Materi Seminar Market Outlook

A thematic strategy
Monetizing election year amid slowing global growth

Hariyanto Wijaya, CFA, CPA (Aust.), CFP, CMT (hariyanto.wijaya@miraeasset.co.id)
Head of Research
Emma A. Fauni (emma.fauni@miraeasset.co.id)
Research Associate
21th February 2019

Monetizing election year amid slowing global growth
 Global macro: Global investors are searching for growth amid slowing global growth. Due to slowing economic
growth in developed countries, including the US, fund flows from developed markets to emerging markets including
Indonesia. YTD, Indonesia has got the biggest inflows to its equity and bonds among other emerging markets.
 The economy of Indonesia is solid as it’s domestically driven. Indonesia’s economy should be solid in 2019 as it
is driven by domestic consumption, while government’s spending focuses on supporting middle - low class
consumption in 2019. Among Asian countries, Indonesia is one of countries with the lowest export exposures to the US
and China as % of GDP.
 Monetizing Indonesia’s election year. JCI tends to rally in presidential election years. JCI rallied 44%, 87%, and
22% in FY04, FY09 and FY14, respectively. The rally of JCI during presidential election years is supported by earning
growth. We expect the EPS of JCI to grow by 11% in FY19F (vs. 9% in FY18F)
 Presidential election. Survey polls show incumbent’s electability is superior. The polls show slightly weakening
public’s satisfaction with Jokowi’s performance although his presidential electability is still superior.
 2019 state budget focusing on support middle-low class consumption. Government’s spending is focused on
supporting mid-to-low class consumption in 2019, a shift in focus from infrastructure spending growth.
 Policy rate has reached peak level, bull market to follow, in our view. We think BI’s policy rate 7-day reverse repo
rate has reached its peak level as inflation keeps tamed. The JCI tends to rally when policy rate reaches peak level.
 Maintain 12-month JCI target of 7,123. Top Picks are RALS, ACES, GGRM, HMSP, KLBF, ICBP, BBNI and BBCA.
Topic #1 – Global macro: Investors are searching for growth
amid slowing global growth
Slowing global economic growth
• Global economic growth to slow down. Only a few countries able to rise against the gravity.
• Indonesia’s GDP to grow at 5.2% in 2019, thanks to its strong domestic consumption
We estimate Indonesia’s FY19 GDP to grow at 5.2% amid decelerating global economic growth
2015 2016 2017 2018F 2019F 2020F

World 3.5 3.3 3.8 3.7 3.5 3.3
Developed Economies:
US 2.9 1.6 2.2 2.9 2.5 1.9
EU 2.4 2 2.5 1.9 1.7 1.7
UK 2.3 1.8 1.8 1.3 1.5 1.6
Japan 1.3 0.6 1.9 0.8 0.9 0.5
Emerging Economies:
Indonesia 4.9 5.0 5.1 5.2 5.2 5.2
China 6.9 6.7 6.8 6.6 6.2 6.0
India 7.4 8.0 8.2 7.2 7.2 7.3
Vietnam 6.7 6.2 6.8 7.1 6.7 6.5
Philippines 6.1 6.9 6.7 6.2 6.4 6.4
Thailand 3.0 3.3 3.9 4.2 3.9 3.7
Malaysia 5.1 4.2 5.9 4.7 4.5 4.6
Singapore 2.0 2.4 3.6 3.3 2.6 2.5
Source: Bloomberg, Mirae Asset Sekuritas Research

Note: Indonesia GDP forecast is based on Mirae estimates, others are Bloomberg consensus
Mirae Asset Sekuritas Indonesia Research Monetizing election year amid slowing global growth | 3 |
Business cycle of G7 in a downcycle. Indonesia’s in an early recovery.
• OECD’s Composite Leading Indicators (CLI) of G7 (including US) are in a downcycle.
• Meanwhile, Indonesia’s CLI are in an early recovery heading for an upcycle.
The business cycle of G7 (including US) in a downcycle, while Indonesia’s in an early recovery heading for an upcycle.
Source: OECD, Mirae Asset Sekuritas Indonesia Research
US GDP to weaken in upcoming quarters
• US’ GDP should weaken in upcoming quarters
• US’ Dec19 retail sales surprisingly plunged the most in nine years despite holiday period
US’ GDP growth to likely weaken Dec19 US’ retail sales surprisingly weaken
(%, QoQ) (%, MoM)
4.5 3
4.2
4.0 2
3.5 3.4
1
3.0 0.1
0
2.5
2.5 2.4
2.2 2.2
2.0 -1
2.0 1.9 1.9
-1.2
-2
1.5
1.0 -3
1Q18 2Q18 3Q18 4Q18F 1Q19F 2Q19F 3Q19F 4Q19F 1Q20F 8/09 8/10 8/11 8/12 8/13 8/14 8/15 8/16 8/17 8/18
Source: Bloomberg, Mirae Asset Sekuritas Indonesia Research Source: Bloomberg, Mirae Asset Sekuritas Research
Note: Seasonally adjusted annual rate of change, based on Bloomberg
consensus
Fund flows to emerging markets
• Weakening economic growth outlook of the US and developed markets trigger fund
to flow from the US and developed markets to emerging markets
Net fund inflow (outflow) in developed markets and US Net fund inflow (outflow) in emerging markets
(USDbn) Developed markets US

(USDbn)
120
15
100 11.1
80 10
60
4.7
5
40
20
0
0
-20 -12.4 -5
-18.2
-40
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19*
-10
3/18 4/18 5/18 6/18 7/18 8/18 9/18 10/18 11/18 12/18 1/19 2/19
Source: Bloomberg, Mirae Asset Sekuritas Indonesia Research Source: Bloomberg, Mirae Asset Sekuritas Indonesia Research
Note: 1Q19 is up to 2/15/19 Note: 2/19 is up to 2/15/19
In EM, Indonesia gets the biggest inflow to its equity and bonds
YTD, Indonesia has got the biggest inflows among other emerging markets.
Year-to-date fund flows in equity Year-to-date fund flows in bonds
(USDbn) (USDbn)
0.9 3
0.8 0.8 2.0

2
0.7
2
0.6
0.5 0.4 1
0.4
1
0.3
0.3
0.2
0
0.2 0.1
0.1 -1 -0.4 -0.4 -0.4

0.0
-1
-0.1 -0.1 Indonesia India Malaysia Thailand
Indonesia Philippines India Malaysia Vietnam Thailand
Source: Bloomberg, Mirae Asset Sekuritas Indonesia Research

Note: Thailand closed at 2/15/19, India closed at 2/14/19, Indonesia closed at
Note: Closed at 2/15/19, Malaysia closed at 2/14/19
2/13/19, Malaysia closed at 1/31/19
Topic #2 – Indonesia’s solid economy as it’s domestically driven
Indonesia’s economy is driven by domestic consumption
• Indonesia’s economy should be solid in 2019 as it is driven by domestic consumption
• In 2019, government’s spending will focus on supporting middle-low class consumption
Domestic demand supports FY19 GDP growth Domestic demand should stay well despite export slowdown
(%) Private consumption Government consumption (%, YoY) (Index)

GFCF Net exports 60 140
7 GDP growth Monthly export (L)
6 Consumer confidence index (CCI) (R)

125
5 40
4 120
3
20
2
1 100
0
0
-4.7
-1
-2 -20 80
2011 2012 2013 2014 2015 2016 2017 2018 2019F 12/16 3/17 6/17 9/17 12/17 3/18 6/18 9/18 12/18
Source: Bloomberg, Mirae Asset Sekuritas Indonesia Research Source: Bloomberg, Bank of Indonesia, Mirae Asset Sekuritas Indonesia
Research
Strong regional economic growth
• Indonesia’s economy is dominated by Java (contributing 58.8% to national GDP),
which is mostly driven by private consumption, providing economic growth stability.
• Maluku’s and Papua’s were braking in 4Q18, given the slowdown in their natural
resources export.
Indonesia’s quarterly RGDP
Sumatra (21.2%) National
5.0
4.7 4.7 Kalimantan (8.3%)
5.5 5.2 5.3 5.2 5.2
4.5 Sulawesi (6.1%) 5.1
4.4 4.3 10.0
5.5 10.0 7.5 5.0
6.8 6.8 6.7 6.2
3.4 3.3 3.3 3.5
4.0 4.5
4Q17 1Q18 2Q18 3Q18 4Q18 0.0 4Q17 1Q18 2Q18 3Q18 4Q18
4Q17 1Q18 2Q18 3Q18 4Q18 0.0
4Q171Q182Q183Q184Q18
Bank Indonesia’s FY19 RGDP growth projection

