20160104id_2016IndonesianStrategy

Asiamoney’s

2013

Best Domestic

Equity House

Market update

4 January 2016

Disclosure: Bahana Securities does and seeks to do business with companies covered in its research reports. Investors should consider this report as only a single factor

in making their investment decision.

Please see the important disclaimer information on the back of this report

2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

2016 Indonesian strategy

Harry Su & team E-mail: [email protected]

Phone: +6221 250 5735

Trying to lift off

MACRO & MARKET SUMMARY:

Exchange rate and CAD: CAD at 1.86% of GDP in 3Q15, likely rising to

2% in 2015 and 2.3% in 2016 on higher imports as the economy picks

up, leading to slightly weaker 2016 exchange rate of IDR14.5k/1USD.

CPI and fuel prices: Nov: 4.88% y-y inflation; 2015F: 2.9%; we expect it

to remain manageable at 4.5% in 2016, and could fall to the 3.7% level

assuming 10% lower fuel prices.

BI policy rate: currently at 7.5%; we expect a 25bps rate cut in 1Q16 for

a total decline of 75bps to 6.75% for 2016, which would be one of the

biggest rate cut in the region in 2016.

GDP growth: 4.73% y-y in 3Q15, slightly higher compared to 4.67% in

2Q15; we expect GDP growth of 4.72% for 2015, before rising to 5.1% in

2016, which would be one of the highest globally.

2016 Index target: 5,100 backed by 14.3% y-y EPS growth (exhibit 5)

for the market, following 7.5% y-y EPS contraction in 2015. Note that

our universe of 102 stocks account for 80% of the JCI's market

capitalization.

Market valuation – third cheapest in the region ex HMSP & UNVR: With

the JCI being one of the worst performing markets in the region (exhibit

7), market valuation has become more reasonable at about 16x 2016F

PE. Excluding HMSP and UNVR, the JCI trades on 2016F PE of around

13x, the third cheapest in the region (exhibit 4). In terms of PEG, the

Indonesian market would also be quite attractive on 0.8x (exhibit 6).

Biggest risks: Tax amnesty not being a game changer and continued tax

shortfall: At this stage, we do not believe that the tax amnesty program

will be a game changer due to lack of qualifications (exhibit 36).

Additionally, market rumors are rife that there would be a reduction to

the amnesty fine to below the 2% level, suggesting a likely lower

contribution for the government’s coffer in 2016. Note that in 2015, tax

revenues excluding duties only reached IDR1,055tn (81.5% of target),

up just 7.1% y-y and translating to a shortfall of IDR239.3tn Going into

2016, we forecast 0.7% y-y growth in tax revenues as we expect the tax

amnesty program and lower tax rates to hurt tax collection, resulting in

IDR300tn tax shortfall, or 2.7% budget deficit.

SWOT ANALYSIS:

STRENGTHS:

Improving fiscal policy mix since 2013 due to fuel-subsidy removal.

Underleveraged economy as external-debt-to-GDP ratio is low at 33.4%.

Room for monetary and fiscal easing amid global economic slowdown.

Huge productive population base to provide sustained domestic economic

growth ahead.

Relatively stable political conditions among Southeast Asian nations.

Exhibit 1. Market data

14A 15A 16F

Opr. profit growth (%) 6.1 (1.3) 11.8

OP growth (%) – cons. 6.1 1.1 13.6

Net profit growth (%) 4.2 (4.9) 15.5

NP growth (%) – cons. 4.2 (3.9) 14.2

EPS growth (%) (4.6) (7.5) 14.3

EPS growth (%) – cons. (4.6) (4.2) 13.0

P/E (x) 17.8 18.7 16.1

P/E* (x) EX-UNVR & HMSP 15.6 16.5 13.0

P/E (x) - consensus 17.8 18.0 15.8

PEG (x) 4.3 (3.8) 1.0

EV/EBITDA (x) 13.1 12.5 11.5

P/BV (x) 14.9 8.7 7.6

P/BV (x) exc. UNVR & LPPF 3.7 3.3 2.9

Div.yield (%) 2.4 2.1 2.4

Net gearing (%) 21.1 22.0 19.0

ROAE (%) 34.7 31.4 28.6

ROAA (%) 14.3 12.0 11.7

ROIC (%) 31.2 23.1 22.0 Source: Companies, Bahana estimates

Based on 30 December 2015 closing price

Exhibit 2. Top 10 leaders & laggards 30-Dec-15 30-Dec-14 Change

(IDR) (IDR) (%)

PSAB IJ

1,370 570 140.4 SRIL IJ

389 162 140.1 AKRA IJ

7,175 4,500 59.4 MIKA IJ

2,400 1,700 41.2 HMSP IJ

94,000 67,507 39.2 ISAT IJ

5,500 4,120 33.5 LPPF IJ

17,600 14,775 19.1 WSKT IJ

1,670 1,428 16.9 UNVR IJ

37,000 32,525 13.8 CTRA IJ

1,460 1,306 11.8

WINS IJ

167 785 (78.7) MEDC IJ

795 3,710 (78.6) MLPL IJ

257 840 (69.4) ANTM IJ

314 878 (64.2) ITMG IJ

5,725 15,900 (64.0) PTBA IJ

4,525 12,375 (63.4) GJTL IJ

530 1,400 (62.1) BEST IJ

294 765 (61.6) HRUM IJ

675 1,715 (60.6) TINS IJ

505 1,200 (57.9) Source: Bloomberg Based on 30 December 2015 closing price

4 January 2016

PT Bahana Securities – Equity Research – Market strategy 2

2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

WEAKNESSES:

Relatively low foreign reserves to support short-term external debt.

Weak government spending ability.

High dependency on commodity-related sectors and reliance on imports.

High and increasing Incremental Capital Output Ratio (low productivity),

causing low connectivity to the global production network.

Slack in labor markets and labor militancy.

OPPORTUNITIES:

Further stimulus by BOJ and EU should open possibilities of capital flows.

Higher US economic growth.

Low oil prices.

Favorable GDP per capita level should attract more sophisticated

investments from developed markets.

At this stage, we still foresee IDR depreciation continuing into 2016, to

14.5k/1USD with IDR movements heavily influenced by reactions to

future Fed rate hikes. Under a second scenario of lower inflation and slow

and gradual US interest rate hikes, the IDR could stay at 13.7k by end-

2016.

THREATS:

Tight global market liquidity with market over-reaction to the Fed rate

hike.

Very strong US Dollar and global currency wars.

Further unfavorable policies on commodity markets.

Hard landing in China adversely impacting Indonesia’s economic growth –

every 1% drop in China’s GDP growth could result in a 0.5% decrease in

Indonesia’s GDP growth.

SECTOR:

OVERWEIGHT:

CONSUMER STAPLES: Our bigger-cap stock picks are UNVR and ICBP; for

the smaller-caps: ROTI. Risk: Weaker IDR given the sector’s high USD-

linked raw material procurement.

CIGARETTES: We like both HMSP and GGRM due to their solid balance

sheet and minimal USD exposure. Risk: Health-related policy risk.

HEALTHCARE: Our top hospital pick is SILO, trading at a 65% discount to

MIKA on 2016F EV/EBTIDA. Our top pharma pick is KAEF on its

undemanding valuation. Risk: Government’s policy risk on price capping

of medicines.

SHIPPING: Our top sector pick is TMAS on its fleet and route expansions

which should allow both top line and earnings to double by 2017. Risk:

Higher global oil prices.

