Analyst Wilianto attended an analyst meeting and came away positive. Last year’s weak link – vehicles (car and motorcycle) have staged a strong come back and is contributing more than half of the company’s profit in 1Q2010.
Indeed, part of the strong performance in this division is a stronger Rupiah but also because Astra is now shifting its focus on profitability (and not defending market share at all cost) - profitability of motorcycles have recovered nicely from Rp900k per unit in 2009 to Rp1.27m in 1Q2010.
The looming issue is the pending increase in car registration tax from 10% to potentially 20%. Regional governments has the authority to decide on the issue and is likely to approve the hike as 60% of the tax income in Jakarta is auto related (2W+4W). Astra points out that when this tax was applied in Vietnam sales volume dropped by 30%. However, underlying demand here in Indonesia remains very strong and we would expect a recovery in sales after 3-4 months of additional tax implementation. Also, note that Jakarta and Surabaya (East Java) contributes about 43% of total car sales.
Astra, the mini Indonesia has done a great job in stabilizing and maintaining ROE at around 28%. The company has become a proxy for the market as it offers investors exposure to commodities (plantation + coal mining), banks, finance and consumers (motorcycle, cars). This name is in great position to benefit when Indonesia is upgraded to investment grade.
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