Sumatra: 4.4%-4.8%
Java: 5.6%-6.0%
Eastern & other regions: 3.8%-4.2%
Java (58.8%)
6.0
5.8 Maluku & Papua (2.6%)
5.7 5.7
5.7 Bali & Nusa Tenggara (2.9%) 17.0 18.3
5.6 8.0 20.0
3.8 3.7 4.4 5.4 6.9
5.5 3.2
0.7 0.0
4Q17 1Q18 2Q18 3Q18 4Q18
-20.0 -9.4
-2.0
4Q17 1Q18 2Q18 3Q18 4Q18 4Q17 1Q18 2Q18 3Q18 4Q18
Source: Bank of Indonesia, Mirae Asset Sekuritas Indonesia Research
Indonesia’s GDP exposure to the US and China is relatively low
• The economy of China and the US is estimated to be moderate in 2019 and 2020
• Among Asian countries, Indonesia is one of countries with the lowest export
exposures to the US and China as % of GDP.
Export exposure to China as % of GDP in 2017 Export exposure to the US as % of GDP in 2017
(%) (%)
25 25
22.6
20.8
20 20
17.3
15 15
11.9
10.3
10 9.2 10
6.1 6.9
6.0
5 5 3.7
2.8
1.9 2.0
0.6
0 0
Source: Bloomberg, Mirae Asset Sekuritas Indonesia Research Source: Bloomberg, Mirae Asset Sekuritas Indonesia Research
Indonesia’s export to China and the US
Indonesia’s export to China is dominated by commodity products

Indonesia’s export to the US is dominated by textile
Indonesia’s export to China in 2017 Indonesia’s export to the US in 2017
Products Export value (USDbn) Portion (%) Products Export value (USDbn) Portion (%)
Mineral products 8.99 35.00 Textiles 4.95 25.00
Animal and vegetable bi-products 4.01 16.00 Plastics and rubbers 2.34 12.00
Metals 2.58 10.00 Footwear and headware 1.86 9.30
Paper goods 2.25 8.70 Machines 1.80 9.00
Plastics and rubbers 1.58 6.10 Animal and vegetable bi-products 1.53 7.70
Chemical products 1.27 4.90 Animal products 1.27 6.40
Machines 1.27 4.90 Foodstuffs 1.17 5.90
Textiles 0.86 3.30 Miscellaneous 1.11 5.60
Wood products 0.82 3.20 Mineral products 0.83 4.20
Foodstuffs 0.60 2.30 Metals 0.66 3.30
Foodwear and headwear 0.49 1.90 Vegetable products 0.59 3.00
Animal products 0.39 1.50 Instruments 0.43 2.20
Instruments 0.19 0.75 Wood products 0.40 2.00
Vegetable products 0.18 0.71 Chemical products 0.26 1.30
Transportation 0.15 0.60 Paper goods 0.26 1.30
Miscellaneous 0.08 0.32 Transportation 0.20 1.00
Animal hides 0.04 0.16 Animal hides 0.19 0.97
Stone and glass 0.03 0.12 Stone and glass 0.09 0.46
Total 25.80 100.46 Arts & antiques 0.00 0.02
Precious metals 0.00 0.00
Total 19.90 100.00
Source: OEC, Mirae Asset Sekuritas Indonesia Research Source: OEC, Mirae Asset Sekuritas Indonesia Research
Topic #3 – Monetizing Indonesia’s election year
JCI rally in election years
Indonesia has conducted direct presidential elections by the people since 2014.
JCI tends to rally in presidential election years.
JCI’s performance during election years

(points) Election period Change, MoM (R) JCI (L) (%)
7,000 30
transition of
6,000 power from 20
+22.3%
SBY to Jokowi YoY
5,000 10
4,000 0
3,000 +87.0% -10

YoY
transition of power
2,000
from Megawati to -20
SBY
1,000 -30
0 -40
1/03 9/03 5/04 1/05 9/05 5/06 1/07 9/07 5/08 1/09 9/09 5/10 1/11 9/11 5/12 1/13 9/13 5/14 1/15 9/15
The rally is supported by earnings growth
• The rally of JCI during presidential election years is supported by earning growth
• JCI tends to post strong EPS growth in presidential election years.
• We expect the EPS of JCI to grow by 11% in FY19F (vs. 9% in FY18F)
JCI and its sectors’ performances
(%, YoY) 2003 2004 2005 2008 2009 2010 2013 2014 2015
JCI 62.8 44.6 16.2 -50.6 87.0 46.1 -1.0 22.3 -12.1
Finance 54.5 69.6 -1.7 -32.3 70.9 54.8 -1.8 35.4 -6.1
Consumer goods 54.6 11.4 20.4 -25.0 105.4 63.1 13.8 22.2 -5.2
Infrastructure 71.0 50.3 42.2 -43.9 48.6 12.4 2.5 24.7 -15.4
Basic industry 73.0 53.9 6.0 -43.3 102.9 41.4 -8.7 13.1 -25.0
Trade, service, & investment 32.0 20.4 14.6 -62.2 85.9 71.9 4.8 13.1 -3.3
Miscellaneous 41.4 54.1 6.6 -55.0 179.8 60.8 -9.8 8.5 -19.1
Mining 250.6 47.7 23.1 -73.2 151.1 48.6 -23.3 -4.2 -40.8
Property 73.1 62.0 -6.0 -58.9 41.9 38.3 3.2 55.8 -6.5
Agriculture 26.7 66.6 62.0 -66.6 90.8 30.3 3.7 9.9 -26.9
EPS growth of JCI and its sectors

(%, YoY) 2003 2004 2005 2008 2009 2010 2013 2014 2015
JCI -27.4 14.2 -0.9 -41.5 72.7 41.6 -8.3 10.2 -34.1
Finance 107.8 13.9 -30.9 -16.1 68.0 42.0 14.4 2.1 -3.8
Consumer goods 2.3 -21.1 32.7 22.4 20.0 71.8 21.0 7.8 1.6
Infrastructure 10.4 -29.5 17.9 -27.7 -21.4 45.2 12.8 -65.0 112.3
Basic industry N/A N/A 32.7 -20.2 248.8 24.1 -8.1 14.3 -39.7
Trade, service, & investment -57.1 62.3 5.9 N/A N/A 129.9 -60.9 206.2 -61.6
Miscellaneous -65.9 -29.7 414.6 -37.8 208.8 37.4 -39.2 27.6 -43.4
Mining -14.3 192.5 -8.7 -34.5 -33.2 19.9 N/A N/A N/A
Property -73.1 -64.6 152.9 -9.9 45.6 27.7 66.1 14.1 -24.4
Agriculture -32.0 -43.9 156.0 0.5 -18.1 36.6 -48.8 104.9 -98.2
Foreign funds tend to inflow in election years
Foreign funds tend to inflow to Indonesia’s equity during presidential election years as
the elected president is acceptable by foreign investors
Net foreign fund flow to Indonesia’s equity
(USDbn)
3.8
3
2.1
1.4
1 0.8
-1
-3
-5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Note: 2019 as of 2/15/19
Election year and monthly foreign fund flows
Although foreign investors booked annual net foreign buy in presidential election years,
they did not do it in every month during the election years.
Net foreign fund flow in Indonesia’s equity market
(USDmn) Presidential election month Net foreign fund inflow (outflow) (L) JCI (R) (points)
Election year Election year Election year
2,500 7,000
2,000
6,000
1,500
1,000 5,000
500
4,000
3,000
-500
-1,000 2,000
-1,500
1,000
-2,000
-2,500 0
1/02 1/03 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19
Topic #4 – Presidential election. A second match. Survey polls
on electability show incumbent leads
Presidential election: A second match
• Indonesia will witness the second match between Jokowi and Prabowo
• Incumbent is supported by dominating parties in the parliamentary
Presidential election: A second match Jokowi gets support from current majority parliamentary
1st match result in 2014
Jokowi - Jusuf Kalla Vs. Prabowo - Hatta Rajasa