TELECOMMUNICATIONS: Our sector OVERWEIGHT stance is led by TLKM

as our top operator followed by ISAT on earnings recovery and lower FX

losses due to greater IDR stability. Risk: Policy risk on lower tariffs,

although this is unlikely as Indonesia’s pricing is one-tenth of

Singapore’s.

NEUTRAL:

BANKS: BBNI, BBRI and BBTN are our top sector picks, followed by

BBCA, BMRI and BJBR. Upside risk: Higher GDP growth; Downside risk:

Weaker IDR.

CONSTRUCTION & TOLL ROAD: Our top picks are WSKT (solid earnings

visibility) and ADHI (most attractive valuation). Upside risk: Lower

interest rates; Downside risk: Reduced state spending on tax receipt

Exhibit 3. Top 10 BUYs & 5 SELLs EPS

gwt

Mkt cap Price TP gwt. PER Yield

(USDm) (IDR) (IDR) (%) (x) (%)

HMSP 31,729 94,000 115,000 6.5 39.3 2.5

TLKM 22,706 3,105 3,750 12.6 17.6 3.7

UNVR 20,481 37,000 46,000 12.4 42.7 2.2

GGRM 7,677 55,000 65,000 9.3 17.8 2.4

BBNI 6,751 4,990 5,700 31.7 8.4 2.4

ICBP 5,700 13,475 16,800 15.0 22.2 2.0

ISAT 2,168 5,500 6,800 19.9 22.4 1.3

WSKT 1,644 1,670 1,975 17.3 20.0 1.0

DMAS 752 215 290 12.2 6.1 4.9

ADHI 553 2,140 2,550 (17.4) 14.3 1.4

ASII 17,622 6,000 5,550 4.9 13.8 3.3

INTP 5,962 22,325 16,400 0.3 18.9 4.8

BIRD 1,289 7,100 4,700 3.6 20.4 2.0

APLN 497 334 220 6.7 10.5 1.9

HERO 349 1,150 650 na 83.8 0.0 Source: Bloomberg, Bahana estimates


http://3.sector/

http://3.1.overweight/

http://3.2.neutral/

4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

shortfall.

CONSUMER-DISCRETIONARY: Our top sector pick is MPPA as it is the

most defensive in the sector due to its grocery-led products. Upside risk:

Commodity rally to fuel farmers’ incomes; Downside risk: Lower-than-

expected SSSG on slow GDP growth.

INDUSTRIAL ESTATES: Our top sector pick is DMAS (sector’s strongest

9M15 marketing sales of 90ha, zero USD debt). Upside risk: Higher

presales; Downside risk: Slow infrastructure development.

MEDIA: We favor MNCN as most of the bad news looks priced in, and we

remain cautious on SCMA’s valuation despite our more positive view on

the stock of late. Upside risk: Digitalization with current FTA TV players

as multiplexers. Downside risks: Softer GDP and stricter interpretation of

ruling No. 50/2005.

METAL & MINING: By stock, PSAB is our top pick in the sector on sizeable

production growth (through Pani mine +45k toz, up 20%) amid a more

stable gold-price environment.

OIL & GAS: Downside risks include lower oil prices for MEDC, and for

AKRA, possible foreign entry into their distribution and logistics

businesses while for PGAS, government-related policy on lower gas

prices. Upside risks: Higher oil & gas prices.

POULTRY: MAIN is our top pick due to its cheapest valuation with solid

corporate governance. Upside/downside risks: Stronger/weaker-than-

expected IDR depreciation due to the sector’s large USD borrowings.

PLANTATIONS: Our top pick is LSIP on its zero debt position, while for

the smaller-cap stocks, we like SGRO and DSNG on their still-growing

mature areas. Upside risk: Higher B20 demand; Downside risk: Low

soybean prices.

UNDERWEIGHT:

AUTOMOTIVE-RELATED: We retain our negative view on ASII and IMAS

on continued discounting and intense competition. On the flip side, GJTL

is a BUY on its attractive valuation and earnings recovery. Risks: Higher

margins (ASII); higher sales (IMAS); and weaker IDR (GJTL).

CEMENT: Our negative view is premised on the oversupply condition and

intense competition, with INTP as our top SELL on expensive valuation.

Key risk to our call is stronger-than-expected GDP growth.

COAL & MINING: We prefer companies with greater stability due to their

large local coal portions: PTBA (52%) and ADRO (21%). Risks to our call

on the sector are faster construction of power plant projects and higher

coal prices.

LAND TRANSPORTATION: BIRD is our top SELL on intense competition

from mobile-based new entrants, lack of drivers and headwinds from

government policy risk. ASSA is the only BUY in the sector as rental car

demand remains stable. Upside risk: Higher-than-expected consumer

spending on taxis.

PROPERTY: With poor marketing sales in 2015, earnings in 2016 will be

depressed, in our view, while lower property prices cloud the discount to

NAV valuation. Our top sector pick is SMRA on its Bandung success, no

USD debt and 28% recurring base. On the flip side, APLN is our top SELL

due to high reclamation costs.

To see the full version of this report, please click here

http://asiaresearch.daiwacm.com/eg/cgi-bin/files/20151210id_2016Compendium.pdf#page=1

4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

Exhibit 4. Regional P/E comparison, 2016F

20.419.1

17.2 16.816.1

15.314.5

13.0 12.712.1

0

2

4

6

8

10

12

14

16

18

20

22

India Philippines South

Korea

Malaysia Indonesia China Thailand Indonesia* Singapore Hong Kong

(x)

Average**: 16.0x

Source: Bloomberg, * excluding UNVR & HMSP, **excluding Indonesia*, Bahana estimates

Exhibit 5. Regional EPS growth comparison, 2016F

38.6

33.0

14.3

12.1 9.6 9.4

6.4

3.3

0.4 0

5

10

15

20

25

30

35

40

South Korea Thailand Indonesia Philippines Malaysia Singapore Hong Kong India China

(%)

Average: 14.1%

Source: Bloomberg, Bahana estimates

Exhibit 6. Regional PEG comparison, 2016F

41.6

6.3

1.9 1.8 1.6 1.4 1.0 0.8 0.4 0.4 0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

China India Hong Kong Malaysia Philippines Singapore Indonesia Indonesia* South

Korea

Thailand

(x)

Average**: 6.3x

Source: Bloomberg * excluding UNVR & HMSP, **excluding Indonesia*, Bahana estimates

Following the HMSP

inclusion, JCI is

currently at 2016F

PE of 16.1x, no

longer the highest

in the region;

however, excluding

UNVR & HMSP, our

2016F market P/E

would further fall

to 13.0x, below the

regional average

We expect 2016F

EPS growth to

reach 14.3% y-y,

slightly above the

regional average,

as well as the

Bloomberg cons. of

13.8% y-y growth,

which is most likely

due to consensus

not having fully

downgraded 2015

earnings

On the other hand,

we look for a 2016

PEG of 1.0x, which

is no longer the

highest in the

region and

excluding UNVR &

HMSP, our 2016F

PEG would further

decrease to 0.8x

4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

Exhibit 7. Regional index comparison, 2015 vs 2014

2015 2014 2015 2014

(%) (%) (%) (%)

SHENZHEN (China) 64.9 33.8 DAX (Germany) 10.8 2.7

SHCOMP (China) 10.2 52.9 CAC 40 (France) 10.0 (0.5)

