10% 9% 7% Others 29% 31% 24% 28% 34% 29% 29% 34% 30% 31% 28% 37% 2010 Adidas 17% 18% 14% 15% 21% 16% 17% 18% 14% 19% 14% 50% Nike 9% 10% 6% 10% 7% 12% 6% 9% 7% 6% 11% 8% Converse 3% 3% 2% 2% 4% 6% 0% 0% 0% 4% 2% 8% Bata 10% 12% 6% 9% 16% 7% 12% 15% 21% 12% 10% 0% Reebok 4% 4% 2% 3% 4% 5% 2% 5% 0% 2% 5% 0% Unbranded 30% 25% 43% 32% 20% 27% 35% 21% 36% 31% 28% 8% Others 28% 28% 26% 28% 27% 27% 27% 32% 21% 27% 30% 25% * Income is on monthly basis: Low
Indonesia Consumer Survey 2017 60 27 March 2017
Figure 107: In your opinion, are any of the following sport shoes brands worth paying more for? Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Adidas 30% 28% 37% 29% 33% 30% 29% 37% 38% 37% 28% 34% Nike 20% 21% 17% 21% 18% 22% 20% 16% 13% 20% 19% 28% Reebok 7% 7% 7% 8% 6% 6% 10% 5% 0% 4% 9% 3% Converse 7% 8% 3% 8% 5% 8% 5% 10% 0% 6% 7% 7% Bata 4% 3% 4% 4% 4% 4% 3% 2% 25% 5% 3% 7% Unbranded 1% 1% 1% 1% 0% 0% 2% 0% 0% 1% 1% 0% Others 31% 31% 30% 30% 34% 30% 32% 32% 25% 26% 34% 21% 2015 Adidas 20% 20% 22% 20% 20% 19% 23% 18% 18% 15% 23% 24% Nike 17% 18% 14% 18% 15% 17% 18% 14% 21% 12% 20% 20% Reebok 9% 9% 8% 9% 7% 7% 9% 11% 15% 8% 9% 12% Converse 4% 5% 1% 4% 1% 6% 3% 1% 0% 3% 4% 6% Bata 7% 6% 10% 7% 7% 6% 6% 8% 15% 8% 6% 6% Unbranded 3% 1% 8% 2% 6% 1% 4% 6% 0% 3% 3% 2% Others 41% 41% 38% 40% 45% 44% 38% 41% 30% 52% 36% 31% 2010 Adidas 17% 19% 13% 17% 17% 18% 18% 16% 0% 15% 19% 26% Nike 8% 8% 8% 7% 10% 10% 7% 5% 0% 5% 10% 9% Reebok 7% 7% 5% 6% 10% 8% 6% 6% 0% 4% 9% 4% Converse 4% 4% 4% 3% 6% 6% 2% 5% 0% 4% 4% 9% Bata 5% 5% 6% 4% 6% 4% 5% 8% 8% 5% 5% 0% Unbranded 7% 5% 12% 9% 1% 6% 6% 14% 17% 11% 4% 4% Others 52% 52% 52% 54% 49% 48% 57% 46% 75% 57% 49% 48% *Income is on monthly basis: Low
Indonesia Consumer Survey 2017 61 27 March 2017
Internet and e-commerce According to our survey, Indonesia's internet penetration has improved to 52% of the respondents compared to merely 48% in 2015 and 14% in 2010. The significant improvement of internet penetration is mainly attributable to smartphone devices, which currently 91% of the respondents are dependent on when it comes to internet access. Smartphones offer a cheaper device option than personal computers, which have significantly declined to 6% as a means to access the internet. Despite having the highest internet penetration growth among our respondents last year (which also may be attributable to the lower base), Indonesia is still behind the curve when it comes to access to internet among the emerging markets. We have plotted population, internet penetration and internet penetration growth to see the correlation between population and internet access. Countries with smaller population tend to lead in terms of internet access among its respondents. However, we can see that Indonesia is still behind India and China; both countries have around 1.3 bn population each, which translates into around five times Indonesia's population. We believe there is still plenty of room for improvement in Indonesia's internet access.
Figure 108: Indonesia's internet access has been Figure 109: However, it is still the lowest among the rising emerging markets
60% 20% 54% 51% Indonesia 50% 15% 40% India 40% South Africa Brazil 10% 29% Mexico 30% Turkey 5%
Internet Internet penetration Russia 20% 15% Internet penetration growth 14% China 9% 10% 0% 45% 55% 65% 75% 85% 95%
0% -5% 2010 2011 2012 2013 2014 2015 2016 Internet penetration Source: Credit Suisse Indonesia Consumer Survey 2017 Size of the bubble represents each country's size of population relative to one another Size : Represents countries with population over 250 million as of 2016 Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 62 27 March 2017
Figure 110: Internet accessibility in 2016 Figure 111: Internet accessibility in 2013 Tablet Computer Tablet 3% 6% 4% Computer 27%
Mobilephone Mobilephone or or Smartphone Smartphone 69% 91%
Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Credit Suisse Indonesia Consumer Survey 2017
Asked about what internet services they used in the last six months, the majority responded social network (39%, the highest), followed by instant messaging (25%). A newly introduced and prominent service introduced in our survey this year is music and videos, which accounts for 15% of the internet usage, according to our survey. Instant messaging slightly improved in the past year, as it is being accessed more through the mobile phone internet. It is worth mentioning that the popularity of internet phones (calling phones using social media, or communication platforms such as WhatsApp and Line) has also driven the use of instant messaging. Online shopping among our respondents has remained relatively low at 4%, more than 50% decline from 2015's 11%. This also translates into one of the lowest shopping usage among the emerging markets.
Indonesia Consumer Survey 2017 63 27 March 2017
Figure 112: What services have you used in the last six months? Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Social network 39% 38% 45% 39% 41% 38% 42% 36% 44% 38% 40% 27% Instant messaging 25% 25% 25% 28% 19% 24% 27% 27% 34% 24% 26% 19% Music & videos 15% 15% 15% 14% 16% 16% 13% 14% 9% 16% 14% 22% Gaming 13% 13% 11% 12% 14% 14% 11% 11% 3% 16% 12% 15% Shopping 4% 5% 2% 4% 6% 4% 3% 5% 3% 4% 4% 8% Banking 2% 2% 1% 2% 2% 1% 3% 4% 6% 1% 2% 3% Travel 2% 2% 1% 1% 3% 1% 2% 2% 0% 1% 1% 6% Other 0% 0% 0% 0% 0% 0% 0% 2% 0% 0% 0% 0% 2015 Social network 39% 37% 45% 39% 39% 40% 38% 40% 28% 35% 44% 39% Instant messaging 24% 24% 24% 25% 22% 24% 24% 27% 22% 20% 30% 24% Music & videos 0% 0% 0% 0% 0% 0% 0% 0% 0% 18% 12% 0% Gaming 17% 17% 15% 16% 18% 18% 15% 12% 11% 14% 8% 17% Shopping 11% 12% 8% 11% 12% 11% 12% 7% 17% 6% 4% 11% Banking 4% 4% 4% 5% 3% 3% 5% 9% 17% 4% 1% 4% Travel 4% 4% 4% 3% 5% 3% 5% 3% 6% 3% 2% 4% Other 1% 1% 1% 1% 1% 0% 1% 1% 0% 1% 0% 1% 2010 Social network 47% 46% 48% 48% 43% 49% 40% 44% 100% 44% 49% 59% Instant messaging 25% 25% 29% 24% 27% 23% 32% 22% 0% 18% 21% 19% Music & videos 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Gaming 19% 19% 21% 17% 24% 21% 17% 0% 0% 17% 17% 14% Shopping 4% 4% 2% 4% 3% 4% 3% 0% 0% 8% 5% 2% Banking 3% 3% 0% 3% 2% 2% 5% 11% 0% 5% 4% 3% Travel 3% 3% 0% 3% 2% 2% 3% 22% 0% 6% 2% 2% Other 0% 0% 0% 0% 0% 0% 0% 0% 0% 1% 1% 2% * Income is on monthly basis: Low
According to data provided by Investment Relation Unit of the Republic of Indonesia (IRU), Indonesia has only 27% of its population as active online shoppers, the lowest in the ASEAN region according to IRU, with the market leader being Singapore. On the other hand, online retail spending accounted for only 2% of the total retail spending in 2016. Indonesia, however, has remained a market leader when it comes to social media and instant messaging usage among the emerging markets. In retrospect, it is one of the lowest when it comes to online services such as banking, travelling, and shopping.
Indonesia Consumer Survey 2017 64 27 March 2017
Figure 113: Total active online shoppers over total Figure 114: Online retail spending over total retail population spending
70% 25%
60% 58% 20% 20% 50% 50% 44% 15% 40% 38% 12% 29% 30% 27% 10% 9% 8% 20%
5%
10% 2% 3%
0% 0% Indonesia Philippines Vietnam Thailand Malaysia Singapore Indonesia Philippines Vietnam Thailand Malaysia Singapore
Source: Investor Relations Unit - Republic of Indonesia Source: Investor Relations Unit - Republic of Indonesia
Figure 115: Indonesia leads among the emerging markets in terms of social media usage but lags in banking, travel, and shopping
45
39 40
35 33
30 27 26 25 25 24 25 22 21 21 21 19 19 19 20 18 18 18 17 17 15 15 14 14 15 13 12 11 11 11 11 11 10 10 10 9 10 8 8 9 7 7 6 6 6 5 4 4 5 3 3 2 2 2 1 1 1 - 0 0 - Social network Music & videos Instant messaging Gaming Banking Shopping Travel Other
Indonesia Mexico Russia Brazil Turkey India China
Source: Credit Suisse Indonesia Consumer Survey 2017
In general, 68% of our respondents believe that their internet purchase will remain the same. While the proportion of respondents who think that they will be spending more on the internet increased to 20% from 12% in 2010, it is still a decline from 2015's 23%. Nevertheless, we believe that the increase in expected internet spending is on the back of the emergence of more e-commerce players that have been doing aggressive advertising and promotions in recent years. However, we believe that overall coverage of internet will improve as we also see an upward trend for internet purchase from regions outside Java (32% from 28% in 2016) and the younger population (25% from 14% in 2010).
Indonesia Consumer Survey 2017 65 27 March 2017
Figure 116: How do you think your internet purchase is going to be in the next six months? Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 More 20% 21% 17% 16% 32% 25% 15% 16% 5% 18% 20% 28% Same 68% 66% 74% 70% 62% 63% 71% 75% 89% 73% 67% 63% Less 12% 13% 9% 14% 6% 12% 13% 9% 5% 9% 13% 9% 2015 More 23% 24% 21% 22% 28% 22% 25% 24% 33% 25% 23% 26% Same 68% 67% 71% 69% 65% 69% 67% 71% 33% 66% 68% 72% Less 9% 9% 8% 9% 7% 9% 8% 6% 33% 9% 9% 2% 2010 More 12% 13% 4% 8% 19% 14% 6% 0% 0% 11% 5% 17% Same 79% 80% 73% 83% 69% 79% 78% 83% 100% 81% 86% 83% Less 10% 8% 23% 8% 13% 7% 16% 17% 0% 9% 9% 0% * Income is on monthly basis: Low
Lazada, OLX, and Tokopedia remain the most widely used websites, collectively representing 57% of the total website usage. Lazada stands at the top for website use, overtaking OLX which was tied last year at 23%. Lippo Group's MatahariMall remains stagnant at 1% of the share, which is the same as last year. Lazada has a strong presence in the rural areas with 44% of the respondents saying that they have used the website in the last 12 months. This is a significant gap from the close second being OLX at 11% usage in the rural area. In terms of income, people of low and high income are about the same when it comes to Lazada and OLX. However, people in the middle income bracket prefer Lazada more at 31% compared to OLX at 15%.
Figure 117: Have you used any of the following e-commerce websites in the last 12 months? Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High Lazada 28% 27% 44% 29% 27% 30% 25% 29% 33% 25% 31% 21% OLX 17% 17% 11% 15% 20% 18% 18% 14% 0% 22% 15% 21% Tokopedia 12% 13% 0% 13% 11% 12% 12% 14% 0% 6% 14% 13% Bukalapak 11% 11% 11% 12% 11% 9% 14% 14% 33% 13% 11% 13% Traveloka 8% 9% 0% 6% 13% 8% 10% 7% 0% 3% 6% 21% Elevenia 8% 7% 11% 10% 4% 7% 10% 7% 0% 13% 6% 8% Zalora 7% 7% 11% 8% 5% 8% 6% 0% 33% 6% 9% 0% Others 9% 9% 11% 9% 9% 10% 6% 14% 0% 13% 9% 4% BliBli 3% 3% 0% 4% 2% 1% 6% 7% 0% 6% 3% 0% BerryBenka 1% 1% 0% 2% 0% 2% 0% 0% 0% 0% 1% 4% MatahariMall 1% 1% 0% 0% 2% 1% 0% 0% 0% 0% 1% 0% Tiket.com 1% 1% 0% 1% 0% 1% 0% 0% 0% 0% 1% 0% * Income is on monthly basis: Low
According to our survey, customers still largely emphasise on website trustworthiness while conducting their online purchase. This is especially true for people living in rural areas, as well as for people in the high-income bracket. Low cost has also been an increasing concern, with 28% of our respondents saying that they look at low costs when it comes to online shopping, from last year's 14%. It is also worth mentioning that our survey suggests that senior citizens are absolutely concerned about low cost when it comes to online purchases.
Indonesia Consumer Survey 2017 66 27 March 2017
Figure 118: What are the reasons you chose the mentioned websites? Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High Trustworthiness 32% 30% 50% 35% 27% 32% 33% 33% 0% 31% 29% 40% Low cost 28% 29% 17% 26% 31% 27% 24% 33% 100% 31% 29% 20% Comprehensive products listings 19% 20% 17% 22% 15% 18% 24% 17% 0% 31% 19% 10% Well-known brand 11% 12% 0% 7% 19% 11% 14% 0% 0% 0% 13% 20% Friends referral 7% 6% 17% 9% 4% 7% 5% 17% 0% 0% 8% 10% Others 3% 3% 0% 2% 4% 5% 0% 0% 0% 8% 2% 0% * Income is on monthly basis: Low
Figure 119: According to our respondents, low cost and comprehensive product listing remains their top concern when it comes to online shopping
Low cost Comprehensive products listings Well known brand Friends referral Trustworthiness Others 100% 4% 1% 2% 3% 2% 2% 8% 90% 14% 17% 17% 21% 19% 23% 4% 19% 80% 1% 7% 7% 5% 12% 7% 70% 3% 7% 5% 12% 11% 5% 60% 18% 13% 12% 41% 50% 37% 28% 40% 40% 28%
30% 49% 51% 20% 32% 32% 32% 27% 10% 23%
0% Brazil China India Indonesia Russia Turkey Mexico
Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 67 27 March 2017
Mobile phones Key stocks PT Telekomunikasi Indonesia (Telkom)
■ Rising smartphone and fixed broadband data use drove consolidated EBITDA and net profit growth of 15.7% YoY and 24.9% YoY across FY16 respectively. While Telkom is a 'consensus buy', it is slightly expensive versus regional peers. The company has outperformed the regional telecommunication sector over the last 12 months.
■ It remains the only liquid (large cap) way to invest in the successful monetisation of Indonesia's data boom. XL Axiata
■ Over the last 18 months, the company has made significant progress on strengthening its balance sheet (through both a rights issue and a tower sale) and reducing its heavy USD-denominated debt exposure. Furthermore, a return to top-line growth means that XL is now finally emerging from investment phase. The world at your fingertips According to our survey, while the owners of mobile phones in Indonesia slightly declines from 86% to 84% from 2015 to 2016, the number of smartphone owners increased to 64% from 55% last year. This indicates that more than half of the mobile phone owners in our survey are using smartphones, or 53.7% (compared to 47.3% in 2015) of the total respondents are on smartphones instead of their outdated mobile phones. We stand by our belief that the rising smartphone penetration is due to the increasing affordability of smartphones due to the influx of cheap smartphones from China and Taiwan. Regardless of Indonesia's economic cycle, the appetite for smartphones has constantly remained strong for Indonesian consumers. There are still 30% of our respondents who are looking to upgrade into a smartphone despite the already high smartphone penetration.
Indonesia Consumer Survey 2017 68 27 March 2017
Figure 120: Indonesians’ ownership of smartphones continues to rise Total Area Region Age Income % of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High 2016 Mobile phone ownership 84% 91% 70% 82% 86% 93% 86% 70% 61% 74% 87% 95% Smartphone ownership 64% 70% 50% 70% 51% 76% 63% 46% 35% 53% 67% 75% Bought mobile phone in last 12 months? 37% 39% 33% 38% 37% 43% 38% 25% 30% 38% 36% 45% Will upgrade to smartphone? 30% 30% 30% 30% 30% 42% 35% 19% 14% 30% 30% 53% Access to internet using mobile phone 48% 57% 30% 52% 38% 68% 46% 23% 14% 35% 51% 60% 2015 Mobile phone ownership 86% 91% 77% 85% 88% 95% 87% 79% 58% 80% 90% 80% Smartphone ownership 55% 61% 42% 59% 45% 73% 52% 25% 25% 44% 58% 70% Bought mobile phone in last 12 months? 43% 44% 40% 42% 44% 50% 40% 39% 23% 40% 43% 46% Will upgrade to smartphone? 61% 53% 72% 65% 52% 70% 61% 58% 31% 55% 64% 64% Access to internet using mobile phone 40% 46% 29% 43% 35% 65% 34% 13% 4% 30% 45% 46% 2010 Mobile phone ownership 67% 76% 51% 67% 68% 80% 66% 54% 35% 56% 79% 91% Smartphone ownership 13% 14% 9% 12% 14% 14% 13% 6% 14% 9% 15% 38% Bought mobile phone in last 12 months? 44% 46% 40% 46% 40% 47% 43% 45% 33% 41% 45% 76% Will upgrade to smartphone? 37% 39% 31% 37% 38% 48% 28% 28% 13% 32% 42% 38% Access to internet using mobile phone 14% 18% 5% 13% 14% 26% 8% 3% 1% 0% 0% 0% * Income is on monthly basis: Low
A common theme that we see from our survey, along with the increased internet penetration, is the increase in internet access through smartphones. The relationship tells us that people are starting to prefer convenience and mobility when it comes to telecommunications and thus moving away from stationary devices, such as personal computers, to more practical devices such as tablets and smartphones. Our survey suggests that people have started preferring more mobile electronics such as mobile phones, tablets, and notebook personal computers for quite some time now.
Figure 121: Increasing internet access through smartphones
Internet access with Smartphone Internet penetration Smartphone ownership 70% 64%
60% 55%
50%
40% 40%
30% 24% 22%
20% 17% 13%
10%
0% 2010 2011 2012 2013 2014 2015 2016
Source: Credit Suisse Indonesia Consumer Survey 2017
Interestingly, another strong trend that is picking up is the strong demand for smartphones. Smartphone purchases rose from 6% in 2010 to 41% in 2016. Despite the high ownership of smartphones, 46% of the respondents we surveyed said that they would likely purchase smartphones in the next 12 months.
Indonesia Consumer Survey 2017 69 27 March 2017
Samsung continues to dominate the market Samsung remains the preferred brand when it comes to mobile phones. Our survey shows that 80% of the respondents preferred Samsung. This is a significant increase for Samsung compared to merely 2% in 2010. In our view, due to Samsung's array of product offerings from the low to high end, it continues to be favoured across Indonesia by different age and income groups. To top it up, Samsung is the preferred brand across emerging markets, with the exception of China where only 12% of the respondents preferred the brand. On the other hand, Nokia which started with 70% in 2010, is now only left with 7% in 2016. This displays how dynamic the electronics market is, especially for handsets.
Figure 122: Samsung still dominates Total Area Region Age Income % of respondents Urban Rural Java Ex-Java 18-29 30-45 46-55 56-65 Low Mid High 2016 Samsung 80% 85% 74% 81% 78% 87% 80% 71% 67% 78% 81% 78% Nokia 7% 4% 11% 7% 7% 0% 6% 13% 33% 7% 7% 11% Xiaomi 2% 3% 1% 2% 1% 1% 3% 0% 0% 1% 2% 0% Apple 1% 2% 1% 1% 1% 1% 1% 3% 0% 0% 2% 0% Cross 1% 1% 2% 2% 0% 1% 1% 3% 0% 1% 2% 0% Asus 1% 1% 1% 1% 0% 3% 0% 0% 0% 1% 1% 0% Lenovo 1% 0% 2% 1% 1% 3% 0% 0% 0% 1% 1% 0% Others 6% 5% 8% 4% 11% 3% 8% 10% 0% 10% 4% 11% 2015 Samsung 50% 51% 46% 49% 50% 52% 50% 46% 33% 49% 49% 64% Nokia 13% 11% 18% 10% 21% 4% 17% 24% 42% 19% 11% 9% Xiaomi 2% 2% 2% 2% 0% 2% 1% 3% 0% 1% 2% 0% Apple 7% 8% 3% 6% 9% 10% 5% 1% 3% 3% 8% 15% Cross 3% 2% 5% 4% 0% 3% 4% 2% 6% 2% 4% 0% Asus 5% 5% 5% 6% 2% 8% 3% 4% 0% 5% 5% 3% Lenovo 4% 4% 4% 5% 1% 5% 3% 1% 0% 5% 3% 3% Others 17% 17% 16% 18% 16% 16% 18% 19% 15% 17% 18% 6% 2010 Samsung 2% 3% 1% 2% 2% 2% 2% 4% 0% 2% 3% 0% Nokia 70% 69% 71% 66% 79% 65% 71% 79% 79% 72% 66% 83% Xiaomi 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Apple 1% 1% 0% 1% 1% 1% 1% 0% 0% 0% 1% 0% Cross 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Asus 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Lenovo 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Others 28% 28% 27% 31% 19% 32% 26% 17% 21% 26% 31% 17% * Income is on monthly basis: Low
Figure 123: Samsung is preferred in all emerging countries except in China Brazil China India Indonesia Russia Turkey Mexico 2016 Samsung Huawei Samsung Samsung Samsung Samsung Samsung 2015 Samsung Apple Samsung Samsung Samsung Samsung Samsung 2014 Samsung Apple Samsung Samsung Samsung Samsung Samsung Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 70 27 March 2017
Figure 124: Share of Samsung continues to rise 2014 2015 2016 90%
80% 80%
70% 61%
60%
50%
48%
46%
46% 46%
50% 44%
44%
44%
41%
41% 36%
40% 35%
31%
30%
28% 27% 30% 26%
20% 17% 12% 10%
0%
Brazil China India Indonesia Russia Turkey Mexico
Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 125: Which of the following products have Figure 126: Which of the following products are you you purchased in the last 12 months? (2016) likely to purchase in the next 12 months? (2016)
Desktop computer Desktop computer DVD Player Notebook PC DVD Player 4% 2% Notebook PC 3% Gaming facility Tablet 6% 9% Gaming facility 12% 1% 5% Mobile Phone 1% Tablet 5% 6% Internet Service 1% TV Mobile Phone 18% 15%
TV 18%
Digital Camera 2% Internet Service 1% Smartphone Digital Camera 46% 4% Smartphone 41%
Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 127: Which of the following products have Figure 128: Which of the following products are you you purchased in the last 12 months? (2010) likely to purchase in the next 12 months? 2010
Notebook PC Desktop computer Notebook PC Desktop computer 4% 3% 11% 7% DVD Player DVD Player 10% TV 21% 22% Gaming facility 2%
Gaming facility TV Digital Camera 2% 1% 29% Smartphone 6% Mobile Phone 27% Internet Service 1%
Digital Camera Mobile Phone 3% Smartphone Internet Service 40% 10% 1%
Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 71 27 March 2017
Healthcare Key stocks Siloam International Hospital
■ We continue to like SILO as room for downside surprise from current levels is low after past disappointments, and expansion plans could fuel additional growth.
■ There could be upside post the private equity, CVC Capital Partners involvement and execution progress in light of higher-than-expected FY17 guidance. The initial look into CVC Capital's experience underscores encouraging turnaround outcomes. Mitra Hospital
■ We continue to view the company as an attractive long-term holding due to mid-teens growth profile, margin expansion opportunity, and balance sheet optionality (Rp2.4 tn in cash). ■ After the recent weakness the stock looks interesting at 33x 2017E EBITDA, below the historical average. Its premium valuation is supported by best-in-class margins and ROIC profile. Prodia Widyahusada
■ Market leader with the largest labs network, Prodia Widyahusada is led by an experienced management team with comprehensive test offerings through its “hub and spoke” model. Its improving top line is driven by volume growth and pricing power with double-digit EBITDA growth on the back of margin expansion and operating leverage.
■ Frost and Sullivan estimates Indonesia’s clinical laboratory testing market will record a CAGR of 12.9% to reach US$1.8 bn by 2017, while the segment in which Prodia operates should see a 16.3% CAGR. Kalbe Farma
■ Challenges continue for the company with the availability of the government’s universal healthcare programme as consumers are shifting towards generic drugs from branded ones. Sales contribution from prescription drugs declined to 23% of the total in 2016, from 25% in 2010, with gross margin declining to 58%, from 67%. Improved access to state healthcare Access to state healthcare in Indonesia is still below the average of the other emerging countries we surveyed. Indonesia remains the second lowest for access to state healthcare (52% of respondents), with India being the lowest (36% of respondents). Indonesia is still lagging Mexico (64% respondents), South Africa (68% respondents), and China (70% respondents). However, Indonesia has seen a significant improvement where 52% of the respondents do have access now, as compared to only 34% in 2010, when we first did the survey, or improving from the previous year at 41%. In fact, Indonesia is the most improved! Thanks to the continuous rise in enrollments to the government’s universal healthcare programme (Jamkesnas=Jaminan Kesehatan Nasional). As of 1 March 2017, there were 174.7 mn people enrolled in the programme, according to BPJS-Kesehatan. This is an addition of 10.6 mn people enrolled in a year, or 6% higher YoY. GoI is targetting that by 1 January 2019, all Indonesians will participate in the programme and have access to healthcare.
Indonesia Consumer Survey 2017 72 27 March 2017
Figure 129: Access to state healthcare in Indonesia is still way below the EM countries, but it is improving significantly
100% 2010 2011 2012 2013 2014 2015 2016 90%
80%
70%
60%
50%
40%
30%
20% Russia Turkey Brazil China South Africa Mexico Indonesia India Source: Credit Suisse Indonesia Consumer Survey 2017
While improvement in healthcare access is taking place across the board, interestingly, those in urban and in Java have seen more improvement than those in rural and outside Java. In urban areas, 55% of the respondents now have access to state healthcare compared to 43% in 2015 or 35% in 2010. Similarly, of those in Java, 52% now have access as compared to 37% in 2015 or 27% in 2010. As such, with the improvement in access to state healthcare, the trend is declining on spending for healthcare. Out of the total monthly spending, around 3.5% was spent on healthcare in 2016, and a similar amount in 2015, but had declined since 2010, where spending on healthcare was at 5% of the total.