53.15% 46.85%
Upcoming 2nd match in 2019
Source: Liputan 6, Mirae Asset Sekuritas Indonesia Research Source: KPU, Mirae Asset Sekuritas Indonesia Research
The policies of Jokowi vs. Prabowo
Tax
Jokowi Prabowo
• Managed to implement tax amnesty program in 2016 • Plans to cut personal income tax by 5-8%p to stimulate
• Raised import tax on selected non-essential goods higher consumption, which, in turn, translates to higher
state’s income from higher value-added tax collected
• Targets to achieve tax-to-GDP ratio of 16% from c.11% in
2018
Public debt
Jokowi Prabowo
• Relies on public debt, which is deemed fine as long as it is • Argues that rising public debt may raise the country’s
used for productive purposes vulnerability to external risks
• Plans to decrease foreign ownership in IDR-denominated debt • Uses govt. debt only to finance productive sectors, such as
to around 20% in five years to come infrastructure projects, and to stop borrowing to pay interest
• Increases sales of sovereign bonds and sukuk to retail and regular costs
investors • Depends less on borrowing, trimming tax rate to boost higher
• Reduces debt financing portion in the state budget state revenue
Source: Various media, Mirae Asset Sekuritas Indonesia Research
The policies of Jokowi vs. Prabowo (con’t)
Biofuels
Jokowi Prabowo
• Reduces fossil fuel energy dependency by gradually using • Reaches energy self-sufficiency using biofuels and
palm oil-based biodiesel from 20% to 100% renewable sources
• Increases renewable energy capacity through investment • Promotes production of palm biodiesel, ethanol, and
renewable energy
• Plans to manage 10mn ha of degraded forest land to grow
crops, such as cassava, sorghum, and palm sugar to
make bioethanol
Food imports
Jokowi Prabowo
• Imports food commodities to maintain stockpiles and stabilize • Prohibits imports to protect local farmers
prices • Sets aside 2mn ha of new land to grow rice, corn, sugar cane,
• Had built 49 dams to supply 20% needs and to build many and soybeans
more to irrigate more agricultural lands • Supports small farmers by increasing land holdings of small
farmers to help them increase their output
The policies of Jokowi vs. Prabowo (con’t)
Resource nationalism
Jokowi Prabowo
• Took control of rich natural resources sites previously owned • Asserts that all natural resources must be under state’s
by foreign companies (Grasberg mine from Freeport- control and gives out rights for use
McMoRan, Mahakam gas field from Total SA and Inpex
Corp, and Rokan oil block from Chevron Corp.)
Indonesia’s election key dates
General election timeline Presidential debates’ schedule
1st debate • President & vice president candidates

17 Jan '19 Theme: Law, human rights and terrorism
20 Oct ’19
1 Oct ’19
Presidential
Parliamentary inauguration • President candidates
inauguration 2nd debate Theme: Energy and food, natural
17 Feb '19 resources and the environment, and
Jan-Mar ‘19 infrastructure
Presidential debates
17 Apr ‘19
Nation goes to polls to elect the next 3rd debate • Vice president candidates
president of Indonesia Theme: Education, health, employment,
4-10 Aug ‘19 17 Mar '19 social and culture
Registration of 23 Sep ‘18 – 13 Apr ’19
presidential candidates
Campaign period for
president and legislative
candidates
4th debate • President candidates
Theme: Ideology, government, defense
30 Mar '19 and security, international relations
3 Sep ‘17-20 Feb ’18

Registration and verification for 5th debate • President & vice president candidates
election participants Not Theme: Economy and social welfare,
specified finance, investment, and industry
Source: KPU, Detik, Mirae Asset Sekuritas Indonesia Research Source: Kompas.com, Mirae Asset Sekuritas Indonesia Research
The political parties of government dominate in recent regional elections
Government parties won in the most populated regions (West, Central, and East Java)
in 2018
Government parties won in regional elections in many areas with high numbers of voters
(mn voters)
18
16
14
12
10
Source: KPU, Mirae Asset Sekuritas Indonesia Research

Note: *Jakarta was governor election in 2017
Profile of voters of Jokowi Vs. Prabowo
According to Populi Center’s survey pool:
• Java should provide a stronger voter base for Jokowi
• Although Sandiaga seems to be popular among millennial voters, Jokowi still
dominates their attention
Profile of voters based on survey by Populi Center
JW-MA PS-SU JW-MA PS-SU

Gender Male 57.0 31.3 Political party preferences PKB 73.0 14.5
Female 55.6 30.5 Gerindra 10.3 86.2
PDIP 90.8 5.4
Ages Millenial (<-34 years) 56.1 30.5 Golkar 58.0 11.3
>34 yrs 57.1 30.8 Nasdem 82.3 11.3
Garuda 0.0 85.7
Island Java 55.8 31.9 Berkarya 50.0 50.0
Sumatra 39.8 42.8 PKS 22.7 70.5
Eastern Indonesia 61.8 26.6 Perindo 58.3 25.0
PPP 47.5 42.5
Religion Islam 52.7 33.5 PSI 75.0 25.0
Protestan 93.1 5.7 PAN 25.0 66.7
Catholic 95.5 0.0 Hanura 64.3 21.4
Others 85.7 7.1 Demokrat 34.1 54.5
Abstain 50.0 50.0 PBB 33.3 66.7
Abstain 42.0 27.9
Source: Populi Center, Mirae Asset Sekuritas Indonesia Research
The current government’s presidential electability is still superior
Presidential electability of Jokowi still outperforms Prabowo’s
Level of public satisfaction with the government
Period LSI Denny JA Period Y Publica Period Alvara The polls show slightly
Sep-18 70.7 Oct-18 72.2 Feb-18 77.3 weakening public’s satisfaction
Oct-18 71.2 Dec-18 70.9 Jul-18 75.6 with the government’s
Nov-18 69.4 Jan-19 70.3 Dec-18 74.9 performance
Source: Detik.com, Sindonews.com, Mirae Asset Sekuritas Indonesia Research
Presidential electability of Jokowi-Ma’ruf vs. Prabowo-Sandiaga
JW-MA (%) PS-SU (%) ∆ Period JW-MA (%) PS-SU (%) ∆ Period
LSI Denny JA 54.8 31.0 23.8 Jan '19 54.8 30.6 24.2 Dec '18 Lowering discrepancy between
Charta Politika 53.2 34.1 19.1 Dec '18 53.2 35.5 17.7 Oct '18
the two candidates…
Indikator Politik Indonesia 54.9 34.8 20.1 Dec '18 57.7 32.3 25.4 Sep '18
Alvara Research Center 54.3 35.1 19.2 Dec '18 53.6 35.2 18.4 Aug '18
Litbang Kompas 52.6 32.7 19.9 Oct '18 55.9 14.1 41.8 Apr '18
Populi Center 56.3 30.9 25.4 Oct '18 52.8 15.4 37.4 0.0
…however, the incumbent is
SMRC 60.4 29.8 30.6 Sep '18 57.2 33.2 24.0 May '18 still way ahead the challengers
*JW: Jokowi-Ma’ruf PS-SU: Prabowo Subianto-Sandiaga Uno ∆: difference between JW-MA and PS-SU
Topic #5 – 2019 state budget to focus on supporting middle-low
class
2019 populist state budget
• Government’s spending to focus on supporting mid-to-low class consumption in 2019