Nikkei (Japan) 9.4 7.1 NZSE (New Zealand) 8.5 12.3

VNI (Vietnam) 5.6 8.1 Nasdaq (USA) 7.9 13.4

KOSPI (Korea) 2.5 (4.8) FTSE 100 (UK) 2.4 1.8

KLCI (Mal.) (3.3) (5.7) S&P 500 (USA) 0.9 11.4

PCOMP (Phil.) (3.9) 22.8 Dow Jones (USA) (0.6) 7.5

SENSEX (India) (5.2) 29.9 SMI (Swiss) (1.1) 9.5

Hang Seng (HK) (6.8) 1.3 ASX (Australia) (1.5) (2.1)

TWSE (Taiwan) (10.6) 8.1 RTSI (Russia) (2.7) (45.2)

IDX (Indonesia) (12.6) 22.3 MADX (Madrid) (6.2) 3.0

STI (Singapore) (14.1) 6.2 S&P/TSX (Toronto) (9.5) 7.4

SET (Thailand) (14.3) 15.3 IBOV (Brazil) (12.7) (2.9) Source: Bloomberg

Based on 30 December 2015 and 30 December 2014 closing prices

Exhibit 8. Currency comparison, 2015 vs 2014

2015 2014 2015 2014

(%) (%) (%) (%)

HKD (Hong Kong) 0.1 (0.0) JPY (Japan) (0.6) (13.7)

TWD (Taiwan) (3.7) (6.2) GBP (UK) (4.9) (6.3)

CNY (China) (4.4) (2.5) EUR (EU) (9.7) (13.6)

PHP (Philippines) (4.8) (0.7) AUD (Australia) (11.0) (9.1)

VND (Vietnam) (4.9) (1.4) NZD (New Zealand) (12.1) (5.4)

INR (India) (5.0) (2.0) MXN (Mexico) (14.6) (13.2)

SGD (Singapore) (6.4) (4.9) RUB (Russia) (16.0) (84.8)

KRW (Korea) (6.9) (3.9) CAD (Canada) (16.1) (9.4)

THB (Thailand) (8.8) (0.6) TRY (Turkey) (19.7) (8.7)

IDR (Indonesia) (10.2) (1.8) BRL (Brazil) (31.2) (12.5)

MYR (Malaysia) (18.5) (6.8) ARS (Argentina) (34.7) (29.8) Source: Bloomberg Based on 30 December 2015 and 30 December 2014 closing prices

Exhibit 9. JCI average monthly turnover, January 2014-December 2015

4.2

4.8

5.95.7

5.2

3.6

5.5

4.3 4.3 4.33.9

4.3

5.1 5.1 5.24.9

4.7

3.63.4

3.9

3.3

4.4

3.7

3.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

(IDRtn)

Source: Bloomberg as of 30 December 2015

Note: When a report covers six or more subject companies please access important disclosures for Daiwa Capital Markets Hong Kong Limited at

http://www.daiwacm.com/hk/research_disclaimer.html or contact your investment representative or Daiwa Capital Markets Hong Kong Limited at Level 26, One Pacific

Place, 88 Queensway, Hong Kong.

Average daily

turnover in 2015

was IDR4.2tn,

lower than 2014’s

level of IDR4.7tn

http://www.daiwacm.com/hk/research_disclaimer.html

4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

Exhibit 10. Bahana equity coverage, leaders & laggards, FY2015 COMPANY STOCK CODE RATING TARGET PRICE Up/(Downside)(%) 12/30/2015 1/1/2015 CHANGE (%)

J Resources PSAB IJ BUY 2,000 46.0 1,370 570 140.4

Sri Rejeki Isman SRIL IJ BUY 500 28.5 389 162 140.1 AKR Corporindo AKRA IJ BUY 7,000 (2.4) 7,175 4,500 59.4

Mitra Keluarga Karyasehat MIKA IJ REDUCE 1,900 (20.8) 2,400 1,700 41.2

HM Sampoerna HMSP IJ BUY 115,000 22.3 94,000 67,507 39.2

Indosat ISAT IJ BUY 6,800 23.6 5,500 4,120 33.5 Matahari Department Store LPPF IJ BUY 19,800 12.5 17,600 14,775 19.1

Waskita Karya WSKT IJ BUY 1,975 18.3 1,670 1,428 16.9

Unilever Indonesia UNVR IJ BUY 46,000 24.3 37,000 32,525 13.8 Ciputra Development CTRA IJ BUY 1,400 (4.1) 1,460 1,306 11.8

Telekomunikasi Indonesia TLKM IJ BUY 3,750 20.8 3,105 2,845 9.1

Pembangunan Perumahan PTPP IJ BUY 4,300 11.0 3,875 3,590 7.9 Summarecon Agung SMRA IJ BUY 1,820 10.3 1,650 1,550 6.5

Ace Hardware Indonesia ACES IJ BUY 875 6.1 825 780 5.8

Bank Tabungan Negara BBTN IJ BUY 1,520 17.4 1,295 1,225 5.7

Sarana Menara Nusantara TOWR IJ BUY 5,000 19.0 4,200 3,980 5.5 Bank Tabungan Pensiunan Nasional BTPN IJ REDUCE 2,350 (10.1) 2,615 2,490 5.0

Indofood CBP Sukses Makmur ICBP IJ BUY 16,800 24.7 13,475 13,150 2.5

Puradelta Lestari DMAS IJ BUY 290 34.9 215 210 2.4 Anabatic Technologies ATIC IJ BUY 800 11.9 715 700 2.1

Bank Jawa Barat dan Banten BJBR IJ BUY 850 12.6 755 740 2.0

Austindo Nusantara Jaya ANJT IJ REDUCE 1,000 (38.3) 1,620 1,590 1.9

Mayora Indah MYOR IJ BUY 31,000 13.6 27,300 27,000 1.1 Bank Central Asia BBCA IJ BUY 14,700 10.5 13,300 13,225 0.6

Lippo Karawaci LPKR IJ REDUCE 1,130 9.2 1,035 1,030 0.5

Express Transindo Utama TAXI IJ REDUCE 120 (11.8) 136 136 0.0 Merdeka Copper Gold MDKA IJ BUY 2,200 9.2 2,015 2,030 (0.7)

Agung Podomoro Land APLN IJ REDUCE 220 (34.1) 334 337 (0.9)

Bank Rakyat Indonesia BBRI IJ BUY 13,000 13.8 11,425 11,650 (1.9) United Tractors UNTR IJ HOLD 16,000 (5.6) 16,950 17,300 (2.0)

Bumi Serpong Damai BSDE IJ BUY 2,020 12.2 1,800 1,865 (3.5)

PP Property PPRO IJ HOLD 180 1.1 178 185 (3.8)

Bank Bukopin BBKP IJ HOLD 730 4.3 700 745 (6.0) Bank Jawa Timur BJTM IJ REDUCE 420 (3.9) 437 469 (6.8)

Nippon Indosari Corpindo ROTI IJ BUY 1,450 14.6 1,265 1,375 (8.0)

Pakuwon Jati PWON IJ HOLD 490 (1.2) 496 540 (8.1) Sido Muncul SIDO IJ BUY 630 14.5 550 610 (9.8)

Indocement Tunggal Prakarsa INTP IJ REDUCE 16,400 (26.5) 22,325 24,800 (10.0)

Gudang Garam GGRM IJ BUY 65,000 18.2 55,000 61,800 (11.0) Surya Citra Media SCMA IJ HOLD 3,250 4.8 3,100 3,500 (11.4)

Pelayaran Tempuran Emas TMAS IJ BUY 3,000 53.8 1,950 2,210 (11.8)

Tiphone Mobile Indonesia TELE IJ BUY 1,180 53.2 770 900 (14.4)

