RHB Indonesia’S Top 10 Picks Target Price Joko Widodo Finally Announced His New Cabinet, Themed Under Indonesia Maju, Yesterday
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Strategy Indonesia 24 October 2019 Indonesia Strategy Overweight (Maintained) 12M JCI Target: 7,000 New Cabinet – All About Check And Balance Cautiously optimistic, helped by stable political conditions. President RHB Indonesia’s Top 10 Picks Target Price Joko Widodo finally announced his new Cabinet, themed under Indonesia Maju, yesterday. The 39 ministerial appointments (including spokesperson, Bank Central Asia (BBCA IJ) – BUY IDR40,000 secretary, and staff), comprised 23 new faces and 16 members of the previous Bank Rakyat Indonesia (BBRI IJ) – BUY IDR5,000 Cabinet. 49% of these are professionals and 51% are from political parties – Telekomunikasi Indonesia (TLKM IJ) – BUY IDR4,700 around 25% (five seats) from PDIP, 25% (five seats) from Golkar, 20% (four Semen Indonesia (SMGR IJ) – BUY IDR16,300 seats) from PKB, 20% (four seats) from Nasdem, and 10% (two seats) from Jasa Marga (JSMR IJ) – BUY IDR7,000 Gerindra, ie the opposition party. Merdeka Copper Gold (MDKA IJ) – BUY IDR1,450 Focus on domestic stability, reconciliation. We believe stability is still a Astra Agro Lestari (AALI IJ) – BUY IDR16,160 main objective in President Joko Widodo’s second term, being deemed as Waskita Karya (WSKT IJ) – BUY IDR2,700 necessary in order for him to achieve the goals of his five focus programmes. Ciputra Development (CTRA IJ) – BUY IDR1,480 This was made evident by his appointment of ex-military leaders and ex-rival Medikaloka Hermina (HEAL IJ) – BUY IDR4,500 in Presidential election Prabowo Subianto as the Defence Minister for political stability and reconciliation, as well as ex-military leader Fachrul Razi as the Analysts Minister of Religion to tone down any potential radical and separatist issues. Andrey Wijaya Edhy Prabowo, the vice chairman of Gerindra, has also been appointed as the +6221 5093 9846 Minister of Maritime Affairs and Fisheries. In our view, the president is clearly [email protected] seeking Gerindra’s support for the 2019-2024 cabinet. As seen in the 2020 State Budget, the biggest portion of allocations will go Michael W Setjoadi towards improving domestic stability. The national security budget (ie +6221 5093 9844 allocations to the Defence Ministry and police department) amounted to [email protected] c.IDR236trn (+15.7% YoY). Sustenance for infrastructure projects. Two ministers with extensive Recent Related Report: experience have also been reappointed – Basuki Hadimuljono (Ministry for Preview 3Q19: Slowdown To Likely Continue Public Housing and Works) and Budi Karya Sumadi (Minister of Indonesia Strategy: Jokowi’s Second Term Inauguration Transportation). Both are proven, credible officers and work in line with the Indonesia Strategy: Top 10: TLKM, SMGR, JSMR, HEAL president’s aim to advance vital infrastructure projects. We believe Finance Added Minister Sri Mulyani and the President’s Chief of Staff Moeldoko also provide Indonesia Strategy: Top 10 Picks: Replacing HMSP With support on the economic and political fronts. BBCA Creativity and tourism in play. The appointment of Nadiem Makarim Indonesia Strategy: IDX-RHB Investment Summit 2019 (founder of Go-Jek) as Education Minister is in line with President Joko Indonesia Strategy: A Stock Picking Market; Add MDKA Widodo’s aim to develop human capital with expertise in information, To Top10 communication, and technology (ICT). The tourism and e-commerce sectors Indonesia Strategy: Market 2Q19 EPS Growth Slowed are still deemed as important as part of the backbone for growth in foreign To 7% reserves – Wishnutama (Minister of Tourism and Creative Economy) is anticipated to bring a new dynamic during his time in office. These two RHB Indonesia analysts: ministers have extensive experience working in areas where millennials have Andrey Wijaya – Strategy, Auto, Infrastructure, Coal a major presence. Michael Setjoadi – Strategy, Staples, Tobacco, Poultry, Telco Upbeat on infrastructure-related and telco sectors. For infrastructure- Christopher Andre Benas – Banks, Plantation, Property related sectors, we expect more contracts to be given soon, with the political Jessica Ayu Pratiwi – Healthcare, Retail, Transportation overhang now over. Also, the central bank’s stance on the benchmark interest Ghibran Al Imran – Small/Mid Cap Banks, Media, Metals rate may also lead to easier financing. For telcos, we believe the new Minister Ahmad Nazmi – Regional Economist Johnny G Plate’s appointment will improve sentiment on Telekomunikasi Indonesia, as the previous minister’s push for industry consolidation may not be continued. % P/E (x) P/BV (x) Yield (%) Company Name Rating TP (IDR) Upside Dec-20F Dec-20F Dec-20F Bank Central Buy 40,000 27.5 23.4 3.9 0.9 AsiaBank Rakyat Buy 5,000 19.6 11.8 2.2 2.9 TelekomunikasiIndonesia Buy 4,700 10.3 18.1 3.5 2.9 SemenIndonesia Indonesia Buy 16,300 28.6 34.8 2.5 