• A focus shift from infrastructure spending growth in the last four years
The growth of FY19 state spending budget components
Other expenditures
Social assitance 21.6
Village fund 16.9
Total expenditure 11.8
Personnel expenditure 10.1
Transfer to region 8.4
Interest payment 6.9
Energy subsidy 4.2
Subsidy 3.5
Material expenditure 2.4
Capital expenditure 2.4
Non-energy subsidy 1.7
0 10 20 30 40 50 (%)
Source: Ministry of Finance, Mirae Asset Sekuritas Indonesia Research
Family Hope Program (PKH) budget spikes up in 2019
• Budget for Family Hope Program (PKH) focuses on mid-to-low income households
• PKH to increase significantly in 2019, which should translate to higher purchasing power
Social protection budget to double in 2019 Family Hope Program (PKH) budget spikes up in 2019
(IDRtr) (mn families)
Distribution (IDRtr) 2018 2019 Change (%) 40 12
Spending amount (LHS)
Family Hope Program (PKH) 17 34 100.6
35
Number of recipients (RHS) 10
Indonesia Smart Program (PIP) 17 11 -34.5
30
National Health Insurance (JKN) 26 27 4.7
8
25
Food aid (BPNT) 21 21 0.0
Educational scholarship for Excellent and 20 6
4 5 19.5
Disadvantaged Students (Bidikmisi)
15
Village fund 60 70 16.9 4
10
2
5
PKH’s Targets 2018 2019 Change (%)
Recipients (mn families) 10 10 0.0 0 0
Average per family per year (IDRmn) 1.7 3.4 100.6
Source: Ministry of Finance, Mirae Asset Sekuritas Indonesia Research Source: PKH, Mirae Asset Sekuritas Indonesia Research
Front-loading the disbursements of PKH
• Government front-loads the disbursements of PKH, which translate to strong consumption
growth in 1H19
• A second round of PKH disbursements is expected in April
Government disbursed the first phase of PKH First phase disbursement: 35.8% of PKH budget
(%) Phase 1 Phase 2 Phase 3 Phase 4
100
21.7 15.5
26.0 23.7 25.8
80
17.3 28.1
20.0 17.0 25.9
60
17.1
40 26.2 28.1
33.9 43.9
20 40.1 35.8
26.3 28.2
20.1 15.2
0
2014 2015 2016 2017 2018 2019
Source: PKH, Mirae Asset Sekuritas Indonesia Research
Advanced schedule of PKH fund disbursement in 2019
Disbursement schedule Month

2018 Feb, May, Aug, Nov
2019 Jan, Apr, Jul, Oct
Source: Press report, Mirae Asset Sekuritas Indonesia Research Source: Ministry of Social Affairs, Mirae Asset Sekuritas Indonesia Research
Government’s further efforts to increase purchasing power
• Pertamina has reduced fuel prices twice amid the declining global oil price and strengthening IDR
• PLN also decreased its tariff price by 3.8% for 900 VA category valid for 21mn customers
• This is expected to uplift low-to-mid income class’ purchasing power
Fuel price list before and after adjustment Avtur price cut to support aviation industry
(IDR/liter)
Per 10 Oct Per 5 Jan Per 10 Feb 8,300
(IDR/liter) (%) 8,210
2018 2019 2019
8,200
Premium 6,550 6,550 6,450 -1.5
8,100 -3.0%
Pertalite 7,800 7,650 7,650 0.0
8,000 7,960
Pertamax 10,400 10,200 9,850 -3.4
7,900
Pertamax Turbo 12,250 12,000 11,200 -6.7
7,800
Dexlite 10,500 10,300 10,200 -1.0
Previous Effective 1 Feb 2019
Dex 11,850 11,750 11,700 -0.4
Source: Pertamina, Mirae Asset Sekuritas Indonesia Research
Source: Pertamina, Mirae Asset Sekuritas Indonesia Research
Electricity price cut for 900 VA category

(IDR/kWh)
1,380
1,352
1,350
-3.8%
1,320
1,300
1,290
1,260
Previous Effective 1 Mar 2019
Source: PLN, Mirae Asset Sekuritas Indonesia Research Source: Press report, Mirae Asset Sekuritas Indonesia Research
A shift focus in 2019 from the growth of infrastructure spending
After four years focusing on the growth of infrastructure spending, government shifts its
focus to social spending in 2019
Flattish infrastructure budget
Road target Bridge target
Rail road target Dam target
Source: Ministry of Finance, Mirae Asset Sekuritas Indonesia Research
Topic #6 – Policy rate has reached a peak, bull market to follow
Tame inflation
• We highlight the broken relationship between IDR forex rate and inflation
• Tame inflation as the government scrutinizes the inflation basket
Divergence between CPI and USD/IDR

(%, YoY) (USDIDR)
20 CPI (L) USDIDR (R) 17,000
15,000
15
13,000
10
11,000
5
9,000
0
7,000
-5 5,000
1/00 1/01 1/02 1/03 1/04 1/05 1/06 1/07 1/08 1/09 1/10 1/11 1/12 1/13 1/14 1/15 1/16 1/17 1/18 1/19
Source: Bank of Indonesia, Bloomberg, Mirae Asset Sekuritas Indonesia Research
Scrutinizing the inflation basket
• Government has identified key components of inflation (raw food, F&B/tobacco,
utilities, and transportation) and controlled prices
Squeezing the key components of inflation
(YoY, %)
1/15 1/16 1/17 1/18 1/19
9
0
Raw food F&B, tobacco Utilities Clothing Health Education Transport/Comm Inflation
Source: Bank of Indonesia, Mirae Asset Sekuritas Indonesia Research
JCI tends to rally when policy rate reaches a peak level
• We think BI’s policy rate 7-day reverse repo rate has reached its peak level as
inflation stays tame
• The JCI tends to rally when policy rate reaches a peak level. The movement of JCI
has a negative correlation with the direction of changes in policy rate.
We think policy rate has reached its peak level, bull market to follow
(%) (points)
Election period
PEAK
13 BI rate (L) 7,000
BI 7 days reverse repo rate (L)
12
JCI (R)
6,000
11
PEAK
10 5,000
9
PEAK 4,000
8
7 3,000
6
2,000
5
4 1,000
7/05 2/06 9/06 4/07 11/07 6/08 1/09 8/09 3/10 10/10 5/11 12/11 7/12 2/13 9/13 4/14 11/14 6/15 1/16 8/16 3/17 10/17 5/18 12/18
Topic #7 – Preferred Sectors and Top Picks
Retail: Improvement to continue
 Administered price adjustments matter for consumers
 Increased social budget will support low-income consumers
 Retailers’ expansion initiatives gathering pace  the retailers under our coverage undertook very aggressive store
expansions in 2018.
 Latest PPh22 (import tax) increase to have minimal impact on retailers
 We believe moderate improvement will continue throughout at least 1H19.
 We retain our Overweight stance, with RALS as our top pick. The company’s target market is the main beneficiary
of the government’s social aid programs.
Utilities vs. Headline inflation (YoY) Net space addition (sqm)

(%) Housing, water, electricity, gas and (m²) RALS ACES MAPI
9 fuel 250,000
8 Headline inflation
200,000
7
6 150,000
5
100,000
4
3 50,000
2
-
1
0 -50,000
1/14 7/14 1/15 7/15 1/16 7/16 1/17 7/17 1/18 7/18 1/19 2011 2012 2013 2014 2015 2016 2017 2018
Source: Bloomberg, BI, Mirae Asset Sekuritas Indonesia Source: Company data, Mirae Asset Sekuritas research
Ramayana Lestari Sentosa (RALS/ Buy / TP IDR2,000)
Transformation into a lifestyle center Cumulative gross revenue (YoY growth) YTD Monthly SSSG
(%) (IDRbn) Sales (L) YTD monthly SSSG (R) (%)
30.0 2,500 32
Company description 27.5
25.0
• PT Ramayana Lestari Sentosa operates department stores in 20.0
2,000
24
Indonesia which sell items, such as clothes, accessories, bags, 15.0 16.2
12.4 1,500
14.4 16
9.3
shoes, cosmetics, and daily needs. Its department stores are 10.0 7.2 6.2
2.4 2.9
8
known as Ramayana, Robinson, and Cahaya. 5.0 4.7 1,000 0.3

0
• Market cap: IDR12.3tr / Last: IDR1,765 / TP: IDR2,000 0.0 -0.9
500
• Analyst: Christine Natasya
-5.0 -8
-7.1
-10.0
1/14 8/14 3/15 10/15 5/16 12/16 7/17 2/18 9/18 0 -16
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18
National Monthly SSSG Greater Jakarta’s SSSG

