Indonesia Consumer Survey 2016 - Credit Suisse

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05 April 2016

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Equity Research

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Indonesia Consumer Survey 2016

CONNECTIONS SERIES

Rise and shine

Credit Suisse Indonesia Consumer Survey: Key themes……………………….. 4

The sixth Credit Suisse Indonesia Consumer Survey……………………………12

Key sectors………………………..………………………..……………………….. 29

Top picks………………………..………………………..……………………….….81

Research Analysts

Ella Nusantoro

62 21 255 37917

[email protected]

Priscilla Tjitra

62 21 2553 7906

[email protected]

Christy Halim

Michael Pranata

05 April 2016

Indonesia Consumer Survey 2016 2

Introduction We are delighted to publish the sixth edition of Credit Suisse Research Institute’s

Emerging Consumer Survey—a project reflecting the results of nearly 16,000 detailed

face-to-face interviews with consumers across nine major emerging economies of Brazil,

China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa and Turkey. In

conjunction with this publication, our investment bank research analysts publish the EM

Consumer Playbook, which focuses on related investment recommendations.

With investor sentiment now showing signs of improvement in emerging markets, our

study provides investors timely insights with regard to the powerful theme of a fast-

developing consumer culture shaped by technological innovation. Should there be doubt

as to the significance of the story, our analysis suggests that nearly 100 mn new

households in our survey countries have found their way into the middle-class territory in

the last two years.

These signs of improvement do of course come after a torrid 2015 for investors in the

region, and our barometers of consumer confidence reflect this. The percentage of our

respondents who now consider it a good time to make a major purchase has fallen by 10%

against a year ago. Similar indicators for Brazil and Russia have dropped sharply. The

countries that top our Emerging Consumer Scorecard are India, China and Saudi Arabia.

Supportive momentum to personal incomes is the common factor.

The weakest countries (Brazil, Russia and South Africa) shared a difficult economic

cocktail of weak currencies, commodity exposure and political risk in 2015. We show how

a weak currency is negative for consumer confidence. Hence, a revival in fortunes of the

countries above and on-going support for emerging consumers rest more widely on the

stability of their currencies in 2016. The good news is that the improving relative growth

projections for emerging markets coupled with currencies that seem intrinsically

undervalued suggests that this could be the case.

We also find that the rise of the emerging consumer is defined as much by age as

nationality. In nearly every surveyed country, the income prospects of the youngest age

brackets are the most optimistic. When we drill down into how this youthful dollar is spent,

a 'lifestyle' theme emerges and specifically is one of a growing healthy lifestyle.

'Premiumisation' is the other watchword to come through in our interviews. The on-going

sharp growth in e-commerce activity and the developing 'sharing economy' provide a

broader backdrop. In e-commerce specifically, we illustrate how online retail markets

across the key countries surveyed can more than triple annual revenue to reach US$2.5 tn

by 2025.

Finally, a legitimate question to pose is whether the structural themes that we seek to draw

out here actually matter for an investor amid economic stress. Clearly, the tailwind of a

cycle on the upswing and a healthy degree of risk appetite are optimal. However, if

investors had simply exited emerging markets as relative growth momentum began to flag

in 2010, a five-fold increase in the online penetration of retail sales in China would have

passed them by, as would the opportunities from the rural transformation in India and

successive years of growth in healthcare provision.

Even when the cycle is a challenge, structural themes can and do still deliver. We believe

that this year’s Survey and Playbook should continue to provide an instructive guide for

investors.

Giles Keating, Vice

Chairman of Investment

Solutions & Products

Stefano Natella, Head of

Global Markets Research

05 April 2016


Credit Suisse's Indonesia Research Team

Research analysts Telephone Email

Jahanzeb Naseer +62 21 2553 7977 [email protected]

Ella Nusantoro +62 21 2553 7917 ella.nusantoro@credit suisse.com

Priscilla Tjitra +62 21 2553 7906 [email protected]

Ari Jahja +62 21 2553 7976 [email protected]

Sanjay Jain +852 2101 6088 [email protected]

Laurensius Teiseran +62 21 2553 7931 [email protected]

Colin McCallum +852 2101 6514 [email protected]

Anand Swaminathan +65 6212 3012 [email protected]

Santitarn Sathirathai +65 6212 5675 [email protected]

05 April 2016


Credit Suisse Indonesia Consumer Survey 2016: Key themes Figure 1: Emerging consumer survey scorecard 2014 vs 2015

Rankings Personal

finances

Inflation

expectations

Household income

expectation

Time for a major

purchase

Income history Rank based on

five factors

(6-12m horizon) 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015

India 2 3 3 4 3 2 2 2 1 1 1 1

China 4 1 4 3 5 4 3 3 4 4 5 2

Saudi Arabia 5 4 5 2 5 5 1 1 3 3 4 2

Indonesia 3 2 6 7 2 1 4 4 2 2 3 4

Turkey 9 6 1 1 9 7 7 8 7 5 6 5

Mexico 6 5 7 6 4 8 9 5 8 8 7 6

Brazil 1 6 2 8 1 3 4 9 5 9 2 7

South Africa 7 8 8 9 8 6 8 6 9 6 9 7

Russia 8 9 9 5 7 9 6 7 6 7 8 9

Note: Ranking is on a score of 1-9 for the nine countries surveyed. Source: Credit Suisse Emerging Consumer Survey 2016.

Figure 2: Indonesia's GDP peaked in 4Q10 and reached its

lowest in 2Q15...

Figure 3: Food spending increased to 50% in 2015 from

28% in 2010

6.0

6.3

5.8

6.8

6.5

6.3

6.0 5.9

6.1 6.2

5.9 5.9

5.5 5.6 5.5

5.6

5.1

5.0 5.0 5.0

4.7 4.7

4.7

5.0

4.5

5.0

5.5

6.0

6.5

7.0

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

GD

P g

row

th (%

)

Housing

8% Auto2% Education

4%

Food50%

Home and Personal Care

8%

Health Care6%

Savings18%

Entertainment4%

Source: Bloomberg Source: Credit Suisse Emerging Consumer Survey 2016

Figure 4: Indonesia's spending momentum 2015 vs 2010—what has changed in behaviour from six years ago

Carbonated drinksBottled water

Dairy products Instant noodles

Cigarettes

Tissues

Feminine hygiene

Cosmetics

Basic mobile phone

Smartphone

Cars

Internet access

Computers

Property

Holiday

Motorcycle

Fashion apparel

Sport shoes and wear

Watches

Jewellery

Perfumes

(30)

(20)

(10)

-

10

20

30

40

- 10 20 30 40 50 60 70 80 90 100

Reco

rded

spen

ding

in 2

015

vs. 2

010

2015 respondents that own/have bought each item (%)

Source: Credit Suisse Emerging Consumer Survey 2016

05 April 2016


Key themes from the emerging consumer survey in 2016

(1) The emerging consumer in 2016

Weak markets and currencies, and downgraded growth expectations have provided

the backdrop of this year's Emerging Consumer Survey. The Indian and Chinese

consumers are still the most robust, while the picture in weak-currency countries such

as Brazil and Russia is poor.

(2) It's all about the currency

While there is a debate of cause and effect, the currency effectively serves as a

transmission of hardship to the consumer via imported inflation on the one

consumption item that typically consumes more of the household budget than any

other—food. EM currencies have rarely been so far from estimates of purchasing

power parity (PPP). Clearly these currencies do not operate in a vacuum. As much as

the local factors such as politics, commodities and risk appetite are at work, they

reflect the broad deterioration in the economic momentum in the emerging versus the

developed word that we have seen in recent years.

(3) The EM consumer through a global lens

Confidence of many of the EM countries, particularly our top countries of India, Saudi

Arabia, China, and Indonesia, rank head and shoulders above many of the DM

consumers in the current environment.

(4) What does an optimistic consumer look like?

The broad themes that emerge have a resonance with previous surveys in that the

urban, young and higher-income earners offer the greatest degree of optimism.

(5) And who's buying what?

In terms of spending intention, we find the low ticket categories are the ones showing

the strongest momentum in every country compared to our previous survey. The

categories with highest spending intention and strongest momentum include fashion

items, sports shoes, perfumes and cosmetics. Categories with low spending intention

and weak momentum include foreign holidays, cars and electronics. Smartphones

show the weakest momentum of all; however, its penetration rates have risen rapidly

which naturally reduce spending intention. Fashion items and especially sports shoes

appear to be underpenetrated and still offer longer term potential as discretionary

spending increases.

(6) Structural growth in e-commerce

Data from this year's EMC survey clearly supports an on-going positive view on the

outlook for e-commerce, despite softer macro conditions in emerging economies. We

believe the softening economic conditions might actually improve the relative

competitive position of online operators, versus the more traditional "brick and mortar"

companies. The further expansion of the middle class, along with rising smartphone

ownership and related internet access also support a positive view on the e-

commerce growth story.

05 April 2016


Table of contents Introduction 2

Credit Suisse's Indonesia Research Team 3 Credit Suisse Indonesia Consumer Survey 2016: Key themes 4 Key themes from the emerging consumer survey in 2016 5 Key themes from Indonesia 8 Key stocks preference 9 The sixth Credit Suisse Indonesia Consumer Survey 12

2015 was a challenging year... 13 ...with economic growth slowing down 13 But Indonesians continue to be optimistic 18 How do Indonesians spend their money? 22 Savings are improving, but still low 26 Still worries over higher inflation 27 Key sector selections 29

Automotive sector 30 Key stocks 30 Four-wheelers 30 Two-wheelers 31

Food and beverages 34 Key stocks 34 Looking for convenience 34 Preference towards local brands 36 Modest price increase seen 37 The rising popularity of beverages 39 Instant noodles 42 Dairy products 43 Cigarettes 45

Personal care products 53 Key stocks 53 Defensive goods 53

Branded goods 55 Key stocks 55 Aspiring for premium brands 55 Fashion 57 Sports shoes and wear 59

Internet and e-commerce 61 Mobile phones 65

Key stocks 65 The era of smartphones and LCD TVs 67

Healthcare 69 Key stocks 69 Availability of Jamkesnas reduces healthcare spending 69

Property 72 Key stocks 72 Potential demand continues to be high 73 Price expectations 74 Young population is key 75 High disposable income growth 76 Rising middle class and affluent consumers (MAC) 77

Banks 78 Key stocks 78 Auto interest on lower interest 78 Key stock selections 81

05 April 2016


Telkom (Telekomunikasi Indo.) (TLKM.JK / TLKM IJ) 82 Astra International (ASII.JK / ASII IJ) 84 Indofood CBP (ICBP.JK / ICBP IJ) 86 Indofood Sukses Makmur (INDF.JK / INDF IJ) 88 Matahari Department Store (LPPF.JK / LPPF IJ) 90 Summarecon Agung Tbk (SMRA.JK / SMRA IJ) 92 Bank Tabungan Pensiunan Nasional Tbk (BTPN.JK / BTPN IJ) 94 Link Net Tbk (LINK.JK / LINK IJ) 96 Siloam International Hospitals (SILO.JK / SILO IJ) 98 Tiphone Mobile Indonesia (TELE.JK / TELE IJ) 100 Appendix 1: Respondents' summary 102

Demographics 102 Income and others 103 Auto 106 Food and beverages 107 Personal care 108 Luxury goods 109 Technology and Internet 111 Telecommunications 112 Travel 114 Education 115 Healthcare 116

Appendix 2: Indonesia macro 117

05 April 2016


Key themes from Indonesia We present you the sixth Credit Suisse Indonesia Consumer Survey, for which we

conducted a survey on 1,530 participants from ten exclusive areas.