Figure 130: Access to state healthcare has improved 2010 2015 2016 60% 55% 54% 52% 52% 48% 50% 43% 42% 41% 40% 40% 38% 37% 34% 35% 33%
30% 27%
20%
10%
0% Total Urban Rural Java Ex Java
Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 73 27 March 2017
Figure 131: Declining trend in self-reliance in affording healthcare
Insurance Company Selfpay 100%
90%
80% 44% 50% 49% 55% 70% 57% 59% 57% 58%
60% 76% 78% 92% 92% 93% 94% 93% 50%
40% 37% 31% 35% 30% 28% 28% 24% 28% 29% 20% 16% 14% 10% 18% 20% 17% 15% 17% 14% 17% 13% 8% 8% 7% 6% 7% 7% 9% 0% Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java 2010 2015 2016 Source: Credit Suisse Indonesia Consumer Survey 2017
According to BPJS-Kesehatan, the number of providers that participate in the programme also increased 7% YoY in total, reaching 26,314 providers, which consist of 1,957 hospitals (+12% YoY), 9,818 Puskesmas or facility health centres (flat), 5,383 clinics (+13% YoY), 4,544 doctors (+2%), 1,150 dentists (flat), 975 optics (+7%), 2,150 drugstores (+15%), and 337 laboratories. The increase in the number of providers is in line with the access to services given by the government. Access to hospitals using the Jamkesnas increased to 45% of the respondents, from 39% in 2010. A similar thing is observed with emergency room that rose from 13% in 2010 to 18% in 2016. Contrary to what happened with drug companies, access to prescription drugs declined to 19%, from 30% in 2010 or 24% in 2015. We believe that this might be due to the administrative issue that could occur should the tender get delayed. Vaccinations and diagnostic tests remained at 9% and 8% of the respondents, respectively.
Figure 132: The increase in number of providers in line with the improvement in service offered Total Urban Rural Java Ex Java Low Mid High % of respondents 2010 2015 2016 2010 2015 2016 2010 2015 2016 2010 2015 2016 2010 2015 2016 2010 2015 2016 2010 2015 2016 2010 2015 2016 Hospital 39% 46% 45% 38% 44% 44% 39% 52% 47% 37% 49% 48% 41% 45% 39% 38% 50% 43% 39% 45% 45% 33% 35% 48% Emergency Room 13% 17% 18% 13% 18% 19% 12% 15% 16% 12% 16% 19% 12% 20% 16% 11% 18% 20% 14% 16% 18% 17% 24% 10% Prescriptions 30% 24% 19% 29% 24% 21% 32% 23% 15% 35% 22% 21% 33% 18% 16% 32% 21% 16% 28% 25% 20% 22% 29% 18% Vaccinations 10% 6% 9% 11% 6% 7% 9% 5% 14% 8% 6% 6% 6% 8% 17% 11% 4% 12% 10% 7% 8% 17% 1% 11% Diagnostic tests 8% 7% 8% 9% 8% 8% 8% 5% 7% 8% 7% 6% 7% 9% 12% 8% 7% 9% 9% 7% 8% 11% 11% 13% Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 74 27 March 2017
Figure 133: Number of participants and providers of Jamkesnas continue to increase 1-Mar-16 1-Mar-17 % YoY chg Number of participants of Jamkesnas (mn people) 164.1 174.7 6% Number of providers: Hospitals 1,749 1,957 12% Puskesmas (facility health centers) 9,811 9,818 0% Clinics 4,760 5,383 13% Doctors 4,441 4,544 2% Dentists 1,150 1,150 0% Optics 907 975 7% Drugstores 1,876 2,150 15% Laboratories 337 Total 24,694 26,314 7% Source: BPJS Kesehatan
There is no doubt that, with the availability of Jamkesnas, the willingness to pay for premium medicine brands will continue to decline. Of our respondents, 77% are not willing to, up from 72% in 2015.
Figure 134: Willingness to pay a premium, international vs local medicine brand Total Area Region Income % of respondents Urban Rural Java Ex Java Low Mid High 2016 No 77% 73% 83% 75% 79% 80% 77% 57% 1% - 10% 20% 23% 14% 21% 17% 17% 20% 33% 11% - 20% 2% 2% 2% 2% 3% 1% 3% 7% 21% - 30% 1% 0% 1% 0% 1% 1% 0% 2% > 30% 1% 1% 1% 1% 1% 1% 0% 2% 2015 No 72% 67% 81% 73% 73% 76% 69% 72% 1-10% extra 23% 26% 16% 23% 23% 20% 25% 20% 11-20% extra 5% 6% 3% 4% 3% 3% 5% 6% 21-30% extra 1% 1% 0% 0% 1% 1% 0% 2% 30% extra 0% 0% 0% 0% 0% 0% 0% 0% * Income is on monthly basis: Low
Indonesia Consumer Survey 2017 75 27 March 2017
Property Key stocks Bumi Serpong Damai
■ Last year, the company had the best pre-sales target achievement record, thanks to its focus on landed residential property. We expect that to continue this year. The company has the lowest net debt-to-equity among peers. As pre-sales had been primarily landed products, earnings recognition should not be a drag for profits this year. Ciputra Development
■ We like companies with good project diversification. The company should benefit from falling overall mortgage rates. Summarecon Agung
■ Product mix was the main drag in SMRA's pre-sales last year. Company only achieved 67% of total target that was largely led by a big miss in apartment sales. For this year, Summarecon allocates merely 15% for apartments while having more landed property. We think the product mix looks more promising for the year. However, we still see risk on company's earnings. Potential demand continues to be high While we are positive on the Indonesia property sector we think growth in 1H17 could be hard to come by, given tax regulatory overhangs and political uncertainties as a result of the current ongoing regional election. Nevertheless, our positive view on property is based on three main factors. First, we have seen lower mortgage rates, e.g., BCA was among the banks that lowered mortgage rates last year and, more recently, this year. Second, higher loan-to-value for property financing should help improve affordability. Third, removal of the second mortgage for pre-built houses and lastly property income tax was lowered to 2.5% from 5.0% previously. Despite the overhangs and short-term risks, we think the macro and regulatory environments are in favour of a recovery in the sector. In addressing the short-term risks, we prefer companies that are less leveraged, have more landed residential property for pre-sales this year, and those that have access to large low-cost land banks.
Indonesia Consumer Survey 2017 76 27 March 2017
Figure 135: Indonesia real estate developers—quarterly pre-sales progression
Source: Company data, Credit Suisse estimates
The number of respondents planning to purchase a property in the next two years improved. Our 2016 survey found that about 86% of the respondents either have houses or their family members own houses—higher than the 73% back in 2010. Separately, 22% of the respondents are planning to buy houses in the next two years; this shows an improvement from 20% in the previous year. We think this can be attributed to an overall lower interest rate environment and flat property price growth in the past couple of years, which consequently led to better affordability. However, this level is still lower than the 2014 peak at 31% of the respondents.
Figure 136: Property ownership and potential purchases Total Area Region Age Income % of respondents Urban Rural Java Ex-Java 18-29 30-45 46-55 56-65 Low Mid High 2016 Property ownership 86% 82% 95% 88% 83% 83% 85% 89% 97% 88% 86% 80% Planning to buy in next 2 years 22% 24% 16% 20% 26% 25% 23% 17% 12% 16% 24% 44% 2015 Property ownership 80% 72% 94% 81% 77% 76% 79% 85% 89% 77% 80% 89% Planning to buy in next 2 years 20% 25% 12% 21% 19% 24% 21% 18% 7% 14% 23% 23% 2014 Property ownership 81% 76% 90% 81% 79% 77% 80% 84% 93% 80% 81% 76% Planning to buy in next 2 years 31% 35% 23% 29% 34% 30% 35% 27% 18% 28% 31% 43% 2013 Property ownership 72% 64% 89% 73% 71% 69% 70% 81% 86% 73% 72% 76% Planning to buy in next 2 years 30% 34% 24% 30% 32% 30% 34% 26% 20% 28% 31% 44% 2012 Property ownership 74% 65% 90% 74% 73% 70% 72% 84% 86% 74% 74% 79% Planning to buy in next 2 years 30% 34% 22% 28% 33% 30% 33% 29% 15% 24% 34% 43% 2011 Property ownership 70% 63% 83% 73% 63% 65% 68% 78% 81% 69% 69% 85% Planning to buy in next 2 years 25% 28% 18% 25% 23% 27% 27% 20% 11% 18% 32% 37% 2010 Property ownership 73% 66% 86% 74% 71% 67% 70% 86% 92% 72% 74% 69% Planning to buy in next 2 years 24% 30% 12% 24% 22% 23% 27% 22% 11% 19% 29% 42% * Income is on monthly basis: Low
Indonesia Consumer Survey 2017 77 27 March 2017
Figure 137: Indonesia remained third place in 2016 in terms of respondents planning to buy a property in the next two years
35% 2011 2012 2013 2014 2015 2016 Average 2016
30%
25%
20%
15% % of respondents
10%
5%
0% Brazil China Indonesia Mexico India South Africa Russia Turkey
Source: Credit Suisse Indonesia Consumer Survey 2017
Historically, lower interest rates as a result of an easing monetary policy come with a lag of 3-9 months. We have seen banks starting to cut mortgage rates aggressively in the past couple of months. The figure below shows that mortgage growth starts picking up as a result.
Figure 138: Mortgage and total loan growth
Mortgage Loan 35
30
25
20 %YoY
15
10
5 Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16
Source: Company data, Credit Suisse estimates
Despite improving mortgage growth, we have not yet seen that translating into developer's pre-sales improvement. We think 1H17 is a challenging period given the overhangs. Price expectations When asked about local property price expectations over the next 12 months, 30% of the respondents said they expected property prices to increase. Those who are bullish on property prices generally are rural residents. Against last year's outcome, only 36% of the respondents expect declining prices for property (34% flat)—this is lower than the 43% in the previous year's survey (28% expected prices to be flat in 2015).
Indonesia Consumer Survey 2017 78 27 March 2017
Figure 139: Respondents have turned a bit more optimistic on property prices
Increase Flat Decrease 100%
90% 25% 36% 34% 34% 36% 80% 41% 43% 43% 47% 46% 70%
60% 38% 50% 31% 30% 27% 34% 32% 28% 40% 39% 27% 29%
30%
20% 37% 35% 36% 38% 30% 27% 29% 25% 25% 10% 18%
0% Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java 2016 2015
Source: Credit Suisse Indonesia Consumer Survey 2017
In the longer term, we believe that Indonesia property prices are more resilient than certain other countries in the region. Historically, Indonesian property developers are more inclined to absorb lower sales volumes than lowering prices given Indonesia's relatively low mortgage loans penetration, implying that even during bad times, most owners are not necessarily exposed to forced selling, limiting downward pressure on prices.
Figure 140: Indonesia has the second lowest Figure 141: …and third lowest mortgage-to-loan mortgage-to-GDP penetration ratio… penetration ratio Mortgage loans as % of GDP Mortgage loans as % of total loans 80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0% PH IN ID CN TH HK SG JP MY KR TW AU
PH ID IN TH CN JP KR MY TW HK SG AU
Source: Central banks Source: Central Banks Respondents with plan of buying a property within the next two years has increased vs 2015 survey On a breakdown by age, the percentage of respondents between the ages of 18 and 45 who plan to buy property in the next two years increased as compared to the 2015 survey. For instance, in the age group of 18-29, about 25% said they planned to buy property in the next two years, up from 24% in the previous year's survey, while in age group of 30- 45, the amount of respondents with similar answer is 23%, up from 21%.
Indonesia Consumer Survey 2017 79 27 March 2017
Figure 142: Percentage of respondents planning to buy property in the next two years by age Figure 143: Indonesia’s median age (2020E)
40% 60 18-29 30-45 46-55 56-65
35% 35% 34% 33% 50 48 30% 30% 30% 45 30% 29% 43 43 43 27% 27%27% 27% 26% 40 38 38 38 25% 24% 25% 23% 23% 22% 21% 31 20% 20% 29 30 28 20% 18% 18% 17% 25 15% 15% 12% 20 11% 11% 10% 7% 10 5%
0% 0 JP HK KR TW SG TH AU CN ID MY IN PH 2010 2011 2012 2013 2014 2015 2016
Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Company data, Credit Suisse estimates
We are positive on the Indonesian property sector’s long-term potential on the back of the country's large and relatively young population as well as low mortgage penetration ratio. We also expect a sustainable increase in wages and a decreasing number of members per household, hence resulting in higher demand on housing going forward. More than 60% of Indonesia's residents are currently aged 20 to 65—the principal working years. Another 27% of its population is below the age of 15, giving the country a large incoming workforce and a low dependency ratio. One of the key factors to have robust growth in the property sector is a young, growing population with the capability of purchasing big-ticket items such as property. According to the UN population division, Indonesia has a relatively young demographic profile, with an estimated median age of 31 by 2020. On breakdown by income, respondents with lower income showed a small increase with just 19% of total having a plan to purchase property in the next two years. The middle income group surprisingly declined to 29% from 32% while there was a big jump for the high-income population from 37% to 42% in 2015-16. We think this could be largely attributed to: (1) falling deposit rates as high-income earners view deposits as an alternative investment against property investment and (2) the recent tax amnesty having unlocked previously hidden wealth in Indonesia.
Indonesia Consumer Survey 2017 80 27 March 2017
Figure 144: Percentage of respondents planning to buy property in the next two years—income Figure 145: Labour force CAGR over 2010-20E
50% 1.8% Low Mid High 1.6% 44% 43% 44% 43% 45% 42% 1.6% 1.5%
40% 1.4% 37% 1.3% 1.3%
35% 34% 1.2% 32% 31% 31% 1.0% 1.0% 29% 30% 28% 28% 1.0% 0.9%
24% 25% 24% 23%23% 0.8%
20% 18% 19% 0.6% 16% 0.4% 0.4% 15% 14% 0.4% 0.3% 0.3%
10% 0.2%
5% 0.0% -0.1%
0% -0.2% PH MY AU IN HK SG ID TH CN KR TW JP 2010 2011 2012 2013 2014 2015 2016
Source: Credit Suisse Indonesia Consumer Survey 2017 Source: United Nations population division
Indonesia's labour force growth is expected to see a 0.9% CAGR over 2010-20E, ahead of Thailand and China. We believe this should enhance an average Indonesian's ability to own property ahead as well.
Indonesia Consumer Survey 2017 81 27 March 2017
Banks Key stocks Bank Negara Indonesia
■ Loan growth has been strong across the board generally, but it is the SOE-corporate (one-third of incremental loans) and medium commercial loans (one-fifth of incremental loans) in particular that have underpinned robust loan growth at BNI. For similar ROAs and ROEs, BNI is trading at a 27% discount to Mandiri on P/E (and 30% discount on P/B), far ahead of its historical average of 14%. Bank Jatim
■ Bank Jatim is the regional development bank for East Java and the smallest bank by assets among the nine banks in our coverage. It is focused on the consumer (67% of loan, 87% of which is payroll loan) and commercial/SME (33%) segments. Jatim's ROA was the third highest last year at 2.4%, behind that of BCA and BRI. Superior profitability can be attributed to the higher proportion of cheaper current/saving deposits (81%), fee income and cost efficiency. Auto interest on lower interest In this year's survey, we witnessed a decrease, from 73% (2015) to 67% (2016), in the percentage of respondents who plan to use financing facilities to finance motorbike purchases, this after an increase from 58% in 2014 going into 2015. This decline applies across categories, mainly ex-Java at just 52% from 70% in the 2015 survey.
Figure 146: Indonesian planning to purchase their motorbike with a form of credit90%
80% 75% 77% 73% 73% 71% 70% 70% 67% 66% 59% 58% 58% 57% 58% 60% 55% 52% 50%
40%
30%
20%
10%
0% Total Java Ex Java Urban Rural Total Java Ex Java Urban Rural Total Java Ex Java Urban Rural 2016 2015 2010
Source: Credit Suisse Indonesia Consumer Survey 2017
Of the respondents who live in rural areas, 59% plan to use financing facilities for motorbike purchases. This is lower than the previous year's survey of 66%. Similarly, 73% of Java residents thought they would use financing facilities, which is lower than 75% from last year's survey. The percentage of urban residents who thought they would use financing facilities also declined to 71% from 77% the previous year.
Indonesia Consumer Survey 2017 82 27 March 2017
Figure 147: Indonesia loan growth by segments
60 Working capital Investment Consumer
50
40
30
%YoY 20
10
0
-10 Dec-02 Jun-04 Dec-05 Jun-07 Dec-08 Jun-10 Dec-11 Jun-13 Dec-14 Jun-16
Source: Company data, Credit Suisse research Savings trend In contrast to the declining appetite to borrow, the percentage of respondents saving through bank accounts has continuously increased from 33% in 2010 to 38% in 2015 and 45% in 2016 despite the lower deposit rates last year, i.e., in the past three years, system's average deposit rates were down from 5.0% peak in Feb 2015 to 3.7% by end of 2016. The number of respondents that opted for cash dropped from 31% in 2010 to 30/25% for 2015/16. This indicates increasing savings awareness for the population in general. Most other methods of savings showed no major changes with property sector slightly up to 5% of total respondents from 4% in 2015 and 2010. The amount with no extra money for saving had shown a decline from 29% in 2010 to 22% in 2016. While this could be driven by factors such as inflation and wage growth, it can also be attributed to lower consumption.
Figure 148: Methods of savings—geographical location 2016 2015 2010 % of respondents Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Bank account 45% 50% 35% 44% 46% 38% 43% 26% 40% 34% 33% 40% 20% 32% 36% Life insurance 4% 5% 1% 3% 5% 4% 5% 3% 5% 3% 2% 2% 1% 1% 4% Cash 25% 22% 30% 21% 32% 30% 29% 32% 31% 26% 31% 30% 35% 37% 19% Property 5% 4% 5% 4% 6% 4% 5% 2% 2% 7% 4% 3% 6% 3% 7% No extra money for saving 22% 18% 29% 28% 9% 24% 18% 37% 21% 29% 29% 25% 38% 27% 33% Source: Company data, Credit Suisse estimates
As a reminder, the banking sector regulator (OJK) introduced a cap on time deposit rates back in 2014 where banks could only offer deposit rates of 200-225 bp above the policy rate. Just recently, OJK imposed a lower cap of 75-100 bp above the policy rate for deposit rates offered by large banks. There is concern in the markets that the OJK may eventually regulate lending rates as well. For now, no such caps will be introduced for lending rates, but the OJK has hinted that the deposit rate cap is meant to encourage banks to trim their lending rates as well. In its communications with banks, the OJK suggested it aims to see lending rates eventually in the single-digit territory, down from the current 12-13% levels.
Indonesia Consumer Survey 2017 83 27 March 2017
Figure 149: Deposit rates by type of deposits Figure 150: Lending yields by type of loan Average deposit rate Policy rate Invt loans WC loans Consumption loan yield 3M TD rate Cons loans Average IDR lending yield 21 20%
19
18% 17
15 16%
% 13
11 14%
9
7 12%
5
3 10%
Jan-05 Jan-03 Jan-04 Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Jan-10 Jan-15 Jan-02 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-11 Jan-12 Jan-13 Jan-14 Jan-16
Source: Bank Indonesia Source: Bank Indonesia
As opposed to the above, the breakdown by income level tells us a different story. Respondents with higher income lowered their interest toward bank savings as opposed to the lower income group. This tells us two things, first, deposit rates sensitivity is higher for the high-income society as opposed to the mid-low income groups and second, the increase of low-income respondents to saving account is in-line with the government's attempt to improve banking sector penetration in Indonesia.
Figure 151: Methods of saving—income 2016 2015 2010 Low Mid High Low Mid High Low Mid High Bank account 26% 52% 40% 24% 43% 45% 19% 45% 52% Life insurance 1% 4% 14% 1% 5% 11% 1% 2% 14% Cash 29% 24% 19% 26% 33% 17% 32% 32% 9% Property 5% 4% 7% 1% 4% 6% 3% 5% 11% Others 0% 0% 7% 0% 0% 1% 0% 0% 7% No extra money for saving 40% 16% 12% 48% 15% 20% 44% 16% 7% * Income is on monthly basis: Low
Figure 152: Savings as a percentage of income Figure 153: Indonesia—income vs savings
Savings Income Low Mid High 22% 100% 21.1%
90% 20%
80% 18% 17.5%
70% 16% 60% 84% 90% 90% 89% 90% 89% 89% 89% 90% 91% 14% 13.5% 50%
12% 40% 11.0% 11.0% 11.1%
10% Savings as % of incomeof % as Savings 30% 8.9% 8.6%
20% 8%
10% 16% 6% 10% 10% 11% 10% 11% 11% 11% 10% 9% 5.1% 0%
4%
Java Java
Total Total
Rural Rural
Urban Urban
Ex Java Ex Ex Java Ex 2% 2016 2010 2010 2015 2016 Source: Credit Suisse Indonesia Consumer Survey 2017 * Income is on monthly basis: Low
Indonesia Consumer Survey 2017 84 27 March 2017
Asia Pacific/Indonesia Automobile Manufacturers
Astra International (ASII.JK / ASII IJ) Rating OUTPERFORM Price (24-Mar-17, Rp) 8,525 COMPANY UPDATE FOCUS LIST STOCK Target price (Rp) 9,800 Upside/downside (%) 15.0
Mkt cap (Rp/US$ bn) 345,122 / 25.89 Improving urban profile Enterprise value (Rp bn) 385,658 Number of shares (mn) 40,484 ■ As the biggest automobile and motorcycle manufacturer and Free float (%) 45.2 distributor, Astra provides a unique exposure to the Indonesian consumer 52-wk price range (Rp) 8,775-6,200 ADTO-6M (US$ mn) 17.6 segment and is exposed to the rising middle class. It has over 60% share of Target price is for 12 months. the four-wheeler market and over 70% share of the two-wheeler market. On
4Ws, it is the sole manufacturer and distributor of Toyota and Daihatsu, and Research Analysts
for 2Ws, it is the sole manufacturer and distributor for Honda. Jahanzeb Naseer 62 21 2553 7977 ■ Our Consumer survey shows that the “intention to buy” for cars has risen [email protected] from 8% to 11% in 2016 vs 2015. Toyota’s brand preference has risen from 23% to 41% over the same period as it launched a number of new models in 2016. The highest change is seen in the urban and high income segment. This bodes well for Toyota’s ability to successfully defend its market share. ■ For two-wheelers the intention to buy has deteriorated from 28% to 26%. The biggest decline is seen in ex-Java which could be a result of lower commodity prices. We could see a recovery in rural demand if the commodity price rebound persists. ■ Risks include a plunge in commodity prices coupled with weaker-than- expected economic recovery and losing market share to Honda. There is also an increasing risk of margin compression from the financing arm as regulators are striving to bring down lending rates to single digit.
Share price performance Financial and valuation metrics
Year 12/16A 12/17E 12/18E Revenue (Rp bn) 181,084.0 202,297.1 225,855.9 EBITDA (Rp bn) 25,076.0 30,117.2 32,949.9 EBIT (Rp bn) 17,534.0 22,089.3 23,801.3 Net profit (Rp bn) 15,156.0 21,530.3 23,529.8 EPS (CS adj.) (Rp) 374.37 531.83 581.22 Change from previous EPS (%) n.a. 0.0 0.0 Consensus EPS (Rp) n.a. 495.71 556.22 EPS growth (%) 4.8 42.1 9.3 The price relative chart measures performance against the P/E (x) 22.8 16.0 14.7 JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 2.4 2.6 3.6 24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 15.4 12.7 11.4 Rp13,328/US$1 P/B (x) 3.08 2.92 2.68
Performance 1M 3M 12M ROE (%) 14.2 18.7 19.1 Absolute (%) 6.9 16.4 15.6 Net debt/equity (%) 29.7 25.0 18.7
Relative (%) 3.0 5.7 0.3 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 85 27 March 2017
Astra International (ASII.JK / ASII IJ) Price (24 Mar 2017): Rp8,525; Rating: OUTPERFORM; Target Price: Rp9,800; Analyst: Jahanzeb Naseer Income Statement (Rp bn) 12/16A 12/17E 12/18E Company Background Sales revenue 181,084 202,297 225,856 ASII is involved in 4 main businesses: automotive, financial services, Cost of goods sold 144,652 160,291 180,150 UT and AALI. It also has various businesses that make up 4% of EBITDA 25,076 30,117 32,950 revenues and 3% of net income (including some infrastructure, EBIT 17,534 22,089 23,801 water distribution, IT, etc.). Net interest expense/(inc.) 46 283 270 Recurring PBT 22,253 29,329 32,031 Blue/Grey Sky Scenario Profit after tax 18,302 24,301 26,532 Reported net profit 15,156 21,530 23,530 Net profit (Credit Suisse) 15,156 21,530 23,530 Balance Sheet (Rp bn) 12/16A 12/17E 12/18E Cash & cash equivalents 29,357 28,310 27,027 Current receivables 22,910 21,510 8,294 Inventories 17,771 15,125 7,363 Other current assets 40,365 43,812 48,275 Current assets 110,403 108,757 90,958 Property, plant & equip. 49,912 52,444 52,233 Investments 33,987 40,368 48,072 Intangibles 1 1 2 Other non-current assets 67,553 55,409 61,306 Total assets 261,856 256,980 252,570 Current liabilities 89,079 68,023 60,418 Total liabilities 121,949 108,874 91,108 Shareholders' equity 111,951 118,282 128,635 Minority interests 27,955 29,822 32,824 Total liabilities & equity 261,855 256,979 252,567 Cash Flow (Rp bn) 12/16A 12/17E 12/18E EBIT 17,534 22,089 23,801 Net interest 0 0 0 Tax paid 0 0 0 Working capital 589 (7,708) 2,671 Other cash & non-cash items 1,284 7,128 3,716 Our Blue Sky Scenario (Rp) 10,400 Operating cash flow 19,407 21,509 30,188 Our blue sky scenario TP of 10,400/share implies 12% volume Capex (11,630) (12,957) (10,966) growth for 4W, which resulted in the auto division P/E rerating to Free cash flow to the firm 7,777 8,551 19,223 23x. Investing cash flow (10,798) (1,554) (19,040) Equity raised 0 0 0 Our Grey Sky Scenario (Rp) 8,700 Dividends paid (8,140) (9,094) (12,311) Our grey sky scenario TP of 7,600/share implies 12% volume Financing cash flow (3,592) (19,383) (16,576) growth for 4W, but with a worse market share for Astra International Total cash flow 5,017 572 (5,427) which resulted in the auto division P/E derating to 12x. Adjustments (437) 0 0 Net change in cash 4,580 572 (5,427) Share price performance Per share 12/16A 12/17E 12/18E Shares (wtd avg.) (mn) 40,484 40,484 40,484 EPS (Credit Suisse) (Rp) 374 532 581 DPS (Rp) 201 225 304 Operating CFPS (Rp) 479 531 746 Earnings 12/16A 12/17E 12/18E Growth (%) Sales revenue (1.7) 11.7 11.6 EBIT 1.9 26.0 7.8 EPS 4.8 42.1 9.3 Margins (%) EBITDA 13.8 14.9 14.6 EBIT 9.7 10.9 10.5 Valuation (x) 12/16A 12/17E 12/18E P/E 22.8 16.0 14.7 The price relative chart measures performance against the JSX COMPOSITE P/B 3.08 2.92 2.68 INDEX which closed at 5,567.13 on 24-Mar-2017 Dividend yield (%) 2.4 2.6 3.6 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 EV/sales 2.1 1.9 1.7 EV/EBITDA 15.4 12.7 11.4 EV/EBIT 22.1 17.3 15.8 ROE analysis (%) 12/16A 12/17E 12/18E ROE 14.2 18.7 19.1 ROIC 8.2 10.0 10.5 Credit ratios 12/16A 12/17E 12/18E Net debt/equity (%) 29.7 25.0 18.7 Net debt/EBITDA (x) 1.66 1.23 0.92
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 86 27 March 2017
Asia Pacific/Indonesia Packaged Foods
Indofood CBP (ICBP.JK / ICBP IJ) Rating NEUTRAL Price (24-Mar-17, Rp) 8,600 COMPANY UPDATE Target price (Rp) 9,500 Upside/downside (%) 10.5
Mkt cap (Rp/US$ bn) 100,292 / 7.52 Noodle pricing power Enterprise value (Rp bn) 93,526 Number of shares (mn) 11,662 ■ Good results in 9M16. PT Indofood CBP Sukses Makmur (ICBP), a subsidiary Free float (%) 19.4 of PT Indofood Sukses Makmur (INDF) delivered another good round of 52-wk price range (Rp) 10,000-7,250 ADTO-6M (US$ mn) 3.0 earnings—9M16 net profit slightly higher than our initial estimates. Revenue Target price is for 12 months. rose 10% YoY to Rp26.5 tn, with net profit soaring 16% YoY to Rp2.8 tn.
