BCAS Vista 16 Jan-20

Government to continue to maintain the labor market reforms

Government will continue to maintain the labor market reforms and protect the labor, which will be covered in the upcoming omnibus bill on job creation, as unions and students against the proposed new legislation took it to the streets. Coordination Economic Minister, Airlangga Hartarto, clarified on Wednesday that the existing minimum wage and severance pay would remain intact, and the government will implement more protection measures for the laid-off workers. Dialogue sessions with 7 labor confederations and 28 other unions have been conducted, and “in principle almost all confederations accept the omnibus bill". The government will finalize the omnibus bill on job creation this week, expecting it to be included in the House of Representative’s National Legislation Program (Prolegnas) this month. The bill is expected to ease business conduct to attract more foreign investments and more job opportunities for the unemployed.  (Jakarta Post)

US-China signed trade agreement phase I

US and China signed trade agreement phase I on 15th Jan-20, which confirms China to purchase at least USD200bn of goods from US for the next 2 years, including manufacturing, food, agriculture and energy product. However, US minister of Finance, Steven Mnuchin, stated that US will still apply the import tariff until the trade agreement phase II is signed. (Kontan)

Auto export reached USD8bn

2019 Indonesia’s 4W export reached USD8bn (around IDR111tn; +8.1% YoY), translating to around 300k units and contributing 5.3% of non-oil and gas export last year. The high auto export were contributed from 12 automakers, where SUVs still dominating followed by light trucks. Gaikindo stated that they are aiming to increase car export to 1mn units by 2025. (Investor Daily)

Coal requirement for power plant reached 109mn ton in 2020

ESDM representative, Sujatmiko, stated that 2020 coal domestic market obligation (DMO) allocation is set at 155mn ton, in which 109mn ton is allocated for power plant. The rest are allocated for smelter industry (16.5mn ton), fertilizer industry (1.7mn ton), cement industry (14.6mn ton), textile industry (6.6mn ton), and paper industry (6.6mn ton). The higher demand of coal is supported with the increasing operation of coal-fired power plant (PLTU) in Indonesia. Note that, the government through ESDM guarantees coal production with the DMO of 25%. (Investor Daily)

Gov’t to operate 26 section of sea highway 

Transportation Ministry has begun operating 26 section of seahighway, increased from a total 19 section in 2018. This year the government will provide IDR439bn subsidy for the highway. (Investor Daily)

Heavy equipment companies are still conservative

Heavy equipment companies are still conservative with their projection along with the estimated stagnant commodity. One of them being United Tractors (UNTR) that projects around 2,900-3,000 units of heavy equipment sales, similar to 2019’s target. This is contributed by the possibility of a same level or even a lower 2020 coal production if the trend of coal price is similar to last year’s. Additionally, the aggressive purchases in 2017 by heavy equipment customers will also contribute to a lesser demand in 2020 compared to 2019. On the other hand, Intraco Penta (INTA) targets 2020 revenue growth of 10-15% that is supported by the business diversification such as power plant, commercial car sale, and investments. (Investor Daily)

Malaysia use all possible diplomatic channels to resolve import ban issue on palm oil

Malaysia's Primary Industries Ministry, supported by the Ministry of Foreign Affairs, is engaging with its Indian counterparts to try and sort out the issue regarding import ban on refined palm oil from Malaysia. India was Malaysia's biggest buyer of palm oil in 2019, with 4.4Mt of purchases. In 2020, purchases could fall below 1Mt if relations do not improve. (Bisnis) 

Comment: Regarding this import ban issue, there is no direct impact on CPO price as this is just a shifting between suppliers, in our view. Sentiment wise, this might give more rooms and flexibility for CPO exporter in Indonesia, such as AALI, to channel their exports. Bear in mind, amid declining FFB production (resulting in tightening in supply), we view there will be offsetting influences (as we expect biodiesel consumption outside the mandate will drop sharply and biodiesel exports are also likely to decline), where higher domestic consumption in Indonesia (due to B30 mandate) may curb export trade. Noted that this new policy (import ban) might change anytime should there is new bilateral agreement between India and Malaysia.

Bank Negara Indonesia (BBNI) plans to issue USD1bn certificate deposit program

BBNI, through its New York office, plans to issue USD1bn Certificate of Deposit Programme, an USD-denominated scripless certificate of deposit (CD) issuance program that can be issued multiple times under the program. This CD will have maturities up to 12 month and will be uncollateralized. In addition, the proceeds of this CD issuance will be used for business expansion and debt refinancing. In another news, the company signed a collaboration agreement with Traveloka PayLater in order to expand their consumer loan segment. (IDX, Bisnis Indonesia)

Pembangunan Perumahan (PTPP) to construct bauxite smelter in West Kalimantan

PTPP consortium with China Aluminum International Engineering Corporation Limited (Chalieco), has sign an agreement with Borneo Alumina Indonesia (BAI) to construct smelter grade alumina refinery with a total contract of USD695mn (equivalent to IDR9.5tn). This project is targeted to be completed by 2022. Note that BAI is a subsidiary of ANTM and Inalum. (Investor Daily)

Waskita Karya (WSKT) targets the production of 120km guard rail

As a strategy to support their businesses, WSKT through its subsidiary, Waskita Karya Infrakstruktur (WKI), targets to produce 120 km guard rail for toll roads, specifically for Trans Sumatra and existing toll roads in Java. As of end 2019, WKI has produced 24 km out of 120 km guard rail. (Bisnis Indonesia)

Diamond Food Indonesia (DMND) to IPO

Diamond Food Indonesia (DMND) plans to issue 100mn new shares through IPO at price of IDR915/shares, translating to a total potential proceed of IDR91.5bn. At the same time, DMND plans to issue 1.2bn new shares (12.2% from APIC) to Anderson Investments for convertible bond that is issued on 11-Jul-19. Additionally, DMND would also conduct employee stock allocation (ESA) of a maximum of 7.3mn shares (7.3% from those offered in IPO). The Company has chosen Indo Premier Sekuritas as the underwriter of the corporate action and the IPO schedule is as follows:

(CNBC Indonesia, Emitennews)