Medco Energi reported FY18 revenue of USD1.22 bn (+34.6% YoY). This coupled with higher margins (30-550 bps expansion), drove operating profit and EBITDA higher by 76.1% YoY to USD472 mn and 35.5% YoY to USD580 mn, respectively. FY18 Revenue, operating profit and EBITDA met our expectation at 103%, 105% and 95% of our FY18 forecasts. However, FY18 earnings came much lower than expected as Medco booked net loss of USD51 mn, dented by non-cash losses from 1) affiliate Amman Mineral and increase in loss from discontinued operations. On quarterly basis, the company reported lower operating profit of USD98 mn (-25.4% QoQ) as revenue declined by 16.7% to USD291 mn and margins contracted across the board, which we believe due to sharp decline in oil price in 4Q18 (Brent crude average price dropped by 11% QoQ to USD68/bbl) .
MEDC saw a solid 17% YoY increase in revenue from oil & gas segment to USD980 mn , driven mainly by oil and gas prices increase of 32% and 16% YoY to USD67.8/bbl and USD6.4/mmbtu, respectively with oil & gas production was relatively flat at 85,000 boepd. From its electric producer unit (MPI), the company generated revenue of USD236 mn, which nearly quadrupled YoY on full consolidation in 2018 and buoyed by 28% increase in electric power as well as 24% power sales volume to 2,704 GWh. The segment generated net income of USD8.3 mn in 2018.
Ophir Energy Plc shareholders agreed to a takeover by MEDC last month with more than 75% of shareholders voted in favor of the 57.5-pence-a-share offer implying at total bid of 408.4 mn pounds (USD539 mn). We believe the deal would be accretive to MEDC's EBITDA as it translates to only 2.1x EV/EBITDA and 0.7x PBV based on consensus number. MEDC plans to fund the acquisition by existing cash resources and a credit agreement which is in place. We see 1) recent USD163mn Energy Building sale completion, 2) planned non-preemptive rights issue and 3) potential USD200 mn proceeds from warrants over 2018 – 2020 could help lower debt financing require ement. We expect Ophir acquisition to be completed at end of 1H19 and improve production which was relatively flattish last year.
We raised our FY19-20F production volume forecast by 7-9% to 92,000 boepd and 99,000 boepd to incorporate higher volume from Ophir and divestment of Tunisia and USA blocks in 1Q19. However, we lowered oil ASP by around 3% to USD65-67/bbl following increased uncertainty in oil price. These together led to our revenue forecast increasing by 6-9% to USD1.4-1.6 bn. Our operating profit and EBITDA forecast grew at faster pace vs. revenue as we assume lower cash cost following 5% lower lifting cost to USD8.7/boe in 2018. However, we revised down our FY19-20F net income forecast by 31-37% as we tweaked up 1) interest expense forecast (on higher debt) and 2) losses in Amman Mineral as its cost still increases on the back of phase 7 development. Following higher EBITDA forecast and adjusted number of shares on warrant conversion, we slightly raised our EV/EBITDA-based TP for MEDC from Rp1,150 to Rp1,200. We retained our Buy rating on 41% upside potential for share price, while the planned Amman IPO in 4Q19 could be next catalyst.
MYOR recently signed a MoU with Lima Land Inc. to lease property within LLI's Special Economic Zone in Batangas, Philippines. MYOR would invest USD80 mn over the next five years and build a plant to produce its popular Kopiko instant coffee mixes. However, management did not disclose the production capacity and target. Once completed, the manufacturing plant in Batangas will help meet increase demand for local consumption and exports. It is expected to provide around 3,000 new jobs in the Philippine. Further, as part of the plan to help boost local business, Mayora will source around 1,000 metric tons desiccated coconut and RBD coconut oil from several Philippine producers. In return, during the bilateral meeting, Indonesia lifted anti-dumping measure on Philippine bananas and non-tariff measure on onions/shallots.
In the Philippines, MYOR competes with Switzerland-based food giant , Nestle and local food and beverage, Universal Robina . In order to avoid SSG tax, this April Nestle also opened a new plant that will make chocolate drinks and all purpose cream with total investment of 2.8 bn peso (around USD54 mn) . At present, we view that MYOR marketing in Philippine has been successful, since Kopiko (Astig, Blanca, Brown) becoming a market leader in coffee segment with market share to almost 35% in FY18. This number indicates that MYOR nearly double its market share over the last five years (around 16% in 2014). Since MYOR has signed a MoU, the company expects in 2Q19 Philippine won't impose 11% SSG tax on instant coffee products.
This year MYOR aims at 11-12% sales growth and has no plan to increase its ASP. MYOR also expects FY19F GPM will be above 26% on the back of higher sales volume, flat raw materials price and stable USD exchange rate. Marketing spending rate will be slowing down this year after aggressive promotions last year, at +15%YoY in 2019F. We forecast operating expense is projected to decline by 12-13%YoY in FY19F (12% sales ratio vs 15.4% in FY18). This year capex also sets at USD 75mn to expand biscuit and coffee production volume.
We maintain our buy rating on MYOR with DCF-based TP of Rp2,800. Our TP of Rp2,800 offers upside potential of 10.2%. In 1Q19, MYOR projects at 11%YoY sales growth at approximately Rp 6 tn, higher compare to the 8% YoY in 1Q18. Election sentiment believed to drive higher volume growth in biscuits and coffee products in 1Q19. Further, low oil and stable raw material price, especially sugar enable MYOR to expand GPM at around 26.5% (+100bps YoY). In our assumption, we project packaged foods division's sales to grow 10.5%YoY in 2019F with GPM of 23.85%. For packaged beverages we forecast higher sales growth of 11.6% YoY with GPM of 26.3% in 2019F. Currently, MYOR is trading at 2019F PER of 30.2x.
We have incorporated Solusi Bangun Indonesia (SBI), formerly Holcim Indonesia to our financial model. We expect in FY19F SMGR to attain 18.1% YoY lower earnings growth compare to FY18, as we factored in the debt which arises for the M&A deal; whilst it can be seen from the interest expenses that jump to Rp2.6 tn in FY19F. Please take into account, we assumed in SBI FY19F financials, royalty fees to remain present this year, but we totally strip out the royalty fees in the subsequent year (FY20F). We believe FY19F will become the transition year post the big ticket size deal. However, starting in FY20F, without projection too aggressive growth in ASP and sales volumes, we estimate SMGR to post double digit earnings growth of 42.3% YoY to Rp3.59 tn.
Through SBI, obviously SMGR will have more room to cater the future demand as the total installed capacity currently totaling 50 mn tons (14.5 mn tons additional from SMCB). Note that, without widening industry idle capacity, having SBI in hand seems to be a great move in our view. Previously the company had reached around 89% of utilization rate, whereas the highest in the industry. Apart of expanding the footprint in West Java, improving the cost efficiency and diversifying the variation of products; by taking over Holcim Indonesia, SMGR will wipe out the likelihood of being stuck sometime in the future due to capacity that reach maximum level of utilization.
Furthermore, despite of oversupply issue will remain linger, at least currently the industry is witnessing the slower growth of additional capacity. We think government most likely will not allow massive investment in cement factory at the moment. Throughout 2018, SMGR was able to maintain their ASP at the level above 4Q17, while toward the end of the year specifically from 2Q18 to 4Q18, SMGR also booked low teen's ASP growth without losing the market share. As such, we see the pricing discipline has been better recently following the less intense competition between the incumbents and relative smaller cement players.
Following the conference call with SMGR, we turn to be more positive on cost transformation program that enable the company to expand their margins as well as potential synergy creation between SMGR-SBI. By keeping the strategy of centralized control, redesigning distribution networks and changing the brand of Holcim to SMGR that potentially lift the ASP of SBI; we believe in the long term, the prospect of SMGR will be more compelling.
After we consolidated SMCB, we arrive at a higher DCF based TP of Rp17,350 (+27.8% upside potential), assuming 11.7% WACC and 5% sustainable growth rate. Our TP implies 2019F EV/EBITDA of 14.4x.
Summarecon Agung booked a 21% QoQ increase of revenues to Rp1.64 tn in 4Q18, supported by 26% QoQ improved revenue recognition from property sales and 13% QoQ increase in recurring income. The 4Q18 revenues contributed to better-than expected FY18 revenues of Rp5.66 tn (+0% YoY), forming 111% of our FY18F. The flat revenues recognition followed by 5% YoY COGS decline, hence brought gross profit to Rp2.74 tn (+7% YoY) with gross margin improved to 48.4% (vs. 45.5% in FY17). Opex also reduced by 4% YoY which brought operating profit came in at Rp1.56 tn (+16% YoY) and met 116% of our FY18F. On the bottom line, SMRA booked a higher-than-expected net profit Rp449 bn (+24% YoY), accounting for 154% of our FY18F.
SMRA booked Rp3.4 tn of marketing sales in 2018 or equal to 85% of Company's initial target. The lower-than-expected pre sales due to sluggish sales of office spaces (only 5% achieved from Rp160 bn target) and shoplots (43% achieved from Rp855 bn target). In contrary, sales from landed houses exceeded target by 4% at Rp2.16 tn while landplots and apartments contributed by Rp302 bn and Rp559 bn, respectively, or realized 94% and 96% of the FY18 target. Summarecon Serpong remained as the breadwinner, generating 46% of total pre sales, followed by Bekasi townships (22% of total), Bandung (16%), Kelapa Gading (8%). Makassar (5%), and Karawang (4%). Based on the 2018 marketing sales achievement, we lowered our previous 2019 marketing sales assumption to Rp3.5 tn (88% of Company's guidance Rp4.0 tn) from previously Rp4.0 tn.
SMRA generated a stellar Rp1.14 tn of 1Q19 marketing sales, similar to 28% of Company's FY19 pre-sales (33% of ours). Most of the pre-sales came from existing projects since SMRA's two new projects were launched in mid to end 1Q19, such as: 1) Martinez Summarecon Serpong, a two-storey housing with ASP starting at Rp900 mn/unit and 2) Denise & Devina Housing Type in Dayana Cluster Summarecon Bandung offering ASP starting at Rp1.1 bn/unit. The launching in Summarecon Bandung was a success with all 129 units sold. We believe residential middle market will play a major role in generating sales this year seen from products sold in 1Q19. We expect ASP across townships will relatively stagnant this year with exception for Serpong due to healthy demand in the area.
We reduced our 2019F-20F revenues by 4-5% based on lower 2019F pre-sales following underachieved 2018 pre-sales. However, our 2019F-20F net profits now improved 5-3% supported by better margins due to change in product mix (more sales from landed housing). We maintain BUY rating with higher TP Rp1,300/sh (previously Rp900/sh) based on 5-year mean discount to our RNAV (57%). SMRA remains one of our top picks for the property sector this year with several highlights: 1) Strong demand for landed houses, 2) Developing townships give ample room for ASPs growth, and 3) SMRA's establishment as the developer of a flourished townships and successful shopping mall operator.
Stocks rose slightly on Wednesday as The Federal Reserve released the minutes of its March monetary policy meeting, with no change in rates expected this year. The Dow Jones industrial average pared small early gains, ending 7 points higher 0.03% at 26,157 . Boeing shares weighed on the Dow, falling 1.1%, while Goldman Sachs rose 1.1%, leading the index. The S&P 500 finished the day up 0.35% at 2,888 while the Nasdaq composite ended 0.7% higher.The Federal Reserve released the minutes of its March monetary policy meeting at 2 p.m. ET. Last month, the U.S. central bank decided to maintain interest rates and hold off any further increases this year.The minutes also revealed that Fed officials are leaving room for possible interest rate increase by the end of the year but currently do not expect to make any changes. On commodity markets : Brent Crude Oil up by 1.6% to USD 71.7/bbl. WTI Crude oil rose by 0.98% to USD 64.6/bbl. Coal gained by 1.23% at USD 82.2/ton. CPO dropped by 3% at MYR 2,056/ton.
JCI ended slightly lower by 6 points or -0.09% to close at 6,478 and recorded Rp343bn of net foreign buy. Agriculture (-0.71%), Property (-0.54%), Infrastructure (-0.38%) were the laggard sector, with BMRI (-0.65% to 7,600), GGRM (-1.45% to 78,150), CPIN (-1.89% to 6,475). become the index movers. Rupiah currency weakened by 20 points to 14,153/USD. Our technical desk suggests for trading within the band of 6,430–6,505, with possibility to end at mix level.
U.S. stock market tumbled on fears over escalation trade tensions with the EU, more unfavorable growth outlook from International Monetary Fund (IMF) and awaited 1Q19 earnings result. U.S trade representative threatened to levy tariff on European goods late Monday in which mainly caused by European companies' subsidies for aircraft manufacturers. If the plan is materialized, the proposed tariff may affect USD11 bn in imports to U.S. Moreover, IMF has cut its outlook for global economic growth from 3.5% in January-19 to 3.3%, making the third reduction of growth expectation. S&P 500 slipped 17.57 points or 0.61% led by losses in industrials, energy and financial companies. DJIA edged lower by 190.44 points or 0.72% after Boeing stock came under pressure. Meanwhile, Nasdaq fell more than 0.5%, driven by Microsoft, Apple, Amazon and Alphabet. On commodity market, Brent crude oil and WTI crude oil declined by 0.69% and 0.65% to USD70.6/bbl and USD64.0/bbl, respectively.
JCI ended higher by 58.6 points or 0.91% to close at Rp6,484 on Tuesday and recorded Rp597 bn net foreign buy. Misc. Industry (+1.77%), Property (+1.54%), Trade (+1.34%), Basic Industry (+1.09%), Infrastructure (+0.97%), Finance (+0.75%), Consumer (+0.67%), Agriculture (+0.55%) and Mining (+0.15%) with UNVR (+1.66% to 49,000), ASII (+1.99% to 7,700), FREN (+13.04% to 260) become the index movers. Rupiah currency strengthened by 34 point to Rp14,133/USD. Our technical desk suggests for trading within the band of 6,430-6,505, with possibility to end at mix level.