Bank Mandiri BMRI IJ BUY 9,700 4.9 9,250 10,825 (14.5) Cardig Aero Services CASS IJ HOLD 1,250 10.6 1,130 1,340 (15.7)

Electronic City ECII IJ REDUCE 700 (17.6) 850 1,035 (17.9)

Kawasan Industri Jababeka KIJA IJ BUY 270 9.3 247 301 (17.9) Bank Negara Indonesia BBNI IJ BUY 5,700 14.2 4,990 6,100 (18.2)

Sampoerna Agro SGRO IJ BUY 1,970 15.9 1,700 2,080 (18.3)

Ramayana Lestari Sentosa RALS IJ REDUCE 640 (0.8) 645 795 (18.9) Astra International ASII IJ REDUCE 5,550 (7.5) 6,000 7,400 (18.9)

Dharma Satya Nusantara DSNG IJ BUY 740 23.3 600 765 (21.6)

Semen Baturaja SMBR IJ HOLD 300 3.1 291 383 (24.0)

Mitra Adiperkasa MAPI IJ BUY 4,750 25.2 3,795 5,025 (24.5) Xl Axiata EXCL IJ BUY 3,900 6.8 3,650 4,835 (24.5)

Blue Bird BIRD IJ REDUCE 4,700 (33.8) 7,100 9,450 (24.9)

Jasa Marga JSMR IJ BUY 6,250 19.6 5,225 7,100 (26.4) Soechi Lines SOCI IJ BUY 630 32.6 475 650 (26.9)

Kalbe Farma KLBF IJ HOLD 1,480 12.1 1,320 1,810 (27.1)

Media Nusantara Citra MNCN IJ BUY 2,000 7.8 1,855 2,580 (28.1)

Hero Supermarket HERO IJ REDUCE 650 (43.5) 1,150 1,600 (28.1) Wijaya Karya WIKA IJ BUY 3,100 17.4 2,640 3,675 (28.2)

Malindo Feedmill MAIN IJ BUY 1,850 21.3 1,525 2,125 (28.2)

Siloam International Hospitals SILO IJ BUY 17,200 75.5 9,800 13,775 (28.9) Adhi Karya ADHI IJ BUY 2,550 19.2 2,140 3,033 (29.4)

Semen Indonesia SMGR IJ HOLD 10,600 (7.0) 11,400 16,200 (29.6)

Bank Danamon Indonesia BDMN IJ BUY 3,400 6.3 3,200 4,550 (29.7) Indofood Sukses Makmur INDF IJ BUY 6,600 27.5 5,175 7,450 (30.5)

London Sumatra Indonesia LSIP IJ BUY 1,870 41.7 1,320 1,905 (30.7)

Tunas Baru Lampung TBLA IJ BUY 630 23.5 510 745 (31.5)

Charoen Pokphand Indonesia CPIN IJ BUY 3,500 34.6 2,600 3,800 (31.6) Lippo Cikarang LPCK IJ BUY 8,300 14.5 7,250 10,650 (31.9)

Japfa Comfeed Indonesia JPFA IJ BUY 550 (13.4) 635 950 (33.2)

Wijaya Karya Beton WTON IJ HOLD 965 17.0 825 1,270 (35.0) Astra Agro Lestari AALI IJ BUY 22,500 42.0 15,850 24,575 (35.5)

Adi Sarana Armada ASSA IJ BUY 130 30.0 100 156 (35.9)

Tempo Scan Pacific TSPC IJ BUY 2,000 14.3 1,750 2,755 (36.5) Surya Semesta Internusa SSIA IJ BUY 720 0.7 715 1,135 (37.0)

Tower Bersama Infrastructure TBIG IJ HOLD 6,500 10.6 5,875 9,625 (39.0)

Krakatau Steel KRAS IJ REDUCE 275 (6.1) 293 483 (39.3)

Kimia Farma KAEF IJ BUY 1,350 55.2 870 1,445 (39.8) Indomobil Sukses Internasional IMAS IJ HOLD 2,000 (15.4) 2,365 3,995 (40.8)

Alam Sutera Realty ASRI IJ REDUCE 300 (12.5) 343 580 (40.9)

Matahari Putra Prima MPPA IJ BUY 2,750 50.7 1,825 3,100 (41.1) Total Bangun Persada TOTL IJ BUY 940 52.8 615 1,100 (44.1)

Garuda Indonesia GIAA IJ BUY 400 29.4 309 565 (45.3)

Erajaya Swasembada ERAA IJ BUY 850 56.0 545 1,080 (49.5) Adaro Energy ADRO IJ BUY 700 35.9 515 1,040 (50.5)

Ciputra Property CTRP IJ REDUCE 365 (11.0) 410 840 (51.2)

Salim Ivomas Pratama SIMP IJ BUY 600 80.7 332 715 (53.6)

Perusahaan Gas Negara PGAS IJ REDUCE 2,500 (8.9) 2,745 5,975 (54.1) Vale Indonesia INCO IJ BUY 2,500 52.9 1,635 3,590 (54.5)

Holcim Indonesia SMCB IJ REDUCE 925 (7.0) 995 2,200 (54.8)

Timah TINS IJ REDUCE 411 (18.6) 505 1,200 (57.9) Harum Energy HRUM IJ REDUCE 500 (25.9) 675 1,715 (60.6)

Bekasi Fajar Industrial Estates BEST IJ REDUCE 300 2.0 294 765 (61.6)

Gajah Tunggal GJTL IJ BUY 860 62.3 530 1,400 (62.1)

Bukit Asam PTBA IJ BUY 7,800 72.4 4,525 12,375 (63.4) Indo Tambangraya Megah ITMG IJ REDUCE 5,200 (9.2) 5,725 15,900 (64.0)

Aneka Tambang ANTM IJ BUY 764 143.3 314 878 (64.2)

Multipolar MLPL IJ BUY 550 114.0 257 840 (69.4) Medco Energi Internasional MEDC IJ BUY 1,300 63.5 795 3,710 (78.6)

Wintermar Offshore Marine WINS IJ HOLD 190 13.8 167 785 (78.7)


4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

Exhibit 11. IPOs, 2015 Listing date Funds raised IPO price Current price Return

Code Name Industry (IDRb) (IDR) (IDR) (%)

BBYB Bank Yudha Bhakti Banking 13-Jan-15 35 115 386 235.7

MIKA Mitra Keluarga Karyasehat Healthcare 24-Mar-15 445 1,700 2,380 40.0

KOPI Mitra Energi Persada Oil-related 4-May-15 24 395 715 81.0

PPRO PP Property Property 19-May-15 909 185 178 (3.8)

DMAS Puradelta Lestari Industrial estate 29-May-15 2,268 210 205 (2.4)

MMLP Mega Manunggal Property Property 12-Jun-15 995 585 795 35.9

MDKA Merdeka Copper Gold Metals 19-Jun-15 838 2,000 2,005 0.2

BOLT Garuda Metalindo Manufacture 7-Jul-15 258 550 1,200 118.2

ATIC Anabatic Technologies Discretionary 8-Jul-15 263 700 700 0.0

BIKA Binakarya Jaya Abadi Infrastructure 14-Jul-15 150 1,000 1,875 87.5

BBHI Bank Harda Internasional Banking 12-Aug-15 100 125 120 (4.0)

VINS Victoria Insurance Insurance 18-Sept-15 38 105 94 (10.5)

