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Indonesia Industry Focus

Indonesia Cement Sector


Refer to important disclosures at the end of this report

ed-TH / sa- MA

Indocement
Semen Indonesia

Mkt Cap Target Price Performance (%)


3 mth 12 mth
US$m
Rp

20,000
10,250

5,545
4,579

14,500
8,200

Rating

(2.1) (16.8) FULLY VALUED


(7.0) (31.1) FULLY VALUED

Source: DBS Vickers, AllianceDBS Research


Indocement Tunggal P. : Indocement was established in 1975. The
expanded heavily in the 90s, prior to Heidelberg Cement Group
becoming the majority shareholder in 2001. The company trades
cement product under Tiga Roda brand.
Semen Indonesia : Semen Gresik was established in 1957 as stateowned cement producer before changing its brand name to Semen
Indonesia recently. In 1995 the company completed an acquisition of
Semen Padang and Semen Tonasa. It is currently the largest player in
the market with more than 40% market share.

Domestic cement demand trend


80

m tonnes
6% CAGR

70
60
8% CAGR

50
5% CAGR
40
30
20
10

2017F

2015

2016F

2014

2013

Slight tweak in earnings as we rolled earnings forward,


maintain negative view on incumbents. We revised our
FY16/17F earnings for INTP and SMGR between (-)2.9% and
2% to reflect the cement sales volume achievement in FY15.
Our estimates are still one of the lowest in the street. Our
target prices are pegged to (-)1SD of respective 10-year mean
forward PE (similar to 2004 levels when industry utilisation was
low), implying another 20-28% downside as de-rating may
continue due to shifts in competitive landscape and legitimate
threat from new entrants. We prefer exposure to SMGR as
compared to INTP for its market leader position in important
markets and its more diversified presence spread throughout
the Indonesian islands. Upside risk to our calls may come from
significant delays in new players greenfield cement plants as
this reduce competition and lift utilisation rates.

Rp

2012

... and put pressure on price and subsequently margins.


Low utilisation rate, continued shifts to bulk segment (with
lower ASP) and government's direction to push efficient
infrastructure development (i.e. with lower cost) will put
pressure on ASP and subsequently erode cement producers
margins going forward.

Price

2011

Flurry of new capacities to drop utilisation rate further...


An additional 19.3m tonnes of new installed capacity is
expected to come on stream by the end of 2017, with
aggressive growth from foreign new entrants (hence, by 2017,
they will represent 12% of total industry capacity, from the
current 6%). Considering the supply-demand imbalance, the
industry's design capacity utilisation rate will continue to drop
to 67% in 2017 (similar level to 2004).

STOCKS

2010

Maintain FULLY VALUED calls for both INTP and SMGR


Moderate growth in demand, driven by bulk segment.
Cement demand momentum started to pick up in 4Q15
(driven by infrastructure development) after a stunted growth
in the first three quarters of last year. Overall, we estimated
cement volume to increase by 5.4%/6.6% to 63.8/67.8m
tonnes in FY16/17F. Growth accelaration in infrastructure
development and slower property pre-sales will push bulk
portion further to c.30% in 2017 (from current 23.7%).

2009

Pressure on ASP remains and will impact margins going


forward

2008

Tjen San Chong +603 2604 3972


tjensan@alliancedbs.com

2007

Burgeoning capacity continues to create supply-demand


imbalance

2006

Analyst
Edward Ariadi Tanuwijaya +6221 3003 4932
edward.tanuwijaya@id.dbsvickers.com

2005

Bulk segment remains as palpable growth driver for


domestic cement demand

2004

JCI : 4,779.99

2003

Challenges for wily veterans to


cement their grip

2 Mar 2016

2002

DBS Group Research . Equity

Source: Indonesia Cement Association (ASI), DBS Vickers, AllianceDBS


Research

Industry Focus
Indonesia Cement Sector

Encouraging momentum on demand


Jan cement sales volume grew 4.4% y-o-y (on apple-to-apple
basis after excluding sales volume from Semen Jawa, a new
member of Indonesia Cement Association [ASI]) to 5.05m
tonnes. Semen Jawa's cement sales made up 1.8% of total
domestic demand.

Property pre-sales to recover moderately (not a surge)


45,000

Rpbn

plateauing

40,000
35,000
30,000
25,000
20,000

Cement demand has started to pick up in 4Q last year (as


shown in chart below), after stunted growth in the early part of
last year. It is mostly driven by infrastructure development and
hence the apparent shift towards bulk segment.

15,000
10,000
5,000
2009 2010 2011 2012 2013 2014 2015 2016F2017F

Quarterly domestic cement demand


25%
20%

16,000
15%
10%
5%

12,000
0%

10,000
4Q15

3Q15

2Q15

1Q15

4Q14

3Q14

2Q14

1Q14

4Q13

3Q13

2Q13

1Q13

4Q12

3Q12

2Q12

1Q12

4Q11

3Q11

2Q11

1Q11

-5%

Share of Bulk and Bag cement sales in Indonesia


100%

Source: Indonesia Cement Association (ASI), DBS Vickers, AllianceDBS


Research

Overall, we estimate that domestic cement demand will grow


5.4%/6.6% to 63.6m/67.8m tonnes in FY16/17F. Growth
acceleration in infrastructure development, coupled with slower
property pre-sales growth (as discussed in detail in our latest
Indonesia property and industrial estate sector report on 5 Jan
2016 titled On the mend after a major setback, despite potential
booster from the government's much heralded one million
house programme), will boost bulk segment demand.

90%

19%

20%

21%

22%

24%

27%

29%

79%

78%

76%

73%

71%

2017F

11,000

2016F

13,000

2015

14,000

2014

15,000

We forecast bulk segment to grow at a 17.2% CAGR between


2015-2017F, while forecasting just 2.2% CAGR for the same
period for the bag segment. Therefore, this pushes bulk portion
to even higher at c.30% in 2017. The long-term multiplier effect
from the much heralded infrastructure development to property
pre-sales will remain as a key positive catalyst, but not in the
near term.

80%
70%
60%
50%
40%

81%

80%

30%
20%
10%
0%

2013

17,000

Source: Property developers under our coverage, DBS Vickers,


AllianceDBS Research

2012

Cement sales (LHS)


Growth y-o-y (RHS)

2011

18,000 '000 tonnes

Bag

Bulk

Source: Indonesia Cement Association (ASI), DBS Vickers, AllianceDBS


Research

Infrastructure spending as % of GDP


700

Rp tr

Infrastructure Investment (LHS)

% of GDP (RHS)

5.5%

Annual cement demand growth


80

600
5.0%

m tonnes

Bag

Bulk

6% CAGR
(overall)

70

500
4.5%

400

50

300

4.0%

200

40

10.8

12.4

13.1

14.3

17.2

19.7

17.2% CAGR
(for bulk)

8.9
6.6

30
3.5%

100
0

3.0%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015F

Source: Ministry of Finance (state budget data), DBS Vickers,


AllianceDBS Research

Page 2

60

20

34.2

39.1

44.1

45.6

46.8

46.1

46.5

48.2

2.2% CAGR
(for bag)

10
0
2010

2011

2012

2013

2014

2015

2016F

2017F

Source: Indonesia Cement Association (ASI), DBS Vickers, AllianceDBS


Research

Industry Focus
Indonesia Cement Sector

Sumatra (representing 21.6% of domestic demand) and


Sulawesi and other areas in East Indonesia (representing 15.9%
of domestic demand) were the cement demand growth drivers
that offset stunted growth in the most lucrative market Java
(representing 55.7% of domestic demand) and declining
demand in Kalimantan (representing 6.7% of domestic
demand).
Demand distribution by region
Java

Sumatra

Kalimantan

Sulawesi

Others

100%
90%

6.0%
5.2%

6.1%
5.8%

6.8%

7.9%

6.8%

7.3%

7.5%

7.4%

7.6%

7.9%

6.4%

6.4%

6.4%

7.0%

7.4%

7.6%

7.6%

6.7%

23.6%

23.4%

23.2%

24.3%

23.0%

21.8%

21.0%

20.9%

21.6%

57.7%

55.7%

55.1%

53.8%

55.3%

55.3%

56.4%

56.3%

55.7%

80%
70%

22.0%

60%
50%
40%
30%

60.3%

20%

Flurry of new capacities to continue


Our checks suggest an additional 19.3m tonnes of new installed
capacity (about 24% of installed capacity on 2015) will come on
stream in 2016 and 2017. The big 3 producers which
represents 84% of total capacities, will add only 9% of their
2015 capacities in this time frame. The foreign new entrants
(most of them are deep pocketed with strong financial
positions) are very aggressive and are expected to almost triple
their cumulative installed capacities within the same period (i.e.
they will represent 12% of total industry capacities in 2017, up
from the current 6%).
Those additional capacities will result in some areas demand
(such as South Sumatra) being better served, but most of the
key markets will experience oversupply.
Cement producers installed capacities

10%

80

0%
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Source: Indonesia Cement Association (ASI), DBS Vickers, AllianceDBS


Research

We believe that Sumatra will continue to be the growth driver


for cement demand by having around 365km of in-progress toll
road projects (i.e. Palembang Indralaya, Medan Binjai,
Medan Kualanamu, Pekanbaru Dumai and Bakauheni
Terbanggi Besar), more infrastructure projects in Palembang,
South Sumatra (as this city is chosen as the host for Asian
Games 2018 together with Jakarta) and the government's
commitment to develop Tanjung Api-Api Special Economic Zone
(SEZ).
Java will remain as the most lucrative market given its sheer
demand size at 56% of total domestic demand. After
experiencing no growth last year, we believe that cement
demand in Java will grow moderately to 4% this year.