2015 was a challenging year...

Within the nine emerging countries that we surveyed, Indonesia has dropped from the third

ranked to the fourth in our consumer confidence scorecard in 2015, with Indonesians being

quite concerned on inflation. Nevertheless, the lower ranking arguably reflects what was a

more challenging year for Indonesia in 2015. A new government took office in October 2014

amid high expectations, but they were not met, as problems resulting from the nomenclature

led to a delay in government spending. And at the same time, declining prices of commodities

globally have negatively impacted the source of income and growth for Indonesians.

But Indonesians continue to be optimistic

Despite disappointment related to Indonesia's weak economic conditions, purchasing power,

the government, etc., its GDP growth at 4.8% in 2015 is still one of the highest among other

emerging countries. Indonesia is the most optimistic country, based on our survey, whereby

26% of our respondents are optimistic about having higher income of more than 10% in the

next 12 months, while majority of Indonesians (69%) are expecting flat to 10% higher income,

and only 4% of Indonesians are expecting lower to flat income over the next twelve months,

which is the lowest as compared to other emerging countries that we surveyed. We believe

that despite a challenging 2015, the improvement seen in 2H15 created a feeling of optimism.

Our survey was conducted between October and November 2015, at the time when the

economy was starting to recover and the GoI was starting to spend. We note that by the end

of 2015, the Indonesian government had announced eight stimulus policy packages (of a total

of ten), which have started to generate some optimism.

How do Indonesians spend their money?

We have been conducting the survey for the past six years and over these years, we

continue to see the largest monthly spending is on food, which has increased to 50% of

household spending in 2015 (vs 38% in 2010). And food spending in Indonesia is much

higher from our overall survey average. The second largest spending is for savings, but

even though it has increased, it is still low as compared to the overall survey average. On

the other hand, the decline in spending is seen on auto (from 8% to 2%), housing (from

12% to 8%), education (from 9% to 4%), and healthcare (from 7% to 6%) between 2010

and 2015. We believe the spending decline in auto and housing is due to weaker

purchasing power, while the decline in education is due to the availability of the

government's programme for free education, and the decline in healthcare spending is due

to the implementation of the government's programme on National Health Care Insurance.

Meanwhile, spending on home & personal care and healthcare have maintained at 8%

and 6% of the total household spending, respectively.

Savings are improving but still low

Indonesians are still low on savings as compared to the other emerging countries that we

surveyed. However, compared to six years ago, this has actually marginally improved, with

significant improvement in urban areas. In 2010, Indonesians were saving 10.8% of their

income, while in 2015, it only reached 11%. The decline in employment opportunities in

the resource-based areas led to a decline in income.

Still worry on higher inflation

Although inflation has been coming down, Indonesians are still quite concerned about

higher inflation, which means higher living costs. That is why we think that savings are the

right mode at this time. Most respondents (64%) still think that inflation is going to be

higher than the past twelve months.

Indonesia is the most

optimistic country with

regards to future income

expectations

Largest spending is on food

(50%) followed by savings

(18%)

Compared to other

emerging countries, savings

are still low in Indonesia

05 April 2016


Key stocks preference Telkom (TLKM.JK, Rp3,350.00, OUTPERFORM, TP Rp3,800.00)

Indonesia’s cellular market continues to look attractive, with good monetisation of very high demand for cellular data services (driven by social networking). This has been made possible by an improving competitive environment, as the industry consolidates towards a three-player market. There is still a long way to go in growing data volumes; smartphone penetration on Telkomsel's network reached just 40.4% as at December 2015. In addition, 4G launch can add further impetus to this improving monetisation, with an additional 40% uplift in ARPU from 3G to 4G currently being experienced.

Astra International (ASII.JK, Rp7,325.00, OUTPERFORM, TP Rp7,600.00)

Improvement in macroeconomic conditions and launch of new models should support 4W

sales volume growth. Monetary easing (75 bp BI cut) should come into full effect in one to

two quarters, resulting in cheaper financing for cars and motorcycles.

Indofood CBP (ICBP.JK, Rp15,325.00, OUTPERFORM, TP Rp18,300.00)

Noodles division will continue to be the company's backbone although it is already highly

penetrated. The driver going forward will be product innovation and new product launches.

Indofood Sukses Makmur (INDF.JK, Rp7,225.00, OUTPERFORM, TP Rp8,700.00)

Fully integrated food company in Indonesia, with most of its earnings derived from the

listed Indofood CBP (ICBP). With slight recovery seen on CPO prices, its agribusiness

should see improvement.

Matahari Department Store (LPPF.JK, Rp18,175.00, OUTPERFORM, TP Rp19,400.00)

We believe Matahari will be the main beneficiary on the back of a rising middle class

segment. Its main exclusive label, Nevada, continues to be the top fashion brand favoured

by our respondents. We believe this is due to its nice design and quality supported by its

affordable price points.

Summarecon Agung (SMRA.JK, Rp1,620.00, OUTPERFORM, TP Rp1,960.00)

It has a good track record in township development in Indonesia and has been successful

in strengthening recurring income through rental income from retail spaces. Around 70%

of SMRA’s operating income is still being generated from the property development

segment. Additionally, we like the name given its exposure to medium segment as well as

its diversified land bank.

Bank Tabungan Pensiunan Nasional (BTPN.JK, Rp2,795.00, OUTPERFORM, TP

Rp3,500.00)

As the central bank now embarks on a lower rate environment with policy rate standing at

6.75% currently, BTPN having 85% deposits as time deposit should benefit most

compared to other banks under our coverage. For this year, we expect another 25 bp of

rate cut bringing policy rate down to 6.5%. As a reminder, when BI hiked its policy rate by

175 bp between June and November 2013, the net interest margins of the top-four banks

expanded, while that of second-tier banks compressed sharply over the next quarters.

Link Net (LINK.JK, Rp4,035.00, OUTPERFORM, TP Rp8,300.00)

Fixed internet access is also undergoing something of a renaissance in Indonesia, as demand for access to high-speed content and gaming increases. Thus, it is still our view that there is plenty of room for growth in the Indonesian broadband market. We expect that as the market develops, competitors will learn to target their rollouts in greenfield areas which are not yet covered by an existing player (such as Link Net), since it will result in a much higher return on their investment. Link Net offers high growth and high return on invested capital, and therefore offers an attractive way to invest in rising fixed internet penetration in Indonesia.

05 April 2016


Siloam International Hospitals (SILO.JK, Rp7,450.00, OUTPERFORM, TP

Rp13,000.00)

We expect Siloam's top-line growth to continue with its pipeline expansion plans and the

increase in healthcare spend as a percentage of total spend. By 2017, Siloam targets to

achieve 10,000 beds from the current 4,800 and have over 50 hospitals in more than 25

cities.

We believe that in the medium term. Siloam could be the best play to leverage on the

healthcare under-penetration story in Indonesia as it builds a hospital network unrivalled in

scope and scale across Indonesia. Margin issues are likely to be shortlived.

Tiphone Mobile Indonesia (TELE.JK, Rp775.00, OUTPERFORM, TP Rp900.00)

As the largest prepaid mobile phone voucher distributor in Indonesia, Tiphone Mobile

Indonesia is a beneficiary of higher data service consumption from rising internet access

needs.

Telkomsel owns a 25% stake (effective from Sep-2014); thus it is now an exclusive

distributor for Telkomsel, a market leader in Indonesia’s telecom industry (30% market

share in Telkomsel distribution). It is the only dealer that distributes through three

diversified channels (traditional, modern retail, and banks).

05 April 2016


Figure 5: Indonesia's consumer related names valuation

Company Ticker Price Rtg Mkt cap TP 16E

PE (x)

EPS growth P/E (x) EV-EBITDA

(x)

PB (x) ROE ADTV

3mos

(Rp) (US$mn) (Rp) at TP 16E 17E 16E 17E 16E 17E 16E 17E 16E 17E (US$

mn)

AUTOMOBILES & COMPONENTS 15.3 16.3% 17.9% 14.8 12.5 13.3 11.4 2.7 2.5 18.6% 19.7% 21.8

Astra International ASII.JK 7,325 O 22,477 7,600 15.3 16.3% 17.9% 14.8 12.5 13.3 11.4 2.7 2.5 18.6% 19.7% 21.8

BANKS 12.8 2.8% 16.5% 13.8 12.1 9.7 8.6 2.2 1.9 15.6% 15.8% 18.3

BTPN BTPN.JK 2,795 O 1,225 3,500 9.5 18.8% 15.2% 7.6 6.6 5.2 4.5 1.0 0.9 13.6% 13.5% 0.3

Bank Central Asia BBCA.JK 13,300 U 24,855 10,900 16.0 5.4% 8.0% 19.6 18.1 14.5 13.4 3.1 2.7 15.9% 15.2% 19.4

Bank Danamon BDMN.JK 3,795 U 2,729 3,500 10.3 36.7% 30.4% 11.1 8.5 2.5 1.9 1.0 0.9 8.9% 10.7% 0.6

Bank Jabar Banten BJBR.JK 900 O 655 1,200 7.9 6.0% 16.2% 5.9 5.1 3.4 2.9 0.9 0.8 14.9% 15.9% 1.1

Bank Mandiri BMRI.JK 10,100 N 17,684 9,800 11.8 -4.4% 21.0% 12.1 10.0 8.3 6.8 1.9 1.7 15.4% 16.8% 18.9

Bank Negara Indonesia BBNI.JK 5,100 O 7,137 5,650 10.2 14.5% 25.9% 9.2 7.3 6.4 5.0 1.2 1.0 12.7% 14.3% 12.5

Bank Rakyat BBRI.JK 11,100 N 20,756 11,400 11.7 -5.2% 16.9% 11.4 9.7 8.6 7.3 2.0 1.7 17.5% 17.0% 23.5

Bank Tabungan Negara BBTN.JK 1,730 N 1,388 1,850 8.4 26.4% 30.8% 7.8 6.0 (0.4) (0.3) 1.1 1.0 14.6% 16.1% 3.2

CONSUMER 38.0 13.9% 11.2% 37.0 33.2 26.0 23.3 24.8 21.8 56.4% 55.9% 6.1

HM Sampoerna HMSP.JK 99,000 O 34,914 108,500 42.2 14.8% 9.4% 38.5 35.2 28.6 26.0 14.4 13.3 37.4% 37.8% 5.9