Research Analysts ■ Noodles accounted for 64% of ICBP's revenue and 75% of operating
Ella Nusantoro profit in 9M16. We are estimating a 2% higher volume and a 5% ASP 62 21 2553 7917 increase this year for noodles. However, with the surprise price increase on [email protected] noodles despite the still low wheat prices, margins for the segment may get pressured. Nevertheless, this might be underpinned from the rise in other input cost such as palm oil (at its highest since July 2012) and chilli prices. An approximate 4% price increase took place in early January. The last price increase by around the same amount was in January of last year. ■ Dairy business accounts for 20% of revenue and 25% of operating profit with its operating margin at its highest of 18.5%. With the rise in sugar prices and skim milk powder, we are concerned that the high margin might not be sustainable. ■ Expanding the ice-cream business. ICBP is looking to expand its ice- cream business this year. It recently relaunched its brand Espessia and launched the Nusantara flavours. It will start to invest in freezers as well as expanding the distribution network. Based on Euromonitor data, the ice- cream industry in Indonesia is reported to have 2016E sales of Rp5.7 tn (US$435 mn), witnessing an 18% CAGR for 2011-16E. The industry is also projected to rise at a 16% CAGR in 2016E-21E, reaching Rp11.8 tn (US$905 mn).
Share price performance Financial and valuation metrics
Year 12/15A 12/16E 12/17E 12/18E Revenue (Rp bn) 31,741.1 34,912.1 38,669.2 42,649.7 EBITDA (Rp bn) 4,690.9 5,878.0 6,231.9 6,842.1 EBIT (Rp bn) 3,992.1 4,985.3 5,129.2 5,531.9 Net profit (Rp bn) 3,000.7 3,642.0 3,776.3 4,103.0 EPS (CS adj.) (Rp) 257.31 312.30 323.82 351.83 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 315.17 343.76 379.96 EPS growth (%) 13.5 21.4 3.7 8.7 The price relative chart measures performance against the P/E (x) 33.4 27.5 26.6 24.4 JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 1.2 1.5 1.8 1.9 24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 20.3 16.0 14.9 13.3 Rp13,328/US$1 P/B (x) 6.49 5.70 5.13 4.61
Performance 1M 3M 12M ROE (%) 20.6 22.0 20.3 19.9 Absolute (%) 4.2 13.9 13.0 Net debt/equity (%) Net cash Net cash Net cash Net cash
Relative (%) 0.4 3.2 -2.4 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 87 27 March 2017
Indofood CBP (ICBP.JK / ICBP IJ) Price (24 Mar 2017): Rp8,600; Rating: NEUTRAL; Target Price: Rp9,500; Analyst: Ella Nusantoro Income Statement (Rp bn) 12/15A 12/16E 12/17E 12/18E Company Background Sales revenue 31,741 34,912 38,669 42,650 Indofood CBP, a subsidiary of Indofood Sukses Makmur (INDF.JK), Cost of goods sold 22,122 23,953 26,926 29,612 is an established market-leading producer of packaged food EBITDA 4,691 5,878 6,232 6,842 products. It has a diverse range of products providing everyday food EBIT 3,992 4,985 5,129 5,532 solutions. Its five business units include noodles, dairy, snack and Net interest expense/(inc.) (112) (170) (202) (219) foods, food seasoning and beverages, Recurring PBT 4,010 5,066 5,268 5,727 Profit after tax 2,923 3,799 3,951 4,295 Blue/Grey Sky Scenario Reported net profit 3,001 3,642 3,776 4,103 Net profit (Credit Suisse) 3,001 3,642 3,776 4,103 Balance Sheet (Rp bn) 12/15A 12/16E 12/17E 12/18E Cash & cash equivalents 7,658 9,310 10,429 11,914 Current receivables 3,364 3,352 3,683 4,125 Inventories 2,547 2,710 3,076 3,404 Other current assets 393 429 457 492 Current assets 13,962 15,800 17,645 19,935 Property, plant & equip. 6,556 7,555 8,452 9,142 Investments 1,119 1,119 1,119 1,119 Intangibles 4,052 3,919 3,786 3,653 Other non-current assets 872 998 1,059 1,157 Total assets 26,561 29,391 32,061 35,006 Current liabilities 6,002 6,608 7,186 7,796 Total liabilities 10,174 11,020 11,909 12,831 Shareholders' equity 15,455 17,597 19,552 21,767 Minority interests 932 775 600 408 Total liabilities & equity 26,561 29,391 32,061 35,006 Cash Flow (Rp bn) 12/15A 12/16E 12/17E 12/18E EBIT 3,992 4,985 5,129 5,532 Net interest 112 170 202 219 Tax paid (1,086) (1,266) (1,317) (1,432) Working capital 188 380 (131) (206) Other cash & non-cash items 268 266 996 1,300 Operating cash flow 3,473 4,535 4,879 5,413 Our Blue Sky Scenario (Rp) 11,500 Capex (1,219) (1,892) (2,000) (2,000) Our Blue sky scenario TP of Rp11,500 implies P/E of 35.5x on the Free cash flow to the firm 2,255 2,643 2,879 3,413 back of softer commodity prices and stronger volume growth Investing cash flow (1,477) (1,504) (2,059) (2,170) Equity raised 0 0 0 0 Our Grey Sky Scenario (Rp) 8,500 Dividends paid (1,203) (1,500) (1,821) (1,888) Our Grey sky scenario TP of Rp8,500 implies P/E of 26.3x on the Financing cash flow (1,643) (1,500) (1,821) (1,757) back of higher commodity prices and weaker volume growth Total cash flow 354 1,530 999 1,485 Adjustments 0 0 0 0 Share price performance Net change in cash 354 1,530 999 1,485 Per share 12/15A 12/16E 12/17E 12/18E Shares (wtd avg.) (mn) 11,662 11,662 11,662 11,662 EPS (Credit Suisse) (Rp) 257 312 324 352 DPS (Rp) 103 129 156 162 Operating CFPS (Rp) 298 389 418 464 Earnings 12/15A 12/16E 12/17E 12/18E Growth (%) Sales revenue 5.7 10.0 10.8 10.3 EBIT 25.3 24.9 2.9 7.9 EPS 13.5 21.4 3.7 8.7 Margins (%) EBITDA 14.8 16.8 16.1 16.0 EBIT 12.6 14.3 13.3 13.0 Valuation (x) 12/15A 12/16E 12/17E 12/18E The price relative chart measures performance against the JSX COMPOSITE P/E 33.4 27.5 26.6 24.4 INDEX which closed at 5,567.13 on 24-Mar-2017 P/B 6.49 5.70 5.13 4.61 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 Dividend yield (%) 1.2 1.5 1.8 1.9 EV/sales 3.0 2.7 2.4 2.1 EV/EBITDA 20.3 16.0 14.9 13.3 EV/EBIT 23.9 18.8 18.1 16.5 ROE analysis (%) 12/15A 12/16E 12/17E 12/18E ROE 20.6 22.0 20.3 19.9 ROIC 26.4 32.0 31.6 32.4 Credit ratios 12/15A 12/16E 12/17E 12/18E Net debt/equity (%) (29.8) (35.4) (37.9) (41.1) Net debt/EBITDA (x) (1.04) (1.11) (1.22) (1.33)
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 88 27 March 2017
Asia Pacific/Indonesia Tobacco
Hanjaya Mandala Sampoerna
(HMSP.JK / HMSP IJ) Rating NEUTRAL Price (24-Mar-17, Rp) 4,000 COMPANY UPDATE Target price (Rp) 4,340 Upside/downside (%) 8.5
Mkt cap (Rp/US$ bn) 465,272 / 34.91 Indonesia’s largest cigarette maker Enterprise value (Rp bn) 464,407 Number of shares (mn) 116,318 ■ PT Hanjaya Mandala Sampoerna Tbk (“HMSP”) is the largest tobacco Free float (%) 7.5 company in Indonesia, with volume of 105.6 bn sticks in FY16. HMSP 52-wk price range (Rp) 4,240-3,630 ADTO-6M (US$ mn) 4.8 reported a better-than-expected FY16 with net profit soaring 23% YoY to Target price is for 12 months. Rp12.8 tn, on 7% higher sales YoY at Rp95.5 tn. FY16 sales account for
97% of our estimates, while the net profit was 7% higher than our estimates. Research Analysts
Ella Nusantoro ■ Higher net profit was mainly due to a better-than-expected interest income 62 21 2553 7917 of Rp854 bn, driven by its cash of Rp5 tn and other short-term financial assets of [email protected] Rp1.6 tn. The company is in a net cash position. Lower opex (+2% YoY) also helped profitability. On average, the company increased its selling price by about 12% YoY, slightly higher than our estimates. ■ HMSP’s market share stood at 28.9% for Sigaret Kretek Mesin (SKM), 37.3% for Sigaret Kretek Tangan (SKT) and 79.5% Sigaret Putih Mesin (SPM), as compared to 29.7%, 37.7%, and 80.3% in FY15, respectively, a general decline across three segments for FY16. ■ HMSP remains most preferred by our respondents in the survey, with 39% market share, with a notable preference from people in the urban area. ■ The GoI is targeting Rp157.16 tn of excise tax in 2017. It has raised excise duty by an average of 9%, which became effective on 1 January 2017 (weighted average at 10.2%). We can then assume that flat volume growth is expected this year. Our volume growth forecast for HMSP is 2% for 2017.
Share price performance Financial and valuation metrics
Year 12/15A 12/16E 12/17E 12/18E Revenue (Rp bn) 89,069.3 95,899.8 101,835.0 108,447.5 EBITDA (Rp bn) 14,467.4 15,928.8 16,810.2 18,018.2 EBIT (Rp bn) 14,048.1 15,449.5 16,270.9 17,418.9 Net profit (Rp bn) 10,425.1 12,323.3 12,794.0 13,526.7 EPS (CS adj.) (Rp) 89.63 105.94 109.99 116.29 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 110.00 114.27 125.76 EPS growth (%) (4.6) 18.2 3.8 5.7 The price relative chart measures performance against the P/E (x) 44.6 37.8 36.4 34.4 JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 2.6 2.7 2.7 2.9 24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 32.1 29.1 27.6 25.8 Rp13,328/US$1 P/B (x) 14.53 14.53 14.53 14.53
Performance 1M 3M 12M ROE (%) 45.8 38.5 40.0 42.2 Absolute (%) 3.9 9.9 0.2 Net debt/equity (%) Net cash Net cash Net cash Net cash
Relative (%) 0.0 -0.8 -15.1 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 89 27 March 2017
Hanjaya Mandala Sampoerna (HMSP.JK / HMSP IJ) Price (24 Mar 2017): Rp4,000; Rating: NEUTRAL; Target Price: Rp4,340; Analyst: Ella Nusantoro Income Statement (Rp bn) 12/15A 12/16E 12/17E 12/18E Company Background Sales revenue 89,069 95,900 101,835 108,448 PT HM Sampoerna Tbk is the largest tobacco company in Cost of goods sold 67,305 72,510 77,187 81,987 Indonesia, with 109.7 bn cigarettes sold and overall market share of EBITDA 14,467 15,929 16,810 18,018 34.9% in 2014. In 2005, it was acquired by Phillip Morris EBIT 14,048 15,450 16,271 17,419 International (PMI). Net interest expense/(inc.) 69 (748) (586) (457) Recurring PBT 13,994 16,197 16,857 17,876 Blue/Grey Sky Scenario Profit after tax 10,425 12,323 12,794 13,527 Reported net profit 10,425 12,323 12,794 13,527 Net profit (Credit Suisse) 10,425 12,323 12,794 13,527 Balance Sheet (Rp bn) 12/15A 12/16E 12/17E 12/18E Cash & cash equivalents 1,719 1,463 1,117 1,110 Current receivables 4,727 3,828 3,651 1,793 Inventories 19,072 19,682 21,347 23,055 Other current assets 4,290 4,281 3,069 3,244 Current assets 29,807 29,254 29,183 29,201 Property, plant & equip. 6,281 7,002 7,663 8,263 Investments 781 780 779 778 Intangibles 60 60 60 60 Other non-current assets 1,081 1,198 1,299 1,399 Total assets 38,011 38,294 38,984 39,701 Current liabilities 4,538 4,629 5,095 5,554 Total liabilities 5,994 6,278 6,968 7,685 Shareholders' equity 32,016 32,016 32,016 32,016 Minority interests 0 0 0 0 Total liabilities & equity 38,010 38,294 38,984 39,701 Cash Flow (Rp bn) 12/15A 12/16E 12/17E 12/18E EBIT 14,048 15,450 16,271 17,419 Net interest (69) 748 586 457 Tax paid (3,569) (3,874) (4,063) (4,350) Working capital (13,602) 388 191 434 Other cash & non-cash items 373 545 539 599 Our Blue Sky Scenario (Rp) 6,000 Operating cash flow (2,820) 13,256 13,525 14,560 Our Blue sky scenario TP Rp6,000 implies P/E of 54.5x on the back Capex (781) (1,200) (1,200) (1,200) of higher volume of cigarette sticks sold Free cash flow to the firm (3,601) 12,056 12,325 13,360 Investing cash flow (1,020) (1,316) (1,300) (1,299) Our Grey Sky Scenario (Rp) 3,000 Equity raised 20,413 0 0 0 Our Grey sky scenario TP Rp3,000 implies P/E of 27.3x on the back Dividends paid (12,259) (12,389) (12,794) (13,527) of weaker volume of cigarette sticks sold Financing cash flow 5,493 (12,196) (12,571) (13,268) Total cash flow 1,654 (256) (346) (7) Share price performance Adjustments 0 0 0 0 Net change in cash 1,654 (256) (346) (7) Per share 12/15A 12/16E 12/17E 12/18E Shares (wtd avg.) (mn) 116,318 116,318 116,318 116,318 EPS (Credit Suisse) (Rp) 90 106 110 116 DPS (Rp) 105 107 110 116 Operating CFPS (Rp) -24 114 116 125 Earnings 12/15A 12/16E 12/17E 12/18E Growth (%) Sales revenue 10.4 7.7 6.2 6.5 EBIT 1.8 10.0 5.3 7.1 EPS (4.6) 18.2 3.8 5.7 Margins (%) EBITDA 16.2 16.6 16.5 16.6 EBIT 15.8 16.1 16.0 16.1 The price relative chart measures performance against the JSX COMPOSITE Valuation (x) 12/15A 12/16E 12/17E 12/18E INDEX which closed at 5,567.13 on 24-Mar-2017 P/E 44.6 37.8 36.4 34.4 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 P/B 14.53 14.53 14.53 14.53 Dividend yield (%) 2.6 2.7 2.7 2.9 EV/sales 5.2 4.8 4.6 4.3 EV/EBITDA 32.1 29.1 27.6 25.8 EV/EBIT 33.0 30.1 28.6 26.7 ROE analysis (%) 12/15A 12/16E 12/17E 12/18E ROE 45.8 38.5 40.0 42.2 ROIC 38.5 38.0 39.5 41.9 Credit ratios 12/15A 12/16E 12/17E 12/18E Net debt/equity (%) (3.9) (3.0) (1.8) (1.7) Net debt/EBITDA (x) (0.09) (0.06) (0.03) (0.03)
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 90 27 March 2017
Asia Pacific/Indonesia Tobacco
Gudang Garam (GGRM.JK / GGRM IJ) Rating NEUTRAL Price (24-Mar-17, Rp) 64,925 COMPANY UPDATE Target price (Rp) 74,100 Upside/downside (%) 14.1
Mkt cap (Rp/US$ bn) 124,921 / 9.37 Getting more popular, according to our survey Enterprise value (Rp bn) 142,180 Number of shares (mn) 1,924 ■ PT Gudang Garam Tbk (GGRM) is Indonesia’s second largest tobacco Free float (%) 23.6 producer. GGRM produces kretek cigarettes with brands such as GG Surya, 52-wk price range (Rp) 77,500-59,300 ADTO-6M (US$ mn) 3.9 GG FIM, GG Merah, GG Pro Mild, and GG Mild. Target price is for 12 months. ■ According to our consumer survey, GGRM has increased overall
Research Analysts popularity among our respondents, from 25% last year to 30% this year.
Ella Nusantoro GGRM’s product has been especially strong in rural areas and amongst the 62 21 2553 7917 lower segment of the income bracket. [email protected] ■ Year to date March 2017, we have seen another price increase from GGRM in the middle of February. The increase is expected given the higher excise duty (around 9% increase YoY) and higher VAT costs (9.1% of banderole prices vs 8.7% last year). The new excise duty and VAT tariffs became effective on 1 January 2017. ■ There is no price increase for GG Surya 16 and GG Mild 16, which we believe is due to weaker volumes. The price increase for GG Merah is around 2% and that for GG FIM is 1.4%, while the price for GG Pro Mild increased by 2.5%. At the same time, the company is also adjusting its banderole prices. ■ As for FY16, GG reported around 3% lower volume, whereas the industry’s estimated decline was by 0.8%. ■ We have a NEUTRAL rating on the stock, as we believe that in light of the government's need to collect more tax revenue, the cigarette sector may not see much benefit. Also, with the weak volumes, GG might continue to be sensitive on increasing its products.
Share price performance Financial and valuation metrics
Year 12/15A 12/16E 12/17E 12/18E Revenue (Rp bn) 70,365.6 76,363.2 84,248.5 91,612.0 EBITDA (Rp bn) 11,712.7 12,323.9 13,289.0 14,626.6 EBIT (Rp bn) 9,997.6 10,475.5 11,307.2 12,511.5 Net profit (Rp bn) 6,368.4 6,937.0 7,650.3 8,719.5 EPS (CS adj.) (Rp) 3,310 3,605 3,976 4,532 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 3,489 3,899 4,404 EPS growth (%) 17.8 8.9 10.3 14.0 The price relative chart measures performance against the P/E (x) 19.6 18.0 16.3 14.3 JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 1.2 4.0 2.2 2.3 24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 12.2 11.6 10.5 9.3 Rp13,328/US$1 P/B (x) 3.30 3.14 2.79 2.47
Performance 1M 3M 12M ROE (%) 18.0 17.8 18.1 18.3 Absolute (%) 4.4 7.7 7.1 Net debt/equity (%) 46.9 45.1 32.8 20.7
Relative (%) 0.5 -3.1 -8.2 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 91 27 March 2017
Gudang Garam (GGRM.JK / GGRM IJ) Price (24 Mar 2017): Rp64,925; Rating: NEUTRAL; Target Price: Rp74,100; Analyst: Ella Nusantoro Income Statement (Rp bn) 12/15A 12/16E 12/17E 12/18E Company Background Sales revenue 70,366 76,363 84,248 91,612 Gudang Garam is Indonesia’s second largest tobacco producer, with Cost of goods sold 54,880 59,941 66,384 71,860 an estimated market share of 21.5% in FY15. It produces kretek EBITDA 11,713 12,324 13,289 14,627 cigarettes with brands such as GG Surya, GG FIM, GG Merah, GG EBIT 9,998 10,475 11,307 12,512 Pro Mild, and GG Mild. Net interest expense/(inc.) 1,430 1,202 1,080 855 Recurring PBT 8,568 9,274 10,227 11,657 Blue/Grey Sky Scenario Profit after tax 6,386 6,955 7,670 8,742 Reported net profit 6,368 6,937 7,650 8,719 Net profit (Credit Suisse) 6,368 6,937 7,650 8,719 Balance Sheet (Rp bn) 12/15A 12/16E 12/17E 12/18E Cash & cash equivalents 2,726 1,502 1,753 1,508 Current receivables 1,568 1,989 2,251 2,346 Inventories 37,256 38,644 40,791 42,518 Other current assets 1,019 618 682 742 Current assets 42,568 42,753 45,477 47,114 Property, plant & equip. 20,106 20,258 20,276 20,161 Investments 0 0 0 0 Intangibles 0 0 0 0 Other non-current assets 830 897 989 1,088 Total assets 63,505 63,908 66,743 68,363 Current liabilities 24,045 22,381 19,979 15,642 Total liabilities 25,498 23,966 21,724 17,576 Shareholders' equity 37,900 39,834 44,791 50,624 Minority interests 108 108 108 108 Total liabilities & equity 63,505 63,908 66,623 68,308 Cash Flow (Rp bn) 12/15A 12/16E 12/17E 12/18E EBIT 9,998 10,475 11,307 12,512 Net interest (1,430) (1,202) (1,080) (855) Tax paid (2,182) (2,318) (2,557) (2,914) Working capital (5,050) (2,011) (1,875) (1,720) Other cash & non-cash items 268 628 882 1,237 Our Blue Sky Scenario (Rp) 77,670 Operating cash flow 1,604 5,572 6,677 8,260 Our blue sky scenario target price of Rp77,670 equates to 21.7x Capex (2,848) (2,000) (2,000) (2,000) 2016E P/E. Free cash flow to the firm (1,244) 3,572 4,677 6,260 Investing cash flow (2,950) (2,066) (2,093) (2,098) Our Grey Sky Scenario (Rp) 70,445 Equity raised 0 0 0 0 Our grey sky scenario target price of Rp70,445 equates to 19.7x Dividends paid (1,534) (5,003) (2,694) (2,886) 2016E P/E. Financing cash flow 990 (5,931) (5,534) (7,196) Total cash flow (357) (2,425) (949) (1,034) Share price performance Adjustments 0 0 0 0 Net change in cash (357) (2,425) (949) (1,034) Per share 12/15A 12/16E 12/17E 12/18E Shares (wtd avg.) (mn) 1,924 1,924 1,924 1,924 EPS (Credit Suisse) (Rp) 3,310 3,605 3,976 4,532 DPS (Rp) 800 2,600 1,400 1,500 Operating CFPS (Rp) 834 2,896 3,470 4,293 Earnings 12/15A 12/16E 12/17E 12/18E Growth (%) Sales revenue 7.9 8.5 10.3 8.7 EBIT 15.9 4.8 7.9 10.7 EPS 17.8 8.9 10.3 14.0 Margins (%) EBITDA 16.6 16.1 15.8 16.0 EBIT 14.2 13.7 13.4 13.7 The price relative chart measures performance against the JSX COMPOSITE Valuation (x) 12/15A 12/16E 12/17E 12/18E INDEX which closed at 5,567.13 on 24-Mar-2017 P/E 19.6 18.0 16.3 14.3 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 P/B 3.30 3.14 2.79 2.47 Dividend yield (%) 1.2 4.0 2.2 2.3 EV/sales 2.0 1.9 1.7 1.5 EV/EBITDA 12.2 11.6 10.5 9.3 EV/EBIT 14.3 13.6 12.4 10.8 ROE analysis (%) 12/15A 12/16E 12/17E 12/18E ROE 18.0 17.8 18.1 18.3 ROIC 14.1 13.8 14.4 15.5 Credit ratios 12/15A 12/16E 12/17E 12/18E Net debt/equity (%) 46.9 45.1 32.8 20.7 Net debt/EBITDA (x) 1.52 1.46 1.11 0.72
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 92 27 March 2017
Asia Pacific/Indonesia Department Stores
Matahari Department Store (LPPF.JK / LPPF IJ) Rating OUTPERFORM Price (24-Mar-17, Rp) 13,900 COMPANY UPDATE Target price (Rp) 16,100 Upside/downside (%) 15.8
Mkt cap (Rp/US$ bn) 40,559 / 3.04 Riding the improving consumer trend Enterprise value (Rp bn) 38,830 Number of shares (mn) 2,918 ■ Largest department store operator in town. Matahari Department store is Free float (%) 65.3 one of the largest department stores in Indonesia with 43% market share (as 52-wk price range (Rp) 21,500-11,725 ADTO-6M (US$ mn) 8.8 of 2015), according to Euromonitor. Matahari operates 151 stores pan- Target price is for 12 months. Indonesia, with a high exposure to ex-Java (61 stores). The company
recently recorded 5.5% same-store sales growth in 2016, down from 6.8% in Research Analysts
2015 on the back of slower economic growth and tighter competition. Ella Nusantoro 62 21 2553 7917 ■ Sweet spot of the market. Matahari caters to the best segment in Indonesia, [email protected] the rising middle class segment. This is the sweet spot in the Indonesian Benny Kurniawan consumer space. The people in this segment tend to be young individuals
who are brand sensitive and would want to upgrade themselves. ■ Strong private label brand. Private labels made up 38% of Matahari Department stores’ gross sales, and it continued to perform well on the back of strong brand recognition (especially Nevada) and continuous innovation. Matahari recently launched its private label initiative, ‘gap brands’. Gap brands aim to cater to the widening price gap between consignment and private label merchandise. Our consumer survey this year showed that the consumer’s preference towards Nevada remained high, at 7%. ■ OUTPERFORM. Although competition is expected to remain tough, especially from specialty stores, we believe the improvement in commodity prices will eventually trickle down and aid consumption. With 38% of its gross sales originating from the ex-Java region, we believe Matahari started to book improvements in 2H16. Its current valuation at 18x 2017E P/E also looks reasonably attractive given that the company is debt-free and is the best department store operator in town.