"Big 3"
Other local

50

Foreign

40
30
20

+68%

10
2.6x
2015

2017F

Source: Companies, DBS Vickers, AllianceDBS Research.


Note: Big 3: SMGR, INTP and SMCB (including LaFarge facilities in
Aceh)

% of total capacities
100%
90%
80%

Historical & expected demand growth per region

30%

6%
10%

11%

12%

12%

13%

77%

74%

70%
60%
50%
40%

84%

20%

-10.6%
-5.0%
0.0%

2015

2016F

2017F

4.0%
5.0%

2015
"Big 3"

4.5%

Sumatra

9.0%
10.0%

9.0%
9.0%
5.7%

Sulawesi

2016F
Other local

2017F
Foreign

Source: Companies, DBS Vickers, AllianceDBS Research


Note: Big 3: SMGR, INTP and SMCB (including LaFarge facilities in
Aceh)

5.1%

Others

10%
0%

-0.2%

Java

-15.0%

+9%

60

Given no sudden up-reversal on commodity-related businesses,


which are the backbone of Kalimantans economy, we believe
that cement demand in Kalimantan will continue declining this
year.

Kalimantan

m tonnes

70

10.0%
10.0%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

Source: Indonesia Cement Association (ASI), DBS Vickers, AllianceDBS


Research

Page 3

Industry Focus
Indonesia Cement Sector

Low utilisation puts pressure on price increase and


margins
Given the supply-demand imbalance, the industry's effective
utilisation (without adjusting for 1-month maintenance period)
will continue to drop to 67% in 2017, similar to 2004 levels. As
competition continues to heat up (especially the threat from
new entrants), the low utilisation rate will further put a cap on
the ability of cement producers to increase ASP. Pricing
behaviour of new entrants has always been fluid and disruptive,
however the price gap has been narrowing.

EBITDA margins vs utilisation rate


110%

45%

105%
100%

40%

95%
90%

35%

85%
80%

30%

75%

Capacity utilisation rate (LHS)

70%

INTP's EBITDA margin (RHS)

65%

SMGR's EBITDA margin (RHS)

25%

Expected cash cost breakdown in FY16F


Coal/fuel

Electricity

Distribution, transportation and handling

Direct labor

100%
90%
80%

38.1%

44.3%

60%

7.4%
7.7%

50%
40%

23.4%

30%
20%
10%

16.4%

15.3%

13.5%

15.7%

18.0%

SMGR

INTP

0%

Energy prices & USD/IDR trend


Electricity tariff - I4 (LHS)

Coal (LHS)

ICP (RHS)

USD/IDR (RHS)
140

120

130

115

120

110

110
100

105

90

100

80
70

95

60

90
Jan-16

Feb-16

Dec-15

Nov-15

Oct-15

Sep-15

Jul-15

Aug-15

Jun-15

May-15

Apr-15

Mar-15

Jan-15

Feb-15

50

Source: State-owned electricity company (PLN), Ministry of Energy and


Mineral Resources (ESDM), Bloomberg Finance L.P., DBS Vickers,
AllianceDBS Research
Note: The indexing used Jan 2015 price as 100

Page 4

2017F

Source: Bloomberg Finance L.P., DBS Vickers, AllianceDBS Research

70%

Given this situation, cost efficiency (and cutting) is the name of


the game for incumbent cement producers. Continuously low
oil and coal prices, reasonable hike in electricity tariff and stable
IDR (so far) have helped cement producers to defend their
eroding but still attractive margins.

2016F

2014

2015F

2013

2012

2011

2010

2009

2008

2007

2006

2005

In addition, there are two extra factors that will contribute to


put pressure on ASP: 1) continued shifts to bulk segment (with
lower ASP) along with the industrys direction, and 2) the fact
that infrastructure developments are being pushed aggresively
(funded by state-owned companies) and state-owned cement
producer SMGR being the market leader in important regions,
pricing downward pressure is inevitable and will subsequently
affect other producers.

20%

2004

60%

Source: DBS Vickers, AllianceDBS Research

Others

Industry Focus
Indonesia Cement Sector

Maintain negative view on incumbents, rolled earnings


forward
We revised up slightly FY16/17F domestic sales volume for
SMGR by 3.1%/2.5% considering the sales volume achievement
in FY15, expected recovery in Indonesia's economy ahead
(potential boost from infrastructure projects) and the intense
competition in major regions. These changes led us to revise up
SMGRs revenue by 4.3%/3.8% in FY16/17F.
Meanwhile, we tweaked the sales volume on INTP by -1.9%/3.6% for FY16/17F with the expectation of further pressure
from competition in West Java area. These changes led us to
revise down INTPs revenue by 4.5%/6.0% in FY16/17F.
Margins were slightly adjusted for continuously low commodity
prices (pushing down cement producers cost) and the more
stable IDR offsetting cement producers need to flush down
inventory and maintain/gain market share. All in, we revised our
FY16/FY17F earnings for INTP and SMGR by (-)2.9% to 2%. Our
estimates are still the lowest in the street, reflecting our negative
stance on the cement sector.

Subsequently, we adjusted our target prices by 1% for INTP (to


Rp14,500) and 5% for SMGR (to Rp8,200), pegged to -1SD of
mean PE forward. Our target prices imply another 20-28%
downside and therefore we maintain our FULLY VALUED calls
on both counters.
At the current multiple, there is no significant gaps between
SMGR and INTP. Between the two, we prefer exposure to SMGR
for its market leader position (through its three established
brands) in the important markets; Java (Semen Gresik has
36.2% market share), Sumatra (Semen Padang has 43.6%
market share) and Sulawesi (Semen Tonasa has 63.4% market
share); and its more diversified presence spread throughout the
Indonesian islands (i.e. not just the Java island, which is the most
lucrative but having the stiffest competition going forward).
INTP currently trades at 16.5x FY16F PE (at its 10-year mean
forward PE) and 10.8x FY16F EV/EBITDA. SMGR currently trades
at 13.2x FY16F PE (at its 10-year mean forward PE) and 8.3x
FY16F EV/EBITDA. Both have tested the trough valuations
sometime in 3Q15 and rebounded sharply to current levels.

Summary of assumptions changes

Domestic volume
('000 tonnes)

Now
Prev

Chg (%)
Revenue
in Rpbn
GP margin
EBITDA margin
Operational profit
in Rpbn
Net profit
in Rpbn
TP
in Rp/sh

Now
Prev

INTP
FY16F
17,275
17,614

FY17F
18,052
18,732

0.3%

-1.9%

-3.6%

18,157
18,573

19,364
20,286

21,026
22,375

Chg (%)

-2.2%

-4.5%

-6.0%

Now
Prev
Now
Prev
Now
Prev

44.0%
44.6%
31.9%
32.0%
4,906
5,030

43.7%
44.2%
31.5%
31.1%
5,142
5,310

43.1%
43.7%
30.8%
30.1%
5,450
5,636

Chg (%)

-2.5%

-3.2%

-3.3%

Now
Prev
Chg (%)
Now
Prev

4,385
4,481

4,455
4,590

4,705
4,796

-2.9%

-1.9%

Chg (%)
Recommendation

FY15F
16,784
16,742

Now
Prev

-2.1%

14,500
14,600
-1%
FULLY VALUED
FULLY VALUED

FY15A
25,969

SMGR
FY16F
27,274
26,464

FY17F
29,034
28,330

3.1%

2.5%

26,948

29,066
27,877

31,761
30,603

4.3%

3.8%

39.5%

38.8%
39.0%
25.8%
25.5%
6,032
5,806

37.9%
38.5%
24.6%
25.0%
6,223
6,232

27.6%
5,899

4,521

3.9%

-0.1%

4,621
4,530

4,770
4,880

2.0%

-2.3%

8,200
7,800
5%
FULLY VALUED
FULLY VALUED

Source: DBS Vickers, AllianceDBS Research

Page 5

Industry Focus
Indonesia Cement Sector

INTP PE Band

INTP EV/EBITDA Band

39.0

18.0

34.0

16.0

29.0

+2SD, 27.4

24.0

+1SD, 22.2

19.0

Ave, 17.0

14.0

-1SD, 11.8

9.0

14.0

+2SD, 14.2

12.0

+1SD, 12.1

10.0

Ave, 10.0

8.0

-1SD, 7.9

6.0

-2SD, 5.8

-2SD, 6.5
4.0
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16

Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16

4.0

Source: Bloomberg Finance L.P, DBS Vickers, AllianceDBS Research

Source: Bloomberg Finance L.P, DBS Vickers, AllianceDBS Research

SMGR PE Band

SMGR EV/EBITDA Band


16.0

25.0

14.0
20.0

+2SD, 19.8
+1SD, 16.6

15.0

Ave, 13.4
-1SD, 10.2

10.0

-2SD, 7.0
5.0

+2SD, 13.6

12.0

+1SD, 11.0

10.0
8.0

Ave, 8.5

6.0

-1SD, 6.0

4.0

-2SD, 3.5

2.0
-

Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16

Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
Jul-07
Jan-08
Jul-08
Jan-09
Jul-09
Jan-10
Jul-10
Jan-11
Jul-11
Jan-12
Jul-12
Jan-13
Jul-13
Jan-14
Jul-14
Jan-15
Jul-15
Jan-16