Unilever Indonesia UNVR.JK 43,175 U 24,970 41,400 45.8 14.0% 12.4% 49.0 43.2 34.7 30.8 57.8 49.9 117.6% 115.4% 7.4

Gudang Garam GGRM.JK 65,200 O 9,509 61,500 19.6 9.2% 16.6% 20.8 17.8 12.6 11.2 3.1 2.8 14.9% 15.6% 5.8

Indofood CBP ICBP.JK 15,325 O 6,773 18,300 27.8 18.1% 12.0% 23.3 20.8 14.1 12.4 4.9 4.3 21.0% 20.8% 3.4

Indofood Sukses Makmur INDF.JK 7,225 O 4,809 8,700 18.7 9.0% 6.2% 17.4 16.3 7.3 6.6 2.1 2.0 12.3% 12.1% 5.5

Kino Indonesia KINO.JK 3,780 O 539 5,900 23.5 26.5% 18.5% 15.1 12.7 9.1 7.7 3.5 3.1 17.3% 17.9% 0.2

HEALTHCARE 38.9 19.8% 23.1% 36.7 29.5 23.8 19.8 6.6 5.7 18.9% 19.7% 4.9

Kalbe Farma KLBF.JK 1,450 U 5,152 1,350 24.5 16.2% 16.3% 26.3 22.6 17.7 15.4 5.5 4.7 20.8% 21.0% 6.6

Mitra Keluarga MIKA.JK 2,475 N 2,730 2,500 52.8 16.5% 23.6% 52.3 42.3 38.4 30.9 9.3 8.0 17.8% 19.0% 2.2

Siloam Hospitals SILO.JK 7,450 O 653 13,000 94.3 61.9% 74.9% 54.0 30.9 11.1 8.0 4.6 4.1 8.5% 13.1% 2.7

MEDIA 24.4 17.4% 22.7% 23.6 19.3 15.8 13.4 8.6 7.1 34.0% 34.0% 2.5

Media Nusantara MNCN.JK 2,150 O 2,327 2,165 18.6 20.1% 27.1% 18.4 14.5 10.2 8.6 2.8 2.4 15.0% 16.9% 3.6

Surya Citra Media SCMA.JK 3,245 N 3,596 3,400 28.1 15.7% 19.9% 26.9 22.4 19.5 16.5 12.5 10.1 46.4% 45.1% 1.9

REAL ESTATE 14.5 13.6% 16.6% 12.3 10.5 9.0 7.8 2.1 1.8 17.2% 17.2% 2.8

Alam Sutera ASRI.JK 376 N 560 450 7.3 8.0% 9.7% 6.1 5.6 6.4 6.0 0.9 0.8 14.7% 14.1% 1.3

Bumi Serpong Damai BSDE.JK 1,815 O 2,648 2,260 15.1 5.0% 11.2% 12.1 10.9 9.8 8.6 1.5 1.3 12.4% 12.2% 3.7

Ciputra Development CTRA.JK 1,285 O 1,493 1,310 12.9 14.9% 17.5% 12.7 10.8 7.7 6.5 2.1 1.8 16.2% 16.7% 1.8

Pakuwon Jati PWON.JK 492 O 1,796 580 13.0 22.4% 22.1% 11.0 9.0 8.0 6.6 2.6 2.1 23.2% 22.8% 2.7

Summarecon SMRA.JK 1,620 O 1,771 1,960 18.7 18.3% 20.5% 15.4 12.8 10.8 9.5 3.1 2.6 20.0% 20.3% 3.0

RETAILING 24.5 60.8% 17.8% 23.9 20.1 14.7 13.3 6.6 5.6 27.5% 27.3% 3.6

Ace Hardware ACES.JK 885 N 1,150 870 23.1 10.0% 5.4% 23.4 22.2 16.9 16.5 4.9 4.2 20.9% 19.0% 0.5

Erajaya Swasembada ERAA.JK 695 O 153 825 9.2 10.3% 15.5% 7.7 6.7 5.8 5.3 0.6 0.6 7.9% 8.6% 0.4

Matahari Department Store LPPF.JK 18,175 O 4,020 19,400 26.1 22.0% 15.8% 24.4 21.1 17.6 15.6 9.5 8.0 38.8% 38.1% 6.2

Matahari Putra Prima MPPA.JK 1,700 N 693 1,550 22.5 102.3% 29.6% 24.7 19.1 11.6 10.1 3.0 2.6 12.0% 13.9% 1.1

Mitra Adiperkasa MAPI.JK 4,925 O 620 4,500 35.4 424.8% 47.8% 38.8 26.2 9.0 8.0 3.0 2.7 7.7% 10.4% 0.2

Ramayana Lestari RALS.JK 715 O 385 900 16.6 14.7% 8.5% 13.2 12.1 4.7 4.4 1.4 1.3 10.8% 11.0% 0.2

Tiphone TELE.JK 775 O 418 900 13.9 25.7% 17.0% 12.0 10.3 7.7 6.9 1.8 1.5 14.6% 15.1% 0.2

TELECOMMUNICATION SERVICES 19.9 7.4% 15.0% 17.9 15.7 7.1 6.5 4.6 4.0 26.0% 26.6% 17.8

Indosat ISAT.JK 6,125 N 2,523 5,800 22.3 -207.9% 14.1% 23.6 20.6 4.7 4.5 2.5 2.4 10.6% 11.4% 0.2

Link Net LINK.JK 4,035 O 931 8,300 29.9 32.0% 40.6% 14.5 10.3 6.8 5.4 2.8 2.4 19.5% 23.0% 0.3

Protelindo TOWR.JK 4,295 N 3,322 4,200 17.7 39.4% 17.3% 18.1 15.4 12.2 10.8 6.1 5.1 33.8% 33.1% 0.1

Telkom TLKM.JK 3,350 O 25,595 3,800 19.9 22.7% 10.7% 17.5 15.8 6.1 5.7 4.1 3.8 23.1% 23.8% 23.9

Tower Bersama TBIG.JK 5,850 N 2,127 5,650 15.9 16.9% 53.4% 16.4 10.7 14.0 12.0 11.4 7.5 69.6% 69.6% 0.7

* Share price as of 01 April 2016

Source: Thomson Reuters, company data, Credit Suisse estimates

05 April 2016


The sixth Credit Suisse Indonesia Consumer Survey This is our sixth Credit Suisse Indonesia Consumer Survey, one part of a survey that the

Credit Suisse Research Institute conducts in nine emerging countries (Brazil, China, India,

Indonesia, Russia, Saudi Arabia, South Africa, Turkey, and Mexico). The Credit Suisse

Research Institute engaged The Nielsen Company, a leader in data measurement and

information across a wide range of industries and regions, to conduct face-to-face

interviews with nearly 16,000 participants. This survey is a comprehensive and exclusive

study of the consumption patterns in each country as well as individuals' outlook about the

future.

For Indonesia, we conducted the survey on 1,530 participants from ten exclusive areas,

similar to previous surveys. This includes six in Java (Jakarta, Jabotabek, Surabaya,

Gresik/Lamongan/Sidoarjo, Bandung, and Kabupaten Bandung) and four outside Java

(Medan, Deli Serdang, Makassar, and Gowa). We believe that these areas sit well with

Indonesia's economy and population given that around 65% of GDP is derived from Java

and the remaining 35% from outside Java, according to BPS (the Indonesia Bureau of

Statistics).

Similar to our previous five surveys, 66% of our participants live in urban areas with the

remaining 34% in rural areas, while 51% are female and 49% male. Most of the

respondents (72%) are below 45 years old, in keeping with Indonesia's young

demographic profile.

Each respondent was asked 180 questions, divided into 12 categories: (1) screening; (2)

autos; (3) food and beverage; (4) personal care; (5) branded goods; (6) computers and

TV; (7) mobile phones; (8) internet; (9) travel; (10) property; (11) education; and (12)

healthcare.

Figure 6: Indonesia's survey summary and key economic indicators

Source: IMF, EIU, UN, Credit Suisse Indonesia Consumer Survey 2016

We have undertaken our

sixth year of survey to

identify Indonesian

consumer behaviour

1,530 respondents in ten

areas (six in Java, four

outside Java)

Some 66% live in urban

areas and 34% in rural

areas, while 72% are young,

aged less than 45 years old

05 April 2016


2015 was a challenging year...

Within the nine emerging countries that we surveyed, Indonesia has dropped from third

position to fourth in our consumer confidence scorecard in 2015, with Indonesians quite

concerned about inflation. Nevertheless, the lower ranking arguably reflects what was a

more challenging year for Indonesia in 2015. A new government took office in October

2014 amid high expectations, but these were not met, as problems resulting from the

nomenclature led to a delay in government spending. At the same time, a decline in the

prices of commodities globally has negatively impacted income and growth for

Indonesians. This worry still exists, but Indonesians continue to be optimistic on household

income expectations and personal finances, compared to other countries surveyed. And

notably, more Indonesians are still looking forward to making a major purchase, with the

country ranked fourth out of nine in the survey on this parameter, similar to our previous

survey.

Figure 7: Emerging consumer survey scorecard 2014 vs 2015

Rankings Personal

finances

Inflation

expectations

Household income

expectation

Time for a major

purchase

Income history Rank based on

five factors

(6-12m horizon) 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015

India 2 3 3 4 3 2 2 2 1 1 1 1

China 4 1 4 3 5 4 3 3 4 4 5 2

Saudi Arabia 5 4 5 2 5 5 1 1 3 3 4 2

Indonesia 3 2 6 7 2 1 4 4 2 2 3 4

Turkey 9 6 1 1 9 7 7 8 7 5 6 5

Mexico 6 5 7 6 4 8 9 5 8 8 7 6

Brazil 1 6 2 8 1 3 4 9 5 9 2 7

South Africa 7 8 8 9 8 6 8 6 9 6 9 7

Russia 8 9 9 5 7 9 6 7 6 7 8 9


Figure 8: Indonesia—state of personal finances over next

six months

Figure 9: Indonesia—consumer confidence indicators (%)

0%

10%

20%

30%

40%

50%

< 1000 1250 1750 2500 4000 6250 8750 > 10000

Income (Rp) This survey average

Last survey average

Balance better vs worse

-20

-10

0

10

20

30

40

50

60

Personalfinances

InflationExpectations

Incomechange inlast 12m

IncomeExpectations

Good time tomake amajor

purchase

Indonesia Average

Source: Credit Suisse Emerging Consumer Survey 2016 Source: Credit Suisse Emerging Consumer Survey 2016

...with economic growth slowing down

Indonesia's GDP peaked in 4Q10 at 6.8% and reached its lowest in 2Q15 (4.66%), before

improving to 5.0% in 4Q15. Inflation had peaked in 4Q13 at 8.0%, before declining to 4.8%

in 4Q15. All this was underpinned by a decline in global commodity prices and, in 2015,

the delay in the disbursement of state spending.

Indonesians are worried

about inflation

Indonesia's GDP declined to

4.8% in 2015, from 6.4% in

2010 and 5.0% in 2014

05 April 2016


Figure 10: Indonesia's GDP peaked in 4Q10 and reached

its lowest in 2Q15 ...