Share price performance Financial and valuation metrics
Year 12/16A 12/17E 12/18E 12/19E Revenue (Rp bn) 9,897.0 11,251.7 12,567.7 13,868.2 EBITDA (Rp bn) 2,784.4 3,026.3 3,284.7 3,513.6 EBIT (Rp bn) 2,528.1 2,754.8 2,995.9 3,205.3 Net profit (Rp bn) 2,019.7 2,242.6 2,447.8 2,646.0 EPS (CS adj.) (Rp) 692.17 768.58 838.89 906.82 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 752.89 837.02 910.70 EPS growth (%) 13.4 11.0 9.1 8.1 The price relative chart measures performance against the P/E (x) 20.1 18.1 16.6 15.3 JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 3.1 3.5 3.9 4.2 24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 14.0 12.8 11.6 10.5 Rp13,328/US$1 P/B (x) 7.47 6.48 5.69 5.03
Performance 1M 3M 12M ROE (%) 40.0 38.4 36.6 34.8 Absolute (%) -5.8 -2.6 -22.8 Net debt/equity (%) Net cash Net cash Net cash Net cash
Relative (%) -9.7 -13.4 -38.1 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 93 27 March 2017
Matahari Department Store (LPPF.JK / LPPF IJ) Price (24 Mar 2017): Rp13,900; Rating: OUTPERFORM; Target Price: Rp16,100; Analyst: Ella Nusantoro Income Statement (Rp bn) 12/16A 12/17E 12/18E 12/19E Company Background Sales revenue 9,897 11,252 12,568 13,868 Matahari Department Store operates department stores across Cost of goods sold 3,685 4,357 4,933 5,444 Indonesia. It offers various fashion items for men, women and kids, EBITDA 2,784 3,026 3,285 3,514 including clothing, bags, shoes and accessories. EBIT 2,528 2,755 2,996 3,205 Net interest expense/(inc.) 1 (48) (64) (102) Blue/Grey Sky Scenario Recurring PBT 2,533 2,803 3,060 3,308 Profit after tax 2,020 2,243 2,448 2,646 Reported net profit 2,020 2,243 2,448 2,646 Net profit (Credit Suisse) 2,020 2,243 2,448 2,646 Balance Sheet (Rp bn) 12/16A 12/17E 12/18E 12/19E Cash & cash equivalents 1,713 1,782 2,607 3,528 Current receivables 95 98 112 122 Inventories 995 1,197 1,319 1,414 Other current assets 171 213 238 264 Current assets 2,974 3,291 4,277 5,328 Property, plant & equip. 1,060 1,168 1,311 1,492 Investments 0 0 0 0 Intangibles 0 0 0 1 Other non-current assets 825 1,524 1,612 1,699 Total assets 4,859 5,983 7,200 8,520 Current liabilities 2,588 2,842 3,136 3,472 Total liabilities 3,004 3,299 3,639 4,025 Shareholders' equity 5,427 6,256 7,133 8,067 Minority interests 0 0 0 0 Total liabilities & equity 4,859 5,983 7,200 8,519 Cash Flow (Rp bn) 12/16A 12/17E 12/18E 12/19E EBIT 2,528 2,755 2,996 3,205 Net interest (93) (1) 48 64 Tax paid 0 0 0 0 Working capital 214 7 133 205 Our Blue Sky Scenario (Rp) 19,000 Other cash & non-cash items (118) (239) (308) (315) Our blue sky target price of Rp19,000 implies 8% SSSG on the back Operating cash flow 2,531 2,521 2,869 3,160 of better-than-expected macroeconomic conditions. Capex (360) (380) (431) (490) Free cash flow to the firm 2,172 2,141 2,438 2,670 Our Grey Sky Scenario (Rp) 12,500 Investing cash flow (507) (1,079) (519) (577) Our grey sky scenario target price of Rp12,500 implies the valuation Equity raised 0 0 0 0 derates as a result of weaker-than-expected SSSG on the back of Dividends paid (1,247) (1,414) (1,570) (1,714) political overhang. Financing cash flow (1,259) (1,373) (1,524) (1,664) Total cash flow 766 69 825 920 Share price performance Adjustments 0 0 0 0 Net change in cash 766 69 825 920 Per share 12/16A 12/17E 12/18E 12/19E Shares (wtd avg.) (mn) 2,918 2,918 2,918 2,918 EPS (Credit Suisse) (Rp) 692 769 839 907 DPS (Rp) 427 485 538 587 Operating CFPS (Rp) 868 864 983 1,083 Earnings 12/16A 12/17E 12/18E 12/19E Growth (%) Sales revenue 9.9 13.7 11.7 10.3 EBIT 8.5 9.0 8.8 7.0 EPS 13.4 11.0 9.1 8.1 Margins (%) EBITDA 28.1 26.9 26.1 25.3 EBIT 25.5 24.5 23.8 23.1 The price relative chart measures performance against the JSX COMPOSITE Valuation (x) 12/16A 12/17E 12/18E 12/19E INDEX which closed at 5,567.13 on 24-Mar-2017 P/E 20.1 18.1 16.6 15.3 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 P/B 7.47 6.48 5.69 5.03 Dividend yield (%) 3.1 3.5 3.9 4.2 EV/sales 3.9 3.4 3.0 2.7 EV/EBITDA 14.0 12.8 11.6 10.5 EV/EBIT 15.4 14.1 12.7 11.6 ROE analysis (%) 12/16A 12/17E 12/18E 12/19E ROE 40.0 38.4 36.6 34.8 ROIC 1335.5 422.1 258.3 266.8 Credit ratios 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) (92.3) (66.4) (73.2) (78.5) Net debt/EBITDA (x) (0.62) (0.59) (0.79) (1.00)
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 94 27 March 2017
Asia Pacific/Indonesia Retailing Conglomerates
Mitra Adiperkasa (MAPI.JK / MAPI IJ) Rating OUTPERFORM Price (24-Mar-17, Rp) 5,925 COMPANY UPDATE Target price (Rp) 6,400 Upside/downside (%) 8.0
Mkt cap (Rp/US$ bn) 9,836 / 0.74 Diverse brand portfolio but well-liked by consumers Enterprise value (Rp bn) 12,408 Number of shares (mn) 1,660 ■ Mitra Adiperkasa (“MAPI”) operates three lines of businesses, (1) Free float (%) 44.0 specialty stores, (2) department stores and (3) food and beverage. MAPI’s 52-wk price range (Rp) 6,075-3,780 ADTO-6M (US$ mn) 0.4 target market is geared towards the higher-end of the population and more Target price is for 12 months. than 60% of its space is in Jakarta. Our consumer survey this year indicates
that the high income bracket is the only segment seeing a recovery this year Research Analysts
and this should be positive for MAPI. Ella Nusantoro 62 21 2553 7917 ■ MAPI’s specialty stores cater to all age groups and segments, boasting [email protected] over 150 brands with top contributions from inditex group brands namely Zara, Benny Kurniawan Stradivarius, Pull & Bear and Bershka. MAPI also has its “active wear” division,
which includes brands such as Adidas, Nike, New Balance and many more. Our consumer survey this year indicates that the respondents’ preference for Zara amongst other branded fashion goods remains high at 5.4%, while Adidas and Nike are the top preference for sports shoes for our respondents. ■ MAPI also operates the Starbucks chain in Indonesia, which has seen its store count growing rapidly over the past ten years. Starbucks is seen as the pioneer of the coffee culture in Indonesia and with the latest restructuring with General Atlantic, we expect its store count growth to expand even faster. ■ We expect MAPI to be more prudent in brand acquisition going forward, given that it closed a few non-performing brands last year. Nevertheless, the growth trajectory for the company should remain high given the rising need of Indonesian consumers for branded fashion and sports goods. Risk on the company includes significant depreciation of the IDR as the company imports most of its content.
Share price performance Financial and valuation metrics
Year 12/15A 12/16E 12/17E 12/18E Revenue (Rp bn) 12,832.8 14,133.2 16,325.6 18,844.2 EBITDA (Rp bn) 1,133.1 1,324.8 1,596.3 1,805.5 EBIT (Rp bn) 536.1 706.7 958.0 1,147.0 Net profit (Rp bn) 37.3 202.7 350.4 555.6 EPS (CS adj.) (Rp) 22.49 122.08 211.11 334.72 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 118.08 207.74 281.97 EPS growth (%) (49.1) 442.8 72.9 58.6 The price relative chart measures performance against the P/E (x) 263.4 48.5 28.1 17.7 JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 0.0 0.0 0.3 0.5 24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 11.5 9.4 7.6 6.4 Rp13,328/US$1 P/B (x) 3.90 3.62 3.24 2.78
Performance 1M 3M 12M ROE (%) 1.5 7.7 12.2 16.9 Absolute (%) 6.8 23.4 28.0 Net debt/equity (%) 106.0 82.6 64.1 43.7
Relative (%) 2.9 12.7 12.6 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 95 27 March 2017
Mitra Adiperkasa (MAPI.JK / MAPI IJ) Price (24 Mar 2017): Rp5,925; Rating: OUTPERFORM; Target Price: Rp6,400; Analyst: Ella Nusantoro Income Statement (Rp bn) 12/15A 12/16E 12/17E 12/18E Company Background Sales revenue 12,833 14,133 16,326 18,844 MAPI operates department stores (SEIBU, SOGO, Galleries Cost of goods sold 7,050 7,671 8,833 10,164 Lafayette), Specialy stores (mainly fashion, which includes: ZARA, EBITDA 1,133 1,325 1,596 1,806 Lacoste, etc) and F&B division (Starbucks, Genki Sushi, Godiva). EBIT 536 707 958 1,147 Net interest expense/(inc.) 388 369 374 292 Blue/Grey Sky Scenario Recurring PBT 148 338 584 855 Profit after tax 30 203 350 556 Reported net profit 37 203 350 556 Net profit (Credit Suisse) 37 203 350 556 Balance Sheet (Rp bn) 12/15A 12/16E 12/17E 12/18E Cash & cash equivalents 504 1,990 1,787 1,699 Current receivables 568 670 765 873 Inventories 3,356 3,531 3,993 4,455 Other current assets 1,268 1,158 1,270 1,337 Current assets 5,696 7,348 7,814 8,364 Property, plant & equip. 2,685 2,466 2,208 1,928 Investments 497 497 497 497 Intangibles 38 38 38 38 Other non-current assets 567 619 705 804 Total assets 9,483 10,970 11,264 11,631 Current liabilities 3,291 3,628 4,071 4,355 Total liabilities 6,508 7,748 7,721 7,586 Shareholders' equity 2,521 2,719 3,039 3,543 Minority interests 0 0 0 0 Total liabilities & equity 9,483 10,970 11,264 11,631 Cash Flow (Rp bn) 12/15A 12/16E 12/17E 12/18E EBIT 536 707 958 1,147 Net interest (388) (369) (374) (292) Tax paid 0 0 0 0 Working capital (464) 58 (126) (204) Our Blue Sky Scenario (Rp) 8,600 Other cash & non-cash items 571 483 510 517 Our blue sky scenario’s TP of Rp8,600/share implies improvement Operating cash flow 255 878 968 1,168 in gross margins level to 48% in 2017-21E. Capex (590) (420) (404) (404) Free cash flow to the firm (335) 458 564 764 Our Grey Sky Scenario (Rp) 4,600 Investing cash flow (651) (453) (466) (477) Our grey sky scenario’s target price of Rp4,600/share implies Equity raised (51) 48 0 0 weaker gross margins as a result of discounting. Dividends paid 0 (4) (30) (53) Financing cash flow 539 1,061 (705) (779) Share price performance Total cash flow 143 1,486 (204) (88) Adjustments 0 0 0 0 Net change in cash 143 1,486 (204) (88) Per share 12/15A 12/16E 12/17E 12/18E Shares (wtd avg.) (mn) 1,660 1,660 1,660 1,660 EPS (Credit Suisse) (Rp) 22 122 211 335 DPS (Rp) 0 2 18 32 Operating CFPS (Rp) 154 529 583 704 Earnings 12/15A 12/16E 12/17E 12/18E Growth (%) Sales revenue 8.5 10.1 15.5 15.4 EBIT (2.0) 31.8 35.6 19.7 EPS (49.1) 442.8 72.9 58.6 Margins (%) EBITDA 8.8 9.4 9.8 9.6 The price relative chart measures performance against the JSX COMPOSITE EBIT 4.2 5.0 5.9 6.1 INDEX which closed at 5,567.13 on 24-Mar-2017 Valuation (x) 12/15A 12/16E 12/17E 12/18E On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 P/E 263.4 48.5 28.1 17.7 P/B 3.90 3.62 3.24 2.78 Dividend yield (%) 0.0 0.0 0.3 0.5 EV/sales 1.0 0.9 0.7 0.6 EV/EBITDA 11.5 9.4 7.6 6.4 EV/EBIT 24.2 17.7 12.6 10.1 ROE analysis (%) 12/15A 12/16E 12/17E 12/18E ROE 1.5 7.7 12.2 16.9 ROIC 1.9 7.1 9.8 12.8 Credit ratios 12/15A 12/16E 12/17E 12/18E Net debt/equity (%) 106.0 82.6 64.1 43.7 Net debt/EBITDA (x) 2.78 2.01 1.42 0.98
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 96 27 March 2017
Asia Pacific/Indonesia Integrated Telecommunication Services
PT Telkom (Telekomunikasi Indo.) (TLKM.JK
/ TLKM IJ) Rating OUTPERFORM Price (24-Mar-17, Rp) 4,080 COMPANY UPDATE Target price (Rp) 4,750 Upside/downside (%) 16.4
Mkt cap (Rp/US$ bn) 411,264 / 30.86 Re-accelerating growth in TLKM and improving Enterprise value (Rp bn) 410,929 Number of shares (mn) 100,800 profitability in fixed line Free float (%) 48.8 52-wk price range (Rp) 4,550-3,285 ■ Telkomsel's revenue grew by 13.0% YoY into 4Q16, in a re-acceleration ADTO-6M (US$ mn) 24.6 from the 11.4% YoY growth delivered in 3Q16, as Telkomsel successfully Target price is for 12 months. pushed through further tariff increases. The result also shows that
Research Analysts Telkomsel's 4G 'combo' packages—launched in mid-2016 in a competitive
Colin McCallum, CA response to Indosat and XL's packages—were skillfully constructed to 852 2101 6514 prevent revenue erosion and create an ARPU uplift. [email protected] ■ Across FY16 as a whole Telkomsel's revenue grew by 14.0%, in line with our forecast. Telkomsel was able to increase voice revenue by 10.1% YoY, in spite of cannibalisation from OTT services such as Whatsapp, while declines in SMS revenue were limited to 3.3% YoY. Of course, this small decline was more than offset by 36.6% YoY growth in data revenues and 38.8% YoY growth in digital revenues. Importantly, there is still some room for this to continue; Telkomsel's 3G/4G smartphone subscriber base increased 33.9% YoY to 82.6 mn, representing just 47.4% of the total subscriber base. ■ The visibility of quarterly results of the fixed line business is not as good, particularly on a quarterly basis. But the fixed line YoY revenue figure looked fairly strong, with revenue growing by 11.8% YoY into 4Q16. We believe that the primary driver is the growth of the fibre broadband IndiHome business. The total subscriber base (both fibre and xDSL) reached 1.624 mn as at 31 December, up 52.1% YoY, while ARPU was stated as Rp341,000, up 8.9% QoQ from Rp313,000 in 3Q16. ■ With another very strong Telkomsel contribution, and with Telkom fixed line contributing less of a drag on profitability, consolidated EBITDA and consolidated net profit grew by 15.7% YoY and 24.9% YoY across FY16, respectively. PT Telkom remains the only liquid (large cap) way to invest in the successful monetisation of Indonesia's data boom.
Share price performance Financial and valuation metrics
Year 12/16A 12/17E 12/18E 12/19E Revenue (Rp bn) 116,333.0 129,438.4 139,193.8 145,222.1 EBITDA (Rp bn) 59,498.0 65,367.2 70,179.8 73,086.6 EBIT (Rp bn) 40,966.0 45,142.2 48,661.0 50,794.6 Net profit (Rp bn) 19,352.0 23,317.7 25,599.3 27,225.8 EPS (CS adj.) (Rp) 196.19 240.14 263.63 280.39 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 227.95 257.07 290.27 EPS growth (%) 25.9 22.4 9.8 6.4 The price relative chart measures performance against the P/E (x) 20.8 17.0 15.5 14.6 JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 3.1 3.5 3.9 5.5 24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 6.9 6.2 5.7 5.4 Rp13,328/US$1 P/B (x) 4.69 4.23 3.81 3.62
Performance 1M 3M 12M ROE (%) 24.3 26.2 25.9 25.5 Absolute (%) 5.2 10.6 23.3 Net debt/equity (%) 0.5 Net cash Net cash Net cash
Relative (%) 1.3 -0.2 7.9 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 97 27 March 2017
PT Telkom (Telekomunikasi Indo.) (TLKM.JK / TLKM IJ) Price (24 Mar 2017): Rp4,080; Rating: OUTPERFORM; Target Price: Rp4,750; Analyst: Colin McCallum Income Statement (Rp bn) 12/16A 12/17E 12/18E 12/19E Company Background Sales revenue 116,333 129,438 139,194 145,222 PT Telekomunikasi Indonesia, Tbk. (TELKOM) is an integrated Cost of goods sold 56,835 64,071 69,014 72,136 telecommunication and network services provider in Indonesia. EBITDA 59,498 65,367 70,180 73,087 EBIT 40,966 45,142 48,661 50,795 Blue/Grey Sky Scenario Net interest expense/(inc.) 1,094 884 552 139 Recurring PBT 38,189 45,002 48,938 51,560 Profit after tax 29,172 33,952 36,904 38,870 Reported net profit 19,352 23,318 25,599 27,226 Net profit (Credit Suisse) 19,352 23,318 25,599 27,226 Balance Sheet (Rp bn) 12/16A 12/17E 12/18E 12/19E Cash & cash equivalents 31,238 35,178 44,518 51,705 Current receivables 0 0 0 0 Inventories 0 0 0 0 Other current assets 16,463 18,339 19,776 20,663 Current assets 47,701 53,517 64,294 72,368 Property, plant & equip. 114,498 122,665 125,880 125,846 Investments 1,847 2,297 2,808 3,370 Intangibles 3,089 3,089 3,089 3,089 Other non-current assets 12,476 12,476 12,476 12,476 Total assets 179,611 194,045 208,546 217,150 Current liabilities 39,762 42,612 45,177 46,589 Total liabilities 74,067 77,579 80,144 81,556 Shareholders' equity 84,384 93,711 103,951 109,396 Minority interests 21,160 22,755 24,451 26,197 Total liabilities & equity 179,611 194,045 208,546 217,150 Cash Flow (Rp bn) 12/16A 12/17E 12/18E 12/19E EBIT 40,966 45,142 48,661 50,795 Net interest (1,094) (884) (552) (139) Tax paid (9,017) (11,051) (12,035) (12,690) Our Blue Sky Scenario (Rp) 5,399 Working capital (5,654) 1,736 1,228 625 Better-than-expected data monetisation and cost control drive a blue Other cash & non-cash items 12,924 20,225 21,519 22,292 sky valuation of 8.1x EV/EBITDA. Operating cash flow 38,125 55,169 58,822 60,883 Capex (27,885) (28,392) (24,733) (22,259) Our Grey Sky Scenario (Rp) 4,074 Free cash flow to the firm 21,502 25,041 32,861 37,999 Worse-than-expected data monetisation and cost control drive a Investing cash flow (28,756) (28,392) (24,733) (22,259) grey sky valuation of 6.1x EV/EBITDA. Equity raised 3,442 0 0 0 Dividends paid (18,248) (22,836) (24,750) (31,437) Share price performance Financing cash flow (9,066) (22,836) (24,750) (31,437) Total cash flow 303 3,940 9,339 7,187 Adjustments 0 0 0 (0) Net change in cash 303 3,940 9,339 7,187 Per share 12/16A 12/17E 12/18E 12/19E Shares (wtd avg.) (mn) 98,639 97,101 97,101 97,101 EPS (Credit Suisse) (Rp) 196 240 264 280 DPS (Rp) 128 144 158 224 Operating CFPS (Rp) 387 568 606 627 Earnings 12/16A 12/17E 12/18E 12/19E Growth (%) Sales revenue 13.5 11.3 7.5 4.3 EBIT 24.6 10.2 7.8 4.4 EPS 25.9 22.4 9.8 6.4 Margins (%) The price relative chart measures performance against the JSX COMPOSITE EBITDA 51.1 50.5 50.4 50.3 INDEX which closed at 5,567.13 on 24-Mar-2017 EBIT 35.2 34.9 35.0 35.0 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 Valuation (x) 12/16A 12/17E 12/18E 12/19E P/E 20.8 17.0 15.5 14.6 P/B 4.69 4.23 3.81 3.62 Dividend yield (%) 3.1 3.5 3.9 5.5 EV/sales 3.5 3.2 2.9 2.7 EV/EBITDA 6.9 6.2 5.7 5.4 EV/EBIT 10.1 9.0 8.2 7.7 ROE analysis (%) 12/16A 12/17E 12/18E 12/19E ROE 24.3 26.2 25.9 25.5 ROIC 30.8 31.1 32.1 33.1 Credit ratios 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) 0.5 (2.9) (9.9) (14.7) Net debt/EBITDA (x) 0.01 (0.05) (0.18) (0.27)
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 98 27 March 2017
Asia Pacific/Indonesia Wireless Telecommunication Services
XL Axiata Tbk (EXCL.JK / EXCL IJ) Rating OUTPERFORM [V] Price (24-Mar-17, Rp) 3,270 COMPANY UPDATE Target price (Rp) 3,950 Upside/downside (%) 20.8
Mkt cap (Rp/US$ bn) 34,950 / 2.62 Signs of revenue recovery Enterprise value (Rp bn) 50,204 Number of shares (mn) 10,688 ■ Despite net cellular revenue declining by 5.5% across FY16, XL's revenue Free float (%) 20.1 trajectory has now bottomed and is improving. XL's net cellular revenue grew by 52-wk price range (Rp) 3,946-2,040 ADTO-6M (US$ mn) 2.0 0.6% QoQ into 4Q16. The key revenue growth driver is the 'XL Xtra' 4G Target price is for 12 months. packages, initially launched in June 2016. Together with the launch of U900, the [V] = Stock Considered Volatile (see Disclosure Appendix) XL Xtra packages also contributed to 2.7% QoQ growth in the average size of
Research Analysts the subscriber base, as XL enjoyed some success in rebuilding scale.
Colin McCallum, CA ■ XL's shift in strategy in 2015, together with the relatively cost-efficient 852 2101 6514 [email protected] nature of the 4G rollout (especially when compared with 3G), seems to have successfully improved the company's cost structure. However, we noted in
2Q16 that a side-effect of XL's strategy of reducing SIM starter pack sales was the loss of support from traditional resellers, and this prompted XL to increase commissions in 3Q16. Costs continued to be an issue in 4Q16, with EBITDA declining 8.0% QoQ and 21.5% YoY thanks to a sharp rise in A&P expenses. Across FY16 as a whole, EBITDA therefore declined by 4.0%. ■ Over the last 18 months XL has made significant progress on strengthening its balance sheet (through rights issue and a tower sale) and reducing its heavy USD-denominated debt exposure. In FY16 as a whole, XL achieved net profit of just Rp376 bn, despite recording Rp1.3 tn in tower gains in FY16. ■ For XL's shares to recover, revenue will need to continue to rise to cover the heavy fixed cost base. Our view is that there is enough data volume growth in Indonesia such that, if unlimited data plans continue to be avoided, all of the 'big 3' operators should be able to grow revenue. On valuation, XL does not yet look overly attractive on P/E, given the aforementioned heavy fixed cost base. However, the expected cash flow yield in FY17 is supportive. Indeed, XL's free cash flow yield is set to improve further in FY18. It is this expectation, based on revenue rising and the capex-to-sales ratio easing to 23.0% as the 4G rollout is completed, that drives our target price of Rp3,950.
Share price performance Financial and valuation metrics
Year 12/16A 12/17E 12/18E 12/19E Revenue (Rp bn) 20,574.7 22,524.4 23,976.2 25,257.2 EBITDA (Rp bn) 8,055.8 8,863.5 9,433.6 10,042.5 EBIT (Rp bn) 12.0 1,283.5 1,723.7 1,792.8 Net profit (Rp bn) 375.3 588.9 984.2 1,114.3 EPS (CS adj.) (Rp) 38.35 55.15 92.18 104.36 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 48.14 112.91 170.30 EPS growth (%) n.m. 43.8 67.1 13.2 The price relative chart measures performance against the P/E (x) 85.3 59.3 35.5 31.3 JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 0.0 0.5 2.3 2.9 24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 6.3 5.5 4.9 4.3 Rp13,328/US$1 P/B (x) 1.51 1.61 1.60 1.59
Performance 1M 3M 12M ROE (%) 2.1 2.7 4.5 5.1 Absolute (%) 4.5 45.3 -16.0 Net debt/equity (%) 73.7 64.5 53.7 39.4
Relative (%) 0.6 34.6 -31.3 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 99 27 March 2017
XL Axiata Tbk (EXCL.JK / EXCL IJ) Price (24 Mar 2017): Rp3,270; Rating: OUTPERFORM [V]; Target Price: Rp3,950; Analyst: Colin McCallum Income Statement (Rp bn) 12/16A 12/17E 12/18E 12/19E Company Background Sales revenue 20,575 22,524 23,976 25,257 XL Axiata is involved in the provision of telephony services in Cost of goods sold 12,519 13,661 14,543 15,215 Indonesia. EBITDA 8,056 8,864 9,434 10,043 EBIT 12 1,284 It is 1,724 1,793 Blue/Grey Sky Scenario Net interest expense/(inc.) 1,533 998this 911 807 Recurring PBT 185 expectation,785 1,312 1,486 Profit after tax 375 based589 on 984 1,114 Reported net profit 375 revenue589 984 1,114 Net profit (Credit Suisse) 375 rising 589and 984 1,114 Balance Sheet (Rp bn) 12/16A the capex12/17E-to- 12/18E 12/19E Cash & cash equivalents 1,400 sales2,084 ratio 3,316 5,393 Current receivables 0 easing to0 0 0 Inventories 0 23.0% as the0 0 0 Other current assets 5,407 4G rollout5,919 is 6,301 6,637 Current assets 6,807 completed,8,004 9,617 12,030 Property, plant & equip. 33,183 that33,187 drives 32,297 30,753 Investments 0 our target0 0 0 Intangibles 6,108 price5,282 of 4,455 3,306 Other non-current assets 8,798 Rp4,080.1038,798 8,798 8,798 Total assets 54,896 55,270 55,168 54,888 Current liabilities 14,477 12,846 13,036 13,183 Total liabilities 33,687 33,649 33,349 32,958 Shareholders' equity 21,209 21,621 21,818 21,930 Minority interests 0 0 0 0 Total liabilities & equity 54,896 55,270 55,168 54,888 Cash Flow (Rp bn) 12/16A 12/17E 12/18E 12/19E EBIT 12 1,283 1,724 1,793 Net interest (1,135) (998) (911) (807) Tax paid (172) (196) (328) (371) Our Blue Sky Scenario (Rp) 4,753 Working capital 3,981 950 819 772 Other cash & non-cash items 8,044 7,580 7,710 8,250 Operating cash flow 10,730 8,618 9,013 9,636 Our Grey Sky Scenario (Rp) 3,093 Capex (5,584) (6,757) (5,994) (5,557) Free cash flow to the firm 1,129 912 2,200 3,307 Investing cash flow (3,849) (6,757) (5,994) (5,557) Share price performance Equity raised 2,207 0 0 0 Dividends paid 0 (177) (787) (1,003) Financing cash flow (8,793) (1,177) (1,787) (2,003) Total cash flow (1,912) 684 1,232 2,077 Adjustments 0 0 0 0 Net change in cash (1,912) 684 1,232 2,077 Per share 12/16A 12/17E 12/18E 12/19E Shares (wtd avg.) (mn) 9,787 10,678 10,678 10,678 EPS (Credit Suisse) (Rp) 38 55 92 104 DPS (Rp) 0 17 74 94 Operating CFPS (Rp) 1,096 807 844 902 Earnings 12/16A 12/17E 12/18E 12/19E Growth (%) Sales revenue (7.4) 9.5 6.4 5.3 EBIT (99.0) 10595.6 34.3 4.0 The price relative chart measures performance against the JSX COMPOSITE EPS 1342.7 43.8 67.1 13.2 INDEX which closed at 5,567.13 on 24-Mar-2017 Margins (%) On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 EBITDA 39.2 39.4 39.3 39.8 EBIT 0.1 5.7 7.2 7.1 Valuation (x) 12/16A 12/17E 12/18E 12/19E P/E 85.3 59.3 35.5 31.3 P/B 1.51 1.61 1.60 1.59 Dividend yield (%) 0.0 0.5 2.3 2.9 EV/sales 2.5 2.2 1.9 1.7 EV/EBITDA 6.3 5.5 4.9 4.3 EV/EBIT 4215.6 38.1 27.1 24.3 ROE analysis (%) 12/16A 12/17E 12/18E 12/19E ROE 2.1 2.7 4.5 5.1 ROIC 0.1 2.7 3.7 4.2 Credit ratios 12/16A 12/17E 12/18E 12/19E Net debt/equity (%) 73.7 64.5 53.7 39.4 Net debt/EBITDA (x) 1.94 1.57 1.24 0.86
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 100 27 March 2017
Asia Pacific/Indonesia Healthcare Facilities
Siloam International Hospitals (SILO.JK / SILO
IJ) Rating OUTPERFORM Price (24-Mar-17, Rp) 14,200 COMPANY UPDATE Target price (Rp) 12,840 Upside/downside (%) -9.6
Mkt cap (Rp/US$ bn) 18,469 / 1.39 Turnaround growth story Enterprise value (Rp bn) 19,294 Number of shares (mn) 1,301 ■ We continue to like SILO as room for downside surprise from the current Free float (%) 39.5 levels is low after past disappointments, and expansion plans would fuel 52-wk price range (Rp) 14,225-7,135 ADTO-6M (US$ mn) 0.3 additional growth. Moreover, there could be upside post CVC's involvement Target price is for 12 months. and execution progress in light of higher-than-expected FY17 guidance.