MKNT Mitra Komunikasi Nusantara Telco-related 16-Oct-15 40 200 475 137.5

KINO Kino Indonesia Retail 10-Nov-15 869 3,800 3,840 1.1

IDPR Indonesia Pondasi Raya Construction 16-Nov-15 388 1,280 1,345 5.1

DPUM Dua Putra Utama Makmur Agriculture 18-Nov-15 921 550 855 55.5

AMIN Ateliers Mecaniques D Indonesie Manufcature 18-Nov-15 31 128 130 1.6

Total 8,570 45.8 Source: Bloomberg note: listed based on date of listing


Exhibit 12. Consumer staples sector relative performance

3.9

18.6

25.0

28.8

0

4

8

12

16

20

24

28

32

0

4

8

12

16

20

24

28

32

1M 3M 6M 9M 12M

(%) (%)

Consumer staples sector relative to JCI Source: Bloomberg, Bahana

Exhibit 13. Telco sector relative performance

3.0

11.1

13.1

26.4

18.3

0

4

8

12

16

20

24

28

0

4

8

12

16

20

24

28

1M 3M 6M 9M 12M

(%) (%)

Telco sector relative to JCI

Source: Bloomberg, Bahana

With scarcity of

growth on the

ground, staples

remain as one of the

most defensive and

resilient sectors

Outperformance due

to its strong growth

caused by higher

data usage and also

its defensive nature

amid current market

volatility

4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

Exhibit 14. Property sector relative performance

2.7

26.8

9.1

4.5

13.7

0

5

10

15

20

25

30

0

5

10

15

20

25

30

1M 3M 6M 9M 12M

(%) (%)

Property sector relative to JCI


Exhibit 15. Consumer retail sector relative performance

2.3

5.8

3.3

(0.4)

10.5

(2)

0

2

4

6

8

10

12

(2)

0

2

4

6

8

10

12

1M 3M 6M 9M 12M

(%) (%)

Consumer retail relative to JCI Source: Bloomberg, Bahana

Exhibit 16. Banks sector relative performance

3.8

9.8

5.8

(1.0)

6.1

(2)

0

2

4

6

8

10

(2)

0

2

4

6

8

10

1M 3M 6M 9M 12M

(%) (%)

Banks sector relative to JCI


In spite of weak

marketing sales, the sector has benefited from positive sentiment on government

regulations and possible lower BI rates ahead

Defensive grocery

demand has

supported the

performance of

retailers

Outperforming,

helped by sentiment

from lower Primary

Reserve

Requirements and

possible lower BI

rates, despite

current rising NPLs

4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

Exhibit 17. Infrastructure sector relative performance

2.6

(1.3)

10.8

0.4 0.4

(2)

0

2

4

6

8

10

12

(2)

0

2

4

6

8

10

12

1M 3M 6M 9M 12M

(%) (%)

Infrastructure-related sector relative to JCI


Exhibit 18. Consumer media sector relative performance

3.7 4.7

10.0

(1.1)

(4.9)(6)

(4)

(2)

0

2

4

6

8

10

12

(6)

(4)

(2)

0

2

4

6

8

10

12

1M 3M 6M 9M 12M

(%) (%)

Consumer media relative to JCI Source: Bloomberg, Bahana

Exhibit 19. Oil-related sector relative performance

4.2 3.7

(14.4)

(5.1)

(6.9)

(15)

(10)

(5)

0

5

(15)

(10)

(5)

0

5

1M 3M 6M 9M 12M

(%) (%)

Oil-related sector relative to JCI Source: Bloomberg, Bahana

Perceived as a

market proxy, it has

performed relatively

in line with the index

Suffered from FMCG

companies’ lower TV

ad spend and their

shift to cheaper

advertising media

(e.g. online and

direct marketing),

though the sector

has improved

recently on a slightly

better economic

outlook

Has been

underperforming on

depressed oil price

outlook on

oversupply condition

as well as the lifting

of Iran sanctions

4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

Exhibit 20. Automotive sector relative performance

(1.4)

6.0

(8.7)

(12.0)

(7.2)

(15)

(10)

(5)

0

5

10

(15)

(10)

(5)

0

5

10

1M 3M 6M 9M 12M

(%) (%)

Automotive sector relative to JCI


Exhibit 21. Cement sector relative performance

10.1

21.8

7.2 8.9

(8.0)

(12)

(8)

(4)

0

4

8

12

16

20

24

(12)

(8)

(4)

0

4

8

12

16

20

24

1M 3M 6M 9M 12M

(%) (%)

Cement sector relative to JCI Source: Bloomberg, Bahana

Exhibit 22. Coal sector relative performance

(4.7)

(16.2)

(18.8)(17.7)

(10.2)

(20)

(15)

(10)

(5)

0

(20)

(15)

(10)

(5)

0

1M 3M 6M 9M 12M

(%) (%)

Coal sector relative to JCI


Weak purchasing

power coupled with

continued huge

discounting

environment has

resulted in market

underperformance

The sector has been

hurt by sentiment on

competition, the

oversupply situation

and weak margins.

Underperformance

on continued weak

coal price due to the

implementation of

China’s clean air

policy

4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

Exhibit 23. Shipping sector relative performance

5.1 4.6

8.0 6.5

(16.3)

(20)

(15)

(10)

(5)

0

5

10

(20)

(15)

(10)

(5)

0

5

10

1M 3M 6M 9M 12M

(%) (%)

Shipping sector relative to JCI Source: Bloomberg, Bahana

Exhibit 24. Poultry sector relative performance

(12.1)

33.5

4.8

(6.2)

(18.0)

(30)

(20)

(10)

0

10

20

30

40

(30)

(20)

(10)

0

10

20

30

40

1M 3M 6M 9M 12M

(%) (%)

Poultry sector relative to JCI


Exhibit 25. Industrial estate sector relative performance

5.1

12.9

(11.1)

(17.9)(19.2)

(30)

(20)

(10)

0

10

20

(30)

(20)

(10)

0

10

20

1M 3M 6M 9M 12M

(%) (%)

Industrial estate sector relative to JCI


Suffering from weak

sentiment due to

softer-than-expected

GDP growth

performance

Underperforming

due to weak IDR as

well as low DOC and

broiler prices caused

by oversupply

conditions

Concerns on

investment outlook

have hurt the

performance of the

sector

4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

Exhibit 26. Plantations sector relative performance

(4.7)

(14.9)

(18.5)

(16.6)

(21.3)

(25)

(20)

(15)

(10)

(5)

0

(25)

(20)

(15)

(10)

(5)

0

1M 3M 6M 9M 12M

(%) (%)

Plantations sector relative to JCI Source: Bloomberg, Bahana

Exhibit 27. Aviation sector relative performance

(1.5)

(9.2)

(18.8)

(9.9)

(23.9) (25)

(20)

(15)

(10)

(5)

0

(25)

(20)

(15)

(10)

(5)

0

1M 3M 6M 9M 12M

(%) (%)

Aviation sector relative to JCI


Exhibit 28. Metals sector relative performance

(2.0)

(31.1) (31.9)(33.4)

(45.1)

(50)

(40)

(30)

(20)

(10)

0

(50)

(40)

(30)

(20)

(10)

0

1M 3M 6M 9M 12M

(%) (%)

Metals sector relative to JCI


Disadvantaged by

lower CPO and

soybean prices due

to global oversupply

conditions

Has been impacted

by slower GDP

growth and natural

disasters, despite

lower oil prices

Suffering from weak

sentiment due to

stronger USD and

global economic

weakness,

negatively affecting

prices of base metals

4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

Exhibit 29. Transportation sector relative performance

(0.1) (0.6)

(4.3)

(32.5)

(45.8)(50)

(40)

(30)

(20)

(10)

0

(50)

(40)

(30)

(20)

(10)