Figure 11: ... with inflation is starting to decline in 4Q15

6.0

6.3

5.8

6.8

6.5

6.3

6.0 5.9

6.1 6.2

5.9 5.9

5.5 5.6 5.5

5.6

5.1

5.0 5.0 5.0

4.7 4.7

4.7

5.0

4.5

5.0

5.5

6.0

6.5

7.01Q

102Q

103Q

104Q

101Q

112Q

113Q

114Q

111Q

122Q

123Q

124Q

121Q

132Q

133Q

134Q

131Q

142Q

143Q

144Q

141Q

152Q

153Q

154Q

15

GD

P g

row

th (%

)

3.6

4.4

6.2 6.3

6.8

5.9

4.6

4.1

3.7

4.4 4.0

3.9

4.5

5.1

8.0 8.0 7.8

7.1

4.4

6.5 6.5

7.1 7.1

4.8

3

4

5

6

7

8

9

1Q10

2Q10

3Q10

4Q10

1Q11

2Q11

3Q11

4Q11

1Q12

2Q12

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

2Q14

3Q14

4Q14

1Q15

2Q15

3Q15

4Q15

Infla

tion

(%)

Source: Bank Indonesia (BI) Source: Bank Indonesia (BI)

Figure 12: Palm oil (MYR/ton) Figure 13: Coal (USD/tonne)

1700

2200

2700

3200

3700

4200

Mar

-10

Sep

-10

Mar

-11

Sep

-11

Mar

-12

Sep

-12

Mar

-13

Sep

-13

Mar

-14

Sep

-14

Mar

-15

Sep

-15

Mar

-16

MY

R /

tonn

e

Palm Oil (MYR/ton)

Avg 2011: 3,273Avg 2012: 2,853Avg 2013: 2,383Avg 2014: 2,419Avg 2015: 2,160YTD 2016: 2,341

45

55

65

75

85

95

105

115

125

135

145

Mar

-10

Sep

-10

Mar

-11

Sep

-11

Mar

-12

Sep

-12

Mar

-13

Sep

-13

Mar

-14

Sep

-14

Mar

-15

Sep

-15

Mar

-16

US

D/m

etric

tonn

e

Coal (USD / metric ton)

Avg 2010: 99Avg 2011: 121Avg 2012: 94Avg 2013: 84Avg 2014: 70Avg 2015: 59YTD 2016: 50

Source: Bloomberg Source: Bloomberg

Indonesia's mining and quarrying sector witnessed 5% lower growth YoY in 2015,

whereas the sector's contribution to GDP declined to 8% in 2015, from 10% in 2010. This

is nevertheless evident in the weaker growth of mineral resources areas, such as

Kalimantan. Its GDP growth declined from 3.3% in 2014 to 1.3% in 2015, and Kalimantan

accounts for 8.8% of national GDP. The Sumatra area, known for its agriculture and

forestry, also saw its GDP lowered from 4.6% in 2014 to 3.5% in 2015. Sumatra is the

second-largest GDP contributor accounting for 21.7% of the nation's GDP. On the other

hand, Java, which is the largest GDP contributor (58.1%) and depends mostly on

manufacturing, reported only a slight decline in GDP, from 5.6% in 2014 to 5.5% in 2015.

Weak commodity prices

slowed economic growth,

particularly in the commodity

resources regions like

Kalimantan and Sumatra

05 April 2016


Figure 14: GDP growth, by region—weakness seen in Kalimantan

Source: Bank Indonesia (BI)

Figure 15: GDP breakdown by segment Figure 16: GDP breakdown by sector

54% 54% 55% 54% 55% 54%

12% 12% 12% 12% 12% 12%

31% 32% 33% 32% 33% 33%

2% 1% 2% 1%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2011 2012 2013 2014 2015

Private consumption Government consumption Investment Net exports

14% 14% 13% 13% 13% 13%

10% 10% 10% 10% 9% 8%

22% 22% 22% 22% 22% 22%

13% 14% 14% 14% 14% 13%

9% 9% 9% 9% 10% 10%

4% 4% 4% 4% 4% 4%4% 4% 4% 4% 4% 5%4% 4% 4% 4% 3% 3%

20% 19% 20% 21% 21% 22%

0%

20%

40%

60%

80%

100%

2010 2011 2012 2013 2014 2015

Agriculture, forestry, and fishery Mining & quarrying

Manufacturing Wholesale and retail trades

Construction Transport & storage

Information & communication Public administration & defence

Others

Source: Bank Indonesia (BI) Source: Bank Indonesia (BI)

05 April 2016


Figure 17: GDP growth, by segment

-2%

0%

2%

4%

6%

8%

GDP Private consumption Government consumption Investment Net exports

2010 2011 2012 2013 2014 2015


Figure 18: GDP growth, breakdown by sector

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

14%

Ag

ricul

ture

, fo

rest

ry,

and

fish

ery

Min

ing

& q

uar

ryin

g

Man

ufa

ctur

ing

Ele

ctric

ity &

ga

s su

pply

Wat

er

supp

ly,

sew

era

ge, w

ast

em

ana

gem

ent

& r

em

edi

atio

nac

tiviti

es Co

nstr

uctio

n

Who

lesa

le a

nd r

eta

il tr

ades

, re

pair

of m

oto

r ve

hicl

es &

mot

orc

ycle

s

Tra

nspo

rt &

sto

rage

Acc

om

oda

tion

& f

ood

se

rvic

eac

tiviti

es

Info

rmat

ion

& c

omm

uni

catio

n

Fin

anci

al &

insu

ranc

e s

erv

ices

Re

al e

stat

e a

ctiv

ities

Bu

sin

ess

serv

ices

Pu

blic

adm

inis

trat

ion

& d

efe

nce;

com

pul

sory

so

cial

sec

urity

Ed

ucat

ion

Hu

ma

n h

ealth

& s

ocia

l wor

kac

tiviti

es

Oth

er

serv

ices

act

iviti

es

2011 2012 2013 2014 2015


The continuous economic slowdown has stemmed from the delay in Government of

Indonesia (GoI) spending in 1H15, where the GoI was faced with the nomenclature issue.

This resulted in both the consumer confidence and retail salex indexes, as measured by

the Bank of Indonesia, plummeting to below 100 in August 2015. The rupiah also

weakened by around 20% to as low as Rp14,700/US$, with inflation peaking at 7.2% in

3Q15. All this was in reverse by the end of 3Q15, when the GoI started to spend—mostly

on infrastructure—the IDR/USD exchange rate started to stabilise. Sentiment thus turned

more positive, continuing into early 2016, when the GoI lowered retail fuel prices and

reduced electricity tariffs as global oil prices declined.

Things started to look better

from the end of 3Q15

onwards

05 April 2016


Figure 19: Brent crude oil price (USD/barrel) Figure 20: Indonesia's retail fuel price (Rp/lt)

30

40

50

60

70

80

90

100

110

120

130M

ar-1

0

Sep

-10

Mar

-11

Sep

-11

Mar

-12

Sep

-12

Mar

-13

Sep

-13

Mar

-14

Sep

-14

Mar

-15

Sep

-15

Mar

-16

US

D/b

arre

l

Brent crude oil (USD/barrel)

Avg 2010: 81Avg 2011: 112Avg 2012: 112Avg 2013: 108Avg 2014: 98Avg 2015: 54YTD 2016: 34

4000

4500

5000

5500

6000

6500

7000

7500

8000

8500

9000

Mar

-10

Sep

-10

Mar

-11

Sep

-11

Mar

-12

Sep

-12

Mar

-13

Sep

-13

Mar

-14

Sep

-14

Mar

-15

Sep

-15

Mar

-16

Rp7,050/litre


Figure 21: Indonesia's GDP per capita (USD) Figure 22: Average exchange rate IDR/USD

3268

37563780

3682

3573

3401

3200

3300

3400

3500

3600

3700

3800

2010 2011 2012 2013 2014 2015

11200

11700

12200

12700

13200

13700

14200

14700

Mar-14 Sep-14 Mar-15 Sep-15 Mar-16

Rp/

US

D

Avg 2014: Rp11,870

Avg 2015: Rp13,457

YTD 2016: Rp13,644

Source: Bank Indonesia Source: Bloomberg

Figure 23: Consumer confidence index Figure 24: Retail sales index

95

98

101

104

107

110

113

116

119

122

Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16

110

140

150

160

170

180

190

200

210

Feb-14 May-14 Aug-14 Nov-14 Feb-15 May-15 Aug-15 Nov-15 Feb-16

192

Source: Bank Indonesia Source: Bank Indonesia

05 April 2016


But Indonesians continue to be optimistic

Nevertheless, despite disappointments in relation to Indonesia's lower purchasing power,

weak economic conditions, etc., its GDP growth at 4.8% in 2015 was still one of the

highest among the other emerging countries, but behind China (6.9%) and India (7.3%) in

2015. And with regards to GDP growth, only three countries that we surveyed reported

higher growth (India, Turkey and Mexico).

Figure 25: Real GDP growth among the emerging countries in 2014 and 2015E

7.3%

6.9%

5.0%

3.5%

2.9%

2.1% 1.6%

0.1%

0.7%

6.9%

7.3%

4.8%

3.4%3.1%

2.5%

1.3%

-3.8%

0.0%

6.5%

7.8%

5.2%

2.5%

3.5%

3.0%

1.6%

-3.5%

1.0%

-4%

-2%

0%

2%

4%

6%

8%

China India Indonesia Saudi Arabia Turkey* Mexico South Africa Brazil Russia

2014 2015 2016E

* Turkey is estimated data.

Source: Company data, Credit Suisse estimates

Indonesia is the most optimistic country, based on our survey, whereby 26% of our

respondents are optimistic about having higher income or incomes growing more than

10% in the next 12 months, while most Indonesians (69%) are expecting flat to 10% higher

incomes, compared to only 64% of those in India. In addition, only 4% of Indonesians are

expecting lower to flat incomes over the next 12 months, which is the lowest compared to

the other emerging countries that we surveyed. We believe that despite a challenging

2015, the improvement seen in 2H15 created a feeling of optimism. Our survey was

conducted between October and November 2015, when the economy was starting to

recover and the GoI had just started to spend. We note that by the end of 2015, the

Indonesian government had announced eight stimulus policy packages (out of a total of

ten), which have started to generate some optimism.

Optimism remains

05 April 2016


Figure 26: Indonesians are the most confident country in terms of income expectations in the next 12 months followed

by India and Brazil

6.5

5.0

9.8

4.6 4.9

2.7

5.7

3.6

9.1

4.3

8.6

1.0

2.5

8.8

4.3

9.3

5.9

7.4

2.5

0.5

2.1

8.1

1.6

7.4

4.1

3.2 2.7

0.2

3.9

2.7

6.8

4.1

8.0

3.7 3.7

1.4

0.5

4.0

2.0

5.8

5.0

4.5

3.6

2.6

1.5 1.2

0.5

0

1

2

3

4

5

6

7

8

9

10

Indonesia India Brazil China Saudi South Africa Turkey Mexico Russia

%

2010 2011 2012 2013 2014 2015

Question: In what way do you expect your household income to change in the next 12 months?