Research Analysts ■ Switching to FY17, SILO has targeted YoY gross operating revenue (GOR)
Ari Jahja growth of 20-25%, while EBITDA as percentage of GOR could reach 15-16% 62 21 2553 7976 (FY16 was 13%). Using FY16 actual GOR and EBITDA as a base, [email protected] respectively, FY17 EBITDA would have come in above Rp930 bn (which implies mid-30% growth instead of 20%) under this scenario. Also, it is important to note that the financial impact from acquisitions and new hospital openings is not baked in. ■ CVC's multi-year value creation plan could provide upside through 2020: (1) increased equipment utilisation, (2) SG&A optimisation, (3) drug procurement efficiencies, and (4) strategic price increases. The second phase of this strategy may include service cost reduction. ■ Also importantly, an initial look into CVC's experience underscores encouraging turnaround outcomes. Australia-based Affinity Health delivered ~320 bp of EBITDA margin expansion in less than two years after CVC's acquisition, prior to being sold to Ramsay Healthcare in April 2005.
Share price performance Financial and valuation metrics
Year 12/15A 12/16E 12/17E 12/18E Revenue (Rp bn) 4,144.1 5,247.0 6,514.0 7,865.0 EBITDA (Rp bn) 568.4 717.4 894.4 1,093.3 EBIT (Rp bn) 211.2 252.6 345.4 381.6 Net profit (Rp bn) 70.4 93.9 130.5 147.2 EPS (CS adj.) (Rp) 59.92 79.93 111.09 125.31 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 72.51 117.66 155.85 EPS growth (%) (2.0) 33.4 39.0 12.8 The price relative chart measures performance against the P/E (x) 237.0 177.7 127.8 113.3 JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 0.0 0.0 0.0 0.1 24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 32.9 26.8 21.8 17.8 Rp13,328/US$1 P/B (x) 9.56 9.11 8.53 7.98
Performance 1M 3M 12M ROE (%) 4.1 5.3 6.9 7.3 Absolute (%) 9.2 40.6 88.6 Net debt/equity (%) 13.1 42.1 50.7 46.2
Relative (%) 5.3 29.9 73.3 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 101 27 March 2017
Siloam International Hospitals (SILO.JK / SILO IJ) Price (24 Mar 2017): Rp14,200; Rating: OUTPERFORM; Target Price: Rp12,840; Analyst: Ariyanto Jahja Income Statement (Rp bn) 12/15A 12/16E 12/17E 12/18E Company Background Sales revenue 4,144 5,247 6,514 7,865 Siloam International Hospitals is an Indonesia-based healthcare Cost of goods sold 2,968 3,772 4,669 5,633 company that owns and operates hospitals. Its hospitals offer a EBITDA 568 717 894 1,093 comprehensive range of specialists, and is located throughout EBIT 211 253 345 382 Indonesia. Net interest expense/(inc.) 52 75 113 126 Recurring PBT 106 125 167 177 Blue/Grey Sky Scenario Profit after tax 62 84 117 133 Reported net profit 70 94 131 147 Net profit (Credit Suisse) 70 94 131 147 Balance Sheet (Rp bn) 12/15A 12/16E 12/17E 12/18E Cash & cash equivalents 160 230 196 210 Current receivables 575 617 766 925 Inventories 140 157 195 235 Other current assets 81 85 106 128 Current assets 956 1,089 1,263 1,498 Property, plant & equip. 1,553 2,291 2,647 2,769 Investments 0 0 0 0 Intangibles 299 299 299 299 Other non-current assets 178 207 257 310 Total assets 2,986 3,886 4,465 4,875 Current liabilities 630 656 809 974 Total liabilities 1,246 2,048 2,490 2,750 Shareholders' equity 1,744 1,832 1,955 2,091 Minority interests (4) 6 20 34 Total liabilities & equity 2,986 3,886 4,465 4,875 Cash Flow (Rp bn) 12/15A 12/16E 12/17E 12/18E EBIT 211 253 345 382 Net interest 0 0 0 0 Tax paid (44) (41) (50) (44) Working capital (82) (30) (53) (56) Other cash & non-cash items 170 322 352 483 Our Blue Sky Scenario (Rp) (from 15,465) 18,525 Operating cash flow 255 503 594 764 Our blue sky scenario assumes 2017 revenue growth of 26.1% and Capex (279) (1,198) (889) (810) EBITDA margin of 21.5%. Free cash flow to the firm (24) (696) (294) (46) Investing cash flow (352) (1,053) (828) (748) Our Grey Sky Scenario (Rp) (from 10,333) 12,270 Equity raised 0 0 0 0 Our grey sky scenario assumes 2017 revenue growth of 22.9% and Dividends paid (6) (6) (8) (11) EBITDA margin of 17.9%. Financing cash flow (23) 620 200 (2) Total cash flow (120) 70 (34) 14 Share price performance Adjustments 0 0 0 0 Net change in cash (120) 70 (34) 14 Per share 12/15A 12/16E 12/17E 12/18E Shares (wtd avg.) (mn) 1,175 1,175 1,175 1,175 EPS (Credit Suisse) (Rp) 60 80 111 125 DPS (Rp) 5 5 7 9 Operating CFPS (Rp) 217 428 506 650 Earnings 12/15A 12/16E 12/17E 12/18E Growth (%) Sales revenue 24.0 26.6 24.1 20.7 EBIT 17.0 19.6 36.7 10.5 EPS (2.0) 33.4 39.0 12.8 Margins (%) EBITDA 13.7 13.7 13.7 13.9 EBIT 5.1 4.8 5.3 4.9 The price relative chart measures performance against the JSX COMPOSITE Valuation (x) 12/15A 12/16E 12/17E 12/18E INDEX which closed at 5,567.13 on 24-Mar-2017 P/E 237.0 177.7 127.8 113.3 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 P/B 9.56 9.11 8.53 7.98 Dividend yield (%) 0.0 0.0 0.0 0.1 EV/sales 4.5 3.7 3.0 2.5 EV/EBITDA 32.9 26.8 21.8 17.8 EV/EBIT 88.5 76.2 56.4 51.0 ROE analysis (%) 12/15A 12/16E 12/17E 12/18E ROE 4.1 5.3 6.9 7.3 ROIC 6.5 7.4 8.7 9.4 Credit ratios 12/15A 12/16E 12/17E 12/18E Net debt/equity (%) 13.1 42.1 50.7 46.2 Net debt/EBITDA (x) 0.40 1.08 1.12 0.90
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 102 27 March 2017
Asia Pacific/Indonesia Healthcare Facilities
PT Mitra Keluarga Karyasehat Tbk (MIKA.JK
/ MIKA IJ) Rating OUTPERFORM Price (24-Mar-17, Rp) 2,600 COMPANY UPDATE Target price (Rp) 3,110 Upside/downside (%) 19.6
Mkt cap (Rp/US$ bn) 37,832 / 2.84 Attractive long-term holding Enterprise value (Rp bn) 35,174 Number of shares (mn) 14,551 ■ We continue to view PT Mitra Keluarga Karyasehat Tbk (“MIKA”) as an Free float (%) 22.9 attractive long-term holding due to mid-teens growth profile, margin 52-wk price range (Rp) 2,950-2,350 ADTO-6M (US$ mn) 1.1 expansion opportunity, and balance sheet optionality (Rp2.4 tn in cash). After Target price is for 12 months. the recent weakness, the stock looks interesting at 33x 2017 EBITDA, below
the historical average. Its premium valuation is supported by best-in-class Research Analysts
margins and ROIC profile. Ari Jahja 62 21 2553 7976 ■ Pertaining to 2017, management has reiterated its mid-teens revenue and [email protected] high-teens EBITDA growth, despite the expected ramp-up in pre-op costs prior to the new Tangerang hospital launch in December. ■ At least ~15% top-line growth for FY17 would be driven by patient volume (7-8%), followed by price increases (3-4%) and revenue intensity (2-3%). Importantly, EBITDA growth could be faster than revenue, fuelled by 1-2% gross margin expansion. ■ Pertaining to capital deployment, management is still in the process of assessing several possible targets. While investor sentiment appears mixed due to potential margin impact, we think it could be a positive growth catalyst.
Share price performance Financial and valuation metrics
Year 12/15A 12/16E 12/17E 12/18E Revenue (Rp bn) 2,140.7 2,479.2 2,918.0 3,413.6 EBITDA (Rp bn) 743.6 901.8 1,069.1 1,249.4 EBIT (Rp bn) 600.0 742.3 877.3 1,021.3 Net profit (Rp bn) 566.8 695.2 802.0 903.0 EPS (CS adj.) (Rp) 39.28 47.78 55.12 62.06 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 47.47 53.88 61.62 EPS growth (%) 4.7 21.6 15.4 12.6 The price relative chart measures performance against the P/E (x) 66.2 54.4 47.2 41.9 JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 0.8 1.0 1.2 1.4 24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 47.7 39.0 32.9 28.0 Rp13,328/US$1 P/B (x) 11.84 10.73 9.74 8.86
Performance 1M 3M 12M ROE (%) 23.1 20.7 21.6 22.1 Absolute (%) 7.9 7.4 8.3 Net debt/equity (%) Net cash Net cash Net cash Net cash
Relative (%) 4.0 -3.3 -7.0 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 103 27 March 2017
PT Mitra Keluarga Karyasehat Tbk (MIKA.JK / MIKA IJ) Price (24 Mar 2017): Rp2,600; Rating: OUTPERFORM; Target Price: Rp3,110; Analyst: Ariyanto Jahja Income Statement (Rp bn) 12/15A 12/16E 12/17E 12/18E Company Background Sales revenue 2,141 2,479 2,918 3,414 Mitra Keluarga Karyasehat is an Indonesia-based healthcare Cost of goods sold 1,168 1,312 1,529 1,781 company that engages in hospital management and business EBITDA 744 902 1,069 1,249 services. Its hospitals offer a range of specialist medical services, EBIT 600 742 877 1,021 and are located in the Greater Jakarta Area, Surabaya, and Tegal. Net interest expense/(inc.) (135) (155) (171) (161) Recurring PBT 740 902 1,054 1,187 Blue/Grey Sky Scenario Profit after tax 588 722 833 938 Reported net profit 567 695 802 903 Net profit (Credit Suisse) 567 695 802 903 Balance Sheet (Rp bn) 12/15A 12/16E 12/17E 12/18E Cash & cash equivalents 2,387 2,652 2,681 2,855 Current receivables 162 175 206 242 Inventories 38 69 80 93 Other current assets 33 38 45 53 Current assets 2,621 2,934 3,012 3,242 Property, plant & equip. 884 1,084 1,365 1,528 Investments 0 0 0 0 Intangibles 2 2 2 2 Other non-current assets 213 235 277 324 Total assets 3,720 4,255 4,656 5,096 Current liabilities 206 436 512 598 Total liabilities 441 671 747 833 Shareholders' equity 3,196 3,527 3,883 4,271 Minority interests 83 57 26 (8) Total liabilities & equity 3,720 4,255 4,656 5,096 Cash Flow (Rp bn) 12/15A 12/16E 12/17E 12/18E EBIT 600 742 877 1,021 Net interest 161 133 146 131 Tax paid (151) (180) (221) (249) Working capital (14) 182 26 30 Other cash & non-cash items 91 99 117 137 Our Blue Sky Scenario (Rp) 3,383 Operating cash flow 688 976 945 1,070 Our blue sky scenario assumes 2017 revenue growth of 22.5% and Capex (205) (299) (398) (299) EBITDA margin of 36.5%. Free cash flow to the firm 483 677 547 771 Investing cash flow (171) (321) (439) (346) Our Grey Sky Scenario (Rp) 2,458 Equity raised 1,208 0 0 0 Our grey sky scenario assumes 2017 revenue growth of 17.3% and Dividends paid (291) (364) (446) (515) EBITDA margin of 33.6%. Financing cash flow 1,063 (390) (477) (549) Total cash flow 1,579 265 29 174 Share price performance Adjustments 3 0 0 0 Net change in cash 1,582 265 29 174 Per share 12/15A 12/16E 12/17E 12/18E Shares (wtd avg.) (mn) 14,429 14,551 14,551 14,551 EPS (Credit Suisse) (Rp) 39 48 55 62 DPS (Rp) 20 25 31 35 Operating CFPS (Rp) 48 67 65 74 Earnings 12/15A 12/16E 12/17E 12/18E Growth (%) Sales revenue 10.0 15.8 17.7 17.0 EBIT 9.5 23.7 18.2 16.4 EPS 4.7 21.6 15.4 12.6 Margins (%) EBITDA 34.7 36.4 36.6 36.6 EBIT 28.0 29.9 30.1 29.9 The price relative chart measures performance against the JSX COMPOSITE Valuation (x) 12/15A 12/16E 12/17E 12/18E INDEX which closed at 5,567.13 on 24-Mar-2017 P/E 66.2 54.4 47.2 41.9 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 P/B 11.84 10.73 9.74 8.86 Dividend yield (%) 0.8 1.0 1.2 1.4 EV/sales 16.6 14.2 12.0 10.2 EV/EBITDA 47.7 39.0 32.9 28.0 EV/EBIT 59.1 47.4 40.1 34.2 ROE analysis (%) 12/15A 12/16E 12/17E 12/18E ROE 23.1 20.7 21.6 22.1 ROIC 56.5 65.1 64.2 61.2 Credit ratios 12/15A 12/16E 12/17E 12/18E Net debt/equity (%) (72.8) (74.0) (68.6) (67.0) Net debt/EBITDA (x) (3.21) (2.94) (2.51) (2.28)
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 104 27 March 2017
Asia Pacific/Indonesia Major Pharmaceuticals
Kalbe Farma (KLBF.JK / KLBF IJ) Rating UNDERPERFORM Price (24-Mar-17, Rp) 1,505 COMPANY UPDATE Target price (Rp) 1,350 Upside/downside (%) -10.3
Mkt cap (Rp/US$ bn) 70,547 / 5.29 Challenging pharma division Enterprise value (Rp bn) 66,685 Number of shares (mn) 46,875 ■ PT Kalbe Farma Tbk (KLBF) is an Indonesia-based pharmaceutical Free float (%) 43.4 company. The company is engaged in the development, production and 52-wk price range (Rp) 1,815-1,280 ADTO-6M (US$ mn) 2.9 distribution of pharmaceutical products for humans and animals. KLBF Target price is for 12 months. reported 14% higher net profit YoY to Rp1.7 tn, on 10% higher revenue YoY
to Rp14.4 tn, slightly below our estimates, accounting for 66% and 70% of Research Analysts
FY16E, respectively. Ella Nusantoro 62 21 2553 7917 ■ Gross profit increased 10% YoY to Rp7 tn, on the back of a stable [email protected] IDR/USD exchange rate, and gross margin improved 10 bp to 48.9%. Opex was only increased 7% YoY, and hence operating profit rose 15% YoY to Rp2.3 tn and operating margin improved 70 bp to 15.8%. ■ Within the four divisions that Kalbe has, nutritionals and consumer health divisions each reported 11% revenue growth YoY in 9M16 to Rp4.1 tn and Rp2.6 tn. They accounted for 28% and 18% of the total revenue. Distribution & logistics reported 10% higher revenue YoY to Rp4.3 tn, accounting for 30% of the total. Prescription pharma that accounts for 24% of the total, reported only 6% revenue growth to Rp3.4 tn, as consumers shift to utilise the BPJS Kesehatan (National Health Care Insurance). Nutritionals is the highest contributor to gross profit, making up 33% of total, and grew 16% YoY to Rp2.3 tn. ■ The prescription drugs division will continue to have major challenges with the continuous increase of participants of the national healthcare insurance scheme. The scheme resulted in a shift from branded generic, which the company focused on, to the unbranded generic. Share price performance Financial and valuation metrics
Year 12/14A 12/15E 12/16E 12/17E Revenue (Rp bn) 17,368.5 18,335.1 20,486.9 22,970.3 EBITDA (Rp bn) 3,006.6 3,235.0 3,745.8 4,300.9 EBIT (Rp bn) 2,761.0 2,922.8 3,373.6 3,895.4 Net profit (Rp bn) 2,067.3 2,223.8 2,584.7 3,005.3 EPS (CS adj.) (Rp) 44.10 47.44 55.14 64.11 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 42.76 48.40 54.08 EPS growth (%) 7.7 7.6 16.2 16.3 The price relative chart measures performance against the P/E (x) 34.1 31.7 27.3 23.5 JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 1.1 1.3 1.3 1.5 24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 22.9 21.0 17.9 15.2 Rp13,328/US$1 P/B (x) 7.52 6.56 5.68 4.92
Performance 1M 3M 12M ROE (%) 23.6 22.1 22.3 22.5 Absolute (%) 0.7 4.5 16.2 Net debt/equity (%) Net cash Net cash Net cash Net cash
Relative (%) -3.2 -6.2 0.9 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 105 27 March 2017
Kalbe Farma (KLBF.JK / KLBF IJ) Price (24 Mar 2017): Rp1,505; Rating: UNDERPERFORM; Target Price: Rp1,350; Analyst: Ella Nusantoro Earnings Drivers 12/14A 12/15E 12/16E 12/17E Per share 12/14A 12/15E 12/16E 12/17E GDP growth 0.05 0.05 0.05 0.05 Shares (wtd avg.) (mn) 46,875 46,875 46,875 46,875 GDP per capita 0.05 0.05 0.05 0.05 EPS (Credit Suisse) (Rp) 44.10 47.44 55.14 64.11 Population growth 0.01 0.00 0.00 0.00 DPS (Rp) 17.00 19.00 19.70 22.89 - - - - BVPS (Rp) 200.15 229.30 264.74 305.96 - - - - Operating CFPS (Rp) 48.45 54.20 55.45 60.29 Income Statement (Rp bn) 12/14A 12/15E 12/16E 12/17E Valuation (x) 12/14A 12/15E 12/16E 12/17E Sales revenue 17,369 18,335 20,487 22,970 P/E 34.1 31.7 27.3 23.5 Cost of goods sold 8,893 9,238 10,132 11,345 P/B 7.52 6.56 5.68 4.92 SG & A 5,572 6,021 6,811 7,539 Dividend yield (%) 1.1 1.3 1.3 1.5 Other operating exp./(inc.) (102) (159) (202) (214) P/CF 31.1 27.8 27.1 25.0 EBITDA 3,007 3,235 3,746 4,301 EV/sales 4.0 3.7 3.3 2.9 Depreciation & amortisation 246 312 372 406 EV/EBITDA 22.9 21.0 17.9 15.2 EBIT 2,761 2,923 3,374 3,895 EV/EBIT 25.0 23.2 19.9 16.8 Net interest expense/(inc.) (11) (54) (86) (127) Earnings 12/14A 12/15E 12/16E 12/17E Non-operating inc./(exp.) (6) 0 0 0 Growth (%) Associates/JV 0 0 0 0 Sales revenue 8.5 5.6 11.7 12.1 Recurring PBT 2,766 2,977 3,460 4,023 EBIT 8.3 5.9 15.4 15.5 Exceptionals/extraordinaries 0 0 0 0 Net profit 7.7 7.6 16.2 16.3 Taxes 643 692 804 935 EPS 7.7 7.6 16.2 16.3 Profit after tax 2,124 2,285 2,655 3,087 Margins (%) Other after tax income 0 0 0 0 EBITDA 17.3 17.6 18.3 18.7 Minority interests 56 61 71 82 EBIT 15.9 15.9 16.5 17.0 Preferred dividends 0 0 0 0 Pre-tax profit 15.9 16.2 16.9 17.5 Reported net profit 2,067 2,224 2,585 3,005 Net profit 11.9 12.1 12.6 13.1 Analyst adjustments 0 0 0 0 Net profit (Credit Suisse) 2,067 2,224 2,585 3,005 ROE analysis (%) 12/14A 12/15E 12/16E 12/17E ROE 23.6 22.1 22.3 22.5 Balance Sheet (Rp bn) 12/14A 12/15E 12/16E 12/17E ROIC 26.7 26.6 28.5 30.5 Cash & cash equivalents 1,895 2,863 3,789 5,216 Asset turnover (x) 1.4 1.3 1.3 1.3 Current receivables 2,347 2,291 2,578 2,910 Interest burden (x) 1.0 1.0 1.0 1.0 Inventories 3,091 3,104 3,334 3,714 Tax burden (x) 0.8 0.8 0.8 0.8 Other current assets 789 643 714 797 Financial leverage (x) 1.3 1.2 1.2 1.2 Current assets 8,121 8,901 10,415 12,637 Credit ratios 12/14A 12/15E 12/16E 12/17E Property, plant & equip. 3,404 4,092 4,620 4,715 Investments 0 0 0 0 Net debt/equity (%) (16.3) (23.2) (27.1) (32.9) Intangibles 422 396 370 345 Net debt/EBITDA (x) (0.53) (0.81) (0.94) (1.15) Interest cover (x) n.a. n.a. n.a. n.a. Other non-current assets 478 505 565 634 Total assets 12,425 13,894 15,970 18,330 Accounts payable 1,133 1,163 1,323 1,470 12MF P/E multiple Short-term debt 252 252 252 252 Current provisions 0 0 0 0 Other current liabilities 1,001 1,013 1,143 1,275 Current liabilities 2,386 2,428 2,718 2,997 Long-term debt 44 0 0 0 Non-current provisions 0 0 0 0 Other non-current liabilities 177 195 215 238 Total liabilities 2,608 2,623 2,933 3,235 Shareholders' equity 9,382 10,749 12,410 14,342 Minority interests 435 523 627 752 Total liabilities & equity 12,425 13,894 15,970 18,330 Cash Flow (Rp bn) 12/14A 12/15E 12/16E 12/17E EBIT 2,761 2,923 3,374 3,895 Net interest 11 54 86 127 Tax paid (643) (692) (804) (935) 12MF P/B multiple Working capital (66) 31 (298) (515) Other cash & non-cash items 208 225 242 254 Operating cash flow 2,271 2,540 2,599 2,826 Capex (724) (1,000) (900) (500) Free cash flow to the firm 1,547 1,540 1,699 2,326 Disposals of fixed assets 0 0 0 0 Acquisitions 0 0 0 0 Divestments 0 0 0 0 Associate investments 0 0 0 0 Other investment/(outflows) (36) 26 26 26 Investing cash flow (761) (974) (874) (474) Equity raised 44 87 105 125 Dividends paid (797) (857) (923) (1,073) Net borrowings (285) (44) 0 0 Other financing cash flow 6 17 20 23 Financing cash flow (1,032) (797) (798) (925) Source: Credit Suisse, Thomson Reuters Total cash flow 478 769 926 1,427 Adjustments 0 0 0 0 Net change in cash 478 769 926 1,427
Source: Company data, Credit Suisse estimates
Indonesia Consumer Survey 2017 106 27 March 2017
Asia Pacific/Indonesia Real Estate Management & Development
PT Summarecon Agung Tbk (SMRA.JK / SMRA IJ) Rating OUTPERFORM Price (24-Mar-17, Rp) 1,340 COMPANY UPDATE Target price (Rp) 1,600 Upside/downside (%) 19.4
Mkt cap (Rp/US$ bn) 19,332 / 1.45 Getting back to the ground floor. Enterprise value (Rp bn) 24,053 Number of shares (mn) 14,427 ■ Setting 23% pre-sales CAGR for 2016-18E. Pre-sales growth has been in Free float (%) 67.7 the negative zone for the past couple of years. While the macro and 52-wk price range (Rp) 1,940-1,235 ADTO-6M (US$ mn) 1.9 regulatory environment had a lot to do with this, product mix is equally Target price is for 12 months. important. For instance, in the last year, the company managed to fully meet
its landed houses and shophouses sales target, but merely 30% of its Research Analysts
apartments' target. For 2017, it is guiding Rp4.5 tn, but this time, landed Laurensius Teiseran products accounted for more with 76% of the total (vs 41%/38% in 2016/15), 62 21 255 37931 [email protected] a more promising product mix, in our view. ■ We expect 66% 2016-18E EPS CAGR vs 40% Bloomberg consensus. We know that sales recognition comes with a lag of 1-2 years for landed and 2-4 years for high-rise depending on the progress of construction—a reason to avoid P/E multiple for seeking fair value. During 2014-16, SMRA had sold >8,200 units of apartments worth Rp5.8 tn, roughly half of which had been recognised as revenue in 2015/16E, i.e., apartments account for about 40% of total revenue vs 7% historical average. It was a disadvantage for earnings as revenue got stretched, leverage went up and margin contracted. The reverse should play out as we account for lower revenue from apartments. ■ Risks and catalysts. We find evidence of demand picking up in the month of October post the first amnesty window, but that was dented by the November Ahok rallies. In this regard, we expect pre-sales to kick in only in 2Q due to the Jakarta election and related uncertainties. On a more positive note, catalysts include stronger mortgage growth and better apartment sales. ■ Valuation. The stock is now trading at a 60% discount to NAV, just 9% above 2015-low and >2 s.d. below its 2015-high. Adjusting for political risks and possible higher interest rates, our DCF-based target price is Rp1,600, implying 18% upside, 50% discount to 2017E NAV and 21% potential upside.