Investment thesis
• Ramayana’s business restructuring move of closing down
unprofitable supermarket stores is likely to continue looking
positive as shareholders agreed to appoint Jane Melinda
Tumewu as the vice president director. Previously, Ms.
Tumewu held the position of the company’s marketing and
merchandising general manager.
• Following the supermarket closures, management is paying
closer attention to its fashion operations. Notably, some of
the closed supermarket spaces are now being used for Summary of financials and valuations
fashion consignment items. Management sees more
(IDRbn) 2015 2016 2017 2018F 2019F 2020F
opportunities from expanding fashion business than from Revenue 7,786.2 8,234.6 8,145.9 8,578.6 8,967.8 9,398.3
keeping supermarkets running. Operating Profit 233.5 357.4 356.4 590.6 606.9 639.5
• Dept store fashion sales saw robust growth. Net profit 336.1 408.5 406.6 581.8 639.6 671.6
• We believe RALS’ prime store concept should allow the OP Margin (%) 3.0 4.3 4.4 6.9 6.8 6.8
company to expand its target market and attract higher- P/E (x) 37.3 30.7 30.8 21.5 19.6 18.6
income customers in the long run. P/B (x) 3.8 3.8 3.6 3.3 3.1 3.0
RoE (%) 10.1 12.2 11.9 16.0 16.4 16.3
Risks RoA (%) 7.4 8.9 8.5 11.6 12.0 12.0
• Unexpected downturn in the domestic economy Source: Company data, Mirae Asset Sekuritas Indonesia Research
ACE Hardware Indonesia (ACES/ Trading Buy / TP IDR1,900)
Vigorous sales SSSG’s monthly revenue and YTD monthly Revenue vs. store count by year
(IDRbn) (Unit)
(IDRbn) Revenue (L) YTD Monthly SSSG (R) (%) Revenue (L) # of store (R)
1000 15 7,500 200

Company description 13.8 13.5 Revenue (10 year CAGR growth) =18.6%
Number of store (10 year CAGR growth) =17.2%
176
180
• ACES is a home improvement and lifestyle product retailer 800 12 6,000 144 160
10.5 140
targeting the middle- to upper-income tiers. The company 4,500 120
600 9
operates as a subsidiary of PT Kawan Lama Sejahtera (which 7,051
100
has a 59.97% ownership stake) and is the license holder of the 400 6 3,000 5,780 80
ACE Hardware’s brand in Indonesia, having been appointed by

60
200 3 1,500 40
26
ACE Hardware Corporation USA 20
• Market cap: IDR30.6tr / Last: IDR1,785 / TP: IDR1,900 0

1/16 5/16 9/16 1/17 5/17 9/17 1/18 5/18 9/18
0 0
2007 2009 2011 2013 2015 2017
0
• Analyst: Christine Natasya Revenue vs. store count by year ACES’ YTD SSSG by region
Investment thesis (IDRbn)

Revenue (L) # of store (R)
(Unit) (%) Jakarta Java -Ex Jakarta Ex Java
• In 2018, the company opened 33 new stores, including seven 7,500

Revenue (10 year CAGR growth) =18.6%
Number of store (10 year CAGR growth) =17.2%
176
200
180
21 19.4
18
Ace Express stores, which have a smaller store format (less 6,000 144 160 16.5
140 15
than 1,000sqm). The number of new store openings is almost 4,500 120
13.3
7,051 12
double relative to the 2017 figure (17 stores). 100
9
10.4
• In our view, ACES’ aggressive new store openings in 2018

3,000 5,780 80
60 6
signal that the company expects better opportunities in 2019 1,500

26
40
3
20
on the back of 1) improved purchasing power and 2) potential 0 0 0
2007 2009 2011 2013 2015 2017 1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18
rupiah appreciation against the USD.
• We note that the high-risk import control regulation— which Summary of financials and valuations
reduces competition in the lifestyle and home improvement
(IDRbn) 2015 2016 2017 2018F 2019F 2020F
industry—is positive for ACES, as it has forced out smaller Revenue 4,742.5 4,935.9 5,938.6 7,331.8 8,303.3 9,499.5
importers across Indonesia. Operating Profit 688.4 729.9 869.3 1,090.4 1,210.4 1,398.8
Net profit 588.3 710.6 777.7 998.6 1,107.6 1,267.5
• In January, ACES booked same-store-sales growth (SSSG) OP Margin (%) 5.6 14.5 10.0 23.0 11.0 14.5
of 10.9% (vs.10.2% in January 2017). P/E (x) 51.3 42.5 38.8 30.2 27.3 23.8
P/B (x) 11.5 9.9 8.6 7.2 6.1 5.3
Risks RoE (%) 22.4 23.3 22.2 23.8 22.5 22.1
• Unexpected downturn in the domestic economy RoA (%) 0.9 0.9 1.0 1.1 1.4 1.5
Source: Company data, Mirae Asset Sekuritas Indonesia Research
Cigarettes: Better times ahead
 Amid flat growth of excise tax in 2019, we expect mild ASP hikes to translate to better profit margins and, hence,
bottom-line growth for cigarette companies
 There is also a potential for consumers “trading up” their cigarette brand preference
 We expect cigarette volume to likely show positive growth
Higher increase in cigarette excise tax compared to the increase in

minimum wages drags down national cigarette sales volume
Source: PMI, Mirae Asset Sekuritas research
Gudang Garam (GGRM/ Buy / TP IDR101,000)
Growing popularity of full-flavored SKM supports sales volume growth
Company description
Revenue breakdown Quarterly OP & OP margin
• Gudang Garam was founded by Mr. Wonowidjojo in 1958.
Paperboard and others Klobot clove cigarettes SKT SKM (IDRbn)
The company is the leading manufacturer of Indonesian 100% 4,000
Operating profit margin (R) Operating profit (L)
18%
Kretek cigarettes and is well known for its signature SKM 90%
9.0% 8.7%8.4%7.7%
16%
80%
full-flavored cigarette brands, GG Surya. 70%
3,200
13.2% 14%
• Market cap: IDR161.0tr / Last: IDR85,400 / TP: IDR101,000 60% 2,400

12%

50%
90.7% 9.7%
40% 10%
89.9% 1,600 8.9%
89.5%
30% 8%
20% 800
6%
10%
0% 0 4%
1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Investment thesis
• Consumers are shifting from SKT to SKM FF because the
flavor is not much different from SKT; the growing
popularity of SKM FF has much to do with taste and
GGRM’s pioneering position in this segment.
• We expect a re-rating on the back of margin expansion and
sales volume growth due to zero excise tax hike in 2019.
• Implementation of the new weighting method will have
almost no impact on GGRM’s weight (to fall just 1.2%p). Summary of financials and valuations
• GGRM’s free cash flow to remain solid, despite capex for (IDRbn) 2015 2016 2017 2018F 2019F 2020F
Kediri airport Revenue 70,365 76,274 83,306 93,934 99,327 108,754
Operating Profit 9,906 9,972 11,119 11,384 15,017 17,988
Risks Net profit 6,426 6,677 7,754 8,007 10,705 12,906
• Unexpected downturn in the domestic economy OP Margin (%) 14.1% 13.1% 13.3% 12.1% 15.1% 16.5%
• Tighter competition P/E (x) 25.6 24.6 21.2 20.5 15.3 12.7
• Higher-than-expected excise tax rate increase P/B (x) 4.3 4.2 3.9 3.6 3.2 2.9
RoE (%) 17.0 16.9 18.4 17.7 21.1 22.8
RoA (%) 10.1 10.6 11.6 11.6 14.2 15.4
HM Sampoerna (HMSP/ Trading Buy / TP IDR4,300)
Expecting stronger sales volume Quarterly gross profit and GPM Quarterly net profit and NPM
(IDRbn) Gross profit % gross margin (%) (IDRbn) Net profit % net margin (%)
Company description 8,000 27.0 4,000 16.0
• Hanjaya Mandala Sampoerna (HMSP) is a top-listed 7,000

26.0
3,500
15.0
tobacco company that manufactures and distributes 6,000 3,000
25.0 14.0
cigarettes in Indonesia. The company is a subsidiary of PT 5,000 24.2 2,500
Philip Morris Indonesia and an affiliate company of Philip 4,000 24.0 2,000 12.8 12.6 13.0
Morris International Inc, the world’s leading international

3,000 1,500
23.0 12.0
2,000 22.8 1,000 11.8
tobacco company. 1,000
22.0
500
11.0
• Market cap: IDR428.1tr / Last: IDR3,750 / TP: IDR4,300 0 21.0 0 10.0

3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Sampoerna A’s sales volume Dji Sam Soe’s sales volume

(bn sticks) Sampoerna A's sales volume (bn sticks) Dji Sam Soe's sales volume
Investment thesis 15 10
• IDX will gradually implement its proposed changes to the 12 8 7.6