Source: Credit Suisse Indonesia Consumer Survey 2016

Minimum wages continued to be increased in 2015 by an average of 14%. This is lower

than the previous year's 17.5%, but is off a higher nominal base. Minimum wages vary by

region, with an average of Rp1.78 mn in 2015 compared to Rp1.5 mn in 2014. In 2016, the

GoI regulated the increase in minimum wage to give more certainty on the annual rise. It

applies a formula based on the sum of nominal GDP growth and the inflation rate. As

such, in 2016, we see an average minimum wage rise of 11.1% nationwide to Rp1.94 mn.

In our survey, we saw a significant hike in wages in 2014, then a drop in 2015, which we

view as a normalisation after the significant increases in 2013 and 2014, consecutively.

Respondents continue to be optimistic about future incomes, as the majority (69%) are still

expecting between flat to a 10% rise in incomes in the next 12 months, while those

expecting down to flat incomes were only 4% of respondents.

Unemployment has been declining to its lowest at 5.94% in 2014. However, with the

slowdown in economic growth, the unemployment rate picked up to 6.18% in August 2015,

based on data from BPS. We believe that the rate could already have peaked, as the

economy started to recover from 2H15 with government spending and GDP growth in

4Q15 reaching 5%.

GoI starts to regulate the

increase in minimum wage

in 2016

Normalisation of wage

increases

A rising unemployment rate

05 April 2016


Figure 27: Increase in minimum wage over the years

11.9%

18.6%

12.0%

9.4%

12.94%

10.42%

9.5%

7.6%

18.3%

17.5%

14.0%

11.1%

6%

8%

10%

12%

14%

16%

18%

20%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

(in IDR th)Avg 2005: Rp 507,698 Avg 2011: Rp 988,829Avg 2006: Rp 603,326 Avg 2012: Rp 1,088,903Avg 2007: Rp 672,428 Avg 2013: Rp 1,296,908Avg 2008: Rp 745,709 Avg 2014: Rp 1,506,237Avg 2009: Rp 841,529 Avg 2015: Rp 1,782,211Avg 2010: Rp 908,824 Avg 2016: Rp1,943,213

Average 12.8% increase

Source: Ministry of Labour and Transmigration

Figure 28: BI rate Figure 29: Unemployment rate in Indonesia

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

Mar

-10

Sep

-10

Mar

-11

Sep

-11

Mar

-12

Sep

-12

Mar

-13

Sep

-13

Mar

-14

Sep

-14

Mar

-15

Sep

-15

Mar

-16

7.0%

6.1

8.1

9.1

9.59.9

11.2

10.3

9.1

8.4

7.9

7.1

6.6

6.1 6.35.9 5.8

6.2

5

6

7

8

9

10

11

12

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Feb

-15

Aug

-15

%

Source: Bank Indonesia Source: Indonesia Bureau of Statistics

05 April 2016


Figure 30: Indonesians have seen certainty over income rises in the past 12 months

% of Area Region Age Income*

respondent Total Urban Rural Java Ex Java 18-29 30-45 46-55 56-65 Low Mid High

2015

Down to flat 12% 13% 10% 12% 15% 12% 11% 15% 14% 20% 12% 5%

Flat to +10% 75% 72% 80% 73% 74% 76% 74% 74% 69% 74% 75% 60%

> +10% 13% 15% 9% 14% 11% 13% 15% 10% 17% 6% 13% 35%

2014

Down to flat 11% 9% 15% 11% 12% 10% 12% 10% 21% 18% 10% 12%

Flat to +10% 76% 75% 76% 74% 81% 74% 77% 78% 71% 87% 77% 72%

> +10% 13% 16% 9% 15% 7% 16% 12% 12% 7% 6% 13% 16%

2010

Down to flat 14% 15% 12% 12% 16% 11% 15% 15% 11% 14% 13% 0%

Flat to +10% 77% 76% 80% 79% 72% 78% 76% 76% 84% 83% 75% 81%

> +10% 9% 9% 9% 9% 12% 11% 9% 9% 5% 4% 11% 19%

Question: In what way do you expect your household income to change in the past 12 months

* Income is on monthly basis—low < Rp1.5 mn, mid Rp1.5-7.5 mn, high > Rp7.5 mn


Figure 31: …and continue to be optimistic for the next 12 months

% of Area Region Age Income*

respondents Total Urban Rural Java Ex Java 18-29 30-45 46-55 56-65 Low Mid High

2015

Down to flat 4% 5% 3% 5% 4% 5% 5% 6% 6% 8% 8% 5%

Flat to 10+% 69% 65% 76% 65% 77% 68% 67% 70% 68% 80% 77% 76%

>+10% 26% 30% 21% 30% 19% 26% 28% 23% 25% 12% 15% 19%

2014

Down to flat 3% 3% 3% 3% 4% 2% 2% 4% 8% 6% 3% 2%

Flat to +10% 69% 69% 71% 65% 81% 68% 70% 72% 71% 76% 70% 68%

> +10% 28% 28% 26% 33% 15% 30% 28% 24% 21% 18% 28% 29%

2010

Down to flat 4% 4% 2% 3% 4% 2% 4% 4% 4% 6% 4% 0%

Flat to +10% 70% 69% 77% 73% 67% 72% 70% 71% 81% 80% 68% 57%

> +10% 26% 27% 21% 23% 28% 26% 26% 25% 14% 14% 28% 43%

Question: In what way do you expect your household income to change in the next 12 months



We also found that most Indonesians do not migrate to other places. Compared to China

and India, we see that fewer Indonesians tend to migrate from their hometown. As such, if

Indonesians do migrate, the urge for better income is much higher compared to those in

China and India.

Migration is not popular

among Indonesians

05 April 2016


Figure 32: Have you migrated from your hometown to

where you are currently living?

Figure 33: Did you migrate to earn a better income?

24 26

19

76 74

81

0

10

20

30

40

50

60

70

80

90

China India Indonesia

Yes No

66

79

93

34

21

7

0

10

20

30

40

50

60

70

80

90

100

China India Indonesia

Yes No

Source: Credit Suisse Indonesia Consumer Survey 2016 Source: Credit Suisse Indonesia Consumer Survey 2016

How do Indonesians spend their money?

Over the past six surveys, we continue to see the largest monthly spending is on food,

with food spending in Indonesia much higher than our overall survey average. In fact,

spending on food has increased to 50% of household spending in 2015 compared to 38%

in 2010. The second-largest spending is for savings. Even though we saw that savings

increased from 16% in 2010 to 18% in 2015, this is still low compared to the overall survey

average.

On the other hand, declines in spending were seen for auto (from 8% to 2%), housing

(from 10% to 8%), education (from 9% to 4%) and healthcare (from 7% to 6%) between

2010 and 2015. We believe the spending declines for auto and housing are due to weaker

purchasing power, while for education it is due to the availability of government

programmes for free education. For healthcare, the fall is due to the implementation of the

government's programme on National Health Care Insurance .

Meanwhile, spending on home, and personal care and entertainment is maintained at 8%

and 4% of total household spending, respectively.

Figure 34: Indonesian monthly spending by category vs overall survey average

0%

5%

10%

15%

20%

25%

30%

35%

Housin

g +

Pu

blic

Utilit

ies

Food

Tra

vel &

En

tert

ain

me

nt

Au

tos

Healthca

re

Ed

uca

tion

HP

C

Sa

vings

Pro

pert

y +

Local T

axe

s

Clo

thin

g

Oth

er

Indonesian monthly spend Overall survey average


Largest spending is on food

(50%) followed by savings

(18%)

05 April 2016


Figure 35: Food spending increased to 50% in 2015 ... Figure 36: ...from 38% in 2010

Housing8% Auto

2% Education4%

Food50%


8%

Health Care6%

Savings18%

Entertainment4%

Housing10%

Auto8%

Education9%

Food38%


8%

Health Care7%

Savings16%

Entertainment4%

* As a % of total spending


* As a % of total spending


Figure 37: Indonesia's rising middle class and affluent (MAC) population, 2012-20

Note: Monthly household expenditure numbers are stained in real 2011 terms (adjusted for inflation) and include regular household

expenditures such as food, utilities, transportation, communication, and regular household supplies and exclude discretionary spending such as

entertainment, restaurant dining and similar categories. Note that the expenditure level is based on data from BPS, which uses regression

analysis to remove irregular expenditures. The spending levels used to define wealth classes in this model may differ from those used by market

research agencies to define socioeconomic status levels because of different data collection methodologies and models.

Source: BCG Population and Household Expenditure Database 2012; BCG analysis; Indonesian Government Statistics Office (BPS).

Indonesians continue to be conservative about wanting to make major purchases

compared to other emerging countries. Indonesia ranked fourth in the category with only

35% of respondents thinking this is an excellent/good time to make major purchases.

Obviously, compared to 2010, the time where Indonesia's GDP grew at 6.4%, a majority of

Indonesians (56%) thought it was an excellent time to make a major purchase. As such,

we believe that the decline in economic growth has led to a preference for larger savings,

instead of spending.

It is not the time to make

major purchases

05 April 2016


Figure 38: In your opinion, is now a good time to make a major purchase? (Area)

2015 2014 2010

% of respondents Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java

Excellent time 5 6 4 5 5 1 1 1 0 3 6 7 5 5 7

Good time 30 31 28 30 29 35 33 38 35 38 50 48 54 54 40

Not such a good time 59 57 61 58 59 59 62 52 59 50 40 40 39 37 48

A bad time 7 6 7 7 6 6 5 8 6 9 4 5 3 5 4


Figure 39: In your opinion, is now a good time to make a major purchase? (Age)

2015 2014 2010

% of respondents Total 18-29 30-45 46-55 56-65 Total 18-29 30-45 46-55 56-65 Total 18-29 30-45 46-55 56-65

Excellent time 5 5 5 6 4 1 1 1 0 0 6 6 6 6 6

Good time 30 28 33 27 25 35 37 34 34 28 50 53 49 50 45


A bad time 7 7 6 6 8 6 4 6 8 9 4 3 5 4 4


Figure 40: In your opinion, is now a good time to make a major purchase? (Income)

2015 2014 2010

% of respondents Total Low Mid High Total Low Mid High Total Low Mid High

Excellent time 5 1 6 6 1 1 1 0 6 3 7 4

Good time 30 27 30 27 35 24 36 33 50 45 51 68

Not such a good time 59 64 57 66 59 68 58 63 40 46 38 21

A bad time 7 8 7 2 6 7 6 3 4 5 4 7

* Income is on monthly basis—low < Rp1.5mn, mid Rp1.5mn-Rp7.5mn, high > Rp7.5mn


With Indonesia's GDP per capita at around US$3,000, Indonesians tend to spend most on

lifestyle items, such as smartphones and internet access. Interestingly, this has been a

similar trend over the past six years since our first survey. This is in addition to basic

mobile phones and motorcycles. Instant noodles continue to be the most popular product,

despite already being highly penetrated, because of their affordability. This is followed by

bottled water, feminine hygiene, carbonated drinks and dairy products.

