More on consumption
Three data points to support upbeat outlook on Indonesia consumption
These data points are: better-than-expected unemployment data including Q109; increased M&A activity in Indonesian domestic companies; and continued growth in corporate capex spending in Q109. We selected three main consumption plays: Astra International (Astra), Bakrieland, and Media Nusantara Citra.
Astra International
Astra is our top pick. Its valuation looks attractive for domestic consumption exposure at 10x 2010E PE. The UBS 2010 forecast is 13% above consensus on better sales growth in the auto business. The company should also be the main beneficiary of a declining JIBOR rate, which could translate into a lower consumer lending rate.
Bakrieland
We pick Bakrieland for four reasons: 1) lower governance risk with an independent private equity firm as a majority shareholder; 2) lower mortgage rates which will likely boost its residential sales; 3) the completion of its toll road project; and 4) potential deregulation allowing foreigners to buy strata-title apartments post elections. Its balance sheet is strong with gearing of only 4%.
Media Nusantara Citra
Our last consumption selection is Media Nusantara Citra because of: 1) attractive low penetration of ad spend; 2) the ability of the company to regain the number one position in market share in 2009; and 3) valuation of 7x 2010E PE for a company that controls 30% of the TV ad spend share in Indonesia. A significant shareholder has also increased its stake in the company in recent years.
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