8.04
10.5 10.3 10.4
LQ45 and IDX30 indices’ weighting calculation method. The 6.9
9 6
first stage (February 1st 2019) will be to include 70% of
non-floating shares in the calculation. In our view, related 6 4
risks have been priced in after the recent selloff of HMSP’s 3 2
shares, as we should see a gradual outflow through August

0 0
2019 (a long time frame for Indonesian funds to do 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18
rebalancing). Summary of financials and valuations

• We expect the absence of an excise tax hike in 2019 to (IDRbn) 2015 2016 2017 2018F 2019F 2020F
result in margin expansion and sales volume growth for Revenue 89,069.0 95,466.7 99,091.5 106,653.4 110,879.2 118,577.9
HMSP, leading to a sector re-rating. Operating Profit 14,048.0 16,020.4 16,111.3 16,892.4 19,207.7 20,571.2
Net profit 10,363.2 12,762.2 12,670.5 13,174.5 14,929.3 15,952.4
Risks OP Margin (%)
1 1 1
5.8 6.8 6.3 15.8 17.3 17.3
• Unexpected downturn in the domestic economy P/E (x) 42.7 34.6 34.9 33.6 29.6 27.7
• Tighter competition P/B (x) 13.8 12.9 13.0 12.8 12.2 11.8
• Higher than expected excise tax rate increase RoE (%) 32.4 37.3 37.1 38.1 41.0 42.7
RoA (%) 27.3 30.0 29.4 29.8 32.1 33.1
Banks: The law of the jungle
• Our bullish view on bank sector is predicated on three factors: 1) Loan demand (driven by corp segment), 2)
NIM improvements (duration gap), and 3) better profitability (stable and normalized asset quality and better
core earnings) with reasonable valuation
• Key risks to our call include: 1) the possibility that US and China will fail to reach an agreement; and 2) a
weaker domestic economy coupled with a flat or lowered BI rate
Loan growth by segment Corp bond + right issue + IPO have slowed down
(YoY, %p) Large Corporate Household w/o Mortg (IDRtr)
14 Stock (IPO&Rights) Corporate Bonds & Sukuk
300
12
250
10
200 97.8
8
150 79.2
6 50.1
4 100 57.5 53.6
54.5 30.1 47.7 156.7
2 50 116.2 111.7
45.7 67.6 57.5 48.7 63.3
0 0
1/16 4/16 7/16 10/16 1/17 4/17 7/17 10/17 1/18 4/18 7/18 10/18 2011 2012 2013 2014 2015 2016 2017 2018
Spread of 3YR Corp Bond Yield and Lending Yield Asset quality metrics
(%) (IDRtr) NPL (L) NPL ratio (R) (%)
AAA AA A BBB
4 150 3.3
3
2 130
2.9
1 110
0 2.5
-1 90
-2 2.1
70
-3
-4 50 1.7
12/09 12/10 12/11 12/12 12/13 12/14 12/15 12/16 12/17 12/18 12/15 12/16 12/17 12/18
Source: OJK, Mirae Asset Sekuritas Indonesia Research Source: OJK, Mirae Asset Sekuritas Indonesia Research
Bank Negara Indonesia (BBNI / Buy / TP IDR11,450)
Unleash the potential Feb 15, 2018
Company description Asset quality to improve The cheapest: 5 yr historical band
NPL amount (L)
• Established in 1946, Bank Negara Indonesia (BBNI) (IDRbn) (%) (%) PB Band (%)
NPL (R)
focuses on corporate, SME segments. It is the first state- 15,000 4 5.0 PB Now 5.0
owned bank to be listed on the IDX and has 1,766 domestic 3 4.0 4.0
10,000
networks as well as 5 overseas branches 3.0 3.0
2
• Market cap: IDR163.6tr / Last: IDR8,775 / TP: IDR11,450 5,000 2.0 2.0
• Analyst: Lee Young Jun 1 1.0 1.0
0 0 0.0 0.0
Investment thesis 4Q11 4Q13 4Q15 4Q17 BBCA BMRI BBRI BBNI
• In 2018, BBNI reported loan growth of 16.2%, supported by Foreign net purchase trend
corporate segment. We predict infrastructure development
and flows from capital market to benefit BBNI in 2019.
Bank-only LDR stood at 88.8% in 2018.
• Deteriorated asset quality has led management to
strengthening credit risk management. We are seeing
BBNI’s effort and, as a result, NPL has been lowered and
came in at 2.0% in 3Q18. Summary of financials and valuations
• BBNI has a negative re-pricing gap, but also highest below (IDRbn) 2015 2016 2017 2018 2019F 2020F
3-month re-pricing earnings asset. Considering BBNI’s Total Op. Profit 34,144.0 40,125.0 44,036.5 47,923.0 53,899.6 61,237.1
funding ability, we think NIM to improve in 2019. PPOP 18,393.2 21,957.3 24,200.1 26,729.0 30,407.2 34,826.7
• One of the cheapest banks among the 4 large-cap banks. Pre-tax Profit 11,466.1 14,302.9 17,165.4 19,820.7 22,425.4 25,648.2
Key beneficiary during the government’s infra-oriented Net Profit 9,066.6 11,338.7 13,616.5 15,015.1 17,259.0 19,747.3
development and policy rate hike. P/E (x) 10.3 9.1 13.6 10.9 9.7 8.5
P/B (x) 1.2 1.2 1.9 1.5 1.4 1.2
Risks RoE (%) 13.9 13.6 14.5 14.5 14.8 15.1
• Pushed back government projects and asset quality RoA (%) 2.0 2.1 2.1 2.0 2.0 2.1
deterioration that might reduce lending yield hike. Source: Company data, Mirae Asset Sekuritas Indonesia Research
Bank Central Asia (BBCA/ Trading Buy / TP IDR30,000)
Opportunity comes to those who wait Feb 14, 2019
Company description BBCA vs. System loan growth NIM trending up
• Bank Central Asia (BBCA) is the nation’s largest private (YoY, %)
Indonesia BBCA (%)
bank in Indonesia, providing universal banking services at 25 7.00
its 1,225 branches and 17,314 ATMs mostly in the Java 20
island. 15 6.95
• Market cap: IDR663.2tr / Last: IDR26,900 / TP: IDR30,000 10

6.90
• Analyst: Lee Young Jun 5
0 6.85
Investment thesis 4Q13 4Q14 4Q15 4Q16 4Q17 4Q18 2/18 4/18 6/18 8/18 10/18 12/18
• In 2018, loan growth came in at 15.0% YoY and we project Foreign net purchase trend
BBCA’s 2019 loans to grow by 11.6%.
• Liquidity has tightened considerably, but we believe strong
franchise, previous deposit rate hikes, and slower (yet still
solid) loan growth will help keep LDR at the current level
going forward.
• NIM improved for the third consecutive month in December
2018. We believe that NIM will be trending up and will Summary of financials and valuations
support to improve its core earnings in 2019. (IDRbn) 2015 2016 2017 2018F 2019F 2020F
• As the bank has maintained a prudent credit quality Total Op. Profit 47,865.2 53,767.0 56,966.3 62,919.1 71,018.6 80,763.2
management, we see limited risks to its provisioning PPOP 26,162.1 30,400.5 31,791.4 35,534.1 40,287.5 46,020.4
expenses heading into 2019. Our provisional expense Pre-tax Profit 22,657.1 25,843.8 29,158.7 32,811.4 37,398.7 42,517.5
forecast for FY19F is IDR 2.9tr (up 6.1% YoY). Net Profit 18,018.7 20,610.3 23,310.0 26,240.3 29,909.1 34,002.8
P/E (x) 18.2 18.5 23.2 24.4 22.2 19.5
Risks P/B (x) 3.7 3.4 4.1 4.2 3.8 3.3
• Sluggish loan growth stemming from weak macro growth RoE (%) 21.8 20.0 19.1 18.7 18.3 18.1
• Government’s policy reversal towards single-digit lending RoA (%) 3.1 3.3 3.2 3.3 3.3 3.4
rates Source: Company data, Mirae Asset Sekuritas Indonesia Research
Consumer: a new year and new optimism
• Lower oil prices and stronger rupiah could boost producers’ profit margins.
• However, intensifying competition in the consumer goods industry remains a risk.
Oil prices USD/IDR performance

