EQUITY RESEARCH

Strategy Report – 7 February 2024

CIPTADANA SEKURITAS ASIA

Overweight
Bloomberg Ticker
Last price
Target – end 2024
52w High/Low price
Mkt. Cap (Rptn/USDbn)
Absolute
Relative to MXASJ
Strategy
Waiting to see how the election goes
Weaker-than-expected market performance in January
Indonesia's equity benchmark (JCI) index started 2024 on a strong note, hitting an all-time
high of 7359.7 (+1.2% YTD) on January 4th as buying interest kicked in during the first
JCI Index
week of the month. This was driven by bets that a dovish shift in global monetary policy
and resilient corporate earnings will provide a boost. However, selling pressure resumed
in the face of some fresh negative factors. On the external side, i) Chinese stocks fell to a
record low, highlighting how bearish the outlook is for the world's second largest
7,208
economy. ii) December data in the US showed a hotter than expected labor market and an
7,500 uptick in inflation, raising questions about when the Fed could realistically consider
cutting rates. iii) On the domestic front, the political situation is heating up after President
7,404 – 6,543 Jokowi claimed that he has the legal right to take sides and participate in campaigns in
the upcoming general election. The Indonesian rupiah, among one of the worst
11,453/735 performing currencies so far in January 2024 after falling nearly 3% to Rp15,780/USD
3m 6m YTD following local media reports that Indonesia's Finance Minister Sri Mulyani Indrawati
could quit ahead of the Feb. 14 presidential election, which raised questions about the
7.2% 5.6% -0.9% country's fiscal outlook. Despite the comeback of foreign investors, with net purchases of
USD534 mn for the month (Exhibit 1), the JCI closed 0.9% lower at 7,207.9, defying our
3.6% 11.8% 4.5% expectations for a positive close.

In-line and strong earnings so far

7,500 25% Indonesia's major banks kicked off the 4Q23 earnings season in the fourth week of
January, and results have been satisfactory so far (Exhibit 2). In January, we covered
15% several recently released earnings results from Indonesia's major banks (BBCA, BBCA,
7,000
BMRI and BBNI), which showed a generally strong performance, with most banks slightly
5% surprising on earnings (up 9% QoQ and 22% YoY, and achieving 102% of full-year target).
As for 2023, the high interest rate environment was margin supportive, translating into
-5% higher NIM and PPOP, while provisioning expenses were mostly lower. Following the
6,500
results, our banking analyst raised her target price on BMRI and maintained her target
-15% price on the other banks. Earnings growth in our coverage universe is moderating to 8.7%
in 2024F from 17.8% in 2023F, mainly due to the continued normalization and decline in
6,000 -25%
commodity prices (coal and nickel), with banking earnings representing 49% total earning
and growing by 10.9% YoY.

Hist. price (LHS) 1yr Rel. to MXAJS (RHS)

Investors prefers one-round of elections, we still expect the run-off
As Indonesia eagerly anticipates the Presidential Election on February 14, the potential
for a single or dual-round election looms. We sense investors express a preference for a
single-round election regardless of the outcome as long it is fair and peaceful. A single-
round election requires a candidate pair to secure more than 50% of the total votes, with
at least 20% of the votes in each province spread across more than half of Indonesia's
provinces. In the event of a two-round election, the second round of voting is scheduled
for June 26. The latest poll by Indonesian Survey Circle (LSI), released on January 30,
showed that Prabowo had crossed the 50% threshold needed to secure a first-round
victory, with an electability rating of 50.7%. Anies came in second with 22.0%, followed by
Ganjar with 19.7%. Given a significant number of respondents who did not respond to the
surveys (approximately 7.6%), we maintain our view that the election is likely to be a two-
round affair. We still guess Prabowo will lead the field on February 14, but not quite reach
50%, with Anies coming in second. Waiting for the second round will be a period of
uncertainty and volatility for the market, and we do not rule out a possible alliance
between Anies and Ganjar camps in the runoff. In February, we believe the broader
market is more likely to consolidate previous gains rather than rally to new highs ahead
of the election. Externally, investors will be particularly interested in the January FOMC
meeting minutes, which are due for release on February 21.
Arief Budiman
Our top picks gain 3.4% in January and continue to outperform the market
+62 21 2557 4800 ext. 819
In January, our model portfolio stocks gained 3.4%, mainly due to the strong performance
budimanarief@ciptadana.com of EXCL (+16.0%), BBNI (+7.0%), MEDC (+5.6%), JSMR (+2.7%), SILO (+1.8%), BBRI (+0.4%)
and TLKM (+0.3%). However, GGRM lost 3.0% while the other pick (MDKA) was flat. Our top
picks continued to outperform the market in January (as the JCI was down 0.9%). Our
portfolio has performed well over the past year, rising 16.9%, outperforming the overall
market (JCI index), which rose 6.2% to 7,273. As for February, we replace BBNI with BMRI
http://www.ciptadana.com within our top pick due to the latter's earnings outperformance, which will continue
through 2024F, supported by strong loan growth. Our other top picks remain BBRI, TLKM,
EXCL, MDKA, MEDC, SILO, JSMR and MEDC (Exhibit 3).