Source: Bloomberg Finance L.P, DBS Vickers, AllianceDBS Research

Source: Bloomberg Finance L.P, DBS Vickers, AllianceDBS Research

JCI Index PE Band

Days of receivables and inventory trending up

(x)

85
49

20.0

+2 stdev

+1 stdev
16.0
Average

14.0
12.0

-1 stdev

70

43
41

65

39

60

37

55

35

50
2010

Jan-12

Jan-13

Jan-14

Jan-15

Jan-16

Source: Bloomberg Finance L.P, DBS Vickers, AllianceDBS Research

Page 6

75

45

18.0

10.0
Jan-11

80

47

2011

2012

2013

2014

2015

SMGR - Days of Receivables (LHS)

INTP - Days of Receivables (LHS)

SMGR - Inventory days (RHS)

INTP - Inventory days (RHS)

Source: Bloomberg Finance L.P, DBS Vickers, AllianceDBS Research

Industry Focus
Indonesia Cement Sector

APPENDIX
Indonesia cement producers: Demand, supply and utilisation rate dynamics
100,000

100%

'000 tonnes
Demand (000 tons) - LHS
Design capacity (000 tons) - LHS
Utilization rate - RHS

96%

90%
80%

80,000
67% 70%
67%
60%

60,000

50%

No additional capacity until 2009


Demand growth in-line with GDP growth

40%

40,000

30%
20%

20,000

10%
0%

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015 2016F 2017F

Source: Cement producers, Indonesia Cement Association (ASI), DBS Vickers, DBS Vickers, AllianceDBS Research
Note: Utilisation rate is based on design capacities (without considering cement plant maintenance period).

Cement regional peers valuation


Company
Semen Indonesia
Indocement Tunggal
Holcim Indonesia *

Ticker

Price

Code

(lcl currency)

Market Cap
(USD m)

SMGR IJ

10,250

4,548.0

13.2

12.7

INTP IJ

20,025

5,514.4

16.5

15.7

SMCB IJ

935

536.0

19.9

15.5

15.3
11,191.7

8.7

Weighted average Indonesia


Anhui Conch Cement

914 HK

15

PE (x)
FY16

EV/EBITDA (x)
FY17

FY16

EBITDA margin (%)

ROE

FY17

FY16

FY17

FY15

8.3

7.8

25.8%

24.6%

17.9%

10.8

10.2

31.5%

30.8%

17.9%

8.0

7.4

15.6%

15.5%

1.3%

14.4

9.6

9.0

28.2%

27.4%

17.1%

7.4

5.5

4.9

26.4%

27.6%

11.5%

Asia Cement (China) Hldgs *

743 HK

316.4

nm

nm

1.3

1.4

19.4%

14.7%

nm

China National Building Material

3323 HK

2,389.1

8.9

8.8

11.9

11.1

18.9%

19.3%

3.5%

China Shanshui Cement

691 HK

2,734.1

nm

nm

21.4

16.0

12.3%

14.9%

nm

West China Cement *

2233 HK

1,136.6

20.5

11.8

7.5

5.9

30.0%

35.2%

1.3%

CR Cement *

1313 HK

1,621.9

Weighted average China


Siam Cement
Weighted average Thailand

SCC TB

442

14,884.2

6.6

6.0

6.0

5.7

17.6%

17.5%

6.3%

7.9

6.6

8.6

7.3

22.9%

24.2%

7.7%

11.7

11.2

9.6

9.1

16.4%

16.4%

20.4%

11.7

11.2

9.6

9.1

16.4%

16.4%

20.4%

Source: Bloomberg Finance L.P, DBS Vickers, AllianceDBS Research


Note: (*): not under our coverage, estimates are based on Bloomberg Finance L.P. consensus numbers
Price and valuation is as of 29Feb2016

Page 7

Industry Focus
Indonesia Cement Sector

Indonesia cement producers: Historical and estimated additional design capacities


Company

Location

2012

2013

2014

2015F

2016F

2017F

East Java

11,600

14,000

14,400

14,400

14,400

14,400

3,000

3,000

West Sumatra

6,330

6,400

7,300

7,300

10,300

10,300

South Sulawesi

4,620

7,300

7,800

8,300

8,300

8,300

22,550

27,700

29,500

30,000

36,000

36,000

West Java

16,000

16,000

17,900

22,300

22,300

22,300

South Kalimantan

2,600

2,600

2,600

2,600

2,600

2,600

18,600

18,600

20,500

24,900

24,900

24,900

West Java

5,600

5,600

5,600

5,600

5,600

5,600

Central Java

3,500

3,500

3,500

3,500

3,500

3,500

1,700

3,400

3,400

3,400

9,100

9,100

10,800

12,500

12,500

12,500

South Sulawesi

2,300

2,300

4,000

4,000

4,000

4,000

Riau

Central Java
Semen Indonesia
(SMGR IJ)

Indocement (INTP IJ)

Holcim Indonesia
(SMCB IJ)

Bosowa

Central Java

East Java

1,200

1,200

1,200

1,200

1,200

1,200

East Java

1,100

1,100

Papua

750

750

3,500

3,500

5,200

5,200

7,050

7,050

Semen Baturaja (SMBR IJ)

South Sumatra

1,250

2,000

2,000

2,000

2,000

3,850

Andalas (Lafarge)

Aceh

1,600

1,600

1,600

1,600

1,600

1,600

Kupang

NTT

550

550

550

550

550

550

South Kalimantan

1,500

1,500

1,500

1,500

West Java

2,000

2,000

Others

1,500

1,500

3,500

3,500

Anhui Conch

Siam Cement

West Java

1,800

1,800

Semen Merah Putih (Wilmar)

Banten

750

1,750

4,250

5,750

Panasia

Central Java

1,500

1,500

Puger

East Java

300

300

600

Jui Shin

West Java

Total

1,500

1,500

1,500

57,150

63,050

72,400

81,800

97,450

101,100

Source: Cement producers, Indonesia Cement Association (ASI), DBS Vickers, AllianceDBS Research

Page 8

Industry Focus
Indonesia Cement Sector

Industry Focus
Indonesia Cement Sector

Cement producer competition heat map

Source: Cement producers, Indonesia Cement Association (ASI), DBS Vickers, AllianceDBS Research
Note:
1. Utilisation rate is based on design capacities (without considering cement plant maintenance period).
2. Red circle: intense competition (oversupply), Orange: moderate competition (adequate supply), Green: light competition (incumbents have the upper hand).

Page 9

Industry Focus
Focus
Industry
Indonesia
Indonesia Cement
Cement Sector
Sector

Cement producer production facility location

Source: Cement producers, DBS Vickers, AllianceDBS Research

Page 10

Industry Focus
Indonesia Cement Sector

Company Guides

Page 11

Indonesia Company Guide

Indocement Tunggal P.
Version 2

Refer to important disclosures at the end of this report

| Bloomberg: INTP IJ | Reuters: INTP.JK

DBS Group Research . Equity

2 Mar 2016

FULLY VALUED

Regaining composure

Last Traded Price: Rp20,000 (JCI : 4,779.99)


Price Target : Rp14,500 (28% downside) (Prev Rp14,600)
Potential Catalyst: Rebound in property presales and better execution
from nationwide infrastructure development
Where we differ: Having one of the lowest estimates in the street
Analyst
Edward Ariadi Tanuwijaya +6221 3003 4932
edward.tanuwijaya@id.dbsvickers.com
Tjen San Chong +603 2604 3972
tjensan@alliancedbs.com

Price Relative
Rp

Relative Index
219

28,580.0

199

26,580.0

179

24,580.0
22,580.0

159

20,580.0

139

18,580.0

119
99

16,580.0
14,580.0
Mar-12

Mar-13

Mar-14

Indocement Tunggal P. (LHS)

Forecasts and Valuation


FY Dec (Rpbn)
Revenue
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
Net Pft Gth (Pre-ex) (%)
EPS (Rp)
EPS Pre Ex. (Rp)
EPS Gth Pre Ex (%)
Diluted EPS (Rp)
Net DPS (Rp)
BV Per Share (Rp)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)

Mar-15

79
Mar-16

Relative JCI INDEX (RHS)

2014A
19,996
6,732
6,790
5,271
5,271
5.2
1,432
1,432
5
1,432
1,350
6,733
14.0
14.0
13.8
9.3
6.7
3.0
CASH
22.1

Earnings Rev (%):


Consensus EPS (Rp):
Other Broker Recs:

2015F
18,157
5,795
5,695
4,385
4,385
(16.8)
1,191
1,191
(17)
1,191
834
6,574
16.8
16.8
13.4
11.3
4.2
3.0
CASH
17.9

2016F
19,364
6,091
5,786
4,455
4,455
1.6
1,210
1,210
2
1,210
847
6,951
16.5
16.5
13.9
10.8
4.2
2.9
CASH
17.9

2017F
21,026
6,480
6,110
4,705
4,705
5.6
1,278
1,278
6
1,278
895
7,382
15.6
15.6
13.2
10.2
4.5
2.7
CASH
17.8

(2)
1,248
B: 13

(3)
1,305
S: 7

(2)
1,431
H: 13

Source of all data: Company, DBS Vickers, AllianceDBS Research,


Bloomberg Finance L.P

ASIAN INSIGHTS
ed: TH / sa: MA

Maintain FULLY VALUED call. We cut FY16/17F domestic sales


volumes by 1.9%/3.6% after adjusting for FY15 achievement.
This, coupled with expected higher portion of bulk segment,
reduced our revenue estimate by 4.5%/6% in FY16/17F.
Slight adjustment in margins considering continuously low
commodity prices and the more stable IDR. All in, we revised
FY16/17F earnings by 2.9%/1.9%. Our current estimates are
one of the lowest in the street.
Expect positive volume growth after weak FY15. INTP hopes
for better growth this year as there are many projects being
kicked-off in Bandung (West Java) and Central Java. The early
signs have been good as INTPs Jan-16 cement sales grew
3.7% y-o-y to 1.46m tonnes (below industry volume growth of
4.4%). INTPs main market Java posted 5.7% growth y-o-y (an
early imporvement after 7.7% y-o-y decline in FY15). Java
accounts for 70% of INTPs domestic cement sales volume.
Intense competition in Western Java to erode margins. We
estimate that 76% of the planned incoming capacity in 20152017 will be located in West Java. We expect new players to
sacrifice margins to gain market share as they ramp up
utilisation rates. Therefore, our EBITDA margins will trend
down for the next two years. INTP still commands the highest
EBITDA margins in the sector.
Valuation:
Our target price of Rp14,500 is pegged to 12x FY16F EPS, at ()1SD of 10-year mean forward PE (similar to 2004 levels when
utilisation rates were low).
Key Risks to Our View:
Significant delays in new players greenfield cement plants.
This would reduce competition in INTPs strongholds, reduce
the severity of competition from new players (better pricing
power for incumbents), and lift utilisation rates.
Recovery in property presales. We expect property presales to
recover moderately going forward after a 3- to 4-year boom
(2010-2013). But a sharp recovery in property presales would
pose an upside risk to our cement volume sales assumptions.
The property sector remains the major cement consumer in
Indonesia.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (Rpbn/US$m)
Major Shareholders (%)
HC Indocement Gmbr
Mekar Perkasa
Free Float (%)
3m Avg. Daily Val (US$m)
ICB Industry : Industrials / Construction & Materials

3,681
73,625 / 5,545
64.1
13.0
22.9
3.9

VICKERS SECURITIES

Company Guide
Indocement Tunggal P.
Domestic Sales Vol ('000 tones)

CRITICAL DATA POINTS TO WATCH

17,642

18,189

2013A

2014A

16,784

17,275

2015F

2016F

18,052

16,100

Earnings Drivers:
Domestic cement volume driving top line growth. We forecast
industry demand to grow modestly (in line with Indonesias real
GDP growth) for the next three years as the country is entering
a normal growth state. As the 2nd largest cement producer in
the country, INTP should experience similar growth. In addition,
we expect INTP to lose market share to new foreign players. We
forecast INTPs sales volume to grow by a 5.7% CAGR over
2015-2017F, a recovery after a weak 2015.

13,800
11,500
9,200
6,900
4,600
2,300
0

Domestic ASP/tonne (in Rp)


958,265

Limited price upside because of competition. We do not expect


cement prices to rise significantly going forward as incumbent
players (including INTP) would be forced to defend their market
share from new players, which are willing to sacrifice margins to
grab market share. The skewed supply-demand imbalance will
also see the utilisation rate of incumbent players remaining low.
We forecast a modest 3% CAGR in ASP/tonne between 2015
and 2017F.
Shift to bulk segment will pressure margins. Accelerating rollout
of infrastructure projects from next year onwards and a
stagnant property market should see cement players (including
INTP) experience stronger growth in the bulk segment than the
more profitable bag cement segment.

2017F

997,104

982,148

2014A

2015F

1,011,612 1,041,960

850,400
637,800
425,200
212,600
0
2013A

2016F

2017F

EBITDA margin (%)


37.0

36.3
33.7

31.9

31.5

30.8

2015F

2016F

2017F

29.6
22.2
14.8

Cost savings from efficiency and continuously low commodity


prices help to alleviate more margin pressure. The benefits of
lower coal and oil prices and the more stable IDR against the
USD help to push down cash cost components. Approximately
45% of INTPs cash cost is for energy, while c.70% of its COGS
is transacted in USD. This should prevent EBITDA margins from
falling further (see chart). We expect INTPs cash cost per tonne
to increase by 4.6% CAGR.

7.4
0.0
2013A

2014A

Revenue trend
Rp bn

10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
-10.0%

20,000
15,000

Low capacity utilisation rate will cap SG&A expenses (as % of


revenue). With the additional 4.4m capacity which came on
stream in 2015, we expect INTPs utilisation rate to drop from
93% in 2014 to 73% in 2017F. In that period, SG&A expenses
are expected to stay at 17-17.5% of revenue (vs 16% average
in the past decade).

10,000
5,000
0
2013A

2014A

Total Revenue

2015F

2016F

2017F

Revenue Growth (%) (YoY)

Market share trend in domestic market


33%
32%
31%
30%
29%
28%
27%
26%
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015 FY16F FY17F

Source: Company, DBS Vickers, AllianceDBS Research

ASIAN INSIGHTS

VICKERS SECURITIES
Page 13

Company Guide
Indocement Tunggal P.

Balance Sheet:
Strong balance sheet for future expansion. INTPs balance sheet
has been impeccable with near-zero interest-bearing debt since
2008. Strong operational cash flow generation and an
abundant cash position will allow INTP to self-finance its future
capex.

Leverage & Asset Turnover (x)


0.8
0.14

0.8
0.8

0.12

0.7

0.10

0.7
0.08

0.7
0.7

0.06

0.7

0.04

0.6

Share Price Drivers:


Positive progress in nationwide infrastructure development.
Good progress and faster infrastructure budget absorption
should imply better cement demand and improvement in INTPs
utilisation rate and subsequently its profitability.
Cement sales. Monthly cement sales data released by the
Indonesia Cement Association (ASI) is a leading indicator of
INTPs stock price direction.

0.02

0.6
0.6

0.00
2013A

2014A

2015F

2016F

Gross Debt to Equity (LHS)

2017F

Asset Turnover (RHS)

Capital Expenditure
Rp
4,000.0
3,500.0
3,000.0
2,500.0
2,000.0
1,500.0

High dividend yield. We expect INTP to continue paying high


dividends, possibly offering c.5% yield annually.

1,000.0
500.0
0.0
2013A

Key Risks:
Further price control by government. The new government
surprised the market in early 2015 by instructing state-owned
cement producers to cut cement price by 4-5% per bag. Given
the competitive market, other producers had to follow suit or
risked losing their market share. Further price regulation by the
government will negatively affect cement producers
profitability.
Much heralded infrastructure projects' slower-than-expected
rollouts. Despite the gallant effort from the government to
speed up the process, infrastructure development realisation
has been slower than the street's lofty expectations. Slower
execution will directly affect cement demand growth and
subsequently negatively affect INTPs utilisation and
profitability.

2014A

2015F

2016F

ROE (%)
20.0%

15.0%

10.0%

5.0%

0.0%
2013A

2014A

2015F

2016F

Company Background
Indocement (INTP) is the most profitable cement producer
(highest margins) in the sector. It sells cement under the Tiga
Roda brand, arguably the most popular brand in Indonesia.
Its sales volume is concentrated in Java (over 72%). The
company registers higher margins because of its centralised
production facilities and premium pricing, and a profitable
Ready Mix Cement (RMC) business.

2017F

Forward PE Band (x)


(x)
23.0
21.0

+2sd:20.6x

19.0

Competition intensifies in Java. INTPs dominance in Java


(particularly West Java) could be under threat once the new
players start production. Its market leader status in Java has
been snatched by Semen Indonesia (SMGR IJ) since 2014.

2017F

Capital Expenditure (-)

+1sd:18.6x

17.0

Avg:16.5x

15.0

1sd:14.4x

13.0

2sd:12.4x

11.0
Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

PB Band (x)
(x)
5.2
4.7

+2sd:4.53x

4.2

+1sd:4.07x

3.7

Avg:3.61x

3.2

1sd:3.15x

2.7

2sd:2.69x

2.2
Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

Source: Company, DBS Vickers, AllianceDBS Research

ASIAN INSIGHTS
Page 14

VICKERS SECURITIES

Company Guide
Indocement Tunggal P.