(USD/bbl) (USD/IDR)
80 15,500
15,000
70
14,500
60
14,000
50
13,500
40 13,000
01/18 03/18 05/18 07/18 09/18 11/18 01/19 01/18 03/18 05/18 07/18 09/18 11/18 01/19
Source: Bloomberg, Mirae Asset Sekuritas Indonesia research Source: Bloomberg, Mirae Asset Sekuritas Indonesia research
Indofood CBP Sukses Makmur (ICBP/ Trading Buy/ TP IDR11,100)
Proxy for instant foods February 15, 2019
Company description ICBP’s 9M18 sales contributors Performance of ICBP’s noodles segment
• Established in 2009, ICBP provides a wide range of food
products. ICBP divides its business activities into six divisions:
1) noodles, 2) dairy, 3) food seasonings, 4) snack foods, 5)
nutrition and special foods, and 6) beverages.
• Analyst: Mimi Halimin
Investment thesis
ICBP’s net sales by business segment
• Given Indonesia’s healthy consumption demand (owing to its
demographic bonus) and ICBP’s domination (especially in the
instant noodles segment, with around 70% market share), we
believe ICBP’s products still have ample room for future
growth.
• ICBP should continue to benefit from weak CPO prices, as

CPO inventory remains high. Moreover, the rupiah has
strengthened recently. If the rupiah remains stable in 2019,
ICBP and other consumer companies will benefit. Summary of financials and valuations
(IDRbn) 2015 2016 2017 2018F 2019F 2020F
• The company’s continuous efforts to innovate and develop
Revenue 31,741 34,375 35,607 39,459 44,161 50,016
new products should contribute to volume growth. Moreover,
Operating Profit
its efforts toward “premiumization” of the noodles business 3,908 4,936 5,378 5,529 6,217 7,256
Net profit 3,001 3,600 3,797 4,400 4,959 5,791
should help boost margins.
OP Margin (%) 12.3% 14.4% 15.1% 14.0% 14.1% 14.5%
P/E (x) 40.5 33.8 32.0 27.6 24.5 21.0
Risks
P/B (x) 7.9 6.9 6.2 5.5 4.9 4.3
• Intensifying competition, a slower-than-expected recovery in
RoE (%) 19.4% 20.5% 19.4% 19.9% 19.9% 20.4%
purchasing intention, higher-than-expected USD/IDR volatility
RoA (%) 11.3% 12.5% 12.0% 12.4% 12.5% 13.2%
and raw material prices, all of which could hamper ICBP’s
profitability
Kalbe Farma (KLBF/ Trading Buy/ TP IDR1,800)
Tailwinds are coming February 15, 2019
Company description KLBF’s 9M18 net sales contributors KLBF’s GPM vs. OPM
• Established in 1966, KLBF is an integrated healthcare
company in Indonesia. The company, listed on the IDX since
1991, is the largest publicly listed pharmaceutical company in
Southeast Asia.
• Analyst: Mimi Halimin
Investment thesis
KLBF’s net sales by business segment
• We believe KLBF’s long-term outlook remains intact,
supported by its well-diversified businesses and good future
prospects from continuous research and technology.
Moreover, rising health awareness in Indonesia should lead to
higher spending on health products, such as nutritionals and
supplements.
• We expect the rupiah to strengthen this year (vs. 2018), which

would benefit pharmaceutical companies, including KLBF.
Summary of financials and valuations
• The strengthening rupiah and the government’s support for
(IDRbn) 2015 2016 2017 2018F 2019F 2020F
the healthcare industry will be positive catalysts.
Revenue 17,887 19,374 20,182 21,164 23,036 24,931
Operating Profit 2,647 3,057 3,214 3,201 3,403 3,516
Risks Net profit 2,004 2,300 2,404 2,414 2,575 2,690
• Unfavorable implementation of the JKN policy and higher- OP Margin (%) 14.8% 15.8% 15.9% 15.1% 14.8% 14.1%
than-expected USD/IDR volatility, which could hamper KLBF’s P/E (x) 36.8 32.1 30.7 30.6 28.7 27.4
profitability P/B (x) 7.1 6.2 5.6 5.1 4.6 4.2
RoE (%) 19.2% 19.3% 18.1% 16.6% 16.1% 15.3%
RoA (%) 14.6% 15.1% 14.5% 13.3% 12.9% 12.3%
PE band of our top picks
ICBP’s forward P/E band KLBF’s forward P/E band
(x) (x)
35 50
+2 st. dev = 42.2x

30 +2 st. dev = 30.0x 40
+1 st. dev = 26.5x +1 st. dev = 36.2x
25
Average = 22.9x 30 Average = 30.3X
20 -1 st. dev = 19.3x -1 st. dev = 24.3x

20
-2 st. dev = 15.8x -2 st. dev = 18.3x
15
10 10
1/12 11/12 9/13 7/14 5/15 3/16 1/17 11/17 9/18 1/12 10/12 7/13 4/14 1/15 10/15 7/16 4/17 1/18 10/18
RALS’ forward P/E band ACES’ forward P/E band

(x) (x)
30 36
+2 st. dev = 27.5x
25 32
+1 st. dev = 22.6x
28 +2 st. dev = 28.0x
20
Average = 17.8x +1 st. dev = 24.7x
24
15 Average = 21.4x
-1 st. dev = 12.9x 20
-1 st. dev = 18.0x
10
16
-2 st. dev = 8.0x +2 st. dev = 14.7x
5 12
1/12 11/12 9/13 7/14 5/15 3/16 1/17 11/17 9/18 1/12 11/12 9/13 7/14 5/15 3/16 1/17 11/17 9/18
PE band of our top picks
GGRM’s forward P/E band HMSP’s forward P/E band
(x) (x)
30 50
25 +1 st. dev = 25.4x

+2 st. dev = 41.3x
40
+1 st. dev = 21.7x +1 st. dev = 36.2x
20
Average = 17.0x 30 Average = 31.0x
15 -1 st. dev = 14.2x -1 st. dev = 25.9x
20 -2 st. dev = 20.7x

10 -2 st. dev = 10.5x
5 10
1/12 11/12 9/13 7/14 5/15 3/16 1/17 11/17 9/18 1/12 11/12 9/13 7/14 5/15 3/16 1/17 11/17 9/18
BBCA’s forward P/B band BBNI’s forward P/B band

(x) (x)
4.5 2.0
+2 st. dev = 1.8x
4.0 +2 st. dev = 4.0x

+1 st. dev = 1.6x
1.5
+1 st. dev = 3.7x Average = 1.3x
3.5
Average = 3.4x -1 st. dev = 1.1x
1.0
-2 st. dev = 0.9x
3.0 -1 st. dev = 3.0x
-2 st. dev = 2.7x 0.5

2.5 1/12 11/12 9/13 7/14 5/15 3/16 1/17 11/17 9/18
1/12 11/12 9/13 7/14 5/15 3/16 1/17 11/17 9/18
Appendix: Economic outlook
Mirae Asset Sekuritas Indonesia’s Macro projection
Mirae Asset
Consensus
Projections
As of February 18, 2019 Unit 2017 2018 2019F 2019F

Real GDP growth YoY, % 5.1 5.2 5.2 5.1
Private consumption YoY, % 5.0 5.1
Government spending YoY, % 2.1 4.8
Investments YoY, % 6.2 6.7
Exports YoY, % 9.1 6.5
Imports YoY, % 8.1 12.0
CPI %, avg. 3.8 3.2 3.8 3.4
Budget balance % of GDP -2.9 -1.9 -2.7 -1.9
USD/IDR IDR, avg 13,555 14,390 13,920 14,000

Note: Consensus figures based on Bloomberg (February 18, 2019)
Indonesia’s CAD to improve in 2H19
• Indonesia’s current account deficit (CAD) widened until 4Q18

• We expect Indonesia’s CAD to improve in 2H19 by decreasing energy subsidy
Indonesia’s current account deficit (CAD) Decrease in import is lesser than decrease in export
(%, YoY)
(IDRtr) (%)
30
6,000 2
Current account (L) Export
25
CAD as % to GDP (R) 1 Import
3,000
20
0 15
0
-1 10
-3,000 7.1
5
-2 4.3
0
-6,000
-3
-5
-9,000 -3.6 -4 -10
-15
-12,000 -5
Source: Bank of Indonesia, Mirae Asset Sekuritas Indonesia Research Source: Bloomberg, Mirae Asset Sekuritas Indonesia Research
The size of subsidy on energy affects oil import volume
• President Jokowi decreased energy subsidy in 2015 and 2016, which resulted in lower
Indonesia’s net oil import volume.
Indonesia’s net import of oil volume Subsidies on energy
(mn tonnes) (IDRtr)