0

1M 3M 6M 9M 12M

(%) (%)

Transportation sector relative to JCI Source: Bloomberg, Bahana

Exhibit 30. Coal price, Jan2014-now

51.0

Average: 64.4

50

55

60

65

70

75

80

85

90

(USD/Mtn)


Exhibit 31. CPO price, Jan 2014-now

642.5

Average: 746

500

550

600

650

700

750

800

850

900

950

1,000

(USD/Mtn)


The taxi industry has

been hurt by

decreased demand

on weak purchasing

power and lower

utilization rates on

intensifying

competition from

online mobile-based

transportation

applications

At the end of 2015,

coal price closed at

USD50.9/Mtn, down

18% y-y, and

averaged

USD58/Mtn over the

year, also down 18%

y-y, in line with our

expectations

At the end of 2015,

CPO price closed at

USD643/ton, down

13% y-y, and

averaged

USD645/ton over

the year, down 23%

y-y, due to lower

biodiesel demand on

weak oil price

4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

Exhibit 32. Gold price, Jan 2014-now

1070.5

Average: 1,213

1,050

1,100

1,150

1,200

1,250

1,300

1,350

1,400

(USD/oz)


Exhibit 33. Nickel price, Jan 2014-now

8,560

Average: 14,360

8,000

10,000

12,000

14,000

16,000

18,000

20,000

22,000

(USD/Mtn)


Exhibit 34. Brent oil price, Jan 2014-now

37.4

Average: 76.6

30

40

50

60

70

80

90

100

110

120

(USD/barrel)


At the end of 2015,

gold price closed at

USD1,071/oz, down

11% y-y, and

averaged

USD1,160/oz over

the year, down 8%

y-y, in line with our

expectation

At the end of 2015,

nickel price closed at

USD8,560/ton, down

43% y-y, and

averaged

USD11,832/ton over

the year, up 30% y-

y, helped by the ore

ban, 1% below our

numbers

At the end of 2015,

Brent oil price closed

at USD37.4/bbl,

down 35% y-y, and

averaged

USD53.7/bbl over

the year, down 46%

y-y, 2% below our

expectation

4 January 2016


2014

Finance Asia's

Best

Equity House

Alpha

Southeast Asia

2014 Best

Research Call

FMCG Sector

Asiamoney's

2013

Best Domestic

Equity House

2015

Institutional

Investors

Highest Ranked

Local Research

House

2015

Global

Banking & Finance

Review

Best Research

House

Exhibit 35. Tin price, Jan 2014-now

14,595

Average: 18,998

13,000

15,000

17,000

19,000

21,000

23,000

25,000

(USD/Mtn)


Exhibit 36. Tax amnesty comparison in some nations

Country

Accompanied by enhanced enforcement (Rule of law)

Implemented

for first time (Uniqueness)

Designed to

attract flight

capital

Geared to

domestic capital

Accompanied

by tax rate adjustment

Result

Argentina No No Yes No No Unsuccessful

Belgium No No Yes Yes No Unsuccessful

Colombia Yes Yes No Yes Yes Successful

France No No Yes No Yes Unsuccessful

India No No Yes Yes No Successful

Ireland Yes Yes No Yes No Successful

Indonesia No ? Yes No Yes ???

Source: FRBNY Quarterly review, Bahana

At the end of 2015,

tin price closed at

USD14,595/ton,

down 24% y-y, and

averaged

USD16,081/ton over

the year, down 27%

y-y

Head Office Surabaya Branch

Graha Niaga, 19th Floor Wisma BII, Ground Floor

Jl. Jend. Sudirman Kav. 58 Jl. Pemuda 60-70

Jakarta 12190 Surabaya 60271

Indonesia Indonesia

Tel. 62 21 250 5081 Tel. 62 31 535 2788

Fax. 62 21 522 6049 http://www.bahana.co.id Fax. 62 31 546 1157

Dealing Room: +62 21 527 0808 (Foreign Institutional)

Research: +62 21 250 5081

+62 21 250 5508 (Domestic Institutional)

Harry [email protected]

Senior Associate DirectorHead of Corporate Strategy & Research

Consumer, Strategy

ext 3600direct: +62 21 250 5735

Teguh Hartanto

[email protected] Director

Deputy Head of Research

Banks, Cement, Aviationext 3610

Leonardo Henry Gavaza, [email protected]

Senior Research ManagerAuto, Heavy equipment, Telco

ext 3608

Michael W Setjoadi [email protected]

Research AnalystConsumer, Healthcare, Poultry

ext 3613

Bob [email protected]

Research AnalystCement, Infratructure,Toll roads

ext 3605

Agustinus Reza Kirana

[email protected] Analyst

Plantations, Shipping, Transportationext 3616

Arandi [email protected]

Research AnalystCoal, Metals, Oil & Gas

ext 3619

Made Ayu Wijayati

[email protected] Executive

ext 3607

Bagus Adi Yoga Prawira

[email protected] AnalystConsumer, Media

ext 3604

Zefanya Halim

[email protected] Manager

ext 3612

Novianty Permata Sari

[email protected]

ext 3618

Ashish Agrawal

[email protected] President

Institutional Equity Salesext 2550 / 2553

Reynard Poernawan

[email protected] Equity Sales

ext 2528

John M. Dasaad


ext 2549

Yohanes Adhi Handoko

[email protected], Surabaya Branch

ext 7250

Suwardi Widjaja


ext 2548

Amelia Husada

[email protected] President

Institutional Equity Salesext 2552

Nurul Farida


ext 2547

+62 31 535 2788 (Surabaya Branch)

Fakhrul [email protected]

Economistext 3602

Melvin Mikha Reminov

[email protected] Associate

ext 3621

Sanni Satrio Dwi Utomo


Industrial Estate, Propertyext 3611

Natalia [email protected] of Sales &

Client Relationship Management ext 2500

Sarah Jessica Hutapea


ext 3693

Nyoman Widita Prabawa


ext 3623

Renaldy Effendy


Consumer, Healthcareext 3606

Gilang Purnama


ext 3601

Adriana Kosasih

[email protected] Executive

ext 2541

Hanna Marionda

[email protected] Trader

ext 2525

Ari Santosa

[email protected] Trader

ext 2554

Bram Taarea


ext 2524

Jozabad Jonathan


Poultryext 3620

Muhammad Wafi


ext 3609

Inca [email protected]

Senior Equity Institutional Salesext 2545

http://www.bahana.co.id/

Important Disclosures and Disclaimer This publication is prepared by PT.Bahana Securities and reviewed by Daiwa Securities Group Inc. and/or its affiliates, and distributed outside Indonesia by Daiwa Securities Group Inc. and/or its affiliates, except to the extent expressly provided herein. Certain copies of this publication may be distributed inside and outside of Indonesia by PT. Bahana Securities in accordance with relevant laws and regulations. This publication and the contents hereof are intended for information purposes only, and may be subject to change without further notice. Any use, disclosure, distribution, dissemination, copying, printing or reliance on this publication for any other purpose without our prior consent or approval is strictly prohibited. Any review does not constitute a full verification of the publication and merely provides a minimum check. Neither Daiwa Securities Group Inc. nor any of its respective parent, holding, subsidiaries or affiliates, nor any of its respective directors, officers, servants and employees, represent nor warrant the accuracy or completeness of the information contained herein or as to the existence of other facts which might be significant, and will not accept any responsibility or liability whatsoever for any use of or reliance upon this publication or any of the contents hereof. Neither this publication, nor any content hereof, constitute, or are to be construed as, an offer or solicitation of an offer to buy or sell any of the securities or investments mentioned herein in any country or jurisdiction nor, unless expressly provided, any recommendation or investment opinion or advice. Any view, recommendation, opinion or advice expressed in this publication constitutes the views of the analyst(s) named herein and does not necessarily reflect those of Daiwa Securities Group Inc. and/or its affiliates nor any of its respective directors, officers, servants and employees except where the publication states otherwise. This research report is not to be relied upon by any person in making any investment decision or otherwise advising with respect to, or dealing in, the securities mentioned, as it does not take into account the specific investment objectives, financial situation and particular needs of any person.