Rising need for

smartphones and internet

access

05 April 2016


Figure 41: Indonesia’s spending momentum 2015 vs 2014 (a year ago)

Carbonated drinks

Bottled water

Dairy Instant noodlesCigarettes

Tissues

Feminine hygiene

Cosmetics

Basic mobile phone

Smartphone

Cars

Internet access

Computers

PropertyHoliday

Motorcycle

Fashion apparel


WatchesJewellery

Perfumes

Leather goods, bags, and shoes

(10)

(5)

-

5

10

15

- 10 20 30 40 50 60 70 80 90 100

Re

cord

ed

sp

en

din

g in

20

15

vs.

20

14



Figure 42: Indonesia's spending momentum 2015 vs 2010—what has changed in behaviour from six years ago

Carbonated drinksBottled water

Dairy products Instant noodles

Cigarettes

Tissues

Feminine hygiene

Cosmetics

Basic mobile phone

Smartphone

Cars

Internet access

Computers

Property

Holiday

Motorcycle

Fashion apparel


Watches

Jewellery

Perfumes

(30)

(20)

(10)

-

10

20

30

40

- 10 20 30 40 50 60 70 80 90 100

Re

cord

ed

sp

en

din

g in

20

15

vs.

20

10



05 April 2016


Figure 43: Indonesian’s future item preference


Savings are improving, but still low

Indonesians still have low savings versus other emerging countries that we surveyed.

However, compared to six years ago, this has marginally improved, with significant

improvements in the urban areas. In 2010, Indonesians saved 10.8% of their income,

while in 2015, it only reached 11%. However, those in urban areas actually save more

than those living rurally. In urban areas, savings improved from 10.8% in 2010 to 12.4% in

2015, while in rural areas, savings declined from 10.5% to 6.2% over the same period.

Interestingly, those outside Java used to save more in 2010—16.1% of their income—but

this figure plummeted to 9.8% in 2015, due to, we believe, the significant decline in

employment opportunities in the resource-based area that led to income declines.

Figure 44: China has the highest savings % of total income

33%

20%

13% 13%

11% 11%

9% 9%

7%

0%

5%

10%

15%

20%

25%

30%

35%

China Saudi India Turkey Indonesia Russia Brazil Mexico South Africa

Sav

ings

as

% o

f inc

ome


Compared to other

emerging countries, savings

are still low in Indonesia

05 April 2016


Figure 45: Indonesia—savings as a percentage of income Figure 46: Indonesia—income versus savings (Rp mn)

10.8%10.8% 10.5%

8.8%

16.1%

11.0%

12.4%

6.2%

11.0%

9.8%

5%

7%

9%

11%

13%

15%

17%

Tot

al

Urb

an

Rur

al

Java

Ex

Java

Tot

al

Urb

an

Rur

al

Java

Ex

Java

Sav

ing

as %

of i

ncom

e

2010 2015

2.8

3.2

3.8

3.4

0.2

0.5 0.4 0.3

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Java Ex Java Java Ex Java

Income Savings

2010 2015


Still worries over higher inflation

Despite inflation coming down, Indonesians still worry about it being higher, as it means

higher living costs and so we think that saving is the right mode at this time. Most of the

respondents (64%) still think that inflation is going to be higher than in the past 12 months.

Figure 47: Inflation is expected to decline or at least remain stable

83

14

2

76

21

4

64

31

5

73

24

4

64

31

5

0

10

20

30

40

50

60

70

80

90

It will be higher than the last 12 months It will be the same as the last 12 months It will be lower than the last 12 months

2011 2012 2013 2014 2015


05 April 2016


Figure 48: Inflation component breakdown (2015) Figure 49: Inflation component breakdown (2010)

8.1%

7.2%

6.4% 6.3%5.8%

4.2%

3.6%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

ProcessedFood,

Beverages,Tobacco

Food Transport,Comm.

andFinance

Housingand

Utilities

Health Education,Recreation

andSports

Clothing

9.4%

7.9%

4.6%

3.5%3.0%

2.7%

1.8%

0%

2%

4%

6%

8%

10%

Food ProcessedFood, Beverages,

Tobacco (BF)

Clothing Education,Recreation

and Sports (ER)

Housingand

Utilities

Health Transport,Comm. and

Finance

Source: Indonesia Bureau of Statistics Source: Indonesia Bureau of Statistics

05 April 2016


Key sector selections

05 April 2016


Automotive sector Key stocks

Astra International

■ Improvement in macroeconomic conditions and the launch of new models should

support 4W sales volume growth.

■ Monetary easing (a 75 bp BI cut) should come into full effect in one to two quarters,

resulting in cheaper financing for cars and motorcycles.

Four-wheelers

Four-wheeler (4W) penetration in Indonesia remained low at 7%, although the trend shows

an improvement from 6% in 2010. This improvement is on the back of several factors: (1)

affordable LCGC (low cost green car) models (US$8-9k); (2) attractive financing rates; and

(3) the need to be more mobile given there is no improvement in public transportation.

Compared to our previous surveys, people with low “incomes” are better off now, with 4%

of the respondents surveyed in the lower bracket having cars versus 3% in 2014 and 1%

in 2010. Further, last year's survey also booked an improvement compared to the 2010

survey when only 7% of the respondents were willing to purchase a car in the next 12

months. However, this year's weaker result compared to last year's is likely due to weaker

economic growth from 2Q-3Q15, coupled with high inflation and the rupiah’s weakening.

Figure 50: Four-wheeler penetration remains low, while people with higher incomes need to be more mobile

Area Region Age Income*

% of respondents Total Urban Rural Java Ex Java 18-29 30-45 46-55 56-65 Low Mid High

2015

Four-wheeler ownership 7 7 6 7 6 6 7 5 9 4 6 25

Prob. of purchase in 12M

Potentially Yes 8 9 7 9 8 9 8 11 4 6 8 17

Unsure 25 25 25 27 23 23 27 27 27 21 26 27

Potentially No 67 65 68 64 70 68 65 62 69 73 66 56

2014



Potentially Yes 14 14 14 13 16 14 14 14 6 13 14 18

Unsure 32 31 34 35 26 32 33 30 30 37 32 27

Potentially No 54 55 52 52 58 53 52 56 63 50 54 55

2010



Potentially Yes 7 8 5 6 9 5 8 10 6 3 8 39

Unsure 25 26 22 26 22 29 22 24 23 20 26 39

Potentially No 68 66 72 67 69 66 70 66 71 77 66 21

* Income is on a monthly basis—low < Rp1.5 mn, mid Rp1.5-7.5 mn, high > Rp7.5 mn


Toyota maintains its market leader position, while Honda is catching up

Toyota remained the preferred brand for car purchases, although there was a noticeable

decline in market share from 52% in 2010 to 23% in 2015. Honda is catching up with 22%

in 2015 versus 16% in 2010. We believe the decline in Toyota is attributed to it not

launching good new models, while Honda launched several hits (Mobilio, BRV, HR-V, and

Freed, among others). A deeper dive into the result also showed mixed results. The

younger population (18-29 years old) preferred Honda (25%) versus Toyota (13%), while

We like Astra on the back of

improvements in

macroeconomic conditions

and the launches of new

models

Honda is catching up with

22% of our respondents

preferring the brand in 2015

versus 16% in 2010. Toyota

is still the market leader with

a 23% market share

05 April 2016


Toyota's dominance remained resilient among the middle aged (30-45 years old). People

with higher monthly incomes also prefer Honda more now versus Toyota.

Figure 51: Toyota remains the market leader, with Honda catching up

% of respondents Area Region Age Income*

Total Urban Rural Java Non-Java 18-29 30-45 46-55 56-65 Low Mid High

2015

Toyota 23 18 36 19 36 13 36 20 17 27 23 20

Honda 22 24 18 21 24 25 18 24 33 18 21 38

Daihatsu 10 12 6 11 6 9 12 8 17 0 11 8

Nissan 6 6 3 6 3 4 2 13 17 0 7 0

BMW 8 11 3 9 6 11 8 8 0 8 9 0

Suzuki 3 5 0 3 3 0 4 8 0 0 3 8

Mitsubishi 1 0 3 1 0 2 0 0 0 0 1 0

Others 26 23 31 29 22 38 20 20 17 47 24 26

2014

Toyota 30 29 28 24 39 24 29 45 17 19 30 37

Honda 23 27 17 18 34 19 24 31 33 13 24 31

Daihatsu 9 5 15 10 6 5 12 10 0 7 10 5

Nissan 5 4 3 3 6 5 5 0 0 7 4 0

BMW 2 3 2 2 3 4 1 0 0 7 2 0

Suzuki 2 2 3 3 1 0 4 3 0 0 2 5

Mitsubishi 1 1 2 1 2 2 1 0 0 0 1 0

Others 29 29 30 40 9 40 25 11 50 49 26 21

2010

Toyota 52 49 58 47 64 43 50 63 62 58 50 64

Honda 16 14 19 13 15 17 15 15 13 16 16 8

Daihatsu 10 13 3 15 2 11 13 4 0 9 11 0

Nissan 3 3 3 3 2 3 5 0 0 0 3 11

BMW 1 1 3 1 2 0 2 0 13 9 1 0

Suzuki 3 4 0 4 0 3 3 4 0 0 4 0

Mitsubishi 2 3 0 4 0 0 3 4 0 0 2 8

Others 13 13 13 13 15 23 9 11 12 9 14 9

* Income is on monthly basis—low < Rp1.5mn, mid Rp1.5-7.5 mn, high > Rp7.5 mn


Two-wheelers

Motorcycles remain the wheels that move Indonesia's economy. Penetration remains high

at 84%, slightly lower than last year’s 86% but higher than 2010’s 73%. Among those

surveyed, 37% of respondents owning a motorcycle claimed that they have more than

one. The average age of a motorcycle is 3.7 years while the average ownership turnover

for them is 5.7 years.

It is noteworthy that the confidence of customers is eroding, in line with the trend seen for

four-wheelers. Only 28% of respondents are willing to purchase motorcycles in the next 12

months, down from 39% last year. This is likely due to high inflation in 2Q and 3Q last year

which resulted in people deferring their motorcycle purchases to buy staples. However, we

are more positive heading into 2016, as inflation has fallen and GDP rebounded in 4Q15.

Further, the BI cut its reference rate by 75 bp which should translate into cheaper

financing. Motorcycles continue to be popular and affordable in Indonesia as a result of a

poor public transportation system.