Share price performance Financial and valuation metrics
Year 12/15A 12/16E 12/17E 12/18E Revenue (Rp bn) 5,623.6 4,815.6 5,444.8 6,749.2 EBITDA (Rp bn) 2,032.4 1,378.2 1,718.9 2,184.6 EBIT (Rp bn) 1,791.4 1,154.0 1,475.4 1,914.4 Net attributable profit (Rp bn) 855.2 281.3 482.7 778.4 EPS (CS adj.) (Rp) 59.28 19.50 33.46 53.96 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 15.67 30.00 45.96 EPS growth (%) (38.3) (67.1) 71.6 61.3 The price relative chart measures performance against the P/E (x) 22.6 68.7 40.0 24.8 JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 1.5 0.9 0.3 0.5 24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 11.8 17.5 13.9 10.8 Rp13,328/US$1 ROE (%) 14.9 4.6 7.6 11.3
Performance 1M 3M 12M Net debt/equity (%) 62.3 61.1 55.1 46.7 Absolute (%) -6.0 6.8 -22.5 NAV per share (Rp) - - - - Relative (%) -9.9 -4.0 -37.9 Disc./(prem.) to NAV (%) - - - -
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 107 27 March 2017
PT Summarecon Agung Tbk (SMRA.JK / SMRA IJ) Price (24 Mar 2017): Rp1,340; Rating: OUTPERFORM; Target Price: Rp1,600; Analyst: Laurensius Teiseran Earnings Drivers 12/15A 12/16E 12/17E 12/18E Company Background Real GDP growth (%) 4.61 5.23 5.23 5.23 SMRA Was founded in 1961. It has three main locations which are Inflation rate (%) 6.47 4.69 4.69 4.69 Summarecon Kelapa Gading which has a land area of 500 hectares, Interest rate (%) 7.50 6.75 6.75 6.75 Summarecon Serpong which has an area of 1500 hectares and Marketing sales (Rp bn) 4,351 3,005 3,734 4,555 Summarecon Bekasi which has an area of 240 hectares. Income Statement (Rp bn) 12/15A 12/16E 12/17E 12/18E Sales revenue 5,624 4,816 5,445 6,749 Blue/Grey Sky Scenario Cost of goods sold 2,717 2,615 2,827 3,425 EBITDA 2,032 1,378 1,719 2,185 EBIT 1,791 1,154 1,475 1,914 Net interest expense/(inc.) 409 531 535 539 Recurring PBT 1,382 623 941 1,375 Profit after tax 1,064 393 690 1,054 Revaluations 0 0 0 0 Reported net profit 855 281 483 778 Net profit (Credit Suisse) 855 281 483 778 Balance Sheet (Rp bn) 12/15A 12/16E 12/17E 12/18E Cash & cash equivalents 1,504 2,177 2,838 3,182 Current receivables 152 349 212 315 Inventories 4,925 5,229 5,422 6,099 Other current assets 709 620 639 764 Current Assets 7,290 8,375 9,111 10,360 Property, plant & equip. 420 421 481 563 Investment Properties 4,312 4,516 4,744 5,028 Investment in Associates/JV 0 0 0 0 Intangibles 8 9 9 9 Other non-current assets 6,728 6,787 7,417 7,734 Total assets 18,758 20,108 21,763 23,694 Current liabilities 4,410 4,072 4,376 5,144 Total liabilities 11,229 12,319 13,402 14,507 Shareholders' equity 6,011 6,113 6,536 7,213 Our Blue Sky Scenario (Rp) 2,190 Minority interests 1,517 1,664 1,811 1,960 Total liabilities & equity 18,758 20,108 21,763 23,694 Our blue sky scenario is based on 33% discount to the company's 2017E NAV. This is largely driven by stronger mortgage growth, Cash Flow (Rp bn) 12/15A 12/16E 12/17E 12/18E better apartment sales, higher plot ratio in Kelapa Gading, better- EBIT 1,791 1,154 1,475 1,914 than-expected infrastructure realisation and positive changes in tax Net interest 0 0 0 0 structure. Tax paid 0 0 0 0 Working capital 0 0 0 0 Other cash and non-cash items (2,107) (628) (573) (686) Our Grey Sky Scenario (Rp) 1,140 Operating cash flow (316) 526 902 1,228 Our grey sky scenario is based on 65% discount to the company's Capex (586) (429) (532) (636) 2017E NAV. We highlight political uncertainty in Indonesia as risk for Free cashflow to the firm (902) 97 370 592 pre-sales growth. Additionally, the possibility of a higher interest Investing cash flow (2,001) (565) (840) (963) rates environment in Indonesia may affect housing affordability and Equity raised 0 0 0 0 the cost of borrowings for the company. Dividends paid 0 0 0 0 Financing cash flow 2,050 713 599 78 Share price performance Total cash flow (267) 673 661 344 Adjustments 0 0 0 (0) Net change in cash (267) 673 661 344 Per share 12/15A 12/16E 12/17E 12/18E Shares (wtd avg.) (mn) 14,427 14,427 14,427 14,427 EPS (Credit Suisse) (Rp) 59 20 33 54 DPS (Rp) 20 12 4 7 BVPS (Rp) 417 424 453 500 NAV per share (Rp) n.a. n.a. n.a. n.a. Earnings 12/15A 12/16E 12/17E 12/18E Growth (%) Sales reveue (2.3) (14.4) 13.1 24.0 EBIT (14.5) (35.6) 27.8 29.8 EPS (38.3) (67.1) 71.6 61.3 Margins (%) The price relative chart measures performance against the JSX COMPOSITE EBITDA 36.1 28.6 31.6 32.4 INDEX which closed at 5,567.13 on 24-Mar-2017 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 EBIT 31.9 24.0 27.1 28.4 Valuation (x) 12/15A 12/16E 12/17E 12/18E P/E 22.6 68.7 40.0 24.8 P/B 3.22 3.16 2.96 2.68 Dividend yield (%) 1.5 0.9 0.3 0.5 EV/Sales 4.3 5.0 4.4 3.5 EV/EBITDA 11.8 17.5 13.9 10.8 EV/EBIT 13.4 20.9 16.2 12.3 ROE analysis (%) 12/15A 12/16E 12/17E 12/18E ROE 14.9 4.6 7.6 11.3 ROIC 13.0 5.9 8.5 11.1 Credit ratios 12/15A 12/16E 12/17E 12/18E Net debt/equity (%) 62.3 61.1 55.1 46.7 Net Debt/EBITDA (x) 2.31 3.45 2.68 1.96
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 108 27 March 2017
Asia Pacific/Indonesia Regional Banks
PT Bank Pembangunan Daerah Jawa
Timur Tbk (BJTM.JK / BJTM IJ) Rating OUTPERFORM Price (24-Mar-17, Rp) 640.00 COMPANY UPDATE Target price (Rp) 690.00 Upside/downside (%) 7.8
Mkt cap (Rp/US$ bn) 9,470/ 0.71 Indonesia Consumer Survey 2017 Number of shares (mn) 14,797 Free float (%) 23.2 ■ Third-highest profitability among Indo banks. Bank Jatim is the regional 52-wk price range 695.00-438.00 development bank for East Java and the smallest bank by assets among the ADTO-6M (US$ mn) 2.1 nine banks in our coverage. It is focused on the consumer (67% of loan, 87% Target price is for 12 months.
of which is payroll loan) and commercial/SME (33%) segments. Jatim's ROA Research Analysts was the third highest last year at 2.4%, behind that of BCA and BRI. Superior
Laurensius Teiseran profitability can be attributed to the higher proportion of cheaper current/ 62 21 255 37931 saving deposits (81%), fee income and cost efficiency. [email protected] Sanjay Jain ■ Falling credit cost likely to persist; we expect 12.9% 2017-18E profit 65 6306 0668 CAGR. Since 2012, Jatim's earnings have been hit severely on elevated loan [email protected] losses as commercial/SME loan quality deteriorated, with gross NPL ratio
reaching 4.92% in 3Q16 (4.77% in 4Q16). Under a new CEO, Jatim shrank the commercial/SME loans last year by 3.4% (after having doubled them in the previous five years) and has also reported a far larger portion of problem loans as NPLs (78% of total loans-at-risk being reported as NPLs vs 29% aggregate for our sample). Therefore, we expect credit costs to fall from 175 bp of loans in 2016 (219 bp in 2015) to 111 bp/66 bp in 2017/18—more than offsetting the margin compression and cautious loan growth. ■ Catalysts and key risks. Jatim is guiding its NPL ratio to be 3.10% for 2017—upside to our 4.5% NPL forecast. Second, execution on loan growth guidance of 8.2% for the year could be a catalyst vs our 6.6% forecast. Key risks would be higher-than-expected loan losses and margin compression. ■ Cheap on fundamentals; maintain OUTPERFORM. On valuation, Jatim is trading at a 7.5x 12M forward P/E, 38% discount to average Indo banks, 24% to the small banks, while its P/B is 1.1x. This is attractive given the superior profitability. Assuming a 15.9% ROE (average 2017-18E), 13.5% cost of equity and 7.2% growth in Gordon growth model gives us a target price of Rp690/sh implying 8% upside potential for the stock.
Share price performance Financial and valuation metrics
Year 12/16A 12/17E 12/18E 12/19E Pre-provision op profit (Rp bn) 1,972.2 1,970.1 2,077.7 2,224.9 Pre-tax profit (Rp bn) 1,452.1 1,619.1 1,849.8 1,894.3 Net attributable profit (Rp bn) 1,028.2 1,146.4 1,309.8 1,341.3 EPS (CS adj.) (Rp) 68.93 76.85 87.80 89.91 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 73.96 81.70 89.91 EPS growth (%) 16.2 11.5 14.2 2.4 P/E (x) 9.3 8.3 7.3 7.1 The price relative chart measures performance against the Dividend yield (%) 6.9 7.1 7.3 7.5 JSX COMPOSITE INDEX which closed at 5,567.13 on BVPS (CS adj.) (Rp) 448.78 480.13 520.96 562.77 24/03/17. On 24/03/17 the spot exchange rate was P/B (x) 1.43 1.33 1.23 1.14 Rp13,328/US$1 ROE (%) 16.5 16.5 17.5 16.6
Performance 1M 3M 12M ROA (%) 2.4 2.6 2.7 2.6 Absolute (%) 16.4 14.3 33.6 Tier 1 Ratio (%) 22.9 24.1 24.6 24.7
Relative (%) 12.5 3.6 18.3 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 109 27 March 2017
PT Bank Pembangunan Daerah Jawa Timur Tbk (BJTM.JK / BJTM IJ) Price (24 Mar 2017): Rp640.00; Rating: OUTPERFORM; Target Price: Rp690.00; Analyst: Laurensius Teiseran Earnings Drivers 12/16A 12/17E 12/18E 12/19E Company Background Loan growth (% YoY) 4.45 6.63 7.38 8.09 Bank Jatim is a regional development bank for East Java province. Credit cost (as bps of loans) 175.5 111.0 66.00 90.00 Bank Jatim was established in 1961 and has been managing civil Gross NPL ratio (%) 4.77 4.53 4.38 4.33 servant payrolls for the regional government of East Java. Net interest margins (%) 6.94 6.81 6.78 6.80 - - - - Blue/Grey Sky Scenario Income Statement (Rp bn) 12/16A 12/17E 12/18E 12/19E Interest income 4,823 4,970 5,301 5,736 Interest expense 1,360 1,378 1,467 1,581 Net interest income 3,463 3,593 3,834 4,155 Fee and commission income 352 364 417 450 Trading income 0 0 0 0 Total non-interest income 352 364 417 450 Total income 3,815 3,956 4,251 4,605 Personal expense 941 1,050 1,173 1,311 Other expenses 992 1,065 1,140 1,219 Total expenses 1,932 2,116 2,313 2,530 Pre-provision profit 1,972 1,970 2,078 2,225 Loan loss provisions 510 340 217 318 Operating profit 1,463 1,630 1,861 1,907 Other non-operating inc./(exp.) (10) (11) (11) (12) Pre-tax profit 1,452 1,619 1,850 1,894 Taxes 424 473 540 553 Net profit before minorities 1,028 1,146 1,310 1,341 Reported net profit 1,028 1,146 1,310 1,341 Net profit (Credit Suisse) 1,028 1,146 1,310 1,341 Balance Sheet (Rp bn) 12/16A 12/17E 12/18E 12/19E Gross customer loans 29,675 31,642 33,979 36,728 Risk provisions 0 0 0 0 Net customer loans 28,353 30,310 32,603 35,268 Interbank loans 7,536 8,338 9,246 10,276 Our Blue Sky Scenario (Rp) 840.00 Investment & securities 3,528 3,705 3,890 4,085 Cash & cash equivalents 1,710 1,870 2,155 2,569 Fixed assets 837 837 837 837 Our Grey Sky Scenario (Rp) 500.00 Other assets 1,068 1,107 1,147 1,188 Total assets 43,033 46,167 49,878 54,222 Total deposits 31,305 33,296 35,571 38,284 Share price performance Other liabilities 4,519 5,194 6,021 7,029 Total liabilities 35,823 38,489 41,591 45,312 Shareholders' equity 6,695 7,162 7,772 8,395 Total liabilities & equity 43,033 46,167 49,878 54,222 Asset quality & Capital 12/16A 12/17E 12/18E 12/19E Asset Quality (%) NPL/ gross loans 4.8 4.5 4.4 4.3 B/S loan loss coverage - - - - Loan/ deposit ratio 90.6 91.0 91.7 92.1 Capital ratios (%) Capital adequacy ratio 23.9 25.1 25.7 25.8 Tier 1 ratio 22.9 24.1 24.6 24.7 Equity Tier 1 ratio 22.9 24.1 24.6 24.7 Per share 12/16A 12/17E 12/18E 12/19E Shares (wtd avg.) (mn) 14,918 14,918 14,918 14,918 The price relative chart measures performance against the JSX COMPOSITE EPS (Credit Suisse) (Rp) 69 77 88 90 INDEX which closed at 5,567.13 on 24-Mar-2017 BVPS (Rp) 449 480 521 563 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 Tangible BVPS (Rp) 449 480 521 563 DPS (Rp) 44 45 47 48 Earnings 12/16A 12/17E 12/18E 12/19E Growth (%) Revenue 9.9 4.6 7.5 8.3 Operating expense 10.7 9.5 9.3 9.4 Pre-provision profit 9.2 (0.1) 5.5 7.1 Net profit 16.2 11.5 14.2 2.4 Deposit (4.9) 6.4 6.8 7.6 Valuation 12/16A 12/17E 12/18E 12/19E EPS growth (%) 16.2 11.5 14.2 2.4 P/E (x) 9.3 8.3 7.3 7.1 P/B (x) 1.43 1.33 1.23 1.14 P/TB (x) 1.4 1.3 1.2 1.1 Dividend yield (%) 6.9 7.1 7.3 7.5 Profitability & margins (%) 12/16A 12/17E 12/18E 12/19E ROE stated 16.5 16.5 17.5 16.6 ROE - CS adj. 16.5 16.5 17.5 16.6 ROA - CS adj. 2.4 2.6 2.7 2.6 Gearing (x) 6.9 6.4 6.4 6.4
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 110 27 March 2017
Asia Pacific/Indonesia Regional Banks
PT Bank Negara Indonesia (Persero)
Tbk (BBNI.JK / BBNI IJ) Rating OUTPERFORM Price (24-Mar-17, Rp) 6,800 COMPANY UPDATE Target price (Rp) 7,800 Upside/downside (%) 14.7
Mkt cap (Rp/US$ bn) 125,543/ 9.42 Fast growth a cause for worry? Number of shares (mn) 18,462 Free float (%) 40.0 ■ Corporate-focused state-owned bank. BNI is the fourth-largest bank in 52-wk price range 6,900-4,310 Indonesia with a decent corporate and consumer (mainly mortgage) ADTO-6M (US$ mn) 9.6 business. Loan book is divided among SOE-corporate (20% of loans), Target price is for 12 months.
private-corporate (30%), SMEs (28.5%) and consumer (17%) with the Research Analysts remaining from subsidiaries. BNI also has a good deposit franchise with 68%
Sanjay Jain low-cost current/saving (CASA) deposits and enjoys the second-lowest cost 65 6306 0668 of funding after BCA (Mandiri is marginally higher). With a network spanning [email protected] over 1,781 branches and 14,157 ATMs, BNI has ~9% of both loan/deposit Laurensius Teiseran 62 21 255 37931 market share. [email protected] ■ With a new CEO, BNI set aside a large provisioning in 2015 and started Rikin Shah 65 6212 3098 growing loans aggressively from 2016. This has caused concern in the [email protected] market but BNI contends most of its loan growth is derived from government infrastructure projects, and is hence safer. We have taken a view that (1) the Indonesian government has a record of saving SOEs, and (2) new loans are unlikely to turn bad unless the economy suffers a major downturn. We prefer BNI to Mandiri for some time on valuation discount that gapped up. ■ Earnings drivers. For 2017, BNI is guiding for loan growth of 15-17% (20.6% in 2016), funding growth of 19-21% (17.6% deposit growth in 2016), net interest margin of 5.8-6.0%, operating expenses growth of 14-16%, gross NPL ratio of 2.8-3.0%, and coverage ratio of 147-149%. ■ We project EPS growth of 15.6% in 2017 and 19.4% in 2018 along with ROEs of 14.3% in 2017 and 15.3% in 2018. However, for target price calculation, we use the projected ROA of 2.12% (average of 2017-19E) and apply a normalised gearing of 7.5x (vs projected 7.2x and 2016 6.8x), which gives us a normalised ROE of 15.6%. With a 13.3% cost of equity and "g" of 9%, the Gordon growth model leads us to a target price of Rp7,800, which implies a 2017 P/B of 1.3x, P/E of 11.0 (9.2x 2018E) with 15% potential upside.
Share price performance Financial and valuation metrics
Year 12/16A 12/17E 12/18E 12/19E Pre-provision op profit (Rp bn) 20,392.4 22,280.2 25,487.1 29,589.6 Pre-tax profit (Rp bn) 14,302.9 16,529.5 19,743.3 23,001.2 Net attributable profit (Rp bn) 11,338.7 13,103.9 15,651.7 18,234.4 EPS (CS adj.) (Rp) 608.84 708.37 846.10 985.72 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 701.45 815.54 889.94 EPS growth (%) 25.1 16.3 19.4 16.5 P/E (x) 11.2 9.6 8.0 6.9 The price relative chart measures performance against the Dividend yield (%) 2.6 3.1 0.0 0.0 JSX COMPOSITE INDEX which closed at 5,567.13 on BVPS (CS adj.) (Rp) 4,680 5,178 5,847 6,621 24/03/17. On 24/03/17 the spot exchange rate was P/B (x) 1.45 1.31 1.16 1.03 Rp13,328/US$1 ROE (%) 13.9 14.3 15.3 15.8
Performance 1M 3M 12M ROA (%) 2.0 2.0 2.1 2.2 Absolute (%) 8.4 29.5 32.0 Tier 1 ratio (%) 18.2 17.4 17.2 17.0
Relative (%) 4.5 18.8 16.7 Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 111 27 March 2017
PT Bank Negara Indonesia (Persero) Tbk (BBNI.JK / BBNI IJ) Price (24 Mar 2017): Rp6,800; Rating: OUTPERFORM; Target Price: Rp7,800; Analyst: Sanjay Jain Earnings Drivers 12/16A 12/17E 12/18E 12/19E Company Background Loans Growth 21.05 17.70 14.76 14.77 PT Bank Negara Indonesia (Persero) Tbk is an Indonesia-based Net Interest Margin 5.87 5.69 5.70 5.75 financial institution. Its products & services are categorised into: Fee Growth 39.17 6.22 9.51 11.75 individual, consisting of credit, savings, treasury & services; Cost to Income Ratio 48.76 49.91 49.56 48.85 corporate, & financing products based on sharia principles. P&L Provision (as % of loans) 1.85 1.50 1.30 1.30 Income Statement (Rp bn) 12/16A 12/17E 12/18E 12/19E Blue/Grey Sky Scenario Interest income 43,768 49,957 57,550 66,073 Interest expense 13,773 15,888 18,422 20,968 Net interest income 29,995 34,070 39,128 45,104 Fee and commission income 6,473 7,446 8,563 9,795 Trading income 1,162 1,162 1,046 942 Total non-interest income 9,114 9,685 10,629 11,902 Total income 39,109 43,754 49,757 57,007 Personal expense 8,834 10,601 12,191 14,019 Other expenses 10,570 11,599 12,851 14,235 Total expenses 19,404 22,200 25,042 28,254 Pre-provision profit 20,392 22,280 25,487 29,590 Loan loss provisions 6,288 6,091 6,135 7,039 Operating profit 14,104 16,189 19,352 22,550 Other non-operating inc./(exp.) 199 341 391 451 Pre-tax profit 14,303 16,530 19,743 23,001 Taxes 2,893 3,343 3,993 4,652 Net profit before minorities 11,410 13,186 15,750 18,349 Reported net profit 11,339 13,104 15,652 18,234 Net profit (Credit Suisse) 11,339 13,104 15,652 18,234 Balance Sheet (Rp bn) 12/16A 12/17E 12/18E 12/19E Gross customer loans 407,528 479,670 550,452 631,733 Risk provisions 16,242 19,897 23,048 26,630 Net customer loans 391,285 459,773 527,404 605,103
Interbank loans 12,538 14,419 15,860 17,446 Investment & securities 149,311 157,534 169,457 182,612 Our Blue Sky Scenario (Rp) 8,200 Cash & cash equivalents 11,168 16,945 18,463 21,120 Fixed assets 21,972 23,426 24,953 26,556 Other assets 16,758 19,666 23,119 26,533 Our Grey Sky Scenario (Rp) 4,400 Total assets 603,032 691,763 779,256 879,370 Total deposits 435,545 511,327 583,268 665,430 Other liabilities 78,233 82,352 85,229 88,516 Share price performance Total liabilities 513,778 593,678 668,497 753,946 Shareholders' equity 87,157 95,781 108,157 122,478 Total liabilities & equity 603,032 691,763 779,256 879,370 Asset quality & Capital 12/16A 12/17E 12/18E 12/19E Asset Quality (%) NPL/ gross loans 2.7 2.8 2.4 2.4 B/S loan loss coverage 147.1 147.5 171.2 179.1 Loan/ deposit ratio 89.8 89.9 90.4 90.9 Capital ratios (%) Capital adequacy ratio 19.3 18.5 18.4 18.2 Tier 1 ratio 18.2 17.4 17.2 17.0 Equity Tier 1 ratio 18.2 17.4 17.2 17.0 Per share 12/16A 12/17E 12/18E 12/19E Shares (wtd avg.) (mn) 18,624 18,499 18,499 18,499 EPS (Credit Suisse) (Rp) 609 708 846 986 The price relative chart measures performance against the JSX COMPOSITE BVPS (Rp) 4,680 5,178 5,847 6,621 INDEX which closed at 5,567.13 on 24-Mar-2017 Tangible BVPS (Rp) 4,680 5,178 5,847 6,621 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1 DPS (Rp) 177 212 0 0 Earnings 12/16A 12/17E 12/18E 12/19E Growth (%) Revenue 22.1 11.8 13.6 14.5 Operating expense 23.7 14.4 12.8 12.8 Pre-provision profit 20.6 9.3 14.4 16.1 Net profit 25.1 15.6 19.4 16.5 Deposit 17.6 17.4 14.1 14.1 Valuation 12/16A 12/17E 12/18E 12/19E EPS growth (%) 25.1 16.3 19.4 16.5 P/E (x) 11.2 9.6 8.0 6.9 P/B (x) 1.45 1.31 1.16 1.03 P/TB (x) 1.5 1.3 1.2 1.0 Dividend yield (%) 2.6 3.1 0.0 0.0 Profitability & margins (%) 12/16A 12/17E 12/18E 12/19E ROE stated 13.9 14.3 15.3 15.8 ROE - CS adj. 13.9 14.3 15.3 15.8 ROA - CS adj. 2.0 2.0 2.1 2.2 Gearing (x) 6.8 7.1 7.2 7.2
Source: Company data, Thomson Reuters, Credit Suisse estimates
Indonesia Consumer Survey 2017 112 27 March 2017
Appendix 1: Respondents' summary Demographics
Figure 155: What is your total monthly income after Figure 154: Could you please tell us your age? tax?
40% 38% 35% 37%
35% 30% 25% 30% 20% 25% 15%
20% % of respondentsof % 10% 16% % of respondents 15% 5% 0% 10% 9%
5%
< 1,000k < > 15,000k >
0%
1,000k - 1,500k 1,000k - 2,000k 1,500k - 3,000k 2,000k - 5,000k 3,000k - 7,500k 5,000k
18 - 29 30 - 45 46 - 55 56 - 65 - 10,000k 7,500k 10,000k - 15,000k - 10,000k Respondents' age IDR Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 156: Urban to rural split Figure 157: Male to female split
Rural 34%
Female Male 51% 49%
Urban 66%
Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 158: How many people live in your household? < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t know % of respondents 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer 1 2 5 3 8 5 1 - - - - - 2 8 14 24 27 20 5 - 1 - 1 - 3 9 24 71 120 81 15 5 3 3 8 5 4 7 34 77 170 125 36 8 4 3 17 12 5 or more 14 41 69 173 158 58 20 7 8 15 10 Mean 3.58 3.78 3.76 3.95 4.06 4.26 4.45 4.13 4.36 4.12 4.19 Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 113 27 March 2017
Figure 159: What is the total after-tax monthly income of your household? Total Area Region Age % of respondents Urban Rural Java Ex Java 18-29 30-45 46-55 56-65 2016 < 1,000k 3% 2% 4% 3% 3% 3% 2% 2% 3% 1,000k - 1,500k 8% 5% 14% 9% 7% 7% 7% 9% 13% 1,500k - 2,000k 17% 14% 21% 16% 17% 19% 15% 15% 19% 2,000k - 3,000k 34% 31% 39% 35% 32% 36% 34% 31% 31% 3,000k - 5,000k 27% 31% 17% 26% 28% 23% 29% 31% 21% 5,000k - 7,500k 8% 11% 3% 8% 8% 8% 8% 8% 8% 7,500k - 10,000k 2% 3% 1% 2% 3% 2% 3% 2% 2% 10,000k - 15,000k 1% 1% 1% 1% 1% 1% 2% 1% 0% > 15,000k 1% 1% 0% 1% 2% 1% 1% 1% 3% 2015 < 1,000k 4% 3% 7% 4% 6% 5% 4% 3% 5% 1,000k - 1,500k 7% 5% 10% 6% 9% 6% 5% 7% 13% 1,500k - 2,000k 19% 16% 24% 18% 21% 19% 18% 22% 17% 2,000k - 3,000k 30% 31% 30% 30% 32% 29% 33% 28% 26% 3,000k - 5,000k 25% 27% 20% 26% 23% 26% 24% 23% 22% 5,000k - 7,500k 9% 12% 5% 11% 5% 9% 9% 11% 7% 7,500k - 10,000k 3% 4% 2% 3% 2% 2% 3% 4% 6% 10,000k - 15,000k 1% 1% 1% 1% 1% 1% 1% 1% 2% > 15,000k 2% 2% 2% 2% 1% 2% 2% 0% 3% 2010 < 1,000k 8% 5% 15% 8% 9% 7% 8% 8% 14% 1,000k - 1,500k 16% 11% 26% 17% 13% 17% 14% 18% 15% 1,500k - 2,000k 26% 24% 29% 26% 25% 26% 27% 21% 23% 2,000k - 3,000k 26% 29% 20% 27% 25% 28% 27% 24% 23% 3,000k - 5,000k 19% 25% 8% 19% 19% 17% 20% 23% 19% 5,000k - 7,500k 3% 4% 1% 3% 4% 3% 3% 4% 3% 7,500k - 10,000k 1% 1% 0% 0% 2% 1% 0% 1% 1% 10,000k - 15,000k 1% 1% 0% 0% 1% 0% 1% 0% 2% > 15,000k 1% 1% 0% 0% 1% 1% 0% 0% 1% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 160: Do you think the state of your own finances over the next six months will be better, worse or about the same?