We recently met with Trada Alam Minera (TRAM) management to gain better insight into the company's coal mining prospects. In 2018, TRAM produced 2.6 mn tons of coal (vs. only 265 k tons in 2017) from its Gunung Bara Utama (GBU) mine. This boosted revenue from coal operation more than twelve-fold to Rp2.34 tn, accounting for 67% of consolidated revenue. TRAM also reported revenue from mining service of Rp828.8 bn (jump 20-fold from only Rp39.5 bn in 2017) and formed 23% of total revenue. At end of 2017, the company launched rights issue of Rp5.6 tn where the proceeds was used to finance the acquisition of nearly 100% stake at GBU and 51 % stake at SMRU (listed mining contractor). Therefore, the acquisition the company has made over the past one year is beginning to bear fruit. From its marine transportation operation, the company generated revenue of Rp288 bn (+5% YoY) or around 8% of total revenue. The company gradually sells its liquid, gas and FPSO fleet and retains dry bulk fleet (tugs and barges for coal transportation) which has synergy with coal mine operation. Meanwhile, heavy equipment rental and vessel management made up the remaining 2% of revenue.
GBU holds mining license for production operation (IUP-OP) of 5,350 Ha mining area, which is located in West Kutai Regency of East Kalimantan province and 60 km from Mahakam river. GBU produces coal ranging 5,000-5,400 kcal/kg GAR CV with around 30% of its coal has low sulfur of 0.4% (premium coal). The company currently sells its coal for USD60-62/ton. Most of GBU's coal, excluding its compliance with Domestic Market Obligation requirement, currently is sold to international market via coal trader (such as Glencore International and LG International). The end users are power plants in Japan, South Korea, Taiwan (which requires premium coal) and Vietnam, Philippines, and India (non-premium coal). GBU prefers not to sell its coal to China as the government often intervene its coal market, adopting tight controls on imports. To support production, GBU has awarded USD347 mn contract to Thiess, the world's largest mining services provider, in Sep-17 to provide total mining service which will continue until 2024. Its own mining contractor, SMRU, also takes part in coal production but still in small portion as currently most of SMRU's revenue (95%) is still generated from serving Berau Coal Energy.
GBU plans to gradually increase its coal production from 2.6 mn ton in 2018 to 4.8 mn tons in 2019, 6.2 mn tons in 2020 and 8 mn tons in 2021, implying a 29% CAGR for next two years. Production target for 2019-2020 should be achievable as current maximum production capacity has reached to 520 k tons per month. GBU prefers to maintain current stripping ratio (SR) of 12x in order not to jeopardize its future coal reserves, although it could lower SR to 7x to reduce production cost in periods of lower coal price. GBU's mine life could range between 12 years based on annual production target of 8 mn tons, in line with IUP expiration period. The company could easily add its coal reserve given its cash and ST investment balance of Rp638 bn at end of 2018. As an example, ITMG added coal reserves of 77 mn tons for USD30 mn (~Rp420 bn) with the acquisition of 100% stake in NPR last year.
TRAM booked net profit of Rp295 bn in 2018 after consecutive losses in the previous four years, mainly supported by coal revenue. The company has not disclosed earnings target for this year. TRAM is currently trading at 21x PER based on 2018 earnings. The valuation could significantly lower this year as earnings should still see a strong jump on following reasons: 1) GBU will almost double its production to 4.8 mn tons, 2) coal margin should also improve from last year's level of 14% on operating leverage. 3) Strong synergy with coal business could also further improve its water transportation (33% GPM in 2018) and mining contracting (14% GPM in 2018) profit. The management mentioned their spot selling price was relatively stable at USD59-62/ton in 1Q19. This is despite Newcastle coal prices have been declined significantly by 21% Ytd to USD79/ton, which we believe due to China's coal import restriction on coal from Australia. China still allows imports from Indonesia which help its low-CV coal price recovery and stable mid-CV coal price.
US stocks was mixed in Monday trading with Dow down by 0.32% to 26,341 led by Boeing (-4.4%) decline, while S&P 500 eked out a 0.1% gain and Nasdaq ended 0.2% gain. Investors are also preparing for the 1Q19 earnings season that will start this week. On the data front, US factory orders fell 0.5% MoM in Feb-19 amid weakness in the machinery, transportation equipment and electronic products segments. US Treasury yields ticked higher with 10-year rate rose to 2.52% while the 30-year yield traded at 2.93%. On commodity markets, oil prices increased with Brent rose by 1.1% to USD71.1/bbl and WTI crude oil went up by 2.1% to USD64.4/bbl. Coal rose 2.0% to USD80.4/ton. CPO was down by 0.85% to MYR2,111/ton while nickel price was up 0.87% to USD13,100/ton.
JCI closed lower at 6,426 by 48 points or -0.75% on Monday trading and recorded Rp842 bn of net foreign buy. The laggard sectors were Infrastructure (-2.06%), Agriculture (-1.30%), and Consumer (-1.23%) which were mainly driven by HMSP (-2.15% to 3,640), TLKM (-1.73% to 3,980), and UNVR (-1.63% to 48,200) as the key movers. Rupiah strengthened by 34 points to 14,167/USD. Our technical desk suggests for trading within the band of 6,340-6,450 with possibility mixed to lower level.
Stocks rose solidly by 0.15% on Friday for the Dow to 26,424 and ended the week with a strong 1.9% gain, up 13.3% so far this year. On US employment situation, a 196,000 MoM rise in nonfarm payrolls for March is a relief, following only a revised 33,000 February increase that had raised questions over the strength of job growth. Another plus, at least for Fed policy, is a slowing in wage pressures that gives payroll growth room to rise. On commodity market, WTI crude oil went up by 1.58% to USD63.1/bbl. while nickel price was down 0.72% to USD12,987/ton.
JCI closed lower at 6,474 by 21 points or -0.32% on Friday trading and recorded Rp435 bn of net foreign buy. The laggard sectors were Mining (-1.39%), Basic Industry (-1.01%), and Consumer (-0.58%) which were mainly driven by HMSP (-1.33% to 3,720), BMRI (-1.63% to 7,550) and BBCA (-0.72% to 27,525) as the key movers. Rupiah strengthened by 49 points to 14,133/USD. Indonesia's consumer confidence index fell to a 4-month low of 124.5 in March from 125.1 in the previous month. Our technical desk suggests for trading within the band of 6,440-6525 with possibility mixed to lower level.
Dow Jones rose by 166 pts (+0.64%) to 26,385, as Boeing up by 2.9%. S&P also gained by 0.2% to 2,879, making its first six day winning streak since February 2018, as energy and materials sector increased. Positive sentiment came from Donald Trump who aims to announce the date of a trade summit with Xi Jinping. From the commodity market, Brent Crude Oil up by 0.13% to USD 69.4/bbl. WTI Crude oil fell by 0.58% to USD 62.1/bbl. Coal declined by 1.65% at USD 77.7/ton. CPO up by 1.45% at MYR 2,100/ton. Nickel down by 1.23% to USD 13,082/ton.
JCI closed at 6,495 higher 18.56 points (+0.29%). Net foreign BUY 731 bn. Sector Leader were; Agriculture (+2.19%), Property (+1.20%), Finance (+1.20%). The Index mover were, BMRI (+3.02% to 7,675), TLKM (+2.28% to 4,040), BBRI (+1.69% to 4,220). Rupiah strengthened by 38 points to 14,182/USD. Our technical desk suggest for trading within the range of 6,440-6,525 with possibility to end higher.
BPS recorded March price index back to inflation territory of 0.11% MoM. However, its annual figure weakened to 2.48% YoY or below central bank inflation target at 2.5% YoY - 4.5% YoY. This headline inflation came below our estimates and Bloomberg consensus. Although almost all components of inflation were in line with our estimates, food price -0.01% MoM deflation made the inflation realization deviates from our estimates. Meanwhile, core inflation was reported stable at 3.03% YoY.
Food price growth came at -0.01% MoM (0.56% YoY), below our estimates at 0.39% MoM. The main restrain of current deflation was meat and its product which was -1.26% MoM. Lower chicken and egg price contributed significantly to this segment deflation as BPS noted these prices contribute to bring inflation down by -0.03% (chicken) and -0.02%, (egg). Fresh fish was also found contributing to overall inflation by -0.03%. On the other side, spices price had 5.14% MoM inflation. It denoted the high volatility of this segment after it posted -5.50% MoM deflation in previous month. Going forward, we believe food price will remain soft until April as Indonesia will have the peak of harvest season. The price will start climbing in May due to Ramadhan month. Food price will have its peak season in June as there will be Lebaran festive.
Airline ticket is recorded contributing to overall inflation by 0.03%, meaning that there is still significant pressure to overall inflation. However, we view the ticket price will have limited upside going forward. There will be significant seasonal price hike during Ramadhan and Lebaran festive season but it will be back to current price in following months. Pertamina has pulled down its aviation fuel price. It will be in favor of softening airline ticket fare inflation as aviation fuel contributes 20% to total airline cost.
Inflation may stay below 2.5% in April due to harvest season and its movement in May-June will be depended on food price stability during Ramadhan and Lebaran high season. We forecast YE 2019 inflation should be around 3.2%. The low inflation will provide opportunity for rate cut in 2019, especially with the inflation breaking down lower end target. Besides low inflation, lower CAD could be a tailwind for lower rate as we assume trade war will be settled by a peaceful deal that may favor Indonesia's export (see our monetary report: The Game Changer). We maintain our view of 50 bps BI's policy rate cut in 2H19.
The Federal Reserve (Fed) is no longer in any rush to raise US interest rates. Fed proved its dovish stance after it cut its FFR hike projection in 2019 from 50 bps to no hike at all. Moreover, Fed plans to end its tapering off policy in September. It will start reducing the cap on Treasury securities monthly redemptions from the current USD30 bn to USD15 bn in May. The move denotes Fed's concern of US slowdown risk in 2019. Fed also revised PCE inflation projection to 1.8% YoY (vs 1.9% YoY in Dec meeting), unemployment rate to 3.7% (vs 3.5%) and GDP growth at 2.1% YoY (vs 2.3% YoY).
How trade war to affect Fed's decision?
We noted three major factors that restrain US economic growth and inflation recently: 1) US – China trade war; 2) Fed's monetary tightening policy and 3) declining tax cut effect. From those 3 factors we have mentioned, trade war has the highest uncertainty. Fed's policy has turned dovish in March meeting and declining tax cut effect has been priced in by Fed and investors. Trade war will become the key as different outcomes may lead to different Fed's monetary stance. If a trade deal to lift up previous tariff sanction is reached, it may give a boost to US and China economic. However, better economic outlook can be seen as an opportunity for another FFR hike cycle even though we see the maximum magnitude will only be at 25 bps in 2020. On the other side, if trade deal is not achieved and even both countries add new tariff sanctions, it will lead to even lower growth and FFR cut opportunity will start to emerge.
How trade war affect Indonesia's CAD and BI's policy rate decision?
Previously, we expect CAD to reach 2.8% of GDP due to trade war impacting global slowdown in 2019. How trade war ends will affect both China and US, leading to sluggish Indonesia's export demand and CAD. Non oil and gas export to US and China reached 25% proportion, making their growth strongly affect Indonesia's export. Then, how will it impact the BI's policy rate decision in 2019? The main reason of BI maintaining policy rate is because of external stability, mainly from CAD and capital flow due to global volatility. Better CAD will lead to better balance of payment (BoP) and more stable Rupiah which will open opportunity of policy rate cut in 2019-2020. On the other hand, high CAD will lead to sluggish BoP and more volatile Rupiah which will make central bank to maintain high policy rate or even raise it if necessary. We will follow our base case as stated below.
Our base case assumes there will be a trade deal between US and China that will alleviate previous tariff sanction burden from both countries. Slowing down economies in both countries (mainly China) will give a pressure to both countries to settle their differences immediately. In this base case, China's growth should reach above 6.2% and favor Indonesia's export demand. We revised our CAD forecast back to 2.5% of GDP. Healthier CAD and less global volatility will bring Rupiah to Rp13,980 in 2019 average, bringing confidence for BI to cut policy rate by 50 bps in 2H19. However, better US macroeconomic figure (growth, inflation and unemployment rate) may lead to another FFR hike. In our opinion, Fed will raise FFR by only 25 bps in 2020 in order to maintain inflation on target at 2.0% YoY. On Indonesia's side, we believe BI will still continue rate cut of 75 bps in 2020 as the CAD will be healthier at 2.2% of GDP in 2020 and Rupiah will still remain below Rp 14,000.
The alternative case contains the risk of trade deal failure that leads to another tariff increment. Higher tariff will drag down the growth forecast of China and US to below 6.0% YoY and 2.0% YoY, respectively. On this case, Indonesia's export can be hurt significantly as its main export destination's demand will decline and CAD will remain high at 3.0% of GDP. As the consequences, we see Rupiah will move around Rp 14,329 in average and Rp 14,550 in YE 2019, preventing BI to cut the rate in 2019. However, sluggish US growth will encourage FFR cut of 50 bps in 2020. We see BI to follow Fed's movement by higher magnitude of 100 bps due to: 1) sluggish growth at 4.8% YoY; 2) Low inflation at 2.0% - 2.5%; 3) Healthier CAD at 2.5% of GDP due to lower domestic demand. Other risks to our call can be seen in page 8.
Around 190 mn Indonesian voters will set off to the polls to elect their President and Vice-President on 17 April and the candidates have less than one month to convince voters. Six recent voters surveys showed that the incumbent President Joko Widodo (Jokowi) to have a double digit (16.8%) lead over Prabowo Subianto, not including undecided voters of 12.5% of the total voters in average (see exh. 1). While five surveys suggested that Jokowi's electability were trending up, survey conducted by national daily Kompas showed that Jokowi's electability has decreased to 49.2% (from 52.6% in Oct-18), while the Prabowo ticket has seen its electability increase to 37.4% (from 32.7% in the same period). Assuming undecided voters were to split equally; these survey results would translate to 58.4% of total ticket for Jokowi vs. Prabowo of 41.6%.