0.5 Jasa Marga Buy 7,000 22.8 18.2 1.7 1.1 Merdeka Copper Buy 1,450 16.0 19.5 3.6 0.0 AstraGold Agro Buy 16,160 51.0 13.2 0.9 0.5 WaskitaLestari Karya Buy 2,700 63.6 6.0 1.0 3.3 Ciputra Buy 1,480 23.8 17.1 1.3 0.9 MedikalokaDevelopment Buy 4,500 30.4 35.5 4.3 0.6 Source:Hermina Company data, RHB See important disclosures at the end of this report 1 Strategy - Indonesia Indonesia Strategy 24 October 2019 Figure 1: Indonesia’s Cabinet for 2019-2024 – themed under Indonesia Maju (Forward Indonesia) NEW FACES No Current Name Affiliation . Position Prabowo Subianto Prabowo Subianto Djojohadikusumo (born 17 Oct 1951) is the Chairman of Gerindra, (68) Gerindra a businessman and a former army lieutenant-general. The highlight of his military 1. (Great career was in 1996, when he was on a mission to free 11 scientific researchers who Minister of Defense Indonesia were taken hostage by the Free Papua Movement (OPM). Prabowo was appointed by Movement) President Soeharto to head the 27,000-strong Army Strategic Reserve Command (Kostrad) during the 1998 riots. Edhy Prabowo (47) Gerindra Edhy Prabowo, born in Muara Enim, 24 Dec 1972, is Gerindra’s vice chairman and Minister of Fisheries (Great the main speaker of DPR's Commission IV (Agriculture, Plantation, Forestry, Marine, 2. and Maritime Indonesia Fisheries and Staple Food). He began his career as an athlete, met Prabowo Subianto Movement) in 1991-1992, and became his most trusted partner in both politics and business. Bahlil Lahadalia (43) Bahlil Lahadalila, born in Banda on 7 Aug 1976, came from humble beginnings. His Investment success story has become a famous example of motivation – as he has built his 3. Coordinating Golkar reputation by weathering through hardships. He led the National Association of Young Board Entrepreneurs (HIPMI) in 2015-2019. He also owned PT Rifa Capital, a holding entity of 10 companies. Zainudin Amali (57) Zainudin Amali, born in Gorontalo on 16 Mar 1962, has been the chairperson of the Minister of Youth East Java DPD (regional representative) since 2013 representing Golkar. Zainudin 4. and Sports Golkar served as Golkar’s secretary-general in 2014-2015. He is now the chairperson of Affairs Golkar DPP (Central Board). Syahrul Y. Limpo Syahrul Yasin Limpo, born in Makassar on 16 Mar 1955, was the governor of South (64) NasDem Minister of Sulawesi in 2008-2018. In 2016, he was one among eight members of Golkar 5. (National Agriculture approved by the party as the new chairman, though he was not elected to the position. Democrat) He moved from Golkar to Nasdem in Mar 2018. Johnny G. Plate, born in Ruteng on 10 Sep 1956, is a businessman. He holds several Johnny G. Plate (63) Minister of NasDem positions including Commissioner of Indonesia Air Asia (2005-present), Commissioner Communication 6. (National of Mandosawu Putratama Sakti (property) (2006-present), President Commissioner of and Information Democrat) Aryan Indonesia (Kidzania) (2007-present), Managing Director of the Bima Palma Technology Group (palm oil) (2006-2013), and Managing Director of Air Asia Investama. Suharso Monoarfa Minister of (64) PPP Suharso Monoarfa, born in Mataram on 31 Oct 1954, is an entrepreneur and politician National 7. (United (acting chairman of PPP party). On 19 Jan 2015, he was elected by President Joko Development Development) Widodo as a member of the Presidential Advisory Council. Planning Agency Juliari P. Batubara PDIP Juliari Peter Batubara, born in Jakarta on 22 Jul 1972, was elected as a member of (47) Minister of Social (Indonesian the Indonesian Parliament Representative (DPR) member for the 2019-2024 period 8. Affairs Democratic and ensigned under Commission VI (Trade, Industry, Investment, SME & SOE, and Party- National Standardization). In 2010, he was entrusted to serve as PDIP's Deputy Struggle) General Treasurer. Bintang Puspayoga PDIP I Gusti Ayu Bintang Darmawati (also known as Bintang Puspayoga) was born on 24 (51) Minister of Woman (Indonesian Nov 1968. She is the wife of former Minister of Cooperatives, Small and Medium 9. Empowerment and Democratic Enterprises in 2014-2019, Anak Agung Gede Ngurah Puspayoga. She was also the Child Protection Party- Chairman of the business management division of the National Crafts Council. Struggle) Coordinating Mohammad Mahfud MD is a lawyer, academician, and politician. He was born on 13 Mahfud MD (62) PKB Minister for May 1957, in Sampang (Madura Island). He was briefly appointed as Minister of (National 10. Political, Legal, Defense and Minister of Justice and Human Rights during President Abdurrahman Awakening and Security "Gus Dur" Wahid’s tenure in 1999-2001. He was also the second Chief Justice of the Party) Affairs Indonesia's Constitutional Court for 2008-13 period. Agus Suparmanto PKB He was actively engaged in developing the sport of fencing in Indonesia. Agus Minister of Trade (National 11. Suparmanto was also reappointed as Chairman of the Indonesia Fencing Association Awakening (PB Ikasi) for 2018-2022.