Neither Daiwa Securities Group Inc. nor any of its affiliates is licensed to undertake any business within the Republic of Indonesia. Any display of any trade name or logo of the Daiwa Securities Group Inc. on this publication shall not be deemed to be an undertaking of any business within the Republic of Indonesia.

Daiwa Securities Group Inc., its subsidiaries or affiliates, or its or their respective directors, officers and employees from time to time may have trades as principals, or have positions in, or have other interests in the securities of the company under research including market making activities, derivatives in respect of such securities or may have also performed investment banking and other services for the issuer of such securities. The following are additional disclosures.

Ownership of Securities

For “Ownership of Securities” information, please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Investment Banking Relationship

For “Investment Banking Relationship”, please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Japan

Daiwa Securities Co. Ltd. and Daiwa Securities Group Inc.

Daiwa Securities Co. Ltd. is a subsidiary of Daiwa Securities Group Inc.


Within the preceding 12 months, The subsidiaries and/or affiliates of Daiwa Securities Group Inc. * has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: Modern Land (China) Co. Ltd (1107 HK); econtext Asia Ltd (1390 HK); Accordia Golf Trust (AGT SP); Hua Hong Semiconductor Ltd (1347 HK); GF Securities Co Ltd (1776 HK); Mirae Asset Life Insurance Co Ltd (085620 KS).

*Subsidiaries of Daiwa Securities Group Inc. for the purposes of this section shall mean any one or more of:

• Daiwa Capital Markets Hong Kong Limited (大和資本市場香港有限公司)

• Daiwa Capital Markets Singapore Limited

• Daiwa Capital Markets Australia Limited

• Daiwa Capital Markets India Private Limited

• Daiwa-Cathay Capital Markets Co., Ltd.

• Daiwa Securities Capital Markets Korea Co., Ltd

Disclosure of Interest of Bahana Securities


Within the preceding 12 months, Bahana Securities has lead-managed public offerings and/or secondary offerings (excluding straight bonds) of the securities of the following companies: J Resources Asia Pasific Tbk PT (PSAB IJ); Waskita Karya Persero Tbk PT (WSKT IJ); Adhi Karya Persero Tbk PT (ADHI IJ); PP Properti Tbk PT (PPRO IJ); Merdeka Copper Gold Tbk PT (MDKA IJ)

Hong Kong

This research is distributed in Hong Kong by Daiwa Capital Markets Hong Kong Limited (大和資本市場香港有限公司) (“DHK”) which is regulated by the Hong Kong Securities and Futures Commission. Recipients of this research in Hong Kong may contact DHK in respect of any matter arising from or in connection with this research.

Relevant Relationship (DHK)

DHK may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage.

Singapore

This research is distributed in Singapore by Daiwa Capital Markets Singapore Limited and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. By virtue of distribution to these category of investors, Daiwa Capital Markets Singapore Limited and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of Daiwa Capital Markets Singapore Limited’s interest and/or its representative’s interest in securities). Recipients of this research in Singapore may contact Daiwa Capital Markets Singapore Limited in respect of any matter arising from or in connection with the research.

Australia

This research is distributed in Australia by Daiwa Capital Markets Australia Limited and it may only be distributed in Australia to wholesale investors within the meaning of the Corporations Act. Recipients of this research in Australia may contact Daiwa Capital Markets Stockbroking Limited in respect of any matter arising from or in connection with the research.

India

This research is distributed in India to Institutional Clients only by Daiwa Capital Markets India Private Limited (Daiwa India) which is an intermediary registered with Securities & Exchange Board of India as a Stock Broker, Merchant Bank and Research Analyst. Daiwa India, its Research Analyst and their family members and its associates do not have any financial interest save as disclosed or other undisclosed material conflict of interest in the securities or derivatives of any companies under coverage. Daiwa India and its associates may have received compensation for any products other than Investment Banking (as disclosed) or brokerage services from the subject company in this report during the past 12 months. Unless otherwise stated in BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action, Daiwa India and its associates do not hold more than 1% of any companies covered in this research report.

There is no material disciplinary action against Daiwa India by any regulatory authority impacting equity research analysis activities as of the date of this report.

https://daiwa3.bluematrix.com/sellside/Disclosures.action


Taiwan

This research is distributed in Taiwan by Daiwa-Cathay Capital Markets Co., Ltd and it may only be distributed in Taiwan to institutional investors or specific investors who have signed recommendation contracts with Daiwa-Cathay Capital Markets Co., Ltd in accordance with the Operational Regulations Governing Securities Firms Recommending Trades in Securities to Customers. Recipients of this research in Taiwan may contact Daiwa-Cathay Capital Markets Co., Ltd in respect of any matter arising from or in connection with the research.

Philippines

This research is distributed in the Philippines by DBP-Daiwa Capital Markets Philippines, Inc. which is regulated by the Philippines Securities and Exchange

Commission and the Philippines Stock Exchange, Inc. Recipients of this research in the Philippines may contact DBP-Daiwa Capital Markets Philippines, Inc.

in respect of any matter arising from or in connection with the research. DBP-Daiwa Capital Markets Philippines, Inc. recommends that investors

independently assess, with a professional advisor, the specific financial risks as well as the legal, regulatory, tax, accounting, and other consequences of a proposed transaction. DBP-Daiwa Capital Markets Philippines, Inc. may have positions or may be materially interested in the securities in any of the markets

mentioned in the publication or may have performed other services for the issuers of such securities.

For relevant securities and trading rules please visit SEC and PSE link at http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf and

http://www.pse.com.ph/ respectively.

United Kingdom

This research report is produced by Daiwa Capital Markets Europe Limited and/or its affiliates and is distributed in the European Union, Iceland, Liechtenstein, Norway and Switzerland. Daiwa Capital Markets Europe Limited is authorised and regulated by The Financial Conduct Authority (“FCA”) and is a member of the London Stock Exchange, Eurex and NYSE Liffe.

This publication is intended for investors who are not Retail Clients in the United Kingdom within the meaning of the Rules of the FCA and should not therefore be distributed to such Retail Clients in the United Kingdom. Should you enter into investment business with Daiwa Capital Markets Europe’s affiliates outside the United Kingdom, we are obliged to advise that the protection afforded by the United Kingdom regulatory system may not apply; in particular, the benefits of the Financial Services Compensation Scheme may not be available.

Daiwa Capital Markets Europe Limited has in place organisational arrangements for the prevention and avoidance of conflicts of interest. Our conflict management policy is available at http://www.uk.daiwacm.com/about-us/corporate-governance-regulatory.

Germany

This document is distributed in Germany by Daiwa Capital Markets Europe Limited, Niederlassung Frankfurt which is regulated by BaFin (Bundesanstalt fuer Finanzdienstleistungsaufsicht) for the conduct of business in Germany.