Motorcycle penetration

remains high at 84%,

although lower than last

year's 86%

05 April 2016


Figure 52: Two-wheeler ownership remains high in Indonesia


Total Urban Rural Java Non-Java 18-29 30-45 46-55 56-65 Low Mid High

2015

2-wheeler ownerships % respondents 84 85 82 72 65 86 86 77 81 63 87 91

No of 2Ws per household

1 motorcycle % owners 63 63 64 63 63 62 71 51 57 79 62 63

>1 motorcycles % owners 37 37 36 37 37 38 29 49 43 21 38 37

When was it purchased? Years ago 3.7 3.7 3.7 3.8 3.7 3.4 3.8 3.9 4.7 4.4 3.7 3.3

Motorcycle ownership turnover Years 5.7 5.8 5.5 5.8 5.5 4.9 5.9 6.5 7.2 5.3 5.7 5.4

Probability of purchase in 12M

Potentially Yes % respondents 28 29 26 27 32 29 31 27 14 26 29 25

Unsure % respondents 26 25 27 26 25 24 26 26 29 22 25 31

Potentially No % respondents 46 46 46 47 43 46 43 47 57 52 46 44

2014











2010











* Income is on monthly basis—low < Rp1.5mn, mid Rp1.5-7.5 mn, high > Rp7.5 mn


Honda consolidating its position as the market leader in 2W industry

Honda and Yamaha remain the two favourite brands for motorcycles, accounting for 93%

of the total market, based on our survey. There is a noticeable drop in Honda's non-Java

market share, although aggregately Honda and Yamaha are gaining more market share.

Honda is slowly eliminating competition through its strong network and after-sales service,

in addition to the introduction of attractive new models.

Honda and Yamaha remain

the two favourite brands for

motorcycles, accounting for

93% of the total market as

per our survey

05 April 2016


Figure 53: Honda remains the market leader, followed by Yamaha


% of respondents Total Urban Rural Java Non-Java 18-29 30-45 46-55 56-65 Low Mid High

2015

Honda 57 53 64 62 43 51 59 61 62 64 55 64

Yamaha 36 39 28 31 47 40 34 30 32 29 36 34

Suzuki 6 6 6 5 8 7 6 6 4 5 7 0

Kawasaki 1 1 1 1 1 1 1 1 0 1 1 0

Others 0 1 1 1 0 1 0 2 2 0 1 2

2014

Honda 55 53 59 58 48 50 56 60 65 56 55 58

Yamaha 36 38 31 34 39 38 36 33 28 37 36 33

Suzuki 7 7 7 7 10 10 6 6 6 5 8 8

Kawasaki 1 1 1 1 1 2 1 1 2 - 2 1

Others 1 1 2 0 1 - 1 - (1) 1 (0) -

2010

Honda 50 48 54 54 42 46 54 48 53 51 49 46

Yamaha 33 36 28 31 37 35 30 39 24 29 34 18

Suzuki 13 12 14 11 17 15 12 7 18 16 13 28

Kawasaki 2 2 2 2 1 2 1 2 4 1 2 9

Others 2 2 2 2 3 2 3 4 1 3 2 -



05 April 2016


Food and beverages Key stocks

Indofood CBP:

■ The noodles division will continue to be the company's backbone and generate strong

free cash flow, despite it being already highly penetrated, as it has absolute pricing

power. The driver going forward will be product innovation and new product launches.

■ The luxury of having a strong cash flow has allowed the company to expand into other

products in its portfolio, such as dairy and beverages, as well as diapers.

Indofood Sukses Makmur:

■ A fully integrated food company in Indonesia, with most of its earnings derived from

the listed Indofood CBP (ICBP). It is also a parent company of the listed agribusiness

(IFAR), the flour milling company (Bogasari), and distribution company (Indomarco).

HM Sampoerna:

■ The largest cigarette company in Indonesia, and with main product on the SKM LTLN

(machine-made, kretek cigarettes, low-tar low-nicotine) that is well targeted to the

rising middle and upper market segment, and younger generation.

Gudang Garam.

■ It is the second largest cigarette company in Indonesia with main product on the SKM

FF (machine-made, kretek cigarettes, full-flavoured) that is well targetted to the middle

market segment.

Looking for convenience

With Indonesians becoming more affluent, they are seeking for more convenience, and of

course affordability. Spending for food has increased from 38% of total household

spending in 2010 to 50% in 2015, according to our survey. And Indonesians spending on

food is much above the overall average survey.

We looked into the trend in the food and beverages segment in the past six years, where

the trend to consume is higher, across all segments. Consumptions of carbonated drinks

(66% in 2015 vs 60% in 2010) and bottled water (89% in 2015 vs 82% in 2010) continue to

rise, particularly among the younger generation, while consumption of instant noodles and

dairy products is pretty much similar, indicating these two products are more defensive.

Interestingly, only cigarettes that continue to see a downward consumption trend (57% in

2015 vs 64% in 2010). Consistent with our findings in the last six years of our survey, local

brands continue to dominate most of the F&B products.

Rising consumption on

bottled water and

carbonated drinks;

defensive on instant noodles

and dairy; while cigarette

consumption declines

05 April 2016


Figure 54: Consumption of food and beverages

2015 2014 2010


Carbonated drinks

Consumed in the past 3M 66 69 61 67 64 74 76 70 72 77 60 64 52 62 55

Consumed more in the next 3M 36 39 32 40 28 37 39 35 32 53 36 41 25 34 41

Bottled water



Dairy products



Instant noodles



Cigarettes





2015 2014 2010

Age Income* Age Income* Age Income*

% of respondents 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High 18-29 30-45 46-55 56-65 Low Mid High

Carbonated drinks

in the past 3M 75 68 55 37 16 18 16 81 75 65 46 18 19 18 69 61 44 36 14 16 18

more in the next 3M 41 39 29 16 14 16 12 44 37 30 22 17 14 16 38 39 28 19 12 15 22

Bottled water

in the past 3M 94 89 86 80 22 23 25 98 94 94 89 24 24 24 86 82 78 70 21 22 23

more in the next 3M 58 58 58 54 22 25 28 67 64 65 52 25 26 26 52 52 50 45 21 21 24

Dairy products

in the past 3M 79 79 68 63 18 20 19 81 76 71 62 17 20 21 81 80 70 58 19 21 23

more in the next 3M 51 50 44 45 19 21 19 56 53 50 35 18 22 25 55 55 46 36 20 22 24

Instant noodles

in the past 3M 96 97 91 89 27 24 25 95 93 94 83 26 24 23 96 97 95 92 28 24 25

more in the next 3M 58 58 57 57 30 24 26 61 60 58 44 25 24 22 62 63 61 62 29 25 19

Cigarettes

in the past 3M 56 61 52 48 17 14 15 56 60 52 45 14 14 14 67 65 59 51 18 17 10

more in the next 3M 33 35 35 28 15 14 14 34 36 31 26 15 14 12 43 40 38 30 18 16 11

* Income is on monthly basis—low < Rp1.5mn, mid Rp1.5mn-Rp7.5mn, high > Rp7.5mn.


Carbonated drinks are gaining popularity with a higher number of respondents

consuming compared to six years ago (66% in 2015 vs 60% in 2010), even though

compared to the previous year, it declined from 74% in 2014, which we believe is due to

weaker purchasing power. They are more popular in urban areas (69%) and in Java

(67%); however, compared to six years ago, the popularity is rising in the rural areas (61%

in 2015 vs 52% in 2010) as well as outside Java (64% in 2015 vs 55%). The want-to-

consume-more-of-carbonated drinks is pretty much stable at around 36% of our

respondents. Carbonated drinks are popular amongst the younger generation due to the

taste and flavour.

The rising consumption of bottled water (89% in 2015 vs 82% in 2010) is due to the

change in lifestyle as most consumers are looking for convenience and healthier living,

even though it declined from 94% in 2014 due to weaker purchasing power. This is true

across all age groups and incomes. Consumption in the urban areas has risen from 86%

in 2010 to 93% in 2015, and, interestingly, rural areas have also seen an increase in

Surging popularity on

carbonated drinks as

product become more

affordable

Bottled water has become a

staple item

05 April 2016


consumption from 74% in 2010 to 83% in 2015. Those in Java have been consuming

more bottled water—from 85% in 2010 to 95% in 2015, and this is stable from the previous

year despite weaker purchasing power. The decline is seen in outside Java, despite which

the trend was stable at 77% in the last six years. However, compared to the previous year,

it plummetted from 91%. Nevertheless, a majority of the respondents are still looking to

consume more, as bottled water has become a staple item.

Meanwhile, the consumption of instant noodles in Indonesia continues to remain high,

undoubtedly as instant noodles are popular in Indonesia, since a majority of the

respondents consume them. Instant noodles are the most affordable food item, priced as

low as Rp2,000/pack, and it offers convenience and enough carbohydrates. Interestingly

when one gets wealthier, instant noodles become a luxury or a rewarding item to have.

This can be seen as a majority of the respondents are still looking to consume more,

across all age groups and across all income levels.

As a majority of dairy products are being consumed by our respondents, we view that

this product also serves as a defensive staple. Dairy products' growing popularity is seen

in the rural area (67% in 2015 vs 59% in 2010). While the urge to consume more of these

products remains high, the urge is not as high as bottled water and instant noodles.

Interestingly, while dairy products are popular amongst the younger generation, we are

seeing a pick-up from the older generation (63% in 2015 vs 58% in 2010).

On the other hand, our respondents are shying away from cigarettes, which saw a decline

in consumption in the past six year (57% in 2015 vs 64% in 2010). This might be due to

higher cigarette prices as the GoI continues to raise taxes, but might also be due to the

increase of health awareness as the GoI is implementing stricter measures on packaging

as well as advertising and promotion on cigarettes. The urge to consume more has also

declined from 40% in 2010 to 34% in 2015. Interestingly, the younger generation is not as

interested in smoking (56% in 2015 vs 67% in 2010).

Preference towards local brands

Consistent with our findings, local brands still dominate most of the F&B sector except for

carbonated drinks. Multinationals might own brands through acquisitions (such as bottled

water Aqua by Danone, or A Mild by Philip Morris International), nonetheless, the popular

products are still local names.

Figure 56: Respondents' preference in buying local brands especially for F&B (2015) 100 100 100 100 100 100 100 100 100 100 100 100 99 99 99 100 100 100 99 100 100 100 100 99

97 100 100

93 89

93 93 91

88 85

90 89

8

1

7 7 6 8

6

-

13

-

10

20

30

40

50

60

70

80

90

100

<Rp1mn Rp1mn - Rp1.5mn Rp1.5mn - Rp2mn Rp2mn - Rp3mn Rp3mn- Rp5mn Rp5mn - Rp7.5mn Rp10mn-Rp15mn Rp10mn - Rp15mn >Rp15mn

Cigarettes Instant Noodle Mineral water Dairy Carbonated drinks


Instant noodle is a defensive

staple

Dairy products are starting

to be defensive as well

Respondents are shying

away from cigarettes

F&B is still ruled by the local

brands

05 April 2016


Figure 57: Respondents' preference in buying local brands especially for F&B (2010)

100 95 96 98

93

86

100

86

75

99 99 100 99 99 98 100 100 100 98 100 99 100 100 100 100

100 100

93 94 91

84

76

81

88

69 65

4 7

4

10 10 7

- - - -

10

20

30

40

50

60

70

80

90

100

<Rp1mn Rp1mn - Rp1.5mn Rp1.5mn - Rp2mn Rp2mn - Rp3mn Rp3mn- Rp5mn Rp5mn - Rp7.5mn Rp10mn-Rp15mn Rp10mn - Rp15mn >Rp15mn

Cigarettes Instant Noodle Mineral water Dairy Carbonated drinks


Modest price increase seen

A majority of our respondents have seen modest price increases on basic food and drink,

whereas this is higher as compared to a year ago. The producers are adjusting price on

the back of the weak Rupiah to USD, which declined 10% YoY in 2015, despite soft

commodity prices (the likes of wheat, skim milk, sugar, corn and CPO) are still on a

declining trend. However, despite the price increases, we saw that margins recovery is

somewhat limited. We believe that because of the weak purchasing power, the increase in

prices is not followed with volume growth.