We have developed simple method to predict 2014 election outcome one-month before it took place. We utilized list of number eligible voters at provincial level, in which we also took into account the nuances of each provinces, and assigned estimated probability of each candidate. In our strategy report dated on 9 June 2014, we predicted Jokowi won 53.7% of the vote with Prabowo on 46.7%. This was not different from the official results of Presidential election, which was held 9 July 2014, where Jokowi took 53.15% vote vs. Prabowo of 46.85%. We now use the same model to predict 2019 presidential election outcome and in addition, we take into account some development that may affect the prospect of the two candidates in several provinces. We expect potential flip in favour of Prabowo camp in Jakarta , learning from 2017 Jakarta governor race. Jokowi's vote may increase in West Java and Banten provinces, judging from 1) West Java June-18 governor election result and 2) Golkar and PPP are now part of Jokowi team. However, we predict Prabowo would still gain in these two provinces given that they are widely regarded as among the most religiously conservative provinces in the country. Prabowo's prospect should be better in North Sumatera as the governor elected last year came from his camp. We also see a significant decrease of Jokowi's vote in South Sulawesi due to the absence attraction of Jusuf Kalla which mattered in 2014. Overall, we predict Jokowi will win the 2019 presidential race, securing 54.1% vote vs. Prabowo of 45.9% vote.
Despite of our prediction favors Jokowi victory, we believe it is not a foregone conclusion as politics is very dynamics. The two presidential candidates and their running mates will enter a three-week campaign period (24 March to 13 April), in which they are officially allowed to address the public in large-scale campaign events across the country. We believe Jokowi camp remains vulnerable to attack. The economy would become the main campaign issue; Prabowo may pick and expose the shortcomings such as high government debt, jobless rate, wealth gap, weak rupiah, and prices of basic foodstuffs. Jokowi's rating could also be affected by decrease in government approval ratings and a loss of favor in several key demographics. Surveys can also be wrong judging from the 2017 Jakarta gubernatorial race when Basuki Tjahaja Purnama lost despite strong lead in most surveys.
Indonesian equities witnessed a 3.5% gain year to date, which we believe that due to increased foreign inflow, Fed's rate pause, stable domestic macros and it has priced-in Jokowi victory. The future movement after 17 April election will be based on the formation of a stable government. In this scenario we still, maintain our top picks of BBRI, BBNI , BTPS, GGRM, ICBP, WIKA, PTPP, WTON and JPFA. However, the likelihood of a short, steep correction in case of unfavorable political outcome seems to exist. If Prabowo wins, we recommend positioning in defensive stocks such as BBCA, UNVR, TLKM, and tactical trading idea on Saratoga related stocks such as SRTG, MDKA and MPMX.
Trade data surprised us as it recorded a USD 0.33 bn surplus after four straight months of deficits previously. Although the surplus was achieved from negative growth of both export and import (which is unhealthy for economic growth), the figure may ease current account deficit (CAD) pressure in this year and hence, may encourage Bank Indonesia to start rate cut cycle. February trade surplus brought YTD deficit to USD -0.8 bn.
BPS reported a -11.33% YoY (-10.03% MoM) drop of Indonesia's export to USD 12.5 bn in February. Oil and gas sector led the plummet with -21.75% YoY (-11.85% MoM) decline, mainly due to the -37.14% of volume contraction. Non oil and gas export also posted negative growth of -10.19% YoY (-9.85% MoM) but its export volume remained positive at 8.81% YoY. Those figures imply that the decrease of non oil and gas export was mostly driven by lower prices, especially on commodities, we believe. February's negative export growth figure also denoted the problem from trade war as Indonesia's export to both China and US declined. China's economy slowdown is reflected by its declining import at -5.2% YoY, making Indonesia's export to China decreased significantly in February. Trade deal agreement between US and China is a key, we believe. Should they fail to secure any agreement, Indonesia's export will remain shrinking. In the long term, Indonesia must diversify its export products and destinations to ensuring its growth and macroeconomic stability.
Sector wise, all sectors recorded negative growth. Trade war should give negative effect to commodities (Indonesia's main export products). Mining sector faced significant decline of -20.8% YoY due to weakening global growth and commodities price. We noted Newcastle coal price was down by -7.68% YoY in February, driving mineral fuel (including coal) export decreased by -14.20% YoY. Manufacture sector also declined by -8.06%, mostly driven by negative growth in animal/vegetable oil (including CPO) at -20.6% YoY. Agriculture sector was also down by -0.76% YoY.
Import growth registered significant fall of -13.98% YoY (-18.61% MoM) to USD 12.2 bn in February. On one side, falling import growth is good news for CAD. It narrowed the YTD trade deficit to USD 734.0 mn or 9.2% lower than same period last year. However, it may also entail negative inference on economic growth. Less import means less domestic expansion. Consumption goods posted significant negative growth of -26.94% YoY and raw/intermediary goods declined by -15.03% YoY. This figure may show that there will be less expansion in consumption and less inventory addition. Current manufacturing PMI was also flat at 50.1, meaning that there will be fewer expansions from manufacturing sector. On the capital goods side, it posted -0.8% YoY growth. Exhibit 5 denoted the relationship of capital goods import with investment in equipment and vehicle. Lower capital goods import may lead to low investment growth. However, in current global volatility (trade war and FFR hike uncertainty), lower import growth will help to maintain stability for CAD and Rupiah.
Better trade balance may lead to rate cut?
In our previous what to expect report, we stated that if the February trade balance unexpectedly gives significant improvement, BI may start signaling rate cut by the end of 2019. BI's focus when raising the rate are CAD and global volatility. Currently global volatility has declined due to more dovish Fed. Moreover, inflation is moving towards the lower end of central bank target of 3.5% +/-1%. If the trade surplus continues and Fed only stipulates a maximum of 25 bps FFR hike projection, there is a strong case for central bank to start rate cut cycle. We call for 50bps rate cut in 2H19 followed by 50-100 bps rate cut in 2020 IF 1) CAD moves to below 2.5% of GDP (trade deal between US and China will help); 2) Fed does not increase FFR in 2019-2020. We will update our forecast figures further after FOMC meeting next week.
In this month, Fed will give more clarity of their FFR movement in 2019. Fed's projection should be the guidance for global central bank, including Bank Indonesia, in deciding future monetary stance. Besides Fed, Bank Indonesia's monetary stance will be also depended to trade data that will be released on Mar 15. Improvement in Indonesia's trade balance will give hope of a rate cut, with the assumption that Fed will not increase FFR at all in 2019.
FOMC meeting in the end of each quarter will give projection of Fed's future policy and macroeconomic estimates. The latest projection showed the committee wanted 50 bps hikes in 2019 but the members consistently emphasized dovish statements afterwards. According to Bloomberg world interest rate probability, market expects no FFR hike at all in 2019. US data started to show a slowing down economy that may prevent Fed to continue its tightening cycle. Core PCE inflation was stable below Fed's target of 2% since October and we see it may weaken even further due to slowing down economy in US and also moderate oil price. On the employment side, the unemployment rate was going down to 3.8% in February (from 4.0% in Jan), indeed. However, the change in nonfarm payrolls declined significantly to only 20k or the lowest since September 2017. We believe Fed will reduce its projection of FFR hike for 2019 from 50 bps to 25 bps in March meeting.
There should not be rate movement by Bank Indonesia in March board of governor meeting. However, we will see further monetary stance of Bank Indonesia after Fed's new policy projection. In previous meeting, Bank Indonesia lowered its projection of FFR hike in this year from 50 bps to 25 bps and it did not reiterate its hawkish stance in the statement. Current Indonesia's macroeconomic condition is favorable as the February inflation went down to 2.57% YoY or near BI's low end target of 3.5% +/-1%. Currency movement is also favorable as Rupiah move within 13,800 – 14,300 range in 1Q19. Forex reserves position was even improved by USD 3.2 bn to USD 123.3 bn in February, showing the high interest rate policy is effective to attract foreign inflow. However, trade balance and current account deficit (CAD) remained negative and we predict trade deficit of USD -717 mn in February due to global slowdown. BI's main attention was the CAD and global volatility during the interest rate hike cycle. So, it will be very difficult to cut the rate if the CAD remained high. However, if the February trade balance unexpectedly gives significant improvement, BI may start signaling rate cut by the end of 2019.
As of March 13, Bloomberg consensus sees February export to have negative growth of -4.55% YoY, import at 0.14% YoY with trade deficit around USD 803 mn. Indonesia export performance should remain to have significant pressure from global slowdown in January. The slowing down sign is even clearer in China which export had significant negative growth of -20.7% YoY and import at -5.2% YoY. Continuing China's weak economic performance will endanger Indonesia's export and also CAD and Rupiah in the end. Furthermore, Indonesia's main commodity products prices see downside risks from current level. Coal price (Newcastle) was down by 7.68% YoY and palm oil declined by 15.89% YoY. On the import side, we expect no much change from Feb-18 figure. Oil price remained subdue (-1.7% YoY) while Indonesia's manufacturing PMI was stagnant at 50.1 in February. We expect export to have negative growth of -4.2% YoY with import at 0.5% YoY, resulting a slight improvement in trade deficit at USD -717 mn (vs USD -1.16 bn in Jan-19).
According to statistics office (BPS), February price index registered a monthly deflation of -0.08% MoM (2.57% YoY) or fell to the low end of Bank Indonesia's target 3.5% +/- 1%. This came below Bloomberg consensus but relatively in line with our estimates. In our "what to expect" edition (published Feb 27), we expect deflation in February because of: 1) normalization of food price; 2) fuel price decline; 3) airlines ticket fare decline. Our analysis is relatively in line with BPS data except the airlines ticket fare that still record inflation in February.
Food price registered deflation of -1.11% MoM (0.72% YoY), in line with our estimates. We believe the food deflation was due to normalization of food price from year-end peak season. The most volatile food component, spices, had deflation of -5.50% MoM. BPS also found that chicken, egg and beans also had deflation in February. However, rice and tuber component had 0.4% MoM inflation. Going forward, we believe food price will remain in downtrend due to incoming harvest season in March – April. Weak el nino should not give significant effect to the harvest output, hence ensuring the stability of food price.
Pertamina lowered its fuel price, what's next?
BPS noted that lower fuel price contribute -0.03% to overall February deflation, in line with our estimates. Pertamina has decided to lower some of fuel price starting Feb 10 due to lower oil price and Rupiah appreciation. Some of which are Pertamax (-3.4% to Rp9,850/l), Pertamax turbo (-6.7% to Rp11,200/l) and Premium in Java Madura Bali (-0.8% to Rp 6,450/l) (see exhibit 3 for detailed list). Oil price will remain uncertain in the future as its trend is highly affected by geopolitical situation. However, if oil price remains below USD 70/ barrel (Brent), there should not be a significant effect to inflation. With current oil price, we believe government will retain current subsidized fuel price even after the election.
Airline ticket fare gave 0.03% to overall inflation in February. We believe it is the effect of paid baggage that is more significant than slight declining ticket price in February. As the paid baggage is started in Jan 22, most of the effect will be carried forward to February inflation. Lion group dominates domestic routes by around 51% market share (2017 data). So, Lion's paid baggage policy should give significant impacts to overall air transport inflation. However, we believe that paid baggage effect to overall inflation will end in February as Citilink cancel its paid baggage policy plan.
We still believe that inflation will stay below 3% at least until April. Harvest season will favors low inflation and even it may bring down annual figure to below low-end inflation target of 2.5% YoY. Government will keep the subsidized fuel price in 2019 and there should be no significant uplift on non-subsidized fuel. Low inflation should give an opportunity for a rate cut. However, we see that there is a more urgent problem to be solved, which is CAD, before rate cut is executed. As we stated in previous month inflation report, we will consider rate cut in late 2019 if: 1) Fed does not increase the FFR in 2019; 2) Trade war tension decline with alleviation of previous tariff; 3) Indonesia's CAD start to move below 2.5% of GDP.