Bahrain

This research material is distributed by Daiwa Capital Markets Europe Limited, Bahrain Branch, regulated by The Central Bank of Bahrain and holds Investment Business Firm – Category 2 license and having its official place of business at the Bahrain World Trade Centre, South Tower, 7th floor, P.O. Box 30069, Manama, Kingdom of Bahrain. Tel No. +973 17534452 Fax No. +973 535113

This material is provided as a reference for making investment decisions and is not intended to be a solicitation for investment. Investment decisions should be made at your own discretion and risk. Accordingly, no representation or warranty, express or implied, is made as to and no reliance should be placed on the fairness, accuracy, completeness or correctness of the information and opinions contained in this document, Content herein is based on information available at the time the research material was prepared and may be amended or otherwise changed in the future without notice. All information is intended for the private use of the person to whom it is provided without any liability whatsoever on the part of Daiwa Capital Markets Europe Limited, Bahrain Branch, any associated company or the employees thereof. If you are in doubt about the suitability of the product or the research material itself, please consult your own financial adviser. Daiwa Capital Markets Europe Limited, Bahrain Branch retains all rights related to the content of this material, which may not be redistributed or otherwise transmitted without prior consent.

United States

This report is distributed in the U.S. by Daiwa Capital Markets America Inc. (DCMA). It may not be accurate or complete and should not be relied upon

as such. It reflects the preparer’s views at the time of its preparation, but may not reflect events occurring after its preparation; nor does it reflect

PT.Bahana Securities’ or DCMA’s views at any time. Neither PT.Bahana Securities, DCMA nor the preparer has any obligation to update this report

or to continue to prepare research on this subject. This report is not an offer to sell or the solicitation of any offer to buy securities. Unless this report

says otherwise, any recommendation it makes is risky and appropriate only for sophisticated speculative investors able to incur significant losses.

Readers should consult their financial advisors to determine whether any such recommendation is consistent with their own investment objectives,

financial situation and needs. This report does not recommend to U.S. recipients the use of any of PT.Bahana Securities’ or DCMA’s non-U.S. affiliates to effect trades in any security and is not supplied with any understanding that U.S. recipients of this report will direct commission business to

such non-U.S. entities. Unless applicable law permits otherwise, non-U.S. customers wishing to effect a transaction in any securities referenced in this

material should contact a Daiwa entity in their local jurisdiction. Most countries throughout the world have their own laws regulating the types of

securities and other investment products which may be offered to their residents, as well as a process for doing so. As a result, the securities

discussed in this report may not be eligible for sales in some jurisdictions. Customers wishing to obtain further information about this report should

contact DCMA: Daiwa Capital Markets America Inc., Financial Square, 32 Old Slip, New York, New York 10005 (Tel no. 212-612-7000).

Ownership of Securities

For “Ownership of Securities” information please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action .

Investment Banking Relationships

For “Investment Banking Relationships” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

DCMA Market Making

For “DCMA Market Making” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action.

Research Analyst Conflicts

For updates on “Research Analyst Conflicts” please visit BlueMatrix disclosure link at https://daiwa3.bluematrix.com/sellside/Disclosures.action. The

principal research analysts who prepared this report have no financial interest in securities of the issuers covered in the report, are not (nor are any members of their household) an officer, director or advisory board member of the issuer(s) covered in the report, and are not aware of any material

relevant conflict of interest involving the analyst or DCMA, and did not receive any compensation from the issuer during the past 12 months except as

noted: no exceptions.

Research Analyst Certification

For updates on “Research Analyst Certification” and “Rating System” please visit BlueMatrix disclosure link at

https://daiwa3.bluematrix.com/sellside/Disclosures.action. The views about any and all of the subject securities and issuers expressed in this

Research Report accurately reflect the personal views of the research analyst(s) primarily responsible for this report (or the views of the firm

producing the report if no individual analysts[s] is named on the report); and no part of the compensation of such analyst(s) (or no part of the

compensation of the firm if no individual analyst[s)] is named on the report) was, is, or will be directly or indirectly related to the specific recommendations or views contained in this Research Report.

http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf%20and%20http:/www.pse.com.ph/

http://www.sec.gov.ph/irr/AmendedIRRfinalversion.pdf%20and%20http:/www.pse.com.ph/

http://www.uk.daiwacm.com/about-us/corporate-governance-regulatory






For stocks and sectors in Indonesia covered by Bahana Securities, the following rating system is in effect:

Stock ratings are based on absolute upside or downside, which is the difference between the target price and the current market price. Unless otherwise specified, these ratings are set with a 12-month horizon. It is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on the market price and the formal rating. "Buy": the price of the security is expected to increase by 10% or more. "Hold": the price of the security is expected to range from an increase of less than 10% to a decline of less than 5%. "Reduce": the price of the security is expected to decline by 5% or more.

Sector ratings are based on fundamentals for the sector as a whole. Hence, a sector may be rated “Overweight” even though its constituent stocks are all rated “Reduce”; and a sector may be rated “Underweight” even though its constituent stocks are all rated “Buy”. “Overweight”: positive fundamentals for the sector. “Neutral”: neither positive nor negative fundamentals for the sector. “Underweight”: negative fundamentals for the sector.

Ownership of Securities For “Ownership of Securities” information, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action .

Investment Banking Relationships For “Investment Banking Relationship”, please visit BlueMatrix disclosure Link at https://daiwa3.bluematrix.com/sellside/Disclosures.action . Relevant Relationships (Bahana Securities) Bahana Securities may from time to time have an individual employed by or associated with it serves as an officer of any of the companies under its research coverage.

Bahana Securities market making Bahana Securities may from time to time make a market in securities covered by this research.

Additional information may be available upon request.

Japan - additional notification items pursuant to Article 37 of the Financial Instruments and Exchange Law

(This Notification is only applicable where report is distributed by Daiwa Securities Co. Ltd.)

If you decide to enter into a business arrangement with us based on the information described in materials presented along with this document, we ask you to pay close attention to the following items.

In addition to the purchase price of a financial instrument, we will collect a trading commission* for each transaction as agreed beforehand with you. Since

commissions may be included in the purchase price or may not be charged for certain transactions, we recommend that you confirm the commission for

each transaction.

In some cases, we may also charge a maximum of ¥ 2 million (including tax) per year as a standing proxy fee for our deposit of your securities, if you are

a non-resident of Japan.

For derivative and margin transactions etc., we may require collateral or margin requirements in accordance with an agreement made beforehand with

you. Ordinarily in such cases, the amount of the transaction will be in excess of the required collateral or margin requirements.

There is a risk that you will incur losses on your transactions due to changes in the market price of financial instruments based on fluctuations in interest

rates, exchange rates, stock prices, real estate prices, commodity prices, and others. In addition, depending on the content of the transaction, the loss

could exceed the amount of the collateral or margin requirements. There may be a difference between bid price etc. and ask price etc. of OTC derivatives handled by us.

Before engaging in any trading, please thoroughly confirm accounting and tax treatments regarding your trading in financial instruments with such experts

as certified public accountants.

*The amount of the trading commission cannot be stated here in advance because it will be determined between our company and you based on current

market conditions and the content of each transaction etc.

When making an actual transaction, please be sure to carefully read the materials presented to you prior to the execution of agreement, and to take responsibility for your own decisions regarding the signing of the agreement with us.

Corporate Name: Daiwa Securities Co. Ltd.

Financial instruments firm: chief of Kanto Local Finance Bureau (Kin-sho) No.108

Memberships: Japan Securities Dealers Association, Financial Futures Association of Japan

Japan Securities Investment Advisers Association

Type II Financial Instruments Firms Association



20160104id_2016IndonesianStrategy

Documents

Transcript of 20160104id_2016IndonesianStrategy