Key Assumptions
FY Dec
Domestic Sales Vol ('000 tones)
Domestic ASP/tonne (in Rp)
EBITDA margin (%)

Segmental Breakdown
FY Dec
Revenues (Rpbn)
Cement
Ready Mix Concrete
Aggregates
Other Businesses
Total
Operating profit (Rpbn)
Cement
Ready Mix Concrete
Aggregates
Other Businesses
Total
Operating profit Margins
Cement
Ready Mix Concrete
Aggregates
Other Businesses
Total
Income Statement (Rpbn)
FY Dec
Revenue
Cost of Goods Sold
Gross Profit
Other Opng (Exp)/Inc
Operating Profit
Other Non Opg (Exp)/Inc
Associates & JV Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Pre-tax Profit
Tax
Minority Interest
Preference Dividend
Net Profit
Net Profit before Except.
EBITDA
Growth
Revenue Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (Pre-ex) (%)
Margins & Ratio
Gross Margins (%)
Opg Profit Margin (%)
Net Profit Margin (%)
ROAE (%)
ROA (%)
ROCE (%)
Div Payout Ratio (%)
Net Interest Cover (x)

2013A

2014A

17,642
958,265
36.0

18,189
997,104
34.0

2015F

2016F

2017F

16,784
17,275
18,052
982,148 1,011,612 1,041,960
32.0
31.0
31.0

2013A

2014A

2015F

2016F

2017F

17,046
2,739
116
(1,209)

18,293
2,819
135
(1,251)

16,701
2,255
156
(955)

17,697
2,557
179
(1,069)

19,036
3,038
206
(1,253)

18,691

19,996

18,157

19,364

21,026

6,139
(86.0)
11.0
0.0

5,930
43.0
2.00
0.0

4,837
45.0
23.0
0.0

4,987
128
27.0
0.0

5,267
152
31.0
0.0

6,064

5,975

4,906

5,142

5,450

36.0
(3.1)
9.2
0.0

32.4
1.5
1.6
0.0

29.0
2.0
15.0
0.0

28.2
5.0
15.0
0.0

27.7
5.0
15.0
0.0

32.4

29.9

27.0

26.6

25.9

2013A

2014A

2015F

2016F

2017F

18,691
(10,037)
8,655
(2,680)
5,975
89.0
18.0
513
0.0
6,595
(1,583)
(2.0)
0.0
5,010
5,010
6,785

19,996
(10,910)
9,087
(3,233)
5,854
121
24.0
790
0.0
6,790
(1,516)
(3.0)
0.0
5,271
5,271
6,732

18,157
(10,160)
7,997
(3,092)
4,906
100
25.0
664
0.0
5,695
(1,310)
0.0
0.0
4,385
4,385
5,795

19,364
(10,897)
8,467
(3,326)
5,142
130
26.0
488
0.0
5,786
(1,331)
0.0
0.0
4,455
4,455
6,091

21,026
(11,954)
9,073
(3,623)
5,450
162
28.0
471
0.0
6,110
(1,405)
0.0
0.0
4,705
4,705
6,480

8.1
2.5
2.2
5.2

7.0
(0.8)
(2.0)
5.2

(9.2)
(13.9)
(16.2)
(16.8)

6.6
5.1
4.8
1.6

8.6
6.4
6.0
5.6

46.3
32.0
26.8
23.7
20.3
20.5
66.1
NM

45.4
29.3
26.4
22.1
19.0
18.4
94.3
NM

44.0
27.0
24.2
17.9
15.4
14.9
70.0
NM

43.7
26.6
23.0
17.9
15.4
15.4
70.0
NM

43.1
25.9
22.4
17.8
15.4
15.4
70.0
NM

Growing RMC business

Expect margins to
decline further as
competition intensifies

Source: Company, DBS Vickers, AllianceDBS Research

ASIAN INSIGHTS

VICKERS SECURITIES
Page 15

Company Guide
Indocement Tunggal P.

Quarterly / Interim Income Statement (Rpbn)


FY Dec
3Q2014
4Q2014
Revenue
Cost of Goods Sold
Gross Profit
Other Oper. (Exp)/Inc
Operating Profit
Other Non Opg (Exp)/Inc
Associates & JV Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Pre-tax Profit
Tax
Minority Interest
Net Profit
Net profit bef Except.
EBITDA

1Q2015

2Q2015

3Q2015

4,668
(2,524)
2,144
(786)
1,358
9.00
7.00
180
0.0
1,554
(348)
0.0
1,206
1,206
1,571

5,829
(3,090)
2,739
(944)
1,795
45.0
7.00
177
0.0
2,025
(470)
0.0
1,555
1,555
2,026

4,328
(2,400)
1,928
(695)
1,233
43.0
8.00
183
0.0
1,466
(320)
0.0
1,146
1,146
1,465

4,547
(2,481)
2,066
(782)
1,285
(14.0)
6.00
170
0.0
1,447
(337)
0.0
1,110
1,110
1,746

4,011
(2,253)
1,758
(629)
1,129
16.0
6.00
85.0
0.0
1,236
(273)
0.0
963
963
1,822

(6.6)
(6.7)
(7.0)
(12.6)

24.9
29.0
32.2
28.9

(25.8)
(27.7)
(31.3)
(26.3)

5.1
19.2
4.2
(3.2)

(11.8)
4.3
(12.1)
(13.2)

45.9
29.1
25.8

47.0
30.8
26.7

44.5
28.5
26.5

45.4
28.3
24.4

43.8
28.1
24.0

Balance Sheet (Rpbn)


FY Dec

2013A

2014A

2015F

2016F

2017F

Net Fixed Assets


Invts in Associates & JVs
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Other Current Assets
Total Assets

9,305
0.0
456
12,595
1,474
2,519
259
26,607

12,144
0.0
655
11,256
1,666
2,671
494
28,885

14,754
0.0
655
8,284
1,551
2,425
463
28,132

16,305
0.0
655
8,001
1,664
2,587
497
29,707

18,275
0.0
655
7,449
1,825
2,809
544
31,556

ST Debt
Creditor
Other Current Liab
LT Debt
Other LT Liabilities
Shareholders Equity
Minority Interests
Total Cap. & Liab.

0.0
1,375
1,365
93.0
797
22,947
30.0
26,607

0.0
1,695
1,565
76.0
764
24,785
0.0
28,885

0.0
1,592
1,499
76.0
764
24,202
0.0
28,132

0.0
1,709
1,571
76.0
764
25,588
0.0
29,707

0.0
1,870
1,672
76.0
764
27,174
0.0
31,556

Non-Cash Wkg. Capital


Net Cash/(Debt)
Debtors Turn (avg days)
Creditors Turn (avg days)
Inventory Turn (avg days)
Asset Turnover (x)
Current Ratio (x)
Quick Ratio (x)
Net Debt/Equity (X)
Net Debt/Equity ex MI (X)
Capex to Debt (%)
Z-Score (X)

1,511
12,502
48.6
53.5
58.2
0.8
6.1
5.5
CASH
CASH
2,161.0
14.7

1,570
11,180
47.4
55.9
57.1
0.7
4.9
4.3
CASH
CASH
4,476.9
13.2

1,349
8,208
51.2
64.7
63.3
0.6
4.1
3.5
CASH
CASH
4,602.1
13.3

1,467
7,925
47.2
60.5
59.0
0.7
3.9
3.2
CASH
CASH
3,287.2
12.5

1,635
7,373
46.8
59.8
58.3
0.7
3.6
2.9
CASH
CASH
3,944.6
11.7

Growth
Revenue Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (Pre-ex) (%)
Margins
Gross Margins (%)
Opg Profit Margins (%)
Net Profit Margins (%)

1Q is the seasonally weakest


quarter

Near-zero debt since


2008

Strong net cash


position

Source: Company, DBS Vickers, AllianceDBS Research

ASIAN INSIGHTS
Page 16

VICKERS SECURITIES

Company Guide
Indocement Tunggal P.

Cash Flow Statement (Rpbn)


FY Dec

2013A

2014A

2015F

2016F

2017F

Pre-Tax Profit
Dep. & Amort.
Tax Paid
Assoc. & JV Inc/(loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Capital Exp.(net)
Other Invts.(net)
Invts in Assoc. & JV
Div from Assoc & JV
Other Investing CF
Net Investing CF
Div Paid
Chg in Gross Debt
Capital Issues
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash
Opg CFPS (Rp)
Free CFPS (Rp)

6,595
810
0.0
0.0
160
(563)
5,419
(2,005)
0.0
0.0
0.0
0.0
(2,005)
(1,658)
(49.0)
0.0
0.0
(1,707)
414
2,121
1,429
927

6,790
878
0.0
0.0
(41.0)
(767)
5,345
(3,405)
0.0
0.0
0.0
9.00
(3,396)
(3,313)
(53.0)
0.0
0.0
(3,366)
77.0
(1,340)
1,463
527

5,695
890
0.0
0.0
221
0.0
5,496
(3,500)
0.0
0.0
0.0
0.0
(3,500)
(4,968)
0.0
0.0
0.0
(4,968)
0.0
(2,972)
1,433
542

5,786
949
0.0
0.0
(118)
0.0
5,286
(2,500)
0.0
0.0
0.0
0.0
(2,500)
(3,070)
0.0
0.0
0.0
(3,070)
0.0
(284)
1,468
757

6,110
1,030
0.0
0.0
(168)
0.0
5,567
(3,000)
0.0
0.0
0.0
0.0
(3,000)
(3,119)
0.0
0.0
0.0
(3,119)
0.0
(551)
1,558
697

Strong operational cash


flow to cover future
expansion capex

Source: Company, DBS Vickers, AllianceDBS Research


Target Price & Ratings History
25485

Rp
S.No.