While the excise tax structure remains the same as it was last year, unchanged tax rate becomes a positive turnaround for cigarette manufacturers. Tax carries the biggest burden for both producer and consumer. Excise tax duty, represents 72% of GGRM COGS and 66% of HMSP COGS. We project stable tax rate slows down ASP increase for packed cigarette. Lower COGS drives higher sales volume and better profitability as well. While Indonesia cigarette industry booked slightly negative growth of -0.1% YoY to 307 bn sticks in FY18. HMSP is able to maintain sales volume growth, it grew by +0.8% YoY from 81.5 bn to 82.1bn sticks. Again, SKM remains the growth driver of Indonesian cigarette industry. In 9M18, GGRM booked higher revenue growth than HMSP (13.6% vs 7.2%). Thus we expect GGRM shows higher sales volume in FY18. We forecasts GGRM to book a total 77 bn sticks throughout 2018. Further, we view that positive results from the biggest cigarette producers should continues this year as the expected slowing 1Q19 likely be compensated by higher consumption from political campaigns approaching election in April. Both HMSP and GGRM are expected to see volume growth in 1Q19. Thus, we forecast GGRM to book 9% gross profit growth and bottom line to expand by 15% in 2019F. Meanwhile, HMSP gross profit growth of 7% and net profit growth of 10% in 2019F.
SKM is the darling of Indonesian smokers. Sweet spot is young smokers that span between 20-35 years of age. Representing 30% of the country population, young smokers favor filtered cigarettes. Cigarette companies continuously campaign filtered cigarette as "bold", "move". "signature". They also use - conscious terms such as "light" and "mild" to attract young smokers. SKM LTLN used to be the popular choice for filtered cigarette. However, we see a changing trend. SKM full flavored and SKM mid tar is the new favorite. The latter has opportunity to capture shifting trend from SKT to SKM mild and SKM FF. Major cigarette producers promote SKM medium category to seize above said opportunity. Djaroem launched LA Bold in 2015, HMSP introduced Magnum Mild in 2017. Last year, HMSP marketed Marlboro Mild Black. Marlboro Mild Black has the same category as SKM medium but more expensive tag (Rp 1,250/stick). Lured by SKM medium potential, Nojorono Group – mid sized cigarette producer – promoted Aroma Bold in September 2018. Latest development, GGRM brought GG Move Duo Filter to market last November. GG Move Duo Filter contains 18 mg tar and around 1 mg of nicotine. The product was sold approximately Rp1,000/stick. On a different note, HMSP's Magnum Mild showed robust sales. Dji Sam Soe sales volume rose by 13.9%YoY to 8 bn sticks in 4Q18. This results full year sales volume of 29.1bn sticks(+28.3%YoY). The growth was mainly driven by Magnum Mild 16sticks variant. Thus, we conclude that SKM medium will gain smoker tractions. This segment offers not only descent price but 'rich' and 'smooth' taste.
We are positive about Indonesia cigarette industry this year and have a BUY call on HMSP and GGRM with TP of Rp 4,500 and Rp 93,000/ share, respectively. New tax regulation (57% excise tax) on tobacco substitutions e.g. vape, tobacco essences and molasses (shisha/hookah) is another tailwind. These positive catalysts would enable cigarette producers to increase price. This year, we expect HMSP to raise SKM price by 6-8%, followed by SPM price at 3-5%. GGRM, meanwhile, likely increase its SKM and SKT products by 2-5% and 2-3% respectively. Besides, greater government stimulus and upcoming election supports industry performance. We prognosticate GGRM and HMSP to achieve 12% and 7.1% sales growth and grow net profit by 15% and 10% respectively.
It seems average livebird price during January'19 came up weak, as it declined by 18.2% MoM and 12.2% YoY to Rp17,546/kg. This was largely attributable to the concern of poultry farmers in regard with the presence of outbreaks due to high rainfall season, whilst eventually led to panic selling of livebird. As such, livebird price dropped to a level below previous floor price for broiler enacted by government at Rp18,000/kg. Meanwhile, DOC price slightly decreased by 2.9% MoM, but still remarkably rose by 42.4% YoY to Rp6,470/chick. Amid expensive domestic corn price combined with drop in livebird price, we believe this will have potentially detrimental effects for the poultry farmers' blended margins. Noting that, blended margins of poultry companies are affected by product mix, whereas apart of feed division as the biggest contributor, DOC and broiler segments actually also have considerable portion over revenue.
New catalyst for poultry industry just showed up recently as Ministry of Trade raised the broiler's reference price at the farmer's level to the new range of Rp20,000-22,000/kg from Rp18,000-20,000/kg. At consumer's level, new reference price for broiler was also adjusted up by 5.9% to Rp36,000/kg from Rp34,000/kg. Actually, government is also lifted reference price for egg at farmer and consumer level to Rp25,000/kg (from Rp23,000/kg) and Rp36,000/kg (from Rp34,000/kg), respectively. We believe such incentives are required in order to give flexibility for poultry farmers to ease the pressure from high corn price environment. In addition, we view that apparently the key focus of government is not only on managing the supply-demand dynamic, but also retain the price at above the level where smaller-sized farmers or breeder bottom line are not in the red territory.
Indonesian poultry industry has seen way better condition on the back of remarkable growth in average price of DOC and Broiler by 31.9% YoY and 16.3% YoY, respectively. This was largely due to lower Grand Parent Stock (GPS) import quota in the last couple years, previous culling programs and ban on Antibiotic Growth Promoter (AGP); as such resulted in tight supply. For this year, we believe oversupply less likely becoming a spotlight, given the support from government in overseeing the supply-demand dynamics and ample chicken consumption growth. However, government has allowed higher quota for GPS imports in 2018 and 2019F to 707,000 GPS (+8.7% YoY) and 800,000 GPS (+13.2% YoY), respectively. Despite population is also expected to rise by 1.3%/year, we believe the impact of higher GPS to be reflected in supply of broiler and DOC in 2020F and 2021F. We think supply of will be normalized starting 2020F onward.
Lack of corn supply is the looming issue at the moment in our view. In the early of January, according to Indonesian Feedmill Association (GPMT), corn price stood at around Rp6,000/kg or way above the domestic corn reference ceiling price at Rp4,000. Fortunately, to cope with the situation, government has made a move by allowing National Bureau of Logistic (Bulog) as a sole importer to import another 30,000 tons of corn in February'19 after throughout 2018 corn import quota recoded at 100,000 tons. We believe this will protect domestic corn price more widening from reference ceiling price. However, we think government's self-sufficiency program has not yielded a desired outcome. Nevertheless, as the harvest festive is yet to come, starting in March'19 corn price will go down.
We downgrade our poultry sector investment rating from Overweight to Neutral with the rationale of i) uncertainty on corn price that may pressure blended margins of feed millers and ii) possible rising broiler and DOC supply progressively in 1 – 2 years ahead underpinned by higher GPS imports quota and iii) normalized impact of AGP ban. We cut our TP of CPIN to Rp5,850 and downgraded rating to Sell from Hold. We also lower TP of MAIN Rp1,670, and cut rating to Hold from Buy. However, we reiterate a Buy call on JPFA with lower TP of Rp3,000, offering limited upside potential of 11.1%. Thus, JPFA remains our top pick in poultry sector. Currently the counter trades at 12.2x P/E 2019, or 46% discount compare to its peers.
At 10M18 new contracts only reached an average of 50.7% of FY18 target. PTPP stood out with 72% of Rp43 tn targeted, followed by ADHI (54% of Rp23 tn), WIKA (49% of Rp58tn) and WSKT (28% of Rp50 tn). However, it gradually improved toward year end. At end of 2018 contractors achieved 87% of target on average which are: ADHI of 101%, PTPP of 100%, WIKA of 89% and WSKT of 54.2%. The companies also secured sizable contract in early 2019 such as EPC contract of Rp12 tn (PTPP), Solo –Kulon Progo toll road of Rp29 tn (ADHI consortium), Jakarta-Cikampek II toll road project of Rp3 tn (WSKT) and Bangkinang – Pangkalan toll road section of Rp8,9 tn (WIKA).
SOE contractors set 22% average growth in new contract this year with WSKT expecting it to double, followed by WIKA of 21%, ADHI of 20%, PTPP of 16%. This came lower than CAGR of 34% in 2015-17. We believe the slowdown in growth is due to 1) the high base effect as new contract almost doubled from 2015 of Rp98.3 tn to Rp177.4 tn in 2017 and 2) management concerns over the future direction of infrastructure spending of the next administration prompting them to be more conservative. With respect to earnings, we foresee contractors and precast maker under our coverage to book net profit growth of 20-24% in 2019 except for WSKT of 10% decline. These are broadly in-line with companies' guidance but far lower than 2015-17 CAGR of 56.6% on slower order book growth mentioned above.
Indonesian government plans set up SOE Housing and Infrastructure holding companies this year. WIKA, PTPP along with some other will be under housing developer, PT Perum Perumnas. While other contractors, ADHI and WSKT will be under infrastructure holding which will be led by PT Hutama Karya. We do not see immediate impact to financial and operational aspect of companies' member. However, in the longer-time we expect the holding formation to bring synergy among member which result from 1) greater bargaining power in the supply chain , less competition and financing (lower cost of fund).
We believe the recent rally in contractors share prices implies that common investor concerns in the sector such as 1) negative growth in new contract, 2) worsened balance sheet and cash flow and 3) declining earnings growth have been answered to large extent. We expect the sector to see a moderate valuation re-rating as the market gains confidence in the sector's improved sentiment (higher contract growth, payment received from large projects, and reimbursement of toll road bridging fund ) and the share price can increase supported by earnings growth this year. We believe the construction companies and WTON could trade up to -1stdev of their average PER. Therefore we assigned higher TP for PTPP of Rp2,900, WIKA of Rp2420, ADHI of Rp2,260, WSKT of Rp2,620 and WTON of Rp680. Please refer to pages 6-10 for detailed key investment merits section.
China's coal imports are expected to decline by 7.0% YoY in 2019 and 9.0% YoY in 2020. This is due to the following reasons 1) additional local coal production 2) new upgrades of mines in China following renovations in 2018 to meet government emissions standards 3) an increase in China coal hauling rail road capacity. In addition, China recently has imposed import restriction of coal following strong coal imports in previous years and high level of coal inventory. It is reported that coal inventory at six major power plants in China is still relatively high at 17.9mn tons. In turn, we expect the Chinese government to not relax import restriction until at least late 1Q19.
India's coal prospects will remain positive, because 2019 Indian coal imports will increase by 1.1% YoY (from 122 mn tons to 124 mn tons), which will be driven by growth in industrial production. Limited by logistical, regulatory and environmental issues Coal India Limited (CIL), the largest India coal producer (84% of total India coal output) is only planning to increase output for 2019-20F by 6% - 17% YoY to 600mn tons - 700mn tons respectively. As India's coal demand is set to increase by 9.1% to 991.4mn tons in 2019. We believe domestic coal production may not be enough to meet demand. In 2018, Indonesia was the largest supplier to India with Indonesia's share of imports run around 39%.
Coal benchmark price for Newcastle 6,300 calorific value (CV) coal price has maintained their solid position at USD101.7/ton as at end of December 2018. While high CV coal is enjoying their price momentum, Low and Medium CV coal (5500 NAR and 4200 GAR) prices saw a decline. Per December 5500kcal/kg and 4200kcal/kg are trading at USD61/ton and USD30.1/ton respectively, this is mainly caused by China's coal import restriction development. Thus, the discount of Indonesian coal price with coal CV of 5500 and 4200kcal/kg to Newcastle benchmark price widened to 39% and 69% recently from only around 19% and 56% in the beginning of the year.
We downgraded our rating on coal mining sector to NEUTRAL following expected higher in China's domestic coal production and China import restriction which should put low and medium coal CV prices under pressure. As a result, we expect negative earnings growth in 2019F for most coal miners that mainly produces low and medium coal CV, but seeing a earnings improvement in 2020F on increase in volume. Our Top pick are ITMG and ADRO with a TP of Rp25,500 (13.6% upside) and Rp1,750 (25.4% upside) respectively. We like ITMG as it sells the highest CV coal in our universe which should be relatively immune to the China coal import curb and wider spread between high CV and low CV and it provides attractive dividend yield at 10.9%. While ADRO has the lowest CV thermal coal among the miners under our coverage, we believe that its integrated mining structure, the addition of coking coal and power business will help ADRO's earnings in the long run.
OPEC and some non-OPEC oil ministers meeting in Dec-18 agreed to curb their output by 1.2 mb/d in order to address growing surpluses in the market. The agreement aims to achieve relative stability and to bring the market towards balance. We believe the OPEC production cut agreement should lead to a balance between oil and supply and demand for 2019. OPEC expects global demand for oil to grow by 1.3 mb/d in 2019. The International Energy Agency (IEA) expects a rise in demand of 1.4 mb/d. We foresee global demand to grow because global economic growth still positive. This growth in oil demand will be mainly met by the rise in US crude production. EIA expects an increase of US crude production of 1.2 mb/d in 2019 to 12.1 mb/d. This is comparable with the production cut of OPEC and non-opec.
As we expect supply and demand should be pretty much in balance after the production cut agreement (vs. expected shortages in oil supply previously), we have adjusted oil price forecasts downward. The steep drop in oil prices in Oct-Dec 2018 created a new reality in which oil prices have less upside potential than we expected a few months ago. We slashed our average 2019-20F Brent oil price forecasts by USD8-6/bbl to USD66-68/bbl and WTI price forecast by USD7-6/bbl to USD60-57/bbl. We believe the severe selloff in oil due to miscommunication between the U.S. and OPEC member countries as well as political factors has created confusion in global oil markets. However, we still expect a modest recovery in oil prices from current levels. Brent price has rebounded by 21% to USD61/bbl from its 2018 lowest level of USD50.4/bbl in 4th week of Dec-18.
