Indonesia Politics (Many Claims to the Throne) 20140410

8/12/2019 Indonesia Politics (Many Claims to the Throne) 20140410

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IndonesiaMarket strategy

Quick count result

Source: Cyrus - CSIS

Find CLSA research on Bloomberg, Thomson Reuters, CapIQ and themarkets.com - and profit from our evalu@tor proprietary database at clsa.com

NasDem

7%

PKB

11%PKS7%

PDI-P19%

Golkar14%

Gerindra

12%

Demokrat9%

PAN

7%

PPP

7%

Hanura5%

PBB2%

PKP

1%

Jayden [email protected]+62 21 2554 8834

Sarina Lesmina+62 21 2554 8820

10 April 2014

IndonesiaPolitics

www.clsa.com

Many claims to the throneThe quick count results are in for Indonesias legislative election. PDI-P

garnered much less of the legislative vote than expected (19% vs 30-

35% anticipated vote). Next will come negotiation amongst parties in

forming presidential tickets ahead of the July vote. The field remains wide

open which will create uncertainty in the process. Near term defensives

should outperform (TLKM, PGAS, JSMR) and weakness may create

opportunities to accumulate infra stocks (WIKA, INTP) and interest rate

sensitives (BMRI, BBRI, PWON and SMRA).

More even than expectedq PDI-P garnered 19% of votes. It was the consistent favourite according to recent

polls with Jokowi as its announced Presidential candidate with 30-35% implied inpre-election polling.

q Golkar, led by Bakrie, achieved 14% of votes, Prabowos Gerindra 12% and SBYsDemokrat party 9% of votes (17% counting affiliate PAN).

q Anecdotally, a level of complacency/apathy set in with many Indonesians assumingthe presidential vote more important. Poll observers estimate a 75% turnout rate.

Key positive is the peaceful processq The major positive of the day is that the election process was peaceful. There was

no major violence on election day, consistent with the campaign period.

q Indonesians voted in temporary voting stations throughout the country with votingcards distributed by neighbourhood heads.

Coalition forming ahead of July presidential run-offq Next will come the negotiations amongst parties in forming coalitions to put forth

Presidential-Vice Presidential pairings. Indonesia will vote in round 1 for its next

president in July allowing ~3 months for this process.q Based on the legislative outcome, many combinations are possible. A PDI-P-Golkar

ticket would need support of at least a third party.

q Gerindras performance in the polls as well as its early alliance with Islamic partyPPP means a Probowo-led coalition will feature prominently in the presidential race.

q A wider coalition of parties means less room for qualified technocrats, and morepolitical appointees to ministries.

Less certaintyq Based on the quick count and existing political allegiances we estimate any

government is going to require a coalition of 4+ parties.

q Against this backdrop, the market may pause or even give back some of its strongrecent gains. Near term this may favour relative defensives (TLKM, PGAS, JSMR).

q A smooth negotiation process delivering a narrower coalition of parties would

favour the infrastructure theme (INTP, SMGR, WIKA, PTPP) and interest ratesensitives (BMRI, BBRI, PWON, SMRA).
http://www.clsa.com/http://www.clsa.com/


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Many claims to the throne Indonesia

10 April 2014 [email protected] 2

Figure 1

Election timeline

Source: Government of Indonesia, media, CLSA

Figure 2 Figure 3

What was expected in pre-election polling what the quick count showed

Source: CSIS Source: Cyrus, CSIS

Figure 4

Voter turnout

Source: CSIS

11 January 05 April2014: campaigning

9 Apr 2014 -Legislativeelection

07-09 May2014: Theannouncement of theresult of the legislative

election and the partieswhich fulfill the 3%threshold

26 April 06 May 2014:

Counting the ballots onnational level

Mid May 2014: Maxseven days after theannouncement ofLegislative election

result, Political Partiesmust reveal theirPresidential candidates

06-08 April 2014: thecalm before theLegislative election

25 April 25 May 2014:Campaign fund audit

09 July 2014 -the Presidentialelection

Sept 2014 shouldthere be a secondround

Oct 2014 newPresident will starthis tenure

15.0

33.4

15.5

3.2 3.0 3.81.8

4.6

1.5

14.5

0

5

10

15

20

25

30

35

40

Golkar

PDI-P

Gerindra

Demokrat

PAN

PKB

PPP

Hanura

Nasdem

Undecided

Nov 13 (Jokowi not nominated)