23485

21485

2
4

1
3

19485

Dat e

Closing
Pric e

T arget
Price

Rat ing

1:

14 Apr 15

22650

20200 F ULLY V ALUED

2:

04 May 15

22800

20000 F ULLY V ALUED

3:

27 May 15

22100

20000 F ULLY V ALUED

4:

08 J un 15

21425

20000 F ULLY V ALUED

5:

10 Aug 15

19800

20000 F ULLY V ALUED

6:

29 Sep 15

16300

14600 F ULLY V ALUED

7:

13 Oct 15

17525

14600 F ULLY V ALUED

8:

02 Nov 15

18425

14600 F ULLY V ALUED

17485

6 7
15485
Mar-15

Jul-15

Nov-15

Mar-16

Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Vickers, AllianceDBS Research

ASIAN INSIGHTS

VICKERS SECURITIES
Page 17

Indonesia Company Guide

Semen Indonesia
Version 2

Refer to important disclosures at the end of this report

| Bloomberg: SMGR IJ | Reuters: SMGR.JK

DBS Group Research . Equity

2 Mar 2016

FULLY VALUED

State-owned producer supremacy

Last Traded Price: Rp10,250 (JCI : 4,779.99)


Price Target : Rp8,200 (20% downside) (Prev Rp7,800)
Potential Catalyst: Rebound in property presales and better execution
from nationwide infrastructure development
Where we differ: Having one of the lowest estimates in the street
Analyst
Edward Ariadi Tanuwijaya +6221 3003 4932
edward.tanuwijaya@id.dbsvickers.com
Tjen San Chong +603 2604 3972 tjensan@alliancedbs.com

Price Relative
Rp

Relative Index

20,480.0

215

18,480.0

195

16,480.0

175
155

14,480.0

135
12,480.0

115

10,480.0

95

8,480.0

75

6,480.0
Mar-12

Mar-13

Mar-14

Semen Indonesia (LHS)

Forecasts and Valuation


FY Dec (Rpbn)
Revenue
EBITDA
Pre-tax Profit
Net Profit
Net Pft (Pre Ex.)
Net Pft Gth (Pre-ex) (%)
EPS (Rp)
EPS Pre Ex. (Rp)
EPS Gth Pre Ex (%)
Diluted EPS (Rp)
Net DPS (Rp)
BV Per Share (Rp)
PE (X)
PE Pre Ex. (X)
P/Cash Flow (X)
EV/EBITDA (X)
Net Div Yield (%)
P/Book Value (X)
Net Debt/Equity (X)
ROAE (%)

Mar-15

55
Mar-16

Relative JCI INDEX (RHS)

2014A
26,987
8,295
7,091
5,566
5,566
3.6
938
938
4
938
375
4,070
10.9
10.9
9.0
7.2
3.7
2.5
CASH
24.7

Earnings Rev (%):


Consensus EPS (Rp):
Other Broker Recs:

2015A
26,948
7,427
5,851
4,521
4,521
(18.8)
762
762
(19)
762
305
4,454
13.4
13.4
8.3
8.2
3.0
2.3
CASH
17.9

2016F
29,066
7,486
5,975
4,621
4,621
2.2
779
779
2
779
312
4,928
13.2
13.2
10.5
8.3
3.0
2.1
0.0
16.6

2017F
31,761
7,811
6,160
4,770
4,770
3.2
804
804
3
804
322
5,421
12.7
12.7
9.7
7.8
3.1
1.9
CASH
15.5

5
771
B: 19

2
831
S: 5

(2)
965
H: 11

Source of all data: Company, DBS Vickers, AllianceDBS Research,


Bloomberg Finance L.P

ASIAN INSIGHTS
ed: TH / sa: MA

Maintain FULLY VALUED call. We adjusted FY16/17F domestic


sales volumes by 3.1%/2.5% as FY15 achievement exceeded
our expectations. Adjustment in volume bumped revenue
estimate by 4.3%/3.8% in FY16/17F. Slight adjustment in
margins considering higher bulk portion, continuously low
commodity prices and the more stable IDR resulted in 2%/()2.3% earnings changes in FY16/17F. Our current estimates
are still one of the lowest in the street.
Sumatra and Sulawesi remains as palpable growth driver.
SMGRs Jan-16 cement sales grew 2.2% y-o-y to 2.16m
tonnes (below industry volume growth of 4.4%), with
noticeable weakness in Java (-1.7% y-o-y) and Kalimantan (25.3% y-o-y). However, Sumatra and Sulawesi cement sales
showed much promise (+14.6% and +26% y-o-y respectively)
and helped to support group cement sales. Sumatra and
Sulawesi accounted for 22% and 12% of SMGRs domestic
cement sales by volume respectively.
Plans to expand to other areas are still in preliminary stage.
SMGR leads in the domestic cement market with 43% market
share, given its long and strong presence in three key regions Java, Sumatra and Sulawesi which account for c.85% of
domestic cement sales. The three brands under SMGR
command 38%, 43% and 64% market shares in Java,
Sumatra and Sulawesi respectively. The planned entry into
Aceh (with JV) and Kupang are still a long way to go.
Valuation:
Our target price of Rp8,200 is pegged to 10.5x FY16F EPS, at
(-)1SD of 10-year mean forward PE (similar level it traded at in
2004 when utilisation level was low).
Key Risks to Our View:
Significant delays in new players greenfield cement plants.
This would reduce competition in SMGRs strongholds, reduce
the severity of competition from new players (better pricing
power for incumbents), and lift utilisation rates.
Recovery in property presales. We expect property presales to
recover moderately going forward after a 3- to 4-year boom
(2010-2013). But a sharp recovery in property presales would
pose an upside risk to our cement volume sales assumptions.
The property sector remains the major cement consumer in
Indonesia.
At A Glance
Issued Capital (m shrs)
Mkt. Cap (Rpbn/US$m)
Major Shareholders (%)
Govt. of Indonesia
Free Float (%)
3m Avg. Daily Val (US$m)
ICB Industry : Industrials / Construction & Materials

5,932
60,798 / 4,579
60.0
40.0
5.0

VICKERS SECURITIES

Company Guide
Semen Indonesia
Domestic Sales Volume
29,034

CRITICAL DATA POINTS TO WATCH


25,450

25,900

Earnings Drivers:
Strong presence in three regions to drive top line. SMGR leads
in the domestic cement market with 43% market share, given
its long and strong presence in three key regions - Java,
Sumatra and Sulawesi which account for c.85% of domestic
cement sales. We expect SMGRs sales volume to expand at a
5.7% CAGR over 2015-2017F. This is in line with our industry
demand forecast, which expects modest growth (in line with
Indonesias real GDP growth) for the next two years as the
country is entering a normal growth state.

2015A

14,800
11,100
7,400
3,700
0
2013A

2016F

2017F

Domestic ASP/tonne
1,065,000

984,233

947,077

1,013,760 1,044,173

852,000
639,000
426,000
213,000
0
2013A

2014A

2015A

2016F

2017F

EBITDA margin
33.7

Cost savings from efficiency and continuously low commodity


prices help to alleviate more margin pressure. The benefits of
lower coal and oil prices and the more stable IDR against the
USD help to push down cash cost components. Approximately
40% of SMGRs cash cost is for energy, while c.65% of its
COGS is transacted in USD. This should prevent EBITDA margins
from falling further (see chart). We expect SMGRs cash cost per
tonne to increase by 5.3% CAGR.

6.7

Low capacity utilisation rate will cap SG&A expenses (as % of


revenue). In anticipation of 6.5m tonnes of effective capacity
coming on stream until 2017, we expect SMGRs utilisation rate
to drop from 90% in 2014 to 82% in 2017F. In that period,
SG&A expenses are expected to stay at 18% of revenue (vs
16.5% average in the past decade).

2014A

27,274

18,500

Shift to bulk segment will pressure margins. Accelerating rollout


of infrastructure projects from next year onwards and a
stagnant property market should see cement players (including
SMGR) experience stronger growth in the bulk segment than
the more profitable bag cement segment.

In addition, exposure to foreign debt taken for expansion in


Vietnam would also directly raise interest expense and reduce
earnings by 0.5% if the IDR depreciates by another 10%
against the USD.

25,969

22,200

904,542

Limited price upside due to competition. We do not expect


cement prices to rise significantly going forward as incumbent
players (including SMGR) would be forced to defend their
market share from new players, which are willing to sacrifice
margins to grab market share. The skewed supply-demand
imbalance will also see utilisation rates of incumbent players
remain depressed. We forecast a modest 3% CAGR in
ASP/tonne between 2015 and 2017F.

