BCAS Vista 21 Jan-20

Government to submit omnibus bill on labor

The government has completed the discussion on the bill for Omnibus Law regarding job creations (Cipta Lapangan Kerja), which includes labor law. Several key points in the bill would include the change in the formula minimum wage and the apporoval of hourly wage. More details are as follow

1.  Minimum wage

• The minimum wage only applies to new workers with less than 1 year employment period. However, wages above the minimum are possible depending on their competence, certificate and education

• Workers with a working period above 1 year will follow the company's salary structure.

• Labor intensive industries can be given incentive in the form of separate minimum wage calculation.

• The application of hourly wage for certain industries and new type of jobs which will not collide with the minimum wage

2.  Layoff

• The government will add a job loss guarantee (JKP) to protect workers affected by layoffs.

• JKP will include cash benefit, vocational training and job placement access.

• JKP will not add any deduction for both workers and companies.

• Workers receiving JKP will also receive other social benefits.

• Contract workers will also receive compensation.

3.  Worker protection and expansion of job creation

• Contract workers will receive similar protection as well as benefit with permanent workers, which includes new jobs created by the digital industry.

• Increasing the protection for outsourcing workers, including social benefits similar with permanent workers.

• Providing a more flexible working hours, with a maximum of 8 hours/day, 40 hours/week, with an additional overtime which will be stipulated by the company’s regulation.

Gaikindo aiming for 5% growth this year

Chairman of the Association of Indonesian Automotive Manufacturers (Gaikindo), Jongkie D. Sugiarto, stated that the association is expecting 4W sales volume to reach 1.05mn units, up 5% YoY, in line with government’s economic growth target of 5.1%-5.2%. Other factor which would support the 5% growth would be a stabilizing fx rate and lower lending interest rate. ASII’s head of corporate communication, Boy Kelana Soebroto, stated that the company will follow Gaikindo’s target, while planning to maintain their market share above 50%. We note that Gaikindo revised down their FY19 target from 1.1mn to 1mn units following a disappointing sales volume during 1H19. (Jakarta Post)

Comments: We have a more conservative stance on the domestic 4W sales volume this year, only expecting to grow 1% YoY. While a stabilizing IDR, stronger commodity prices and lower interest rate would support volumes, we are still in the view that volumes would mainly be driven by the launch of new models, which we foresee would be minimal this year.

National broadcasting industry is projected to grow 5-10% in 2020

The Head of Indonesian Private Television Station Association (ATVSI), Syafril Nasution, projects broadcasting industry to grow moderately positive at 5-10% this year on the back of a more stable political condition post-election in 2019. He also stated that 2019’s growth is relatively flat due to more advertisement switched to digital media, which based on e-marketers data, digital platform penetration has reached to 25% from advertisement expenses. On another note, PubMatic 2019 report also stated that Indonesia’s advertisement expenses through digital media in 2019 has reached USD2.6bn (+26% YoY) with the increasing internet users. (Bisnis Indonesia)

Comments: We believe the improvement of rate card will be giving positive momentum for the media sector in 2020 with our expectation rate card to increase around 10-12% for MNCN and SCMA, leading to a potential 12-15% revenue growth in 2020. We also expect this is achievable with MNCN and SCMA holding the majority of the media sector market share of around 59.3%.

The Indonesian Poultry Association (Pinsar) has recorded a decline in poultry price at farmer level to IDR15k per kg (below reference price of IDR18k-20k per kg) since the beginning of Jan-20 due to an excess in production. Pinsar also projected there will be an excess in broiler production up to 20mn from Dec-19 to Feb-20 periods, and proposed for the Government to cut the final stock by reducing the amount of hatching eggs. (Kontan)Poultry price to keep on falling as there is an excess in production

Bumi Serpong Damai (BSDE) to issue USD300mn bonds

BSDE plans to issue USD300mn bonds with the coupon rate of 5.95% and 5-years tenor. The proceeds will be used to refinance the 2021 notes, other Rupiah denominated debt and general corporate purposes. The bond is expected to be issued at the same with the company’s rating at, Moody’s Ba3 (Stable) / Fitch: BB- . (Bloomberg)

Delta Dunia (DOID) booked 20.3mn bcm of OB removal in Dec-19 (-35.6% YoY)

DOID booked Dec-19 OB removal of 20.3mn bcm (-35.6% YoY, -28.5% MoM), bringing 12M19 OB removal of 380.1 mn bcm, translating to 93.4% of our FY19 projection of 406.9mn bcm. This was mainly driven by coal price uncertainty leading to a sluggish production from customers coupled with a higher rainfall in December (1.7x higher rainfall compared to previous month). The Company also managed to book coal production of 2.9mt (-14.7% YoY, -35.6% MoM) with SR ratio increased to 7.6x compared to 6.3x in Nov-19. (Company)

Smartfren (FREN) to allocate USD250mn for 2020 capex

FREN will allocate USD250mn for this year’s capex, a similar level as 2019, which will be funded through a bank loan from CDB. The capex will be used to expand their network coverage in cities with high demand, aiming to increase its subscriber base. With this, FREN is targeting to add another 5k-6k BTSs in first and second tier cities. (Investor Daily)

Pertamina collaborates with 3 SOE manufacturers for refinery development

Pertamina is collaborating with Barata Indonesia, Krakatau Steel (KRAS), and Rekayasa Industri (Rekind) to increase the use of local content requirement (TKDN) on an USD60bn refinery development. CEO of Pertamina, Nicke Widyawayi, stated that the development of 4 Refinery Development Master Plan (RDMP) and Grass Roott Refinery (GRR) until 2027 will provide a good momentum for local companies to take part. The Company plans to involve 50% local resources for both human resources and construction contents. (Bisnis Indonesia)

Bank Artos Indonesia (ARTO) and BPD Banten (BEKS) to conduct right issue

ARTO plans to issue 15bn new shares with nominal value of IDR100/share through a pre-emptive right issue, which will give a maximum dilution effect of 92.56%. In another context, BEKS also plans to issue 400bn new shares with the nominal value of IDR3/share through a pre-emptive right issue that will give a maximum dilution effect of 86.19% to the shareholder wo does not exercise their pre-emptive right. The proceeds will be used to support the companies’ capital to meet the minimum capital requirement from OJK. (Bisnis Indonesia)