Nov 13 (Jokowi nominated)

Mar 14

NasDem

7%

PKB10%

PKS7%

PDI-P

19%

Golkar

14%

Gerindra

12%

Demokrat

9%

PAN

7%

PPP

7%

Hanura5%

PBB

2%

PKP

1%

93.3

84.07

70.9975.3

0

10

20

30

40

50

60

70

80

90

100

1999 2004 2009 2014

%


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Figure 5 Figure 6

Volunteers at work in a polling booth in Jakarta Security staff supervise; inked pinkie after voting

Source: CLSA Source: CLSA

Figure 7 Figure 8

Voters inspect the roll of candidates in their area Voters can buy a t-shirt after the election

Source: CLSA Source: CLSA


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Figure 9

Indonesian large cap valuations

Market cap P/E (x) Price to book (x) ROE (%)

Ticker Name US$b Rec 14CL 15CL 14CL 15CL 14CL 15CL

Conglomerates

ASII IJ Astra Intl 28.7 U-PF 15.7 13.3 3.4 3.0 23 23

.

Banks

BBCA IJ BCA 23.9 O-PF 16.4 14.0 3.6 3.1 24 24

BBRI IJ BRI 22.2 O-PF 10.6 9.5 2.6 2.2 27 27

BMRI IJ Bank Mandiri 21.2 O-PF 11.8 10.3 2.3 2.0 21 21

BBNI IJ BNI 8.6 U-PF 10.1 9.0 1.8 1.5 19 19

.

Utilities

TLKM IJ Telkom 20.8 BUY 15.0 13.9 3.3 3.0 23 23PGAS IJ Perusahaan Gas 11.3 O-PF 11.8 12.7 3.8 3.4 33 33

.

Infrastructure

SMGR IJ Semen Indonesia 8.8 O-PF 19.1 17.3 4.4 3.9 24 24

INTP IJ Indocement 8.1 BUY 17.0 15.3 3.4 2.9 22 22

UNTR IJ United Tractors 6.9 SELL 16.3 13.1 2.3 2.0 14 14

.

Consumer

UNVR IJ Unilever Indo 20.0 U-PF 37.6 34.0 43.9 39.1 123 123

GGRM IJ Gudang Garam 8.6 O-PF 19.6 16.8 3.0 2.7 16 16

KLBF IJ Kalbe Farma 6.3 BUY 31.3 26.0 7.6 6.6 26 26

INDF IJ Indofood 5.6 U-PF 14.3 12.8 2.5 2.2 18 18ICBP IJ ICBP 5.2 U-PF 21.4 19.6 4.1 3.7 20 20

Source: CLSA. Note top 15 covered stocks by market cap

Companies mentionedBank Mandiri (BMRI IJ - RP10,250 - OUTPERFORM)

BRI (BBRI IJ - RP10,175 - OUTPERFORM)

Indocement (INTP IJ - RP24,950 - BUY)

Jasa Marga (JSMR IJ - RP6,100 - BUY)

Pakuwon (PWON IJ - RP387 - BUY)

Perusahaan Gas (PGAS IJ - RP5,275 - OUTPERFORM)

Semen Indonesia (SMGR IJ - RP16,800 - OUTPERFORM)

Summarecon (SMRA IJ - RP1,115 - BUY)

Telkom (TLKM IJ - RP2,330 - BUY)

Wijaya Karya (WIKA IJ - RP2,440 - BUY)
https://www.clsa.com/member/company/index.asp?clsa_id=1726https://www.clsa.com/member/company/index.asp?clsa_id=1827https://www.clsa.com/member/company/index.asp?clsa_id=162705874https://www.clsa.com/member/company/index.asp?clsa_id=1853https://www.clsa.com/member/company/index.asp?clsa_id=130005757https://www.clsa.com/member/company/index.asp?clsa_id=162705835


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Indonesia Politics (Many Claims to the Throne) 20140410