Stevanus Juanda

9M18 net income rose 14.1% yoy, ahead of our 12.1% expectation for 2018. 3Q18 net income rose 15.8% yoy and was up 12.1% qoq. Retailers (MAPI, RALS and AMRT) beat expectations while financial and consumer stocks were in line. Cement beat expectations, which was a surprise. Telco and construction were below expectations, which could underpin the recovery. Picks: MAPI, SMGR, AKRA, SIDO and RALS.

  • Earnings accelerated in 3Q18. Based on a sample of 113 stocks in JCI that represent 77% of the index, we found that earnings growth accelerated from 13.1% yoy in 1H18 to 14.1% yoy in 9M18. 3Q18 net income of these 113 stocks was Rp85t, up 15.8% yoy and 12.1% qoq. The higher qoq performance was driven by strong profits from large caps, such as AMRT, UNVR, SMGR, JSMR and AALI. 9M18 earnings were slightly ahead of UOBKH’s JCI 12.1% yoy growth projection for net income in 2018.
  • 9M18 results slightly below expectations. We found 24.8% of the stocks reported in- line results, 33.6% were above expectations and 41.6% below expectations. Overall, 9M18 results were in line; given the 14.1% growth in total earnings.
  • Large caps and small caps in line; but mid caps missed. By market capitalisation, large caps (above US$2b market cap) reported an even spread in 9M18 results. For small caps (below US$1b market cap), 40.4% were above expectations, 44.2% below and 15.4% in line. For mid-caps, 52.4% (market cap of US$1b-2b), 52.4% reported below-average 9M18 results.
  • Consumer and financial sectors in line, but retail sector beats. By sector, big sectors such as financial and consumers reported in-line results. Despite in-line results, we still like the consumer sector which is trading at more than -1SD PE below its historical mean. Retailers also beat expectations in 9M18. Some names that surprised on the upside were UNVR, SIDO, AMRT, MAPI and RALS
  • Coal and cement above expectations. Given higher-than-expected coal prices, the coal sector beat expectations. Three out of four cement names delivered earnings that were above expectations. Those that delivered surprisingly good earnings growth were PTBA, INDY, HRUM, SMGR, SMCB and SMBR.
  • Telco and property below expectations. Some 75% of telco companies reported lower-than-expected 9M18 earnings; thus, the recovery in this sector might still be too early. Property also reported lower-than-expected earnings as higher interest rates hurt demand and foreign debt created forex losses. We are negative on the property sector.
  • Our picks: Cement and retail. Cement names could surprise on the upside as previous price wars resulted in very low investor expectations. We like SMGR. Retailers should continue in their recovery: we like MAPI, ACES and RALS. Other names that reported above-expectation results: AKRA.


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