We do not see significant impact from lower oil price to PGAS earnings as we only assumed upstream unit contribution of 10-12% to total earnings for 2019-20F. We only expect high impairments ahead E&P investment if Brent price drops below USD40/bbl. We are now reviewing our earnings forecast and TP for PGAS following the completion of Pertagas acquisition at end 2018. We need to fine tune our revenue, interest expenses and interest income as the final deal is different from what we initially calculated. The latest deal of Rp20.2 tn is for 51% Pertagas (Pertagas Niaga plus + the remaining 4 subsidiaries) which is higher than initial deal of Rp16.7 tn for 51% stake in Pertagas (and Pertagas Niaga). PGAS will pay 50% of transaction using its internal cash and issue loan of Rp10.1 tn vs. our previous forecast of 70% cash and 30% loan. However, we are overall positive after the completion of acquisition, as PGAS would then have a monopoly on downstream gas business. We will meet the management soon to get new guidance on Pertagas volume and EBITDA. We currently have Buy rating on PGAS with TP of Rp2,720.
The JCI closed 3.86 points or 0.06% higher on the final trading day of 2018, bringing full-year decline of 2.5% and settled at 6,194 points. Investors took profit after the JCI rose to its intraday high of 6,206 points supported by mid-day window-dressing activities with positive sentiment driven partially by gains seen on Wall Street. Despite falling by 8.3% in USD term, the JCI outperformed its Asia ex-Japan peers as MXASJ index dropped by 16.4% for the full year. The JCI closing figure in 2018 was 1.5% lower than our target of 6,288 points. The JCI saw high volatility in 2018, trading at 5,634-6,689 range (see exh 1). We believe the negative return in 2018 was mainly due to global factors such as 1) escalated trade war between the US and China which raised investor concern about global economy and trade, 2) the US Federal Reserve interest rate hike of 100bps for this year while its forecast of fewer interest-rate increases in 2019 fell short of investors' hopes of a more dovish monetary policy.
What were the top leaders & laggards stock?
We looked at various stocks in JCI that have contributed the most to the decline and have seen selling pressure. Among JCI constituents, largecaps and midcaps led the lagging movers (see exh. 2). These include: HMSP, which dropped 21.6% in 2018 and contributed 89.4 points decrease to JCI) , followed by UNVR (-18.8% YoY ; -64.0 points) , TLKM (-15.5% YoY ; -47.1 points) , TRIO (-88.2% YoY ; -41.2 points) and UNTR (-22.7% ; -23.0 points). HMSP and UNVR were most negatively impacted by IDX's plan to include free-float adjusted variable for LQ45 and IDX30 indices weightings. From the top leaders pack, BBCA rose by 18.7% and contributed 95.4 points followed by CPIN which jumped more than doubled and add 63.1 points. There were also plenty of rally in several stocks that might have got unnoticed such as TCPI , a shipping stock which jumped more than 70-fold (contributing 39.4 points) and BYAN , a coal stock, which almost doubled in 2018 (add 29.6 points). TCPI share trading has been halted since Novembers due to significant increase in cumulative price while BYAN shares are trading with very thin volume. Sector wise, Basic industry & chemical stocks record the highest return of 24.0% followed by mining of 11.5% and banking of 3.1%. Meanwhile, consumer and trade & service posted negative return of 10.2% and 14.9%, respectively (see exh. 3).
We are still constructive on Indonesia equity market in 2019 and we expect the following factors to act as market drivers: 1) resilient economy at 5.1% GDP growth, 2) a less pressures on Rupiah and interest rate on fewer Fed rate hikes and lower oil prices which is also expected to lower CAD , 3) solid earnings growth (13.5% market EPS growth), 4) The lightest positioning of foreign investors (45.3% of total mkt-cap) after they sold Indonesian stock to a annual record USD3.7 bn and 5) we also believe the election event will support JCI performance as historical returns during election years were always positive and double digit. Therefore, we maintain our Overweight stance on Indonesia equity with YE-2019 target of 6,980 (set in Oct-18), implying 13% upside potential. We believe JCI's current valuation of 15.6x 2019F PER is still attractive (see exh. 4) as it is still lower than historical average of 16.5x and supported by strong earnings growth.
We generally maintain our investment themes (see exh. 5) for the market in 2019: i) banks that are expected to continue performing well during rising interest rate environment: BBRI, BBNI and BTPS (ii) beneficiary recovering household consumption on consumption-friendly policy ahead elections: GGRM and ICBP, iii) stocks with cheap valuation which is expected to generate alpha: JPFA and ERAA. However, we replace our commodity picks (UNTR and MEDC) with contractors (WIKA and PTPP) as our coal and oil analysts are reviewing their coal and oil prices assumption due to recent unfavorable developments sweeping commodity stock with negative sentiment. We do not expect to see the glamour part of the construction sector where it has been trading at significant premium to market valuation in the past, however, we still expect a rebound in construction sector this year on sector rotation and historically the construction sector saw re-rating during election year (see exh. 6). We are also reviewing our TP on BBRI, BBNI and ICBP due to their TP now offers less than 10% upside potential on recent rally in share prices.
Following earnings revisions, the aggregate 2018-19F earnings estimate of companies under our coverage declined by 5%-3%, translating into EPS market of 360 and 398. Our new 2018F market EPS forecast is in relatively line with Bloomberg EPS positive forecast of 361 and 390. With 2018 likely to be another year of tepid earnings growth (8%), we would watch out for downgrade risks to 2019 growth estimates (+11%) , given downside risk may come from : 1) higher interest rate expenses following 100bps increase in benchmark rate this year while there is still potential another rate hike given Fed's plan to increase its rate 3Q or 4Q18, 2) 5.8% Ytd depreciation in Rupiah against USD , which may weak further as the CAD is likely to widen close to 3% of GDP in 2Q18, on wider net oil deficit and a weaker goods trade balance expectations.
The JCI has corrected by 13% from the peak in February, but we remain cautious going into the rest of the year for following reasons. First, external factors that could drive JCI lower: 1) news flow on US-China trade war could turn out as negative to global risk appetite and 2) another round of Fed rates hike. Second, domestic macro uncertainty (weak Rupiah, widening CAD and unimpressive economic growth) could continue to plague Indonesian equities. Third, foreign outflows could strengthen again as foreigners are likely to reposition to prepare for the second round of MSCI's China A-share inclusion , effective on 3 September while the strong dollar is also pressuring the JCI as foreign investors will book lower translated gains in US dollars. Next week, BPS and BI are scheduled to release 2Q18 GDP (6-Aug) and CAD data (10-Aug), respectively, and market will also watch nomination of president and VP candidates. The above are several factors that could drive the JCI in either direction in 2H18 but we believe is skewed to lower side.
Based on our new market EPS number while we maintain intrinsic forward PER of 15.8x, which we derive using RFR of 6.9% and ERP of 5.0%, our YE-18 JCI target is reduced from 6,499 previously to 6,288 (rounded up to 6,300). The recent market recovery drives forward PER back to 15.2x, which is close to our fair valuation level for JCI. As our new YE-18 JCI target leaves only 5% upside from current level, we reduced our market rating from Overweight to Neutral for FY18. As we still believe the current market situation is not very different now if compared to 2013 and 2015 episodes (sharp depreciation in rupiah, high rate hike and widened CAD), we still recommend investors focus on the following themes 1) stocks that had been constantly outperformers in 2013 and 2015 such as BBCA (TP: Rp26,100), UNVR (TP: Rp4,900) , TLKM (TP: Rp4,600), ICBP (TP; Rp9,600) , and PTPP (TP: Rp3,100) , 2) weak Rupiah play UNTR (TP: Rp46,000) , 3) benefit from strong oil price : MEDC (TP: Rp1,630) , 4) The most profitable bank with ROA of 9% and ROE of 30% and unique business model BTPS (TP: Rp2,170). Downside risk: Based on 2013 and 2015 experience, JCI could hit its lowest level between mid August or end of September (see exhibit 3).
U.S. stock markets closed a holiday shortened session in red with technology and financial shares leading the declines ahead of Independence Day. DJIA slipped 0.5% (-132.56 points), S&P inched down 0.5% (-13.49 points) and Nasdaq fell 0.9%. Trading volumes were relatively lower compared to normal due to Fourth of July holiday on Wednesday. Moreover, selloff in tech sector expedited after news related with Micron Technology on temporarily blocked from selling some of its memory chips in China. On commodity markets, Brent and WTI rose by 0.6% and 0.27% to USD77.8/bbl and USD74.1/bbl. According to Morgan Stanley's analyst, crude oil is likely to go up in 2H18 following the U.S. sanctions on Iran limit output which potentially reduce production from Iran up to 1.1 mn barrels per day.
JCI dipped by 112.8 points or 1.96% to close at Rp5,634 on Tuesday and recorded Rp538 bn net foreign sell. Basic Industry (-3.89%), Misc. Industry (-3.06%), Infrastructure (-2.59%), Finance (-2.00%), Trade (-1.84%), Property (-1.46%), Mining (-1.18%), Consumer (-0.99%) and Agriculture (-0.90%) were the sector laggards, with BBCA (-3.96% to 20,600), BMRI (-3.07% to 6,325), PGAS (-16.4% to 1,630) become the lagging movers. Rupiah currency weakened by 7 points to Rp14,397/USD. Our technical desk suggests for trading within the band of 5,550 – 5,650, with possibility to end at mix level.
Selling pressure continues on the Indonesian bourses causing the benchmark JCI to drop 7% Ytd to 5,909, but seeing a corrective bounces in the last two days. This market sell-off was due mainly to concerns about global sentiment, particularly the US Fed's plan to raise interest rates this year, which continues to put pressure on the rupiah. On Wednesday, Rupiah fell to Rp 14,084/USD, the lowest level since December 2015 . The Indonesian rupiah is the currencies with twin deficits (current account deficit and fiscal deficit), in addition to the Indian rupee and the Philippine peso, which made investors more worried on the newfound hawkish Fed sentiment. The mood in the government bond markets has also been pessimistic as currency volatility has weighed on carry appetite. Indonesia Finance ministry decided to reject all offers in last auction (8 May) on higher yields sought by bidders. We see these conditions are exacerbated by 1) moderate GDP growth with potential downside risks and 2) unsurprisingly and appear rather weak 1Q18 earnings results.
Over the past decade, we have seen the Rupiah value versus the dollar (IDR/USD) and the JCI moving in tandem on many occasions. Take the case of 2008 when rupiah crashed from 9,393/USD to 11,120/USD, the JCI fell vertically by 51%. Then again in 2015, the rupiah literally crashed from a level of 12,388/USD to 13,788/USD and this period was also marked by a sharp correction in the JCI of 12%. The JCI and the rupiah are directly and indirectly affected by several similar factors, including among others : the outlook for the Indonesian economy, trade deficit (surplus), foreign institutional investors' (FII) flow, forex reserves, and monetary policies undertaken by governments across the globe. Sometimes, there could be a temporary disconnect between the JCI and the rupiah movements. For instance, during 2012 to 2014, markets were rising with JCI up by 13% and 22% , but the rupiah saw a depreciation of 7% and 2%. This was mainly because of some temporary, albeit strong factors, influencing the currency. These included global geopolitical developments, local political issues, and the effect of banking sector which have the biggest weighting (currently 30%) in the JCI and is not impacted by the IDR/USD movement in a big way as their forex assets should equal forex liabilities. But, even so , the JCI and the Rupiah had a positive correlation of 0.63 during 2008-2018. (see exh. 2).
1Q18 real GDP growth came in at 5.06% YoY, which fell from 5.19% in 4Q17 despite improving from 5.01% in 1Q17. This came below both our (5.16%) and consensus (5.19%) expectations. GFCF (investment) lead the growth with the highest pace of 7.9% while household consumption remained steady at 4.9% YoY and government spending moderate to 2.7% YoY. However, weaker external demand condition became a drag factor with net export slashing real GDP growth. Given this outturn we see downside risks to our GDP forecast of 5.3% in 2018, however, our economist prefers to maintain his forecast as he still expect improvement in coming quarters from . We still view that a relatively stable growth report is likely to give BI the confidence to tighten policy, if market volatility heightens again, weighing on the rupiah and driving bond yields higher.
Almost all of companies under our coverage have released their 1Q18 earnings results with the exception of ITMG. Only 8% of companies beat estimates or poses upside risk to our earnings forecast, 18% fell short or slightly miss and the rest 74% in line with. We made 8 changes to our earnings forecast with 6 downgrades and 2 upgrades. As results our 2018F and 2019F market EPS slightly declined by 3.1% and 1.4% to 363 and 410, implying 12.8% YoY and 12.9% YoY growth. We also raised our risk free rate assumption from 6.8% to 6.9%, resulted to lower intrinsic market PER of 15.8x (at -0.5stdev of mean). These together bring our year-end JCI target lower to 6,499 (rounded up to 6,500) (see exhibit 4 for detailed calculation). As our new JCI target implies 10% upside from current price, we maintain our Overweight stance on Indonesia equity market. Our stock picks are BBNI, BBTN, BNGA, GGRM, SCMA, UNTR, MEDC, and PTPP. We also recommend tactically buying stocks that have declined by more than 25% Ytd such as: JSMR, EXCL, TOWR and SILO.