26,354

33.1
30.7
27.6

25.8

27.0

24.6

20.2
13.5

0.0
2013A

2014A

2015A

2016F

2017F

Revenue trend
Rp bn

30.0%

30,000

25.0%

25,000

20.0%

20,000
15,000

15.0%

10,000

10.0%
5.0%

5,000
0

0.0%
2013A

2014A

Total Revenue

2015A

2016F

2017F

Revenue Growth (%) (YoY)

Market share trend in domestic market


47%
46%
45%
44%
43%
42%
41%
40%
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015 FY16F FY17F

Source: Company, DBS Vickers, AllianceDBS Research

ASIAN INSIGHTS

VICKERS SECURITIES
Page 19

Company Guide
Semen Indonesia

Balance Sheet:
Exposure to USD debt. SMGR has exposure to foreign debt
which it took on to expand into Vietnam in 2013. As of Dec
2015, foreign debt made up about one-third of SMGRs total
long-term debt. Further weakness in the IDR will inflate SMGRs
debt position.

Leverage & Asset Turnover (x)


0.9

0.25

0.9
0.9

0.20

0.8
0.8

0.15

0.8
0.8

0.10

0.8
0.7

0.05

Net cash position provides buffer for future expansion. SMGR


has been in a net cash position in the past decade (except in
2012 when it took on new loans for the TLCC acquisition),
thanks to strong operational cash flow and good management
of expansion capex.
Share Price Drivers:
Positive progress in nationwide infrastructure development.
Good progress and faster infrastructure budget absorption
should imply better cement demand and improvement in
SMGRs utilisation rate and subsequently its profitability.

0.7
0.7

0.00
2013A

2014A

2015A

2016F

Gross Debt to Equity (LHS)

2017F

Asset Turnover (RHS)

Capital Expenditure
Rp
6,000.0
5,000.0
4,000.0
3,000.0
2,000.0
1,000.0

Cement sales. Monthly cement sales data released by the


Indonesia Cement Association (ASI) is a leading indicator of
SMGRs stock price direction.

0.0
2013A

2014A

2015A

2016F

2017F

Capital Expenditure (-)

ROE (%)

Expect lower dividend payout. SMGR has distributed 45-55% of


net profits over 2006-2013. Following recent talks of cutting
dividends from state-owned enterprises (SOE) to spur
infrastructure development, we expect lower dividend payouts
and yields going forward.

25.0%
20.0%
15.0%
10.0%

Key Risks:
Further price control by government. The new government had
surprised the market early this year by instructing state-owned
cement producers to cut cement prices by 4-5% per bag.
Further price regulations could hurt profitability.
Slower-than-expected much heralded infrastructure project
rollout. Despite gallant efforts by the government to speed up
the process, project rollouts have been slower than the street's
lofty expectations. Slower execution will directly affect cement
demand growth, and consequently, hurt SMGRs utilisation
and profitability.
Additional risks from overseas expansion. SMGRs vision to
expand overseas presents potential country and political risks.
SMGR has expanded into Vietnam (after acquiring a stake in
Thang Long Cement Company in 2013) and is eyeing
neighbouring countries such Myanmar and Bangladesh.

5.0%
0.0%
2013A

2014A

2015A

2016F

2017F

Forward PE Band (x)


(x)
22.3

+2sd:21.5x

20.3

+1sd:19x

18.3
16.3

Avg:16.4x

14.3

1sd:13.9x

12.3

2sd:11.3x
10.3
8.3
Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

PB Band (x)
(x)
6.5

+2sd:6.08x
5.5

Company Background
Semen Indonesia (SMGR) is the largest cement producer in
Indonesia with over 40% market share. It has production
facilities on three key islands (Java, Sumatra and Sulawesi) and
solid distribution channels, which enables it to command high
market shares throughout Indonesia.

+1sd:5.07x
4.5

Avg:4.05x
3.5

1sd:3.03x
2.5

2sd:2.01x
1.5
Mar-12

Mar-13

Mar-14

Mar-15

Mar-16

Source: Company, DBS Vickers, AllianceDBS Research

ASIAN INSIGHTS
Page 20

VICKERS SECURITIES

Company Guide
Semen Indonesia

Key Assumptions
FY Dec

2013A

2014A

2015A

2016F

2017F

Domestic Sales Volume


Domestic ASP/tonne
EBITDA margin

25,450
904,542
33.0

26,354
947,077
31.0

25,969
984,233
28.0

27,274
1,013,760
26.0

29,034
1,044,173
25.0

Segmental Breakdown
FY Dec

2013A

2014A

2015A

2016F

2017F

24,152
370

26,335
652

25,958
990

28,026
1,039

30,670
1,091

24,522

26,987

26,948

29,066

31,761

6,998
(26.0)

7,078
(124)

5,751
148

5,877
156

6,059
164

6,972

6,954

5,899

6,032

6,223

29.0
(7.0)

26.9
(19.0)

22.2
15.0

21.0
15.0

19.8
15.0

28.4

25.8

21.9

20.8

19.6

2013A

2014A

2015A

2016F

2017F

24,501
(13,557)
10,944
(3,972)
6,972
91.0
35.0
(177)
0.0
6,920
(1,566)
16.0
0.0
5,370
5,370
8,099

26,987
(15,388)
11,599
(4,645)
6,954
202
32.0
(97.0)
0.0
7,091
(1,517)
(8.0)
0.0
5,566
5,566
8,295

26,948
(16,302)
10,646
(4,747)
5,899
46.0
34.0
(129)
0.0
5,851
(1,325)
(4.0)
0.0
4,521
4,521
7,427

29,066
(17,780)
11,285
(5,253)
6,032
46.0
38.0
(142)
0.0
5,975
(1,354)
0.0
0.0
4,621
4,621
7,486

31,761
(19,723)
12,038
(5,815)
6,223
46.0
43.0
(152)
0.0
6,160
(1,396)
5.00
0.0
4,770
4,770
7,811

25.0
17.9
14.1
10.8

10.1
2.4
(0.3)
3.6

(0.1)
(10.5)
(15.2)
(18.8)

7.9
0.8
2.3
2.2

9.3
4.3
3.2
3.2

44.7
28.5
21.9
28.1
18.7
22.5
45.0
39.4

43.0
25.8
20.6
24.7
17.1
19.9
40.0
71.8

39.5
21.9
16.8
17.9
12.5
15.0
40.0
45.8

38.8
20.8
15.9
16.6
11.6
14.1
40.0
42.5

37.9
19.6
15.0
15.5
11.1
13.3
40.0
41.1

Revenues (Rpbn)
Cement
Others

Total
Operating profit (Rpbn)
Cement
Others

Total
Operating profit Margins
Cement
Others

Total
Income Statement (Rpbn)
FY Dec
Revenue
Cost of Goods Sold
Gross Profit
Other Opng (Exp)/Inc
Operating Profit
Other Non Opg (Exp)/Inc
Associates & JV Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Pre-tax Profit
Tax
Minority Interest
Preference Dividend
Net Profit
Net Profit before Except.
EBITDA
Growth
Revenue Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (Pre-ex) (%)
Margins & Ratio
Gross Margins (%)
Opg Profit Margin (%)
Net Profit Margin (%)
ROAE (%)
ROA (%)
ROCE (%)
Div Payout Ratio (%)
Net Interest Cover (x)

Cement contributes 98%


of SMGRs revenue

Expect margins to
decline as competition
intensify

Source: Company, DBS Vickers, DBS Vickers, AllianceDBS Research

ASIAN INSIGHTS

VICKERS SECURITIES
Page 21

Company Guide
Semen Indonesia

Quarterly / Interim Income Statement (Rpbn)


FY Dec
4Q2014
1Q2015
Revenue
Cost of Goods Sold
Gross Profit
Other Oper. (Exp)/Inc
Operating Profit
Other Non Opg (Exp)/Inc
Associates & JV Inc
Net Interest (Exp)/Inc
Exceptional Gain/(Loss)
Pre-tax Profit
Tax
Minority Interest
Net Profit
Net profit bef Except.
EBITDA

2Q2015

3Q2015

4Q2015

7,638
(4,490)
3,148
(1,304)
1,844
103
10.0
(59.0)
0.0
1,897
(417)
(3.0)
1,478
1,478
2,204

6,340
(3,781)
2,560
(1,078)
1,481
8.00
7.00
5.00
0.0
1,501
(307)
(4.0)
1,190
1,190
1,850

6,300
(3,854)
2,446
(1,137)
1,309
(5.0)
7.00
(14.0)
0.0
1,297
(297)
(5.0)
995
995
2,034

6,474
(3,967)
2,507
(1,199)
1,309
58.0
8.00
(70.0)
0.0
1,304
(290)
(2.0)
1,013
1,013
2,417

7,833
(4,700)
3,133
(1,333)
1,800
(15.0)
13.0
(49.0)
0.0
1,749
(432)
6.00
1,323
1,323
3,328

18.2
16.5
19.2
17.1

(17.0)
(16.1)
(19.6)
(19.5)

(0.6)
9.9
(11.7)
(16.4)

2.8
18.8
0.0
1.8

21.0
37.7
37.6
30.6

41.2
24.1
19.3

40.4
23.4
18.8

38.8
20.8
15.8

38.7
20.2
15.6

40.0
23.0
16.9

Balance Sheet (Rpbn)


FY Dec

2013A

2014A

2015A

2016F

2017F

Net Fixed Assets


Invts in Associates & JVs
Other LT Assets
Cash & ST Invts
Inventory
Debtors
Other Current Assets
Total Assets

18,863
0.0
2,078
4,213
2,646
2,916
197
30,912

20,221
0.0
2,437
5,032
2,812
3,301
504
34,307

25,168
0.0
2,447
3,992
2,409
3,544
594
38,153

28,714
0.0
2,447
3,120
2,627
3,822
580
41,310

30,626
0.0
2,447
4,190
2,915
4,177
643
44,997

ST Debt
Creditor
Other Current Liab
LT Debt
Other LT Liabilities
Shareholders Equity
Minority Interests
Total Cap. & Liab.

