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Analysis: Round-up of 2013 results: The good, the bad & the ugly
All 87 stocks under our coverage, which account for about 75 percent of total market capitalization of the Indonesia Stock Exchange (IDX), have announced their financial results for the fourth quarter 2013 (Q4 2013)
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All 87 stocks under our coverage, which account for about 75 percent of total market capitalization of the Indonesia Stock Exchange (IDX), have announced their financial results for the fourth quarter 2013 (Q4 2013). In aggregate, operating-profit growth for our basket of stocks reached 7.4 percent year on year (y-o-y) (chart 1), relatively flat versus the 7.5 percent y-o-y growth reported in Q4 2012, and in line with our projection of 7.9 percent y-o-y growth.
On the bottom line, however, Q4 2013 net profit growth of 6.7 percent y-o-y is better than expected, up from 5.2 percent in Q4 2012, and compares favorably to our expectation of -0.9 percent supported mainly by the performances of Telkom Indonesia (TLKM) with +10.5 percent y-o-y, Astra International (ASII), +25.3 percent y-o-y and Gudang Garam (GGRM) +8.4 percent y-o-y. Additionally, in our preview, we had only anticipated 2.3 percent y-o-y growth for the banks, compared to the actual figure of 13.6 percent, helped predominantly by three banks' higher-than-expected earnings: Bank Rakyat Indonesia (BBRI), Bank Mandiri (BMRI) and Bank Negara Indonesia (BBNI).
The good: Out of the five sectors listed under this category, which have booked above-market growth rates at both the operating and net-profit levels, the biggest surprise to us has been the plantation sector's performance, which moved from the ugly section to the good, caused by higher production of around 14 percent y-o-y and the increase in the Q4 2013 average selling price (APS) by 33 percent to Rp 8.3 million (US$732) per ton y-o-y. This is followed by the automotive sector, which benefited from ASII's higher margins stemming from a one-off incentive from its Japanese principals. For infrastructure, growth acceleration surprised on the upside, mainly boosted by the construction sector attributed by the performances of Adhi Karya (ADHI), Total Bangun Persada (TOTL) and Waskita Karya (WSKT). On banks, we note that despite its solid performance, the sector experienced y-o-y growth deceleration in Q4 2013 due to slower growth caused by a slowdown in consumer loans and overall banks' lower credit-risk appetite. Rounding up the good section, we also encountered a positive surprise on the property front, mainly due to higher-than-expected Bumi Serpong Damai's (BSDE) revenue recognition.
In the 'bad' sector, there are only two industries, oil-related and poultry, with mixed performances in terms of operating and net-profit results (chart 3) relative to the market. In general, the oil-related sector is skewed toward Perusahaan Gas Negara's (PGAS) performance with slowing growth due to the inability to raise prices as well as limited volume growth. On the poultry front, we saw negative surprises on the back of a weak rupiah resulting in higher raw material prices which pressured margins.
In line with our expectations, the biggest y-o-y contraction in our 'ugly' category (chart 4) came from the metal sector, which was hurt by low nickel prices (Q4 2013: $13,909/ton; Q4 2012: $16,976/ton) for Aneka Tambang (ANTM) and Vale Indonesia (INCO)
On the flip side, Timah (TINS) managed to turn around its operation, having benefitted from the government's one-door policy for tin exports. In the telecommunications sector, operating earnings were hit by US dollar-linked infrastructure-related costs while bottom-line erosion stemmed from foreign exchange (FX) losses due to US dollar-denominated borrowings for Indosat (ISAT) and XL Axiata (EXCL). Additionally, we observed one-off accelerated depreciation charges on TLKM. For the coal sector, the companies remained plagued by weak coal prices; however, we begin to observe some operating efficiencies such as at Adaro Energy (ADRO), Indo Tambangraya Megah (ITMG) and Tambang Batubara Bukit Asam (PTBA). The cement sector suffered from slowing domestic volumes, margin contractions due to higher costs and an adverse impact from rupiah depreciation. Finally, on the consumer side, we note that the sector's performance remains relatively in line with Bahana's overall stock universe, despite challenges in the form of weak rupiah and intense competition.
The writer is Senior Associate Director/Head of Equities and Research at PT Bahana Securities