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Police nab cocaine in 15-yr-old rum
Oct 06, 2014 News 0
The ever vigilant Police Anti-Narcotics ranks stationed at the Cheddi Jagan International Airport, Timehri yesterday intercepted an outgoing passenger on his way to New York with almost six kilograms of cocaine.
The drug was concealed in four bottles of 15 year old El Dorado rum.
This newspaper understands that at about 03:30 hours, the ranks stopped the Guyanese man who was about to board BW 524 to JFK International Airport in New York, USA.
His suitcase was checked and ranks observed that the four bottles of rum seemed unusually heavy for the liquid that it was supposed to contain.
A quick field test was done on the rum and it was found to contain a substance other than liquor.
The man was escorted to Georgetown where the police analyst conducted further tests which confirmed that the rum was laced with cocaine.
The drug was subsequently extracted and found to weigh almost six kilograms. The man has been arrested and is assisting police with their investigations.
Earlier this week, police anti-narcotics ranks Police anti narcotics agents put a huge dent in the operations of marijuana farmers in the Upper Demerara River district, raiding and destroying several acres of cultivated plants, with a street value that could reach as high as US$20M.
The agents had carried out the raid last Tuesday at a location called Hauraruni.
So far for this year, police narcotics ranks were involved in several similar operations in the Berbice and Demerara River areas as well as the Soesdyke/Linden Highway.
They have managed to destroy more than 180,000 marijuana plants and close to 400,000 tonnes in harvested cannabis.