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 EQUITY RESEARCH
Strategy Report – 7 February 2024
CIPTADANA SEKURITAS ASIA

Exhibit 1: JCI vs. cumulative net foreign inflow in January 2024

USD mn
7,400 600
7,350
500
7,300
400
7,250
7,200 300
7,150
200
7,100
100
7,050
7,000 0

JCI (LHS) Net Foreign Buy (RHS)

Source: Bloomberg

Exhibit 2: Earnings results of big four banks

Rp bn 2023 2022 YoY 4Q23 3Q23 QoQ 2023F 2023A/F

BBRI 60,100 51,170 17% 16,107 14,071 14.5% 60,188 100%
BMRI 55,061 41,171 34% 15,997 13,832 15.7% 51,356 107%
BBNI 20,910 18,312 14% 5,157 5,451 -5.4% 20,762 101%
BBCA 48,639 40,736 19% 12,219 12,228 -0.1% 49,442 98%
TOTL 184,710 151,389 22% 49,480 45,582 9% 181,748 102%
Source: Bloomberg

Exhibit 3: Update on our top picks

Bberg Mkt Cap Last Target Upside PER (x) EV/EBITDA (x)* ROE Yield
Ticker Rating (Rp tn) Price Price pot.(%) 2023F 2024F 2023F 2024F 24F (%) 24F (%)

BBRI Buy 852.2 5,625 6,250 11.1 13.0 11.5 2.5 2.3 20.9 6.1
BMRI Buy 840.0 6,650 7,500 12.8 11.3 10.3 2.4 2.1 21.9 4.6
TLKM Buy 396.2 4,000 4,800 20.0 15.6 15.1 5.2 4.9 17.8 4.2
EXCL Buy 29.5 2,250 2,900 28.9 21.3 17.2 5.2 3.5 6.9 2.7
GGRM Buy 38.4 20,400 27,800 36.3 6.5 6.1 3.7 3.5 10.1 9.7
JSMR Buy 34.7 4,790 5,400 12.7 15.1 7.7 7.8 5.9 9.0 1.2
MDKA Buy 63.1 2,520 3,400 34.9 -226.6 188.1 14.8 14.8 1.9 0.0
MEDC Buy 30.6 1,220 1,850 51.6 6.5 6.2 3.9 3.4 16.1 3.0
SILO Buy 29.5 2,270 3,035 33.7 27.7 24.6 10.7 9.4 14.6 1.3
Total/Avg OW 1,462 28.9 -15.3 34.4 6.7 5.9 12.3 3.3
Source: Bloomberg and Cipadana * PBV for banks

Please see analyst certification and other important disclosures at the back of this report 3
 EQUITY RESEARCH
Strategy Report – 7 February 2024
CIPTADANA SEKURITAS ASIA

EQUITY RESEARCH

HEAD OF RESEARCH ECONOMIST ANALYST

Arief Budiman Renno Prawira Erni Marsella Siahaan, CFA
Strategy, Automotive, Heavy Equipment, Economist Banking, Hospital
Construction, Oil & Gas and Shipping T +62 21 2557 4800 ext 735 T +62 21 2557 4800 ext 919
T +62 21 2557 4800 ext 819 E prawirarenno@ciptadana.com E siahaanerni@ciptadana.com
E budimanarief@ciptadana.com

ANALYST ANALYST ANALYST

Yasmin Soulisa Gani Thomas Radityo
Property, Plantations Telco, Tower, Media, Technology Coal, Metal Mining
T +62 21 2557 4800 ext 799 T +62 21 2557 4800 ext 734 T +62 21 2557 4800 ext 795
E soulisayasmin@ciptadana.com E gani@ciptadana.com E radityothomas@ciptadana.com