Better About the same Worse 100% 0% 0% 4% 3% 2% 8% 8% 9% 7% 90%
80% 45% 46% 70% 57% 67% 58% 64% 60% 61% 63% 71% 50%
% of respondentsof % 40%
30% 52% 55% 20% 40% 35% 32% 33% 31% 28% 10% 21%
0% < 1,000k 1,000k - 1,500k 1,500k - 2,000k 2,000k - 3,000k 3,000k - 5,000k 5,000k - 7,500k 7,500k - 10,000k 10,000k - 15,000k > 15,000k Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 114 27 March 2017
Figure 161: Net percentage of people who are positive regarding their finances over the next six months
60% 55% 50% 50%
40% 37% 33%
30% 28% 28%
22% % of respondentsof % 20% 18% 14%
10%
0% < 1,000k 1,000k - 1,500k 1,500k - 2,000k 2,000k - 3,000k 3,000k - 5,000k 5,000k - 7,500k 7,500k - 10,000k 10,000k - 15,000k > 15,000k
Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 162: In your opinion, is now a good time to make a major purchase? - Area 2016 2015 2010 % of respondents Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Excellent time 2% 2% 1% 2% 2% 5% 6% 4% 5% 6% 6% 7% 5% 6% 7% Good time 34% 33% 34% 35% 30% 30% 31% 28% 29% 31% 50% 48% 54% 55% 39% Not such a good time 60% 60% 61% 59% 63% 59% 57% 61% 59% 58% 40% 40% 39% 36% 48% A bad time 5% 5% 5% 4% 5% 7% 6% 7% 7% 5% 4% 5% 3% 4% 6% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 163: In your opinion, is now a good time to make a major purchase? - Age 2016 2015 2010 % of respondents Total 18-29 30-45 46-55 56-65 Total 18-29 30-45 46-55 56-65 Total 18-29 30-45 46-55 56-65 Excellent time 2% 1% 2% 2% 2% 5% 5% 5% 6% 4% 6% 6% 6% 6% 6% Good time 34% 37% 31% 35% 30% 30% 28% 33% 27% 25% 50% 53% 49% 50% 45% Not such a good time 60% 57% 63% 60% 61% 59% 59% 56% 62% 64% 40% 38% 40% 39% 45% A bad time 5% 5% 5% 3% 6% 7% 7% 6% 6% 8% 4% 3% 5% 4% 4% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 164: In your opinion, is now a good time to make a major purchase? - Income 2016 2015 2010 % of respondents Total Low Mid High Total Low Mid High Total Low Mid High Excellent time 2% 1% 1% 6% 5% 3% 6% 6% 6% 5% 7% 4% Good time 34% 29% 35% 47% 30% 32% 29% 27% 50% 46% 53% 68% Not such a good time 60% 64% 59% 44% 59% 57% 59% 65% 40% 44% 36% 21% A bad time 5% 6% 4% 3% 7% 8% 6% 2% 4% 5% 3% 7% * Income is on monthly basis: Low
Indonesia Consumer Survey 2017 115 27 March 2017
Figure 165: What savings or investment channels, if any, does your household use to save money? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k % of respondents 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k Bank account 45% 21% 17% 30% 48% 54% 58% 51% 36% 25% Cash 25% 26% 30% 29% 27% 22% 17% 19% 18% 19% No extra money for saving 22% 52% 52% 33% 19% 14% 8% 4% 27% 16% Property 5% 0% 1% 7% 4% 5% 7% 6% 9% 9% Life insurance 4% 0% 0% 1% 2% 5% 9% 15% 9% 16% Stock market 0% 0% 0% 0% 0% 0% 1% 4% 0% 6% Mutual Fund 0% 0% 0% 0% 0% 0% 0% 2% 0% 6% State Treasury bill-bond 0% 0% 0% 0% 0% 0% 0% 0% 0% 3% Collectables 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Gold and Jewellery 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 166: To what extent has your household income changed in the last 12 months? < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k % of respondents 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k Decline more than 20% 0% 0% 0% 1% 2% 0% 0% 13% 0% -10% to -20% 0% 3% 2% 2% 1% 3% 0% 0% 0% -10% to flat 5% 17% 12% 7% 8% 4% 6% 7% 0% Unchanged 63% 53% 55% 48% 36% 31% 27% 60% 43% Flat to +10% 18% 20% 18% 30% 36% 42% 36% 13% 36% 10-20% 8% 3% 5% 7% 11% 15% 24% 0% 21% 20-30% 0% 0% 1% 1% 2% 0% 6% 0% 0% 30%+ 3% 0% 0% 0% 0% 1% 0% 7% 0% No income 12 months ago 5% 4% 7% 5% 5% 3% 0% 0% 0% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 167: In what way do you expect your household income to change in the next 12 months? < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k % of respondents 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k Decline more than 20% 0% 0% 0% 0% 1% 1% 0% 0% 0% -10% to -20% 0% 1% 4% 1% 2% 2% 3% 0% 0% -10% to flat 8% 6% 6% 4% 3% 3% 0% 7% 0% Unchanged 40% 53% 39% 36% 26% 30% 36% 20% 21% Flat to +10% 35% 25% 33% 37% 36% 35% 18% 40% 57% 10-20% 13% 10% 11% 13% 20% 18% 33% 7% 21% 20-30% 0% 2% 1% 2% 5% 3% 6% 7% 0% 30%+ 3% 0% 1% 1% 3% 4% 3% 13% 0% No income 12 months ago 3% 3% 5% 5% 4% 3% 0% 7% 0% Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 116 27 March 2017
Figure 168: Have you migrated from your hometown to where you are currently living? And did you migrate to earn better income? Migrated Did not migrate Moved to earn better income 100% 93% 92% 86% 90% 79% 80% 69% 66% 70%
60%
50%
40% 64%
30% 76% 74% 81% 81% 20% 85% 36% 26% 10% 24% 19% 19% 15% 0% 2015 2016 2015 2016 2015 2016 China India Indonesia Source: Credit Suisse Indonesia Consumer Survey 2017 Automotive
Figure 169: Do you own a car or motorbike for personal use? < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k % of respondents 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k Car 5% 1% 0% 4% 9% 17% 31% 21% 36% Motorbike 68% 74% 86% 91% 93% 96% 88% 100% 100% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 170: Will you or your family purchase or replace your car in the next 12 months?
Definitely will Probably will Not sure Probably won’t Definitely won’t 50%
45%
40%
35%
30%
25% % of respondentsof % 20%
15%
10%
5%
0% Total < 1,000k 1,000k - 1,500k 1,500k - 2,000k 2,000k - 3,000k 3,000k - 5,000k 5,000k - 7,500k 7,500k - 10,000k10,000k - 15,000k > 15,000k
Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 117 27 March 2017
Figure 171: Will you or your family purchase or replace your motorbike in the next 12 months?
Definitely will Probably will Not sure Probably won’t Definitely won’t 50%
45%
40%
35%
30%
25% % of respondentsof % 20%
15%
10%
5%
0% Total < 1,000k 1,000k - 1,500k 1,500k - 2,000k 2,000k - 3,000k 3,000k - 5,000k 5,000k - 7,500k 7,500k - 10,000k10,000k - 15,000k > 15,000k
Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 172: How do you plan to finance this motorbike purchase? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k % of respondents 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k All Cash 29% 21% 34% 36% 26% 30% 13% 55% 0% 100% Cash + Credit 33% 57% 31% 47% 29% 26% 30% 36% 50% 0% All Credit 34% 21% 34% 15% 44% 36% 47% 9% 50% 0% Don’t know 4% 0% 0% 2% 1% 9% 10% 0% 0% 0% Source: Credit Suisse Indonesia Consumer Survey 2017 Food and beverages
Figure 173: Have you purchased or will you be purchasing any of the following products? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t % of respondents 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer know Purchased in the last 3 months Bottled water 88% 84% 73% 82% 88% 90% 96% 92% 100% 100% 89% 91% Carbonated drinks 61% 58% 47% 59% 61% 65% 72% 62% 85% 45% 52% 55% Cigarettes 51% 45% 49% 55% 51% 53% 44% 54% 54% 45% 41% 41% Dairy products 70% 58% 53% 67% 70% 76% 84% 77% 46% 73% 81% 86% Instant noodles 94% 92% 94% 93% 94% 93% 97% 81% 92% 82% 100% 100% Will purchase in the next 12 months Bottled water 62% 61% 56% 63% 61% 64% 64% 73% 85% 82% 70% 32% Carbonated drinks 37% 26% 28% 37% 37% 38% 40% 50% 62% 45% 44% 18% Cigarettes 35% 39% 31% 38% 35% 36% 28% 38% 54% 18% 30% 18% Dairy products 50% 45% 41% 51% 46% 57% 49% 58% 31% 55% 70% 50% Instant noodles 64% 63% 66% 67% 64% 64% 62% 54% 77% 55% 81% 50% Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 118 27 March 2017
Personal care
Figure 174: Have you purchased or will you be purchasing any of the following products? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t % of respondents 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer know Purchased in the last 3 months Cosmetics & skin care 52% 48% 41% 47% 52% 55% 64% 44% 53% 71% 49% 58% Feminine hygiene 84% 82% 72% 81% 82% 88% 92% 81% 100% 86% 86% 80% Tissue 56% 35% 39% 47% 54% 62% 74% 78% 67% 93% 66% 65% Will purchase in the next 12 months Cosmetics & skin care 35% 40% 26% 35% 34% 37% 44% 31% 47% 36% 46% 15% Feminine hygiene 56% 59% 52% 55% 56% 56% 69% 50% 67% 43% 82% 27% Tissue 39% 33% 28% 37% 36% 43% 51% 50% 67% 50% 66% 15% Source: Credit Suisse Indonesia Consumer Survey 2017 Luxury goods
Figure 175: Have you purchased or will you be purchasing any of the following products? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t % of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer know Fashion Purchased in the last 3 months 38% 43% 30% 36% 38% 40% 51% 56% 38% 55% 18% 17% Planning to purchase in 12 months 48% 58% 41% 52% 49% 47% 57% 56% 62% 45% 9% 35% Leather Purchased in the last 3 months 13% 13% 4% 11% 11% 14% 21% 33% 38% 36% 0% 4% Planning to purchase in 12 months 17% 18% 12% 19% 13% 19% 24% 30% 31% 36% 6% 13% Sport shoes Purchased in the last 3 months 15% 13% 7% 17% 11% 19% 24% 19% 38% 27% 3% 13% Planning to purchase in 12 months 19% 18% 9% 19% 16% 25% 30% 30% 38% 27% 6% 9% Jewelry Purchased in the last 12 months 10% 5% 9% 8% 10% 11% 12% 22% 15% 18% 0% 9% Planning to purchase in 12 months 16% 20% 19% 12% 17% 19% 18% 22% 15% 18% 3% 9% Perfumes Purchased in the last 12 months 39% 28% 26% 35% 38% 44% 55% 37% 77% 64% 9% 35% Planning to purchase in 12 months 42% 33% 27% 42% 40% 48% 53% 44% 69% 73% 9% 35% Watches Purchased in the last 12 months 9% 13% 2% 7% 7% 12% 13% 15% 31% 55% 3% 4% Planning to purchase in 12 months 11% 13% 6% 9% 10% 15% 12% 19% 38% 36% 3% 0% Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 119 27 March 2017
Technology and internet
Figure 176: Have you purchased any of the following products in the last 12 months? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t know % of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer Smartphone 21% 20% 8% 15% 20% 24% 33% 38% 11% 23% 46% 32% TV 9% 9% 8% 8% 10% 10% 11% 8% 7% 9% 3% 4% Mobile phone 8% 20% 14% 9% 8% 6% 4% 8% 11% 5% 8% 0% DVD Player 5% 7% 2% 5% 5% 6% 2% 3% 7% 0% 0% 0% Notebook PC 3% 0% 1% 1% 3% 4% 5% 5% 7% 9% 0% 0% Tablet 2% 0% 2% 1% 2% 4% 2% 3% 4% 14% 3% 0% Digital Camera 1% 4% 1% 2% 1% 1% 1% 0% 4% 5% 0% 0% Desktop computer 1% 0% 0% 1% 1% 1% 0% 5% 4% 0% 0% 0% Internet Service 0% 0% 0% 0% 0% 0% 1% 0% 4% 0% 0% 4% Gaming facility 0% 0% 0% 1% 1% 0% 0% 0% 0% 5% 0% 0% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 177: Will you be purchasing any of the following products in the next 12 months? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t know % of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer Smartphone 21% 33% 21% 17% 22% 22% 16% 34% 28% 33% 17% 22% TV 8% 16% 9% 7% 8% 9% 8% 11% 6% 17% 3% 9% Notebook PC 5% 4% 5% 4% 6% 5% 8% 9% 0% 8% 0% 4% Tablet 3% 0% 0% 3% 3% 4% 3% 3% 6% 0% 0% 0% Mobile phone 2% 2% 4% 3% 2% 2% 0% 0% 0% 0% 0% 0% Digital Camera 2% 0% 1% 3% 2% 1% 3% 11% 0% 0% 0% 4% DVD Player 2% 4% 2% 5% 1% 1% 1% 3% 0% 0% 0% 0% Desktop computer 1% 0% 1% 2% 1% 0% 3% 3% 6% 0% 0% 0% Gaming facility 0% 2% 0% 0% 1% 0% 0% 0% 0% 0% 0% 0% Internet Service 0% 0% 1% 0% 0% 1% 0% 0% 6% 0% 0% 0% Source: Credit Suisse Indonesia Consumer Survey 2017 Telecommunications
Figure 178: Do you currently own a mobile phone / handset for personal use? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t % of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer know Yes, I own and pay for my own 77% 59% 57% 76% 76% 83% 83% 90% 93% 100% 90% 73% mobile phone/handset Yes, I own my own mobile phone/handset but is paid for by my 1% 0% 2% 0% 1% 1% 1% 3% 0% 0% 0% 0% employer Yes, I own my own mobile phone/handset but is paid by 6% 8% 4% 4% 6% 6% 10% 0% 0% 0% 0% 12% somebody else No I do not own my own mobile 16% 33% 37% 20% 17% 11% 6% 6% 7% 0% 10% 15% phone/handset Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 120 27 March 2017
Figure 179: Have you bought a mobile phone or handset in the last 12 months?
2010 2015 2016 90%
80%
70%
60%
50%
40% % of respondentsof% 30%
20%
10%
0% Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Would prefer Don’t know 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k not to answer
Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 180: Are you planning to upgrade to a Figure 181: Which brand of smartphone are you smartphone in the next 12 months? going to purchase? 2010 2016 60% Apple 3% Don't know 50% 21%
40% Other
30% 3% % of respondents 20%
10%
Android
0% 73%
India a
Brazil
Africa
South China
Turkey Russia Mexico Indonesi Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 121 27 March 2017
Travel
Figure 182: Have you been or are you planning to go on a holiday?
Took holiday in the last 12 months Planning to take holiday in the next 12 months 100%
95%
90%
85%
80%
75%
70% % of respondents
65%
60%
55%
50% < 1,000k 1,000k - 1,500k 1,500k - 2,000k 2,000k - 3,000k 3,000k - 5,000k 5,000k - 7,500k 7,500k - 10,000k 10,000k - 15,000k > 15,000k
Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 183: Where did you go or where are you planning to go for holiday? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k % of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k Holiday in the last 12 months At home 71% 90% 77% 79% 73% 64% 60% 54% 46% 55% Domestic 29% 10% 23% 21% 27% 36% 40% 46% 54% 45% International 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Holiday in the next 12 months At home 55% 63% 64% 60% 55% 49% 49% 50% 25% 55% Domestic 45% 37% 36% 40% 45% 51% 51% 50% 75% 45% International 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 184: What was the main form of transport that you used to reach your holiday destination? % of respondent Total < 1,000k 1,000k - 1,500k 1,500k - 2,000k 2,000k - 3,000k 3,000k - 5,000k 5,000k - 7,500k 7,500k - 10,000k 10,000k - 15,000k > 15,000k Car 32% 33% 29% 21% 30% 31% 50% 36% 86% 20% Bus 29% 33% 29% 18% 33% 32% 13% 36% 0% 20% Train 13% 0% 6% 9% 10% 18% 22% 9% 0% 0% Ship 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% Airplane 4% 0% 0% 3% 2% 3% 9% 9% 14% 20% Other 22% 33% 35% 50% 25% 15% 6% 9% 0% 40% Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 122 27 March 2017
Education
Figure 185: Do you intend to spend more on education or training course in the next 12 months?
Less About the same More 90%
80%
70%
60%
50%
40%
30%
20%
10%
0% Total < 1,000k 1,000k - 1,500k 1,500k - 2,000k 2,000k - 3,000k 3,000k - 5,000k 5,000k - 7,500k 7,500k - 10,000k - > 15,000k 10,000k 15,000k Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 186: Do you conduct any education online? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k % of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k Yes 0.5% 0.0% 0.0% 0.4% 0.4% 0.3% 0.9% 3.0% 6.7% 0.0% Number of respondents 1,518 39 118 244 497 383 112 33 15 11 Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 123 27 March 2017
Healthcare
Figure 187: Does your household have access to free or partially-free healthcare from the State? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t % of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer know Yes 52% 55% 42% 44% 52% 59% 61% 41% 67% 62% 46% 62% Number of respondents 1,492 40 118 243 489 375 111 32 15 13 35 21 Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 188: How do you pay for your healthcare? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t know % of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer Insurance 14% 6% 6% 7% 12% 19% 22% 11% 22% 0% 0% 13% Self-Pay (Cash) 57% 71% 84% 86% 59% 48% 42% 47% 33% 75% 75% 88% Paid by company 28% 24% 9% 7% 29% 33% 37% 42% 44% 25% 25% 0% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 189: What services, if any, could you get free from the state? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t know % of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer Hospital 45% 43% 44% 43% 45% 45% 44% 45% 60% 44% 89% 50% Emergency Room 18% 20% 16% 21% 16% 19% 22% 10% 7% 11% 6% 15% Prescriptions 19% 24% 17% 14% 20% 21% 20% 17% 20% 17% 6% 31% Vaccinations 9% 9% 12% 13% 11% 7% 6% 14% 7% 11% 0% 4% Diagnostic tests 8% 4% 10% 9% 8% 8% 8% 14% 7% 17% 0% 0% Outpatient service 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 190: Do you trust local domestic brands as much as foreign brands? Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t % of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer know Yes, I trust local brands on 78% 65% 78% 83% 78% 76% 74% 78% 67% 54% 89% 76% both efficacy and safety I trust local brands on 10% 5% 7% 8% 11% 13% 13% 13% 13% 31% 0% 0% efficacy but not on safety I trust local brands on safety 4% 5% 3% 1% 3% 5% 7% 3% 7% 15% 0% 10% but not on efficacy No, I do not trust local brands neither on efficacy or 2% 0% 3% 1% 2% 2% 1% 3% 0% 0% 0% 0% on safety Don't know 7% 25% 10% 7% 6% 4% 5% 3% 13% 0% 11% 14% Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesia Consumer Survey 2017 124 27 March 2017
Appendix 2: Indonesia macro
Figure 191: Indonesia macro 2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F National accounts, population and unemployment Real GDP growth (%) 4.7 7.7 6.2 6.0 5.6 5.0 4.8 5.1 5.2 5.2 Growth in real private consumption (%) 4.7 4.8 5.1 5.5 5.5 5.3 4.8 5.1 5.3 5.3 Growth in real fixed investment (%) 3.9 8.5 8.9 9.1 5.0 4.6 5.1 4.8 5.6 6.0 Fixed investment (% of GDP) 31.1 31.0 31.3 32.7 32.0 32.6 33.2 33.1 33.2 33.5 Nominal GDP (US$bn) 538.6 756.1 892.7 914.8 903.8 889.0 857.6 918.2 1,002.0 1,079.0 Population (mn) 228.5 231.4 237.6 242.0 245.4 248.8 252.2 255.5 258.8 262.1 GDP per capita (US$) 2,357.0 3,268.0 3,756.4 3,780.1 3,682.4 3,573.1 3,400.8 3,594.0 3,874.0 4,118.0 Prices, interest rates and exchange rates CPI inflation (% year-on-year change, December over December) 2.8 7.0 3.8 3.7 8.1 8.4 3.4 3.0 4.5 4.7 CPI inflation (% change in average index for the year) 4.8 5.1 5.3 4.0 6.4 6.4 6.4 3.5 4.3 4.1 Exchange rate (IDR per USD, end-year) 9,400.0 8,991.0 9,068.0 9,670.0 12,189.0 12,440.0 13,795.0 13,500.0 13,900.0 13,900.0 Exchange rate (IDR per USD, average) 10,354.1 9,078.3 8,773.3 9,418.6 10,562.7 11,884.5 13,457.6 13,648.0 13,700.0 13,900.0 REER (% year-on-year change, December over December) (1) 15.6 6.0 (1.2) (5.4) (11.6) 10.0 (1.6) (0.5) (1.0) (1.0) Nominal wage growth (% year-on-year change)(2) 5.3 12.2 3.4 20.4 16.1 4.0 6.5 5.0 6.0 6.5 Overnight rate (%, end-year) (3) 6.5 6.5 6.0 5.8 7.5 7.8 7.5 5.8 n.a n.a Fiscal data (4) General government fiscal balance (% of GDP) (1.6) (0.7) (1.1) (1.8) (2.2) (2.1) (2.5) (2.9) (2.7) (2.5) General government primary fiscal balance (% of GDP) 0.1 0.6 0.1 (0.6) (1.1) (1.0) (1.4) (1.8) (1.6) (1.4) General government expenditure (% of GDP) 16.7 15.2 16.5 17.3 17.3 16.8 15.6 15.3 15.2 15.2 General government revenue (% of GDP) 15.1 14.5 15.5 15.5 15.1 14.7 13.0 12.3 12.5 12.7 Gross general government debt (% of GDP, end-year) (5) 31.4 24.7 22.3 22.4 21.6 23.6 26.2 30.5 33.2 35.4 Money supply and credit Broad money supply (M2, % of GDP) 35.6 36.0 36.7 38.4 39.1 39.5 39.4 38.5 38.8 39.8 Broad money supply (M2, % year-on-year change) 13.0 15.4 16.4 15.0 12.8 11.9 8.9 6.0 10.5 12.0 Domestic credit (% of GDP) 24.3 23.4 25.1 27.2 28.5 29.0 29.5 28.7 28.6 29.4 Domestic credit (% year on year change) 12.2 9.9 22.4 19.2 16.1 12.8 11.1 6.5 9.5 12.0 Domestic credit to the private sector (% of GDP) 23.4 24.5 27.0 30.0 32.5 33.0 33.1 32.5 32.8 33.6 Domestic credit to the private sector (% year-on-year change) 6.8 20.0 25.8 21.9 20.0 12.6 9.6 6.5 10.5 12.0 Balance of payments (6) Exports (goods and non-factor services, % of GDP) 24.7 23.1 23.9 23.1 22.7 22.4 19.9 17.8 16.5 15.8 Imports (goods and non-factor services, % of GDP) 20.7 20.3 21.2 23.3 23.4 22.7 19.3 17.4 16.4 16.0 Exports (goods and non-factor services, % year-on-year change (14.2) 25.5 27.8 (0.9) (2.8) (3.0) (14.4) (4.0) 1.5 3.0 in $ value) Imports (goods and non-factor services, % year-on-year change in (23.0) 30.3 29.9 12.7 (0.8) (4.5) (18.0) (3.5) 3.0 5.0 $ value) Current account balance (US$bn) 10.6 5.1 1.7 (24.4) (29.1) (27.5) (17.8) (18.8) (21.1) (24.4) Current account balance (% of GDP) 2.0 0.7 0.2 (2.7) (3.2) (3.1) (2.1) (2.0) (2.1) (2.3) Net FDI inflows (US$bn) 2.6 11.1 11.5 13.7 13.7 15.9 15.9 14.0 17.0 19.0 Scheduled external debt amortisation (US$bn) 17.1 18.7 23.0 42.0 38.8 38.8 38.8 45.0 45.0 45.0 Foreign debt and reserves Foreign debt (US$bn) 172.9 202.4 225.4 252.4 266.1 293.8 310.7 335.0 350.0 340.0 Public 99.3 118.6 118.6 126.1 123.5 129.7 143.0 158.0 170.0 160.0 Private 73.6 83.8 106.7 126.2 142.6 164.0 167.7 177.0 180.0 180.0 Foreign debt (% of GDP) 32.1 28.5 26.7 28.8 29.4 33.0 36.2 36.5 34.9 31.5 Foreign debt (% of exports of goods and services) 130.2 123.4 111.7 124.8 129.8 147.8 182.5 205.0 211.0 199.0 Central bank gross FX reserves (US$bn) 66.1 96.2 110.1 112.8 99.4 111.9 105.9 110.0 101.0 98.5 Central bank net non-gold FX reserves (US$bn) 63.6 92.9 106.5 108.8 96.4 108.8 103.3 107.0 98.0 95.5 (1) Real effective exchange rate, increase indicates appreciation. (2) Nominal wage: manufacturing. (3) BI changed its policy target from 1m SBI rate to overnight rate in 2008. (4) Refers to central government. (5) Excludes SOE and BI debt. (6) BoP number Source: Indonesia Bureau of Statistics, Ministry of Finance, Bank Indonesia, Credit Suisse, CEIC, World Bank
Indonesia Consumer Survey 2017 125 27 March 2017
Companies Mentioned (Price as of 24-Mar-2017) Ace Hardware Indonesia (ACES.JK, Rp810) Astra International (ASII.JK, Rp8,525, OUTPERFORM, TP Rp9,800) Gudang Garam (GGRM.JK, Rp64,925, NEUTRAL, TP Rp74,100) Hanjaya Mandala Sampoerna (HMSP.JK, Rp4,000, NEUTRAL, TP Rp4,340) Indofood CBP (ICBP.JK, Rp8,600, NEUTRAL, TP Rp9,500) Indofood Sukses Makmur (INDF.JK, Rp8,050) Kalbe Farma (KLBF.JK, Rp1,505, UNDERPERFORM, TP Rp1,350) Matahari Department Store (LPPF.JK, Rp13,900, OUTPERFORM, TP Rp16,100) Media Nusantara Citra (MNCN.JK, Rp1,790) Mitra Adiperkasa (MAPI.JK, Rp5,925, OUTPERFORM, TP Rp6,400) PT Alam Sutera Realty TBK (ASRI.JK, Rp362) PT Bank Central Asia Tbk (BBCA.JK, Rp16,550) PT Bank Danamon Indonesia Tbk (BDMN.JK, Rp4,700) PT Bank Mandiri (Persero) Tbk (BMRI.JK, Rp11,900) PT Bank Negara Indonesia (Persero) Tbk (BBNI.JK, Rp6,800, OUTPERFORM, TP Rp7,800) PT Bank Pembangunan Daerah Jawa Barat dan Banten T (BJBR.JK, Rp2,180) PT Bank Pembangunan Daerah Jawa Timur Tbk (BJTM.JK, Rp640, OUTPERFORM, TP Rp690) PT Bank Rakyat Indonesia (Persero) Tbk (BBRI.JK, Rp13,150) PT Bank Tabungan Negara Persero Tbk (BBTN.JK, Rp2,320) PT Bank Tabungan Pensiunan Nasional Tbk (BTPN.JK, Rp2,730) PT Bekasi Fajar Industrial Estate Tbk (BEST.JK, Rp306) PT Bumi Serpong Damai Tbk (BSDE.JK, Rp1,865) PT Ciputra Development TBK (CTRA.JK, Rp1,270) PT Indosat Tbk (ISAT.JK, Rp6,975) PT Kawasan Industri Jababeka Tbk (KIJA.JK, Rp324) PT Kino Indonesia (KINO.JK, Rp2,550) PT Lippo Karawaci Tbk (LPKR.JK, Rp735) PT Mitra Keluarga Karyasehat Tbk (MIKA.JK, Rp2,600, OUTPERFORM, TP Rp3,110) PT Pakuwon Jati Tbk (PWON.JK, Rp600) PT Sarana Menara Nusantara (TOWR.JK, Rp4,000) PT Summarecon Agung Tbk (SMRA.JK, Rp1,340, OUTPERFORM, TP Rp1,600) PT Surya Semesta Internusa Tbk (SSIA.JK, Rp600) PT Telkom (Telekomunikasi Indo.) (TLKM.JK, Rp4,080, OUTPERFORM, TP Rp4,750) Prodia Widyahusada (PRDA.JK, Rp4,800) Pt Link Net Tbk (LINK.JK, Rp5,300) Ramayana Lestari Sentosa (RALS.JK, Rp1,155) Siloam International Hospitals (SILO.JK, Rp14,200, OUTPERFORM, TP Rp12,840) Surya Citra Media (SCMA.JK, Rp2,670) Tower Bersama (TBIG.JK, Rp5,475) Unilever Indonesia (UNVR.JK, Rp43,150) XL Axiata Tbk (EXCL.JK, Rp3,270, OUTPERFORM[V], TP Rp3,950)
Disclosure Appendix Analyst Certification I, Ella Nusantoro, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and securities and (2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
3-Year Price and Rating History for Astra International (ASII.JK)
ASII.JK Closing Price Target Price Date (Rp) (Rp) Rating 28-Apr-14 7,600 8,370 O 16-Jun-14 7,250 9,000 30-Oct-14 6,900 8,000 01-Apr-15 8,175 9,800 15-Jul-15 6,825 8,400 21-Aug-15 6,050 7,500 30-Oct-15 5,900 7,600 27-Apr-16 6,825 6,500 N 23-Sep-16 8,600 8,600 28-Feb-17 8,200 9,800 O OUTPERFORM NEUTRAL * Asterisk signifies initiation or assumption of coverage.