redpajama_set_name: RedPajamaCommonCrawl


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Creggs Rugby 8, Connemara RFC 13.
Connemara travelled to Creggs for Sunday's top-of-the-table Junior 1A League decider and emerged victorious following an immensely physical battle, with the outcome in the balance right to the last play of an enthralling game.
With time almost up, Creggs were camped on the Connemara line but a tremendous turnover sealed a vital win for the experienced West Galway outfit. Despite the intense competitiveness, this match was played with great spirit by both teams and particular credit is due to the Connemara defence which was unyielding in the face of sustained Creggs pressure.
The large crowd enjoyed a fast and fluid opening flurry which saw scoring chances at either end before Connemara right winger Marty Conneeley finished off a slick handling move with a try after 14 minutes to silence the large home crowd.
Creggs needed something special to lift the spirits after this score and it came in the 28th minute when fullback Ronan Dowd counter-attacked from just outside his own 22 and linked with his brother Shane who took his pass at full pace and set off on a brilliant 70 metre run which took him clear of the opposition for a super score.
With neither try converted, the score remained at 5 all but Creggs were now in ascendancy. Connemara looked to be in deep trouble when Ulster referee Robbie Mc Greer produced a yellow card for a high tackle in the 32nd minute.
However Creggs failed to capitalise on their numerical advantage and instead it was Connemara who went ahead during this period with a well taken try by second-row Eugene Conroy following a series of rucks close to the line.
Creggs were awarded a penalty on the stroke of half-time, which Ronan Dowd slotted to narrow the gap to 10 – 8. Connemara turned around to face into the stiffening wind and would not have been comfortable with such a slender lead.
Unfortunately, the third quarter did not go according to plan for the home team with the previously efficient lineout beginning to malfunction under increased pressure from Connemara. Several vital balls were stolen and this deprived Creggs of a key attacking platform.
Connemara also showed great commitment and technique in the rucks and won some critical battles on the floor. On a rare excursion into the Creggs 22, Connemara were awarded a penalty which fullback Henry O'Toole converted to lead by 13 to 8 heading into the final ten minutes.
Creggs threw everything into attack in search of a try but Connemara held firm to grind out a hard-fought win, the final whistle being greeted with a mixture of relief and elation by their large band of supporters. Creggs are still not entirely out of the League title race but are now reliant on other teams to defeat Connemara on their title run-in. This is very unlikely, as both their remaining games are at home in Clifden.
Creggs must now regroup for next weekend's Junior Cup Quarter-Final at home against Monivea. Creggs suffered two early setbacks in this game with prop Eoghan Farrell and centre Tom Callaghan sustaining injuries in the opening ten minutes. Number 8 Kevin Brandon also had to be replaced and these changes were disruptive in such a finely balanced contest.
On the plus side, Tom Fleming has made a speedy recovery from injury and he made a valuable contribution when he replaced the unfortunate Farrell after just four minutes of action. Aidan Leech also had a storming game, carrying the ball with intent at every opportunity.
On a day when each player stood up to the challenge, Brian Diffley and Kevin Brandon were prominent throughout, while the Dowd brothers, Chris Duignan and James Brandon carried the fight to Connemara out wide. Connemara had star performers in the three O'Toole brothers, with centres David Mc Donagh and Eoin Bourke impregnable in defence while Kevin Barry, Eugene Conroy and Niall Staunton also made valuable contributions.
Creggs Rugby: Ronan Dowd, Thomas Flynn, James Brandon, Tom Callaghan, Chris Duignan, Shane Dowd, Mark Brandon, Eoghan Farrell, Maurice Buckley, Aidan Leech, Brian Donoghue, Tom Oates, Ronan Cahill, Brian Diffley, Kevin Brandon, Tom Fleming, Sean Higgins, Luke Meehan, Brian Coady, and Andrew Callaghan.
Connemara: Henry O'Toole, Marty Conneeley, David Mc Donagh, Peter OToole, Ian Heanue,Michael OToole, Kevin Barry, Barry Gibbons, Ian Staunton, Eugene Conroy, Niall Staunton, Conor O'Malley, Paul Lee, T J Berry, Marco Tademeyer, Kevin Keogh, Thomas Sicre, Dylan Slater, Emmet Ferron, and David O'Reilly.