Crude oil Refined oil Sum
10 300
5 250 240.0
210.0
0
200
-5
150
-10
103.5 100.7
100
-15
60.8
43.7 47.0
-20 50
-25 -24.1 0
-24.0
-26.7 -27.3 2013 2014 2015 2016 2017 2018 2019
-30 Outlook state
2013 2014 2015 2016 budget
Source: BPS, Mirae Asset Sekuritas Indonesia Research Source: Ministry of Finance, Mirae Asset Sekuritas Indonesia Research
Government’s measures to curb CAD and stabilize IDR
Intensifying export Reducing Import
Tax exemption Postpone some infrastructure projects to curb

• Impose tax exempt on 6-month deposit rate for import of raw materials
exporters converting its export proceeds (Devisa • Government delayed electricity project with
Hasil Ekspor/DHE) into IDR denomination capacity of 15,200MW, which is part of
35,000MW. Other projects also under review
Boost tourism include projects from oil and gas as well as
• Promote 10 “new Balis” transportation.
• Build coordination between central govt., regional
govt., BI, and OJK
• Increased number of tourist visits is expected to
boost foreign exchange income Import duty hike for consumer goods
Negative Investment List (DNI) relaxation • Through PMK No. 110 2018, the government
raised PPh 22 import tax on selected non-
• In 2018, the government continued to ease essential goods: 210 items categorized as luxury
Negative Investment List (DNI) to attract more goods from 7.5% to 10.0%, 218 items categorized
investment on export orientation and import as consumer goods from 2.5% to 10.0%, and
substitution industry. other 719 items from 2.5% to 7.5%.
Source: Mirae Asset Sekuritas Indonesia Research
Important Disclosures & Disclaimers
Disclosures
As of the publication date, PT Mirae Asset Sekuritas Indonesia, and/or its affiliates do not have any special interest with the subject company and do not own 1% or more of
the subject company's shares outstanding.
Analyst Certification
The research analysts who prepared this report (the “Analysts”) are registered with the Indonesian jurisdiction and are subject to Indonesian securities regulations. They are
neither registered as research analysts in any other jurisdiction nor subject to the laws and regulations thereof. Opinions expressed in this publication about the subject
securities and companies accurately reflect the personal views of the Analysts primarily responsible for this report. Except as otherwise specified herein, the Analysts have
not received any compensation or any other benefits from the subject companies in the past 12 months and have not been promised the same in connection with this report.
No part of the compensation of the Analysts was, is, or will be directly or indirectly related to the specific recommendations or views contained in this report but, like all
employees of , PT Mirae Asset Sekuritas Indonesia, the Analysts receive compensation that is impacted by overall firm profitability, which includes revenues from, among
other business units, the institutional equities, investment banking, proprietary trading and private client division. At the time of publication of this report, the Analysts do not
know or have reason to know of any actual, material conflict of interest of the Analyst or , PT Mirae Asset Sekuritas Indonesia except as otherwise stated herein.
Disclaimers
This report is published by PT Mirae Asset Sekuritas Indonesia (“Mirae”), a broker-dealer registered in the Republic of Indonesia and a member of the Indonesia Exchange.
Information and opinions contained herein have been compiled from sources believed to be reliable and in good faith, but such information has not been independently
verified and Mirae makes no guarantee, representation or warranty, express or implied, as to the fairness, accuracy, completeness or correctness of the information and
opinions contained herein or of any translation into English from the Bahasa Indonesia. If this report is an English translation of a report prepared in the Indonesian language,
the original Indonesian language report may have been made available to investors in advance of this report. Mirae, its affiliates and their directors, officers, employees and
agents do not accept any liability for any loss arising from the use hereof. This report is for general information purposes only and it is not and should not be construed as an
offer or a solicitation of an offer to effect transactions in any securities or other financial instruments. The intended recipients of this report are sophisticated institutional
investors who have substantial knowledge of the local business environment, its common practices, laws and accounting principles and no person whose receipt or use of this
report would violate any laws and regulations or subject Mirae and its affiliates to registration or licensing requirements in any jurisdiction should receive or make any use
hereof. Information and opinions contained herein are subject to change without notice and no part of this document may be copied or reproduced in any manner or form or
redistributed or published, in whole or in part, without the prior written consent of Mirae. Mirae, its affiliates and their directors, officers, employees and agents may have long
or short positions in any of the subject securities at any time and may make a purchase or sale, or offer to make a purchase or sale, of any such securities or other financial
instruments from time to time in the open market or otherwise, in each case either as principals or agents. Mirae and its affiliates may have had, or may be expecting to enter
into, business relationships with the subject companies to provide investment banking, market-making or other financial services as are permitted under applicable laws and
regulations. The price and value of the investments referred to in this report and the income from them may go down as well as up, and investors may realize losses on any
investments. Past performance is not a guide to future performance. Future returns are not guaranteed, and a loss of original capital may occur.

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A thematic strategy

Monetizing election year amid slowing global growth

21th February 2019

2015 2016 2017 2018F 2019F 2020F

Source: Bloomberg, Mirae Asset Sekuritas Research

Source: OECD, Mirae Asset Sekuritas Indonesia Research

(%, QoQ) (%, MoM)

(USDbn) Developed markets US

Year-to-date fund flows in equity Year-to-date fund flows in bonds

0.8 0.8 2.0

0.1 -1 -0.4 -0.4 -0.4

Source: Bloomberg, Mirae Asset Sekuritas Indonesia Research

(%) Private consumption Government consumption (%, YoY) (Index)

6 Consumer confidence index (CCI) (R)

Bank Indonesia’s FY19 RGDP growth projection

Indonesia’s export to China is dominated by commodity products

Indonesia’s export to China in 2017 Indonesia’s export to the US in 2017

JCI’s performance during election years

3,000 +87.0% -10

Source: Bloomberg, Mirae Asset Sekuritas Indonesia Research

EPS growth of JCI and its sectors

Source: Bloomberg, Mirae Asset Sekuritas Indonesia Research

1st match result in 2014

Jokowi - Jusuf Kalla Vs. Prabowo - Hatta Rajasa

Upcoming 2nd match in 2019

Source: Various media, Mirae Asset Sekuritas Indonesia Research

Source: Various media, Mirae Asset Sekuritas Indonesia Research

Source: Various media, Mirae Asset Sekuritas Indonesia Research

General election timeline Presidential debates’ schedule

1st debate • President & vice president candidates

3 Sep ‘17-20 Feb ’18

Source: KPU, Mirae Asset Sekuritas Indonesia Research

JW-MA PS-SU JW-MA PS-SU

Source: Populi Center, Mirae Asset Sekuritas Indonesia Research

Presidential electability of Jokowi still outperforms Prabowo’s

Level of public satisfaction with the government

Presidential electability of Jokowi-Ma’ruf vs. Prabowo-Sandiaga

Source: Various media, Mirae Asset Sekuritas Indonesia Research

• Government’s spending to focus on supporting mid-to-low class consumption in 2019

Social assitance 21.6

Village fund 16.9

Total expenditure 11.8

Personnel expenditure 10.1

Transfer to region 8.4

Interest payment 6.9

Energy subsidy 4.2

Material expenditure 2.4

Capital expenditure 2.4

Non-energy subsidy 1.7

Source: Ministry of Finance, Mirae Asset Sekuritas Indonesia Research

Average per family per year (IDRmn) 1.7 3.4 100.6

(%) Phase 1 Phase 2 Phase 3 Phase 4

Source: PKH, Mirae Asset Sekuritas Indonesia Research

Advanced schedule of PKH fund disbursement in 2019

Disbursement schedule Month

Electricity price cut for 900 VA category

Rail road target Dam target

Source: Ministry of Finance, Mirae Asset Sekuritas Indonesia Research

Divergence between CPI and USD/IDR

20 CPI (L) USDIDR (R) 17,000

Source: Bank of Indonesia, Bloomberg, Mirae Asset Sekuritas Indonesia Research

Squeezing the key components of inflation

Source: Bank of Indonesia, Mirae Asset Sekuritas Indonesia Research