Indonesia Consumer Survey 2017 126 27 March 2017
3-Year Price and Rating History for Gudang Garam (GGRM.JK)
GGRM.JK Closing Price Target Price Date (Rp) (Rp) Rating 06-Apr-14 48,900 46,200 U 07-Apr-14 50,200 46,200 N 31-Oct-14 57,750 53,500 22-Apr-15 53,100 66,800 O 04-Aug-15 48,850 63,700 26-Nov-15 51,600 61,500 15-Mar-16 65,600 61,500 N 06-Jun-16 70,000 74,100
* Asterisk signifies initiation or assumption of coverage. UNDERPERFORM NEUTRAL OUTPERFORM
3-Year Price and Rating History for Hanjaya Mandala Sampoerna (HMSP.JK)
HMSP.JK Closing Price Target Price Date (Rp) (Rp) Rating 04-Jan-16 3,669 4,340 O * 15-Mar-16 4,139 4,340 N * Asterisk signifies initiation or assumption of coverage.
OUTPERFORM NEUTRAL
3-Year Price and Rating History for Indofood CBP (ICBP.JK)
ICBP.JK Closing Price Target Price Date (Rp) (Rp) Rating 26-Aug-14 5,138 5,900 O 15-May-15 6,800 7,550 N 01-Aug-15 6,150 7,550 O 17-Feb-16 7,762 9,150 21-Sep-16 9,600 10,200 N 20-Feb-17 8,375 9,500 * Asterisk signifies initiation or assumption of coverage.
OUTPERFORM NEUTRAL
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3-Year Price and Rating History for Kalbe Farma (KLBF.JK)
KLBF.JK Closing Price Target Price Date (Rp) (Rp) Rating 14-Apr-14 1,520 1,280 N 19-May-14 1,630 1,290 11-Aug-14 1,640 1,350 01-Aug-15 1,745 1,350 U * Asterisk signifies initiation or assumption of coverage.
NEUTRAL UNDERPERFORM
3-Year Price and Rating History for Matahari Department Store (LPPF.JK)
LPPF.JK Closing Price Target Price Date (Rp) (Rp) Rating 08-Apr-14 14,800 16,800 O 04-Aug-14 14,750 17,700 18-Sep-14 16,700 19,900 29-Oct-14 15,150 19,400 30-Jul-15 17,000 19,200 27-Oct-15 18,025 19,700 23-Feb-16 16,250 19,400 26-Apr-16 17,900 19,900 18-May-16 18,800 R 19-May-16 18,800 19,900 O OUTPERFORM REST RICT ED 27-Jun-16 20,000 * 23-Nov-16 14,575 17,600 O 01-Mar-17 11,725 16,100 * Asterisk signifies initiation or assumption of coverage.
3-Year Price and Rating History for Mitra Adiperkasa (MAPI.JK)
MAPI.JK Closing Price Target Price Date (Rp) (Rp) Rating 30-Apr-14 6,375 4,900 U 19-May-14 5,350 4,500 04-Aug-14 5,125 4,100 03-Nov-14 5,175 3,400 01-Apr-15 5,900 6,500 O 18-May-15 5,350 7,050 31-Jul-15 4,650 6,550 03-Nov-15 3,505 4,500 19-Apr-16 4,200 5,400 23-Jun-16 4,180 * UNDERPERFORM OUTPERFORM 24-Nov-16 4,850 6,400 O * Asterisk signifies initiation or assumption of coverage.
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3-Year Price and Rating History for PT Bank Negara Indonesia (Persero) Tbk (BBNI.JK)
BBNI.JK Closing Price Target Price Date (Rp) (Rp) Rating 15-Apr-14 4,995 5,000 N 14-Oct-14 5,275 5,550 17-Nov-14 5,825 6,000 09-Apr-15 7,175 7,550 24-Jul-15 5,000 5,850 24-Sep-15 4,280 5,100 O 14-Dec-15 4,800 5,550 29-Mar-16 5,050 5,650 31-May-16 4,800 5,500 19-Aug-16 5,850 5,900 N NEUTRAL OUTPERFORM 02-Nov-16 5,525 5,650 09-Dec-16 5,475 6,300 O 21-Mar-17 6,575 7,800 * Asterisk signifies initiation or assumption of coverage.
3-Year Price and Rating History for PT Bank Pembangunan Daerah Jawa Timur Tbk (BJTM.JK)
BJTM.JK Closing Price Target Price Date (Rp) (Rp) Rating 13-Mar-17 580 690 O * * Asterisk signifies initiation or assumption of coverage.
OUTPERFORM
3-Year Price and Rating History for PT Mitra Keluarga Karyasehat Tbk (MIKA.JK)
MIKA.JK Closing Price Target Price Date (Rp) (Rp) Rating 03-Dec-15 2,295 2,500 N * 03-Aug-16 2,720 3,110 O * Asterisk signifies initiation or assumption of coverage.
NEUTRAL OUTPERFORM
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3-Year Price and Rating History for PT Summarecon Agung Tbk (SMRA.JK)
SMRA.JK Closing Price Target Price Date (Rp) (Rp) Rating 05-Feb-15 1,635 2,020 O * 20-Oct-15 1,395 1,960 * 19-May-16 1,530 * 17-Jun-16 1,685 1,950 O 09-Feb-17 1,320 1,600 * Asterisk signifies initiation or assumption of coverage.
OUTPERFORM
3-Year Price and Rating History for PT Telkom (Telekomunikasi Indo.) (TLKM.JK)
TLKM.JK Closing Price Target Price Date (Rp) (Rp) Rating 05-Jun-14 2,509 2,738 O 25-Aug-14 2,673 2,937 25-Nov-14 2,773 3,086 30-Sep-15 2,633 3,236 09-Dec-15 3,002 3,335 04-Mar-16 3,400 3,783 14-Apr-16 3,375 3,883 28-Apr-16 3,579 4,000 15-Jun-16 3,810 4,150 28-Jun-16 3,820 R OUTPERFORM REST RICT ED 29-Jun-16 3,820 4,150 O 28-Jul-16 4,340 4,750 * Asterisk signifies initiation or assumption of coverage.
3-Year Price and Rating History for Siloam International Hospitals (SILO.JK)
SILO.JK Closing Price Target Price Date (Rp) (Rp) Rating 21-Apr-14 10,530 10,333 N 29-Apr-14 10,727 12,794 O 10-Nov-14 14,024 12,794 N 05-Feb-15 13,138 R 17-Feb-15 12,031 12,794 N 08-Apr-15 12,892 13,384 05-Aug-15 16,090 14,024 03-Dec-15 9,546 12,794 O 20-Apr-16 8,636 12,794 * 03-Aug-16 10,186 12,840 NEUTRAL OUTPERFORM * Asterisk signifies initiation or assumption of coverage. REST RICT ED
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3-Year Price and Rating History for XL Axiata Tbk (EXCL.JK)
EXCL.JK Closing Price Target Price Date (Rp) (Rp) Rating 29-May-14 5,450 4,784 U 16-Jun-14 4,932 4,932 N 25-Aug-14 5,598 5,524 29-Oct-14 5,400 5,425 15-Jan-15 4,424 5,524 O 16-Feb-15 5,105 5,672 17-Mar-15 4,340 5,376 11-Aug-15 2,510 5,150 01-Feb-16 3,689 R 26-May-16 3,410 4,700 O UNDERPERFORM NEUTRAL 15-Jun-16 3,600 4,850 OUTPERFORM 23-Aug-16 3,370 4,250 REST RICT ED
28-Oct-16 2,290 4,080 01-Feb-17 2,850 3,950 * Asterisk signifies initiation or assumption of coverage. The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities As of December 10, 2012 Analysts’ stock rating are defined as follows: Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months. Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months. Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months. *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ra tings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin Ame rican and non-Japan Asia stocks, ratings are based on a stock’s total return relative to the average total return of the relevant country or regional benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 1 2-month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may b e assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, wh ich was in operation from 7 July 2011. Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances. Not Rated (NR) : Credit Suisse Equity Research does not have an investment rating or view on the stock or any other securities related to the company at this time. Not Covered (NC) : Credit Suisse Equity Research does not provide ongoing coverage of the company or offer an investment rating or investment view on the equity security of the company or related products. Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward. Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation: Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months. Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months. Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months. *An analyst’s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors. Credit Suisse's distribution of stock ratings (and banking clients) is:
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Target Price and Rating Valuation Methodology and Risks: (12 months) for Astra International (ASII.JK) Method: Our Rp9,800/share target price for Astra International is based on our sum-of-the-parts valuation analysis. Our TP implies 19x FY17E P/E (price-to-earnings). Our OUTPERFORM rating is on the back of improvement in commodity prices and good launches of 4W models Risk: Potential downside risks to our Rp9,800/share target price and OUTPERFORM rating for Astra International include: competition risk, regulatory risk in the form of import duties, plus a significant deterioration in the macro economy, particularly at the consumer confidence level, which has a high correlation with car sales, and liquidity in auto financing, which has a high correlation with motorcycle sales volume. Target Price and Rating Valuation Methodology and Risks: (12 months) for Gudang Garam (GGRM.JK) Method: Our target price of Rp74,100/share and NEUTRAL rating for Gudang Garam implies a 21x 2016E P/E at the target price, with an 13% estimated earnings growth over the next two years. We derive our target price using the five-year average market relative P/E of 1.25x with JCI's target P/E of 16.6x. Our NEUTRAL rating is derived from its undemanding valuation, as well as the clarity of the excise tax scheme this year and its ability to pass on the prices to consumers. Risk: The following risks could impede the achievement of our Rp74,100/share target price for Gudang Garam and NEUTRAL rating. (1) Change in government regulation: There is no specific timeline as to when the Government of Indonesia will revise excise tax regulations. In the past two years, the tax has been revised yearly, and was favourable to SKM (machine-made cigarettes) and tier 1 companies (large-size producers, producing more than 2 bn sticks), narrowing the gap in tax to the SKT (hand rolled cigarettes) and mid and smaller size producers. (2) Strong demand for low tar, low nicotine: GG's brands in the low-tar, low-nicotine category include the Nusantara series and Surya Slim series, and last year it launched Surya Slim Premium and Surya Pro Mild. However, its presence in this category is relatively small. Low-tar, low-nicotine kretek cigarettes have been posting strong growth in the past decade, particularly for younger smokers in urban areas. (3) Consumers down-trading to less expensive cigarettes: If the GoI increases the excise tax, cigarettes will become more expensive, encouraging consumers to downtrade to cheaper products. (4) Weak consumer purchasing power: Although the consumer confidence index, surveyed by Bank Indonesia, showed that the confidence of Indonesian consumers is rising, concerns about the possibility of higher inflation (due to the recent increase in electricity tariffs) might disrupt consumer affordability. (5) Rising interest rates: GG's debt is usually Rupiah-denominated and in the form of short-term loans. This is used for raw materials (clove) purchasing, where typically the harvest season peaks at the end of 4Q and 1Q (depending on the weather). A rise in interest rates would increase its interest expense, hence affecting its profitability. Target Price and Rating Valuation Methodology and Risks: (12 months) for Hanjaya Mandala Sampoerna (HMSP.JK) Method: Our target price of Rp4,340/share for HM Sampoerna implies 42x P/E 2016E (38x P/E 2017E) with 9% earnings growth over the next two years. Our target price is derived based on premium P/E multiple of Sampoerna over its parent company (PM.N) as we benchmark the premium valuation of Unilever Indonesia (UNVR.JK) and its parent company (ULVR.L) over the past one year. We believe the main risk to the stock is the possibility of another excise tax hike as the government is short in achieving its target last year. Hence, we maintain our rating at NEUTRAL. Risk: The following risks could impede the achievement of our Rp4,340/share target price and NEUTRAL rating for HM Sampoerna: (1) regulatory risk, (2) litigation risk, (3) operational risks, (4) supply of raw materials, (5) competition risk, (6) labour-intensive industry, (7) unable to extend its arrangements with its third-party operators, (8) Indonesia macro risks. Our target price is derived based on premium P/E multiple of Sampoerna over its parent company (PM.N) as we benchmark the premium valuation of Unilever Indonesia (UNVR.JK) and its parent company (ULVR.L) over the past one year. Target Price and Rating Valuation Methodology and Risks: (12 months) for Indofood CBP (ICBP.JK)
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Method: We derive our Rp9,500 target price on ICBP using a combination of two different methodologies: (1) SOTP (sum-of the parts), and (2) market relative performance. The usual SOTP where we are able to see each of the business division value – we are using our target price multiples for each of the division at 17.3x in 2017E EV/EBITDA, to be in line with the weighted average of consumer companies within Credit Suisse coverage in NJA and we arrive at Rp9,100/share. On the market relative performance count, we would like to determine how much the market is valuing the company. By implying 1.7 on current market P/E of 17.7x, we arrive at Rp9,882/share. With a 50:50 combination of SOTP and market relative performance, we arrive at our target price of Rp9,500, which implies 29.3x P/E 2017E with 6% earnings growth over the next two years. With a limited upside potential, we have a NEUTRAL rating on the stock. Risk: Risks that could impede achievement of our Rp9,500 target price and NEUTRAL rating for Indofood CBP include: (1) competition from both existing and new players, (2) fluctuation of commodity prices, (3) completion of new capacity, (4) Indonesia's macroeconomic situation, (5) fluctuation of exchange rates, and (6) regulatory risks. Target Price and Rating Valuation Methodology and Risks: (12 months) for Kalbe Farma (KLBF.JK) Method: We derive our target price of Rp1,350/share for Kalbe Farma using a discounted cash flow (DCF) methodology and 11.1% WACC (weighted average cost of capital), underpinned from the 7.5% risk-free, 0.7 beta, 5% risk premium, and 5.2% terminal growth. Our target price equates to 28x 2015E P/E (price-to-earnings). Our UNDERPERFORM rating on the stock is on the back of the pressure that Kalbe has on its pharmaceuticals division; it is still finding new principals for its distribution division, and its demanding valuation. Risk: Risks to our Rp1,350/share target price and UNDERPERFORM rating for Kalbe Farma include: (1) a weakening Rupiah, (2) acquisition, (3) selling treasury stocks, (4) retiring treasury stocks, and (5) Government of Indonesia regulations. Target Price and Rating Valuation Methodology and Risks: (12 months) for Matahari Department Store (LPPF.JK) Method: Our target price of Rp16,100 for Matahari Department Store is based on a multiple valuation. The target price is based on 21x FY17E price to earnings ratio (P/E), which is 1.5 standard deviation below its historical mean as sales growth is slowing down We have an OUTPERFORM rating on the company on the back of better position from forex pressure, manageable working capital days, a healthy balance sheet, and resilient middle-income target market. Risk: Key risks to our Rp16,100 target price and OUTPERFORM rating for Matahari Department Store include competition from both existing and incoming players, risk of meeting its expansion target, regulatory risks and macro risks of Indonesia. Target Price and Rating Valuation Methodology and Risks: (12 months) for Mitra Adiperkasa (MAPI.JK) Method: Our target price of Rp6,400 for Mitra Adiperkasa is based on our two-stage DCF model. We are conservative enough to use 7.7% risk-free rate and a lower tax rate than what MAPI has now to reflect normalisation going forward. Our OUTPERFORM rating is on the back of improvement in operations Risk: Key risks to our OUTPERFORM rating and Rp6,400 target price for Mitra Adiperkasa include principal risks, slower MAA business turnaround, competition from both existing and new players, regulatory risks, and macro risks. Target Price and Rating Valuation Methodology and Risks: (12 months) for PT Bank Negara Indonesia (Persero) Tbk (BBNI.JK) Method: Our target price of Rp7,800 for BBNI is derived based on Gordon's growth model, assuming normalised return of equity (ROE) of 16%, beta of 1.15x, risk-free rate of 8% and market risk premium of 5.0%, implying 1.6x 2017E price-to-book ratio (P/B) and 10.2x 2017E price- to-earnings ratio (P/E). BNI already swallowed the bitter pill of NPLs and credit cost in 2015. We thus have an OUTPERFORM rating on the stock. Risk: Risks to our target price of Rp7,800 and OUTPERFORM rating for BBNI include: (1) BNI has been growing loans very aggressively, it could lead to some adverse selection and loan-losses in future; (2) BNI is leveraged into the interest rate cycle due to its current/saving deposit franchise. Its margins have suffered lately as BI cut rates through 2016; (3) BNI needs to invest in technology and branch network, there is a risk that cost growth could be higher than revenue growth; (4) risks relating to Indonesia, including macroeconomic, political and social risks; and (5) currency risks. Target Price and Rating Valuation Methodology and Risks: (12 months) for PT Bank Pembangunan Daerah Jawa Timur Tbk (BJTM.JK) Method: Our target price of Rp690/share for BJTM is derived based on Gordon's growth model, assuming: a normalised return on equity (ROE) of 15-16%, beta of 1.1x, risk-free rate of 8% and market risk premium of 5.0%, implying 8.7x 2017E price to earnings ratio (P/E) and 1.4x 2017E price to book ratio (P/B). With relatively higher profitability versus peers, we think valuation looks compelling at current level. Therefore, we rate the stock OUTPERFORM.
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Risk: Risks to our target price of Rp690/share and OUTPERFORM rating for BJTM include: (1) significant changes in global sentiment; (2) significant changes in the public's confidence in the bank; (3) risks relating to Indonesia, including macroeconomic, political and social risks; and (4) currency risks. Target Price and Rating Valuation Methodology and Risks: (12 months) for PT Mitra Keluarga Karyasehat Tbk (MIKA.JK) Method: Our target price of Rp 3,110 for MIKA is derived using DCF (discounted cash flow) methodology, with assumed WACC (weighted-average cost of capital) of 9.1% and implied terminal value EBITDA multiple of ~35x. Our OUTPERFORM rating is driven by: (1) continued double- digit growth profile, (2) best-in class margins, and (3) optionality from its net cash position. Risk: The main risks to our target price of Rp3,110 and OUTPERFORM rating of MIKA include: (1) lower-than-expected growth, (2) delays in execution, (3) unfavourable regulatory changes, and (4) intensifying competition. Target Price and Rating Valuation Methodology and Risks: (12 months) for PT Summarecon Agung Tbk (SMRA.JK) Method: Our DCF-based target price of Rp1,600 for PT Summarecon Agung Tbk is implying 50% discount to the RNAV of the company (a standard deviation away to its long-term average). We have an OUTPERFORM rating on the stock on a bottoming out earning projection and improved outlook for pre-sales. Risk: We recognise the strong track record of PT Summarecon Agung Tbk in property development and we are indeed positive on the long-term outlook of the company. Risks to our DCF-based target price of Rp1,600 (which implies 50% discount to the company's RNAV) for the company include macroeconomic risks such as changes in interest rates, inflation, regulatory risk coming from current government. Risks to our OUTPERFORM rating include weaker than expected pre-sales delivery. Target Price and Rating Valuation Methodology and Risks: (12 months) for PT Telkom (Telekomunikasi Indo.) (TLKM.JK) Method: Our target price of Rp4,750 for PT Telkom is based on discounted cash flow (DCF) analysis, based on an estimated 9.9% cost of capital and a 4.0% terminal growth rate. We value Telkom's fixed-line business at Rp1,280 and its 65% holding in its cellular subsidiary, Telkomsel, at Rp3,335 share. At Rp4,750, Telkom would trade at an enterprise value-to-earnings before interest, taxes, depreciation, and amortisation (EV/EBITDA) multiple of 7.1x for FY16E (using proportional consolidation), lower than the regional integrated average and Telkom still enjoys higher growth in a market with lower penetration. We rate the stock OUTPERFORM, due to strong smartphone data monetization and valuation. Risk: Telkom's key asset, Telkomsel, is primarily a cellular operator within a seven-player market. The risks that may impede achievement of our target price of Rp4,750 and OUTPERFORM rating for PT Telkom on the cellular side are: (1) either faster-than-expected, or slower- than-expected growth in the cellular market, from the current level; (2) the prospect that competitors take a larger or smaller proportion of the market share of net additions; (3) that capex forecasts prove higher or lower than expected; and (4) that competition leads to higher or lower attrition of revenue per user than expected. Key risks to our target price on the fixed-line side are: (1) faster-or-slower cannibalisation of voice revenue per line by cellular competition; (2) faster-or-slower rollout of broadband lines than expected; (3) better success in reducing employment-related costs; and (4) better success in lowering capex requirements. Target Price and Rating Valuation Methodology and Risks: (12 months) for Siloam International Hospitals (SILO.JK) Method: Our target price of Rp12,840 for SILO is derived using DCF (discounted cash flow) methodology, with assumed WACC (weighted-average cost of capital) of 9.4% and implied terminal value EBITDA multiple of ~15x. Our OUTPERFORM rating is driven by: (1) margin expansion from ramp-up of new hospitals, (2) improving momentum of new hospital launches, and (3) the stock trades at 25% discount to historical average. Risk: The main risks to our target price of Rp12,840 and OUTPERFORM rating of SILO include: (1) lower-than-expected growth, (2) delays in execution, (3) unfavourable regulatory changes, and (4) intensifying competition. Target Price and Rating Valuation Methodology and Risks: (12 months) for XL Axiata Tbk (EXCL.JK) Method: Our discounted cash flow (DCF) analysis, based on an estimated 10.5% weighted average cost of capital and a 2.5% terminal growth rate, supports our Rp3,950 target price for XL Axiata. At Rp3,950, XL Axiata would trade at an FY17 enterprise value-to-earnings before interest, taxes, depreciation, and amortisation (EV/EBITDA) multiple of 6.3x. While ahead of the regional average, XL Axiata's potential for medium-term growth is higher given still-low penetration rates in Indonesia. We rate the stock OUTPERFORM, on valuation and as it was previously oversold due to a weak balance sheet. Risk: XL Axiata is the third-largest competitor within the ten-player Indonesian market. The risks that may impede achievement of our Rp3,950 target price and OUTPERFORM rating are: (1) either faster-than-expected, or slower-than-expected growth in the cellular market, from the current penetration level; (2) the prospect that competitors take a larger or smaller proportion of the market share of net additions; (3) that capex forecasts prove higher- or lower-than-expected due to competitive pressures or pressures from the regulator; (4) that competition
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leads to higher or lower attrition of revenue per user than expected, for example through a price war; and (5) faster- or slower-than- expected speed of tower sharing.
Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures/view/selectArchive for the definitions of abbreviations typically used in the target price method and risk sections. See the Companies Mentioned section for full company names The subject company (ICBP.JK, SILO.JK, TLKM.JK, HMSP.JK, LPPF.JK, EXCL.JK, BBNI.JK, SMRA.JK, MAPI.JK, ASII.JK, BMRI.JK, BDMN.JK, CTRA.JK, KIJA.JK, ASRI.JK, SCMA.JK, BTPN.JK, LPKR.JK, BSDE.JK, BBTN.JK, BBCA.JK, TBIG.JK, LINK.JK, KINO.JK, ISAT.JK, INDF.JK, PRDA.JK, TOWR.JK, UNVR.JK) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse. Credit Suisse provided investment banking services to the subject company (ICBP.JK, SILO.JK, TLKM.JK, HMSP.JK, LPPF.JK, EXCL.JK, BBNI.JK, BMRI.JK, BDMN.JK, CTRA.JK, BTPN.JK, LPKR.JK, BSDE.JK, BBTN.JK, KINO.JK, INDF.JK, PRDA.JK, TOWR.JK, UNVR.JK) within the past 12 months. Credit Suisse has managed or co-managed a public offering of securities for the subject company (SILO.JK, TLKM.JK, HMSP.JK, LPPF.JK, BMRI.JK, BDMN.JK, LPKR.JK, PRDA.JK) within the past 12 months. Credit Suisse has received investment banking related compensation from the subject company (ICBP.JK, SILO.JK, TLKM.JK, HMSP.JK, LPPF.JK, EXCL.JK, BBNI.JK, BMRI.JK, BDMN.JK, CTRA.JK, BTPN.JK, LPKR.JK, BSDE.JK, BBTN.JK, KINO.JK, INDF.JK, PRDA.JK, TOWR.JK, UNVR.JK) within the past 12 months Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (ICBP.JK, SILO.JK, TLKM.JK, HMSP.JK, GGRM.JK, LPPF.JK, MIKA.JK, EXCL.JK, BBNI.JK, SMRA.JK, MAPI.JK, ASII.JK, KLBF.JK, BMRI.JK, BDMN.JK, RALS.JK, CTRA.JK, KIJA.JK, ASRI.JK, PWON.JK, MNCN.JK, SCMA.JK, BTPN.JK, LPKR.JK, BSDE.JK, BBTN.JK, BBRI.JK, BBCA.JK, TBIG.JK, LINK.JK, BEST.JK, ACES.JK, KINO.JK, ISAT.JK, INDF.JK, PRDA.JK, TOWR.JK, UNVR.JK) within the next 3 months. Credit Suisse may have interest in (ICBP.JK, SILO.JK, TLKM.JK, HMSP.JK, GGRM.JK, BJTM.JK, LPPF.JK, MIKA.JK, EXCL.JK, BBNI.JK, SMRA.JK, MAPI.JK, ASII.JK, KLBF.JK, BMRI.JK, BDMN.JK, RALS.JK, CTRA.JK, KIJA.JK, ASRI.JK, BJBR.JK, PWON.JK, MNCN.JK, SCMA.JK, BTPN.JK, LPKR.JK, BSDE.JK, BBTN.JK, BBRI.JK, BBCA.JK, TBIG.JK, SSIA.JK, LINK.JK, BEST.JK, ACES.JK, KINO.JK, ISAT.JK, INDF.JK, PRDA.JK, TOWR.JK, UNVR.JK) For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit- suisse.com/disclosures or call +1 (877) 291-2683. For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated within the past 12 months, please refer to the link: https://rave.credit-suisse.com/disclosures/view/report?i=290972&v=58r90z4pyblub1aecpjfoga9t . Important Regional Disclosures Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report. The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events. Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares. Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report. For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit- suisse.com/sites/disclaimers-ib/en/canada-research-policy.html. Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (SILO.JK, TLKM.JK, HMSP.JK, LPPF.JK, BMRI.JK, BDMN.JK, LPKR.JK, LINK.JK, KINO.JK, PRDA.JK) within the past 3 years. Principal is not guaranteed in the case of equities because equity prices are variable. Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that. This research report is authored by: Credit Suisse (Hong Kong) Limited ...... Colin McCallum, CA Credit Suisse AG, Singapore Branch ...... Sanjay Jain ; Rikin Shah PT Credit Suisse Securities Indonesia ...... Ella Nusantoro ; Jahanzeb Naseer ; Benny Kurniawan ; Ari Jahja ; Laurensius Teiseran To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the FINRA 2241 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. PT Credit Suisse Securities Indonesia ...... Ella Nusantoro Important disclosures regarding companies or other issuers that are the subject of this report are available on Credit Suisse’s disclosure website at https://rave.credit-suisse.com/disclosures or by calling +1 (877) 291-2683.
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