321
2,822
2,163
3,242
508
20,935
921
30,912

82.0
3,250
1,954
3,315
606
24,139
960
34,307

139
3,978
2,483
3,156
958
26,420
1,021
38,153

139
4,341
2,309
3,310
958
29,232
1,021
41,310

139
4,815
2,452
3,464
958
32,154
1,016
44,997

774
650
40.5
80.9
72.4
0.9
1.9
1.3
CASH
CASH
71.4
6.5

1,412
1,635
42.0
78.9
70.9
0.8
2.2
1.6
CASH
CASH
75.3
6.5

86.0
698
46.4
89.3
64.5
0.7
1.6
1.1
CASH
CASH
156.9
6.2

379
(329)
46.3
93.0
56.3
0.7
1.5
1.0
0.0
0.0
145.0
5.9

467
587
46.0
92.1
55.8
0.7
1.6
1.1
CASH
CASH
97.1
5.6

Growth
Revenue Gth (%)
EBITDA Gth (%)
Opg Profit Gth (%)
Net Profit Gth (Pre-ex) (%)
Margins
Gross Margins (%)
Opg Profit Margins (%)
Net Profit Margins (%)

Non-Cash Wkg. Capital


Net Cash/(Debt)
Debtors Turn (avg days)
Creditors Turn (avg days)
Inventory Turn (avg days)
Asset Turnover (x)
Current Ratio (x)
Quick Ratio (x)
Net Debt/Equity (X)
Net Debt/Equity ex MI (X)
Capex to Debt (%)
Z-Score (X)

1Q is the seasonally weakest


quarter

About one-third of LT debt is


in foreign currency

High capex expansion


to put SMGR under net
debt this year

Source: Company, DBS Vickers, AllianceDBS Research

ASIAN INSIGHTS
Page 22

VICKERS SECURITIES

Company Guide
Semen Indonesia

Cash Flow Statement (Rpbn)


FY Dec

2013A

2014A

2015A

2016F

2017F

Pre-Tax Profit
Dep. & Amort.
Tax Paid
Assoc. & JV Inc/(loss)
Chg in Wkg.Cap.
Other Operating CF
Net Operating CF
Capital Exp.(net)
Other Invts.(net)
Invts in Assoc. & JV
Div from Assoc & JV
Other Investing CF
Net Investing CF
Div Paid
Chg in Gross Debt
Capital Issues
Other Financing CF
Net Financing CF
Currency Adjustments
Chg in Cash
Opg CFPS (Rp)
Free CFPS (Rp)

6,920
1,127
0.0
0.0
(577)
143
6,047
(2,544)
0.0
0.0
0.0
(131)
(2,675)
(2,211)
(69.0)
0.0
(43.0)
(2,324)
0.0
1,048
1,117
591

7,091
1,341
0.0
0.0
(635)
442
6,721
(2,558)
0.0
0.0
0.0
(323)
(2,881)
(2,427)
(500)
0.0
(58.0)
(2,984)
0.0
855
1,240
702

5,851
1,528
0.0
0.0
1,135
100
7,289
(5,168)
0.0
0.0
0.0
(424)
(5,592)
(2,226)
0.0
0.0
(432)
(2,658)
0.0
(962)
1,037
358

5,975
1,453
0.0
0.0
(292)
0.0
5,782
(5,000)
0.0
0.0
0.0
0.0
(5,000)
(1,809)
154
0.0
0.0
(1,654)
0.0
(872)
1,024
132

6,160
1,588
0.0
0.0
(88.0)
0.0
6,264
(3,500)
0.0
0.0
0.0
0.0
(3,500)
(1,849)
154
0.0
0.0
(1,694)
0.0
1,070
1,071
466

Strong operational cash


flow to cover future
capex

Source: Company, DBS Vickers, AllianceDBS Research


Target Price & Ratings History

Rp

14840
13840

1
4

2
12840

11840
10840

8
9840

6 7

S.No.

Dat e

Closing
Pric e

T arget
Price

1:

03 Mar 15

14825

2:

14 Apr 15

12850

12200 F ULLY V ALUED

3:

27 May 15

13175

12000 F ULLY V ALUED

4:

08 J un 15

12975

12000 F ULLY V ALUED

5:

10 Aug 15

9700

12000 F ULLY V ALUED

Rat ing

12200 F ULLY V ALUED

6:

29 Sep 15

9100

7800

F ULLY V ALUED

7:

13 Oct 15

10150

7800

F ULLY V ALUED

8:

30 Oct 15

9800

7800

F ULLY V ALUED

8840
7840
6840
Mar-15

Jul-15

Nov-15

Mar-16

Not e : Share price and Target price are adjusted for corporate actions.

Source: DBS Vickers, AllianceDBS Research

ASIAN INSIGHTS

VICKERS SECURITIES
Page 23

Industry Focus
Indonesia Cement Sector

DBS Vickers recommendations are based an Absolute Total Return* Rating system, defined as follows:
STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

* Share price appreciation + dividends


GENERAL DISCLOSURE/DISCLAIMER
This report is prepared by PT. DBS Vickers Securities Indonesia ("DBSVI"). report is solely intended for the clients of DBS Bank Ltd and DBS Vickers Securities
(Singapore) Pte Ltd, its respective connected and associated corporations and affiliates (collectively, the DBS Vickers Group) only and no part of this
document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Vickers
Securities Indonesia.
The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd.,
its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the DBS Group))
do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This
document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives,
financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in
substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no
liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this
document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to
buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the
securities mentioned in this document. The DBS Group may have positions in, and may effect transactions in securities mentioned herein and may also
perform or seek to perform broking, investment banking and other banking services for these companies.
Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no
assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information
in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material
information concerning the company (or companies) referred to in this report.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions
and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations,
opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion
of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty
by the DBS Group (and/or any persons associated with the aforesaid entities), that:
(a)
(b)

such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and
there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments
stated therein.

Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein.
They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this
report.
DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, has
not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months
and does not engage in market-making.
ANALYST CERTIFICATION
The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their
securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be,
directly, or indirectly, related to specific recommendations or views expressed in this report. As of 2 March 2016, the analyst(s) and his/her spouse and/or
relatives who are financially dependent on the analyst(s), do not hold interests in the securities recommended in this report (interest includes direct or
indirect ownership of securities).
COMPANY-SPECIFIC / REGULATORY DISCLOSURES
1.
PT. DBS Vickers Securities Indonesia ("DBSVI") does not have a proprietary position in the securities recommended in this report as of 1
March 2016.
2.

Compensation for investment banking services:


DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities

Page 24

Industry Focus
Indonesia Cement Sector

as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to
obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed
in this document should contact DBSVUSA exclusively.
RESTRICTIONS ON DISTRIBUTION
General

This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or
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This report is being distributed in Australia by DBS Bank Ltd. (DBS) or DBS Vickers Securities (Singapore) Pte Ltd (DBSVS),
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Indonesia

This report is being distributed in Indonesia by PT DBS Vickers Securities Indonesia.

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This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from
ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this
report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that
ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and
associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them
may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform
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compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from
the subject companies.

Singapore

This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No.
198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the
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affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers
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Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent
required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with
the report.

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Kingdom

This report is being distributed in the UK by DBS Vickers Securities (UK) Ltd, who is an authorised person in the meaning of the
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intended only for institutional clients.

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This research report is being distributed in The Dubai International Financial Centre (DIFC) by DBS Bank Ltd., (DIFC Branch)
rd
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This report was prepared by DBS Vickers Securities Indonesia (DBSVI). DBSVUSA did not participate in its preparation. The
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with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in
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Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA
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should contact DBSVUSA directly and not its affiliate.

Other
jurisdictions

In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified,
professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

Wong Ming Tek, Executive Director, ADBSR

PT. DBS Vickers Securities Indonesia


DBS Bank Tower, Ciputra World 1, 32/F
Jl. Prof. Dr. Satrio Kav. 3-5, Jakarta 12940, Indonesia
Tel. 6221-3003 4900, Fax: 6221-3003 4943

Page 25

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