ANALYST ANALYST ANALYST

Putu Chantika Putri Nicko Yosafat Muhammad Gibran
Consumer, Cigarette Retail, Pharmaceutical Cement, Poultry, Toll road
T +62 21 2557 4800 ext 740 T +62 21 2557 4800 ext 760 T +62 21 2557 4800 ext 798
E putriputu@ciptadana.com E yosafatnicko@ciptadana.com E gibranmuhammad@ciptadana.com

TECHNICAL ANALYST RESEARCH ASSISTANT

Asrul Husni Sumarni
T +62 21 2557 4800 ext 780 T +62 21 2557 4800 ext 920
E husniasrul@ciptadana.com E sumarni@ciptadana.com

EQUITY SALES

DIRECTOR OF INSTITUTIONAL EQUITY SALES

Dadang Mulyana
Plaza ASIA Office Park unit 2
Jl. Jend. Sudirman Kav. 59
Jakarta - 12190
T +62 21 2557 4800 ext 838
F +62 21 2557 4900
E mulyanadadang@ciptadana.com

BRANCH OFFICES

JAKARTA - MANGGA DUA SURABAYA SURABAYA

Komplek Harco Mangga Dua Intiland Tower Surabaya
Rukan Blok C No.10 Ground Floor Suite 5 & 6
Jl. Mangga Dua Raya Jl. Panglima Sudirman 101-103
Jakarta - 10730 Surabaya - 60271
T +62 21 600 2850 T +62 31 534 3938
F +62 21 612 1049 F +62 31 534 3886

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 EQUITY RESEARCH
Strategy Report – 7 February 2024
CIPTADANA SEKURITAS ASIA

Analyst Certification

Each contributor to this report hereby certifies that all the views expressed accurately reflect his or her personal views about the
companies, securities and all pertinent variables. It is also certified that the views and recommendations contained in this report are not
and will not be influenced by any part or all of his or her compensation.

Disclaimer

This report does not constitute an offer to buy or sell any security/instrument, invitation to offer or recommendation to enter into any
transaction. Nor are we acting in any other capacity as a fiduciary to you. When making and investment decision, you should determine,
without reliance upon us or our affiliates, the economic risks and merits (and independently determine that you are able to assume these
risks) as well as the legal, tax and accounting characterizations and consequences of any such transaction. In this regard, by accepting this
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(b) there may be legal, tax or accounting risks associated with any transaction, (c) you should receive (and rely on) separate and qualified
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advice (and any risks associated with any transaction and our disclaimer as to these matters.

The information contained in this report is based on material we believe to be reliable; however, we do not represent that it is accurate,
current, complete, or error free. Assumptions, estimates and opinions contained in this report constitute our judgment as of the date of the
document and are subject to change without notice. Any projections are based on a number of assumptions as to market conditions and
there can be no guarantee that any projected results will be achieved. Past performance is not a guarantee of future results. PT
CIPTADANA SEKURITAS ASIA AND ITS AFFILIATES SPECIFICALLY DISCLAIMS ALL LIABILITY FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL
OR OTHER LOSSES OR DAMAGES INCLUDING LOSS OF PROFITS INCURRED BY YOU OR ANY THIRD PARTY THAT MAY ARISE FROM ANY
RELIANCE ON THIS REPORT OR FOR THE RELIABILITY, ACCURACY, COMPLETENESS OR TIMELINESS THEREOF.

Disclaimer: This document is not intended to be an offer, or a solicitation of an offer, to buy or sell relevant securities (i.e. securities
mentioned herein or of the same issuer and options, warrants or rights to or interest in any such securities). The information and opinions
contained in this document have been compiled from or arrived at in good faith from sources believed to be reliable. No representation or
warranty, expressed or implied, is made by PT CIPTADANA SEKURITAS ASIA or any other member of the Ciptadana Capital, including any
other member of the Ciptadana Group of Companies from whom this document may be received, as to the accuracy or completeness of the
information contained herein. All opinions and estimates in this report constitute our judgment as of this date and there can be no
assurance that future results or events will be consistent with any such opinions, forecasts or estimates. The information in this document
is subject to change without notice; its accuracy is not guaranteed; and it may be incomplete or condensed.

Please see analyst certification and other important disclosures at the back of this report 5