After arriving in Georgetown, Tasmania, on the Devil Cat (jet-powered catamaran ferry) from Melbourne (a 6 hour trip), we bused down to the northern city of Launceston. About a 15 minute walk from downtown Launceston is an amazing place called Cataract Gorge.
There is a lot to do in Cataract Gorge, which is a reserve (Australian for "park") featuring a chairlift over a deep basin of water, swimming pools, gardens, a suspension bridge, and roving peacocks.
However, on the day we visited, the only thing good was the weather. Danger lurked in the shadows ... when would it strike?
Check out Cataract Gorge, take a chairlift ride over First Basin, and swing out to the suspension bridge, all the time enjoying the scenery of Zig Zag Reserve.
Our hero preparing to bravely trek into the wild park that leads into Cataract Gorge.
Only 100 meters into the park, our hero faces his first danger: navigating a large collection of flowers places in his path.
Elaine Lambert and Kath seem oblivious to the danger that surrounds them.
Or is this the look of worry that our hero might get lost in the gorge, never to return?
Like Indiana Jones (which is the closest comparison to our hero I can think of), truk spies a chairlift to take the family away from danger.
Or will it deliver them into the clutches of the villains that surround them?
High above the swirling waters, truk notes civilians on the ground and laments the inevitable "collateral damage" to follow.
One slip in the chairlift and the river below waits to sweep you away and crush your skull on the sharp, jagged rocks below.
Bushy trees on both sides attempt to snag our heros and pull them down the danger, but they brush off every attempt.
Mocking death, Kath sneaks in a grin when the end of the chairlift is in sight.
The calm waters of the First Basin below hide the many sea creatures lurking and waiting for our party to get too close.
High cliff walls prevent any escape, serving to seal our fate.
Weapons temporarily sheathed, our heros venture toward the bridge, ever vigilant for the dangers that surround them.
"Are those children playing cricket over there on the lawn? You take the frontal approach, and I will flank them the left side..."
Drenched in the blood of their enemies and exhausted from the fight, our hero near the bridge shifting the strong wind.
Is that a friendly wave from Elaine . . . or a signal for help?
High above the icy depths, Elaine struggles to the other side of the bridge.
Upriver, the thrashing of the crocs sliding off of the banks into the water is enough to send a shiver up your spine.
Larry waves us forward, "Stop! Go back! The dragon is behind me!"
With weapons no match for the giant, our hero and his friends beat a hasty retreat using the chairlift to whisk them from certain death!
River water crashes on the rocks below them, but onward they travel, too scared to look back.
Sensing the approach of a violent end, Kath purses her lips and waits for the inevitable.
Below them, the dragon rears back and prepares to unleash hell!
Our small band of warriors passes out, waking up hours later, far away from danger and wondering about their miraculous escape.
The only clue to where they are is a scenic lookout above a glorious valley on three sides.
... as Larry scans the horizon for any sign of the dragon.
Pretty flowers ... or a hiding place for the beast?
The winding road down the valley seems peaceful, but is it?
Caged by high mountains in the distance, our heros struggle on.
A hairpin turn leads down into the valley.
"Proceed with caution," pleads Larry.


text:
Share this Story: Editorial: Don't shred these federal workers' jobs
Editorial: Don't shred these federal workers' jobs
Ottawa Citizen Editorial Board
(Clockwise from lower left) Suzanne Winter-Heartson, 32, Brian Jones, 48, Scott Helman, 50, and Paul Pringle, 45,. They are four of 33 workers with developmental disabilities who have been told their contract shredding paper for the federal government will end next year. Photo by Wayne Cuddington /Postmedia
Shredding and sorting paper may not sound to some people like an ideal career. But to 34 developmentally disabled Ottawa adults, it has been a positive, essential experience. So let's find a way to save their jobs – or offer them a plan that is equally constructive.
The background: For almost four decades, the federal government has employed developmentally challenged adults in this structured work, originally for Library and Archives Canada but now for a variety of departments. The program is run by the Ottawa-Carleton Association for Persons with Developmental Disabilities.
Editorial: Don't shred these federal workers' jobs Back to video
There's value to processing all that federal paper waste, but the real bonanza is how it teaches the workers important basic skills: showing up reliably and punctually; completing a task; practising social interaction. In the private sector, it's hard to find the right blend of job opportunities for a first-time worker who struggles with challenges. Yet many of these workers have eventually been able to move successfully to other employment. There are currently 34 people in the program.
The program is now threatened mostly for money reasons: Until recently, the workers were paid an honorarium of $2,000 annually. New rules say they must be compensated at minimum wage, $14 an hour for the hours they work. The Liberal government have extended the program a year but says it will end in 2020.
Understandably, both the workers and their families are upset. Conservative leader Andrew Scheer called it a "costly and heartless" decision.
Admittedly, this is not a simple issue. Some argue that the actual tasks being performed by these employees are diminishing in importance as the market for recycled paper products shrinks. Others decry segregated workforces as "tokenism." It may be that there are other, more practical means of supporting this cohort.
But saving money by ending the program is an illusory goal. One family wrote to us that when their son was receiving only the honorarium, he could claim a provincial disability pension as well. Now that he is at minimum wage, the provincial pension is reduced accordingly. In other words, governments pay, one way or another. being paid to perform a task is always better.
Liberal Minister of Public Services Carla Qualtrough has made positive, if vague, statements about being committed to new jobs for the workers, and we don't doubt her sincerity. But words won't make it so. Ms. Qualtrough, show us a specific, compassionate and useful plan to employ these people who are so eager to work.


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It's not too late to start playing, as we award a prize each week to the player with the week's highest score!


text:
Baume & Mercier é uma empresa suíça relógios de luxo fundada em 1830. É uma subsidiária do conglomerado de luxo Richemont.

História

A Baume & Mercier foi fundada como "Frères Baume" em 1830 pelos irmãos Louis-Victor e Célestin Baume, que abriram um comércio de relógios em Les Bois, um vilarejo no Jura Suíço. O fabricante suíço de relógios expandiu internacionalmente estabelecendo uma filial em Londres em 1921 sob o nome "Baume Brothers", o que levou à expansão no Império Britânico. Ao final do século XIX, a empresa tinha estabelecido uma reputação internacional e seus relógios tinham estabelecido recordes de precisão e ganho uma quantidade de competições de marcação de tempo.

Em 1918, o diretor da empresa William Baume fez uma parceria com Paul Mercier para fundar a "Baume & Mercier" em Genebra. A firma se tornou especializada na fabricação de relógios de pulso, modelos com "formas" particularmente não convencionais que não tinham o formato tradicional redondo. Em 1919, a Baume & Mercier recebeu o Punção de Genebra, o mais alto destaque internacional de todos os tempos para a excelência na fabricação de relógios.

Durante os "Roaring Twenties", a marca adotou a emancipação das mulheres. Nos anos 40, a Baume & Mercier lançou um número de coleções de modernos relógios femininos, mas notavelmente o Marquise.

Nos anos 70, a Baume & Mercier apresentou relógios modelados como os modelos Galaxie e Stardust. Em 1973, a Baume & Mercier apresentou o Riviera, um dos primeiros relógios esportivos de aço do mundo. Em 1988, o fabricante suíço de relógios se juntou ao grupo Richemont.

Atualmente, a marca oferece as coleções Clifton, Classima e Hampton para homens e mulheres,  a coleção Capeland para homens e as coleções Linea e Promesse para mulheres. Em 2015, Baume & Mercier incrementou sua oferta de relógios esportivos ao firmar uma parceria com o prestigioso fabricante de carros de corrida Carroll Shelby International. A companhia oferece a edição limitada de modelos "Shelby Cobra" , concebido para carros esportivos, nas coleções Capeland e Clifton.

Embaixadores
Os embaixadores celebridades da Baume & Mercier incluíram Gwyneth Paltrow, Emmanuelle Chriqui, Andy Garcia, Gary Sinise, Ashton Kutcher, David Duchovny, Teri Hatcher, Kim Basinger, Evangeline Lily, e Kiefer Sutherland. A campanha "Baume & Mercier & Me" de endosso de celebridades foi usada para levantar dinheiro para caridade. Em dezembro de 2015, o ator, cantor e modelo chinês Chen Kun se tornou um famoso embaixador da Baume & Mercier, ao usar um relógio da coleção Clifton na sua campanha  de apresentação.

Coleção atual
Os modelos atuais na coleção da Baume & Mercier:
 Hampton – coleção de formato retangular vintage baseada nos relógios Baume & Mercier dos anos 40 no estilo Art déco
 Capeland – coleção vintage cronógrafo
 Classima – coleção minimalista de relógios clássicos
 Linea – coleção feminina com pulseiras intercambiáveis
 Clifton – coleção vintage baseada nos relógios Baume & Mercier dos anos 50
 Promesse – coleção feminina elegante inspirada nos modelos da década de 1970, com moldura oval ao redor de um mostrador redondo

Precificação
Com um preço médio de venda entre 2.000 e 5.000 dólares, os relógios Baume & Mercier estão na faixa média do segmento do mercado de relógios de luxo.

Em 2016, Baume & Mercier passou a apresentar ofertas mais em conta, abaixo de 1.000 dólares ao lançar os modelos  "My Classima", uma subcoleção da coleção de relógios clássicos Classima.

Coleções anteriores
 Riviera – coleção de cronógrafos esportivos. Para comemorar o jogo perfeito acontecido em 29 de maio, 2010, Roy Halladay do Philadelphia Phillies comprou 60 cronógrafos Riviera Sport 8724 para cada um de seus colegas de time, todo o corpo de treinadores e todo o pessoal da sede do clube, para expressar seu apreço.
 Diamant – coleção feminina apresentando uma assinatura "diamante oval"
 Iléa – coleção feminina com 30 mm de diâmetro, apresentando um diamante descentralizado na coroa

Ligações externas

Baume & Mercier
Baume & Mercier no Facebook
Baume & Mercier no Twitter

Marcas da Richemont
Empresas de Genebra
Genebra
Empresas relojoeiras suíças

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