Figure 58: Margins across consumer staples companies remained stable

31% 32%30%

30% 29% 29%30%

31% 32% 31% 31%

14%

13% 13%

11%

13%12% 12%

13%14%

12%13%

4%

6%

8%

10%

12%

14%

16%

18%

20%

22%

0%

5%

10%

15%

20%

25%

30%

35%

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15

Gross margin Operating margin Net margin Revenue growth (RHS)

* Data based on 12 listed Indonesia consumer companies (ICBP, GGRM, KLBF, UNVR, MYOR, RMBA, TSPC, ROTI, ULTJ, STTP, TCID,

SIDO). Source: Company data, Credit Suisse estimates

05 April 2016


Figure 59: What level of inflation have you seen over the past 12 months on basic food and drink?



2015

Below 1% 5 6 4 5 6 6 4 7 3 6 5 2

1%-3% 28 30 26 30 26 28 29 25 28 29 29 19

3.1%-5% 24 26 20 27 17 23 27 25 16 24 23 33

5.1%-7% 8 9 7 8 9 7 9 7 12 9 9 9

7.1%-10% 7 7 5 7 4 8 7 5 3 4 6 13

Above 10% 3 3 3 4 2 4 3 3 3 2 3 5

I have not noticed any 12 9 18 11 17 12 11 15 10 16 12 4

I don’t know 12 9 18 9 19 11 10 13 27 10 13 15

2014

Below 1% 6 6 7 7 4 6 6 7 4 5 7 2

1%-3% 28 26 31 26 32 28 27 28 27 26 26 30

3.1%-5% 19 20 17 18 17 22 19 14 13 13 20 26

5.1%-7% 6 8 3 6 6 5 7 8 7 3 8 5

7.1%-10% 6 8 2 5 3 5 6 7 4 3 6 6

Above 10% 5 5 6 7 1 4 6 5 5 9 5 3


I don’t know 17 15 22 21 19 16 17 20 23 21 15 10

2010

Below 1% 7 8 4 3 16 5 7 8 8 5 7 13

1%-3% 23 24 22 16 42 23 25 20 21 24 23 5

3.1%-5% 23 21 25 26 11 24 21 22 23 27 21 35

5.1%-7% 13 13 15 16 6 11 15 15 12 13 14 17

7.1%-10% 8 8 10 11 2 6 9 9 16 5 10 13

Above 10% 7 8 5 8 3 7 7 7 5 4 8 17


I don’t know 13 12 17 15 10 16 12 13 9 18 11 0



Figure 60: Wheat (USD/bushel) Figure 61: Skim milk (USD/metric tonne)

4

5

6

7

8

Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16

USD

/bus

hel

Wheat (USD/bushel)

Avg 2010: 5.4Avg 2011: 6.8Avg 2012: 7.4Avg 2013: 6.8Avg 2014: 5.9Avg 2015: 5.1YTD 2016: 4.7

1400

1700

2000

2300

2600

2900

3200

3500

3800

4100

4400

4700

5000

5300

5600


US

$ / m

etric

tonn

e

Skim milk (USD/metric tonne)

Avg 2010: 3,393Avg 2011: 3,660Avg 2012: 3,163Avg 2013: 4,399Avg 2014: 3,753Avg 2015: 2,165YTD 2016: 1,820


05 April 2016


Figure 62: Sugar (USD/50kg) Figure 63: Corn (USD/bushel)

11

13

15

17

19

21

23

25

Feb-13 Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16

USD

/50k

g

Sugar (USD/50kg)


2

3

4

5

6

7

8


USD

/bus

hel

Corn (USD/bushel)



The rising popularity of beverages

Carbonated drinks vs bottled water

Carbonated drinks are gaining popularity with a higher number of respondents

consuming these drinks as compared to six years ago (66% in 2015 vs 60% in 2010),

even though the popularity declined from 74% in 2014, which we believe was due to

weaker purchasing power. They are more popular in urban areas (69%) and in Java

(67%); however, as compared to six years ago, the popularity is rising in the rural areas

(61% in 2015 vs 52% in 2010) as well as outside Java (64% in 2015 vs 55%). The want-

to-consume-more-of-carbonated drinks is pretty much stable at around 36% of our

respondents. Carbonated drinks are popular amongst the younger generation due to the

taste and flavour.

Figure 64: Consumption of carbonated drinks (area)

2015 2014 2010





Figure 65: Consumption of carbonated drinks (age and income)

2015 2014 2010



in the past 3M 75 68 55 37 16 18 16 81 75 65 46 18 19 18 69 61 44 36 14 16 18

more in the next 3M 41 39 29 16 14 16 12 44 37 30 22 17 14 16 38 39 28 19 12 15 22



Coca-Cola, manufactured by Coca-Cola Amatil, showed a slight improvement (27% in

2015 vs 25% in 2014); however, when compared to six years ago, its popularity has

declined from 30% in 2010 to 27% in 2015, due to stiffening competition. However, Coca-

Cola continues to lead as the most favoured carbonated drink in Indonesia.

Its closest competitor, Big Cola, which is manufactured by Spain-based AjeGroup, saw its

share decline to 16% in 2015 from 20% in 2014. Big Cola started gaining popularity since

2013. Its popularity was mainly due to its 'value for money' product, which is around 30%

cheaper as compared to Coca-Cola, and its larger volume. Nevertheless, Big Cola is more

popular among respondents who live in rural areas and outside Java. It is also popular

amongst the lower income group due to its affordability and across generations.

Surging popularity on

carbonated drinks as the

product is becoming more

affordable

05 April 2016


Both Sprite and Fanta, which are also manufactured by Coca-Cola Amatil, maintained

their position as the second and third most favoured carbonated drinks in Indonesia. Their

shares are relatively stable at 22% and 21%, respectively. Despite competition from Big

Cola, interestingly, Sprite's popularity is stable as compared to six years ago—at 22%. On

the other hand, the decline in Fanta's popularity (21% in 2015 vs 31% in 2010), we

believe, is due to competition as Big Cola is also producing a product with a similar

flavour.

Pepsi Cola continues to be challenging, being the fifth most favoured carbonated drink in

Indonesia, with its popularity remaining flat at 4%. Pepsi Cola is manufactured by PT

Pepsi-Cola Indobeverages, a JV between Indofood CBP and Asahi Group Holdings.

Figure 66: Carbonated drinks, by brands



2015

Coca-Cola 27 28 26 32 25 27 27 26 29 29 31 26

Sprite 22 21 26 25 27 22 22 23 22 27 25 24

Fanta 21 21 21 22 24 21 21 21 20 16 24 26

Big Cola 16 15 18 18 21 16 15 16 17 27 16 17

Pepsi Cola 4 4 3 3 3 4 4 4 3 1 5 7

2014

Coca-Cola 25 26 23 26 25 25 24 27 26 21 26 31

Sprite 21 20 24 23 26 20 22 21 23 26 23 24

Fanta 22 22 22 24 23 22 22 25 20 28 23 26

Big Cola 20 19 23 22 22 19 21 18 23 22 23 15

Pepsi Cola 5 5 3 5 4 5 4 4 1 3 5 4

2010

Coca-Cola 30 31 27 32 32 29 31 33 35 31 37 42

Sprite 22 21 25 28 30 20 23 24 22 29 23 21

Fanta 31 30 34 36 35 31 30 30 33 38 34 37

Big Cola 0 0 0 0 0 0 0 0 0 0 0 0

Pepsi Cola 4 5 2 4 3 5 3 2 2 3 6 0



Bottled water consumption continues to be high

The rising consumption of bottled water (89% in 2015 vs 82% in 2010) is due to a change

in lifestyle as most consumers are looking for convenience and healthier living, even

though it declined from 94% in 2014 due to weaker purchasing power. Consumption in the

urban areas rose from 86% in 2010 to 93% in 2015, and interestingly rural areas also saw

consumption increasing from 74% in 2010 to 83% in 2015.

Consumers in Java have been consuming more bottled water from 85% in 2010 to 95% in

2015—stable from the previous year despite weaker purchasing power. The decline is

seen in outside Java, where the trend was stable at 77% in the last six years. However, as

compared to the previous year, it plummetted from 91%. Nevertheless, a majority of the

respondents are still looking to consume more as bottled water has become a staple item.

Figure 67: Consumption of bottled water

2015 2014 2010





Bottled water has become a

staple item

05 April 2016



2015 2014 2010



in the past 3M 94 89 86 80 22 23 25 98 94 94 89 24 24 24 86 82 78 70 21 22 23

more in the next 3M 58 58 58 54 22 25 28 67 64 65 52 25 26 26 52 52 50 45 21 21 24



The bottled water business is competitive, as it depends on brand equity, product visibility

and pricing. The gap between the first player and the second one is huge, at 37% in 2015,

even though it has narrowed from 46% in 2010.

Aqua, manufactured by Danone, continues to be the most preferred bottled water brand by

our respondents, despite its market share declining to 50% in 2015 from 62% in 2014 (56% in

2010) due to competition. Aqua is more popular among respondents who live in the urban

areas and outside Java, which we believe is because of the location of its plants as well as a

stronger distribution network. The brand is popular amongst all generations, and because of

its pricing and market positioning, it become the preferred brand for the higher income earner.

Aqua was a local brand that was acquired by Groupe Danone in 1998.

According to our survey, the second most favoured bottled water brand is Club. Club was

acquired by a JV of Indofood CBP and Asahi Group. Its popularity rose to 13% in 2015,

from 10% in 2010. We view that after the acquisition, the distribution of the brand has

improved. The transition of the distribution to its sister company, Indomarco, is expected to

be completed by 2Q16. The brand is preferred by those in urban areas and in Java mostly,

for the middle income segment.

Figure 69: Bottled water consumption, by brands



2015

Aqua 50 51 48 44 73 50 52 46 51 50 51 63

Club 13 14 12 14 11 14 12 14 14 10 13 8

Vit 12 12 12 12 7 13 11 13 13 14 12 10

2 Tang 5 4 5 5 1 4 5 5 5 7 4 4

Viro 4 3 5 5 1 4 4 4 1 4 4 3

Sangua 1 1 2 1 0 1 1 1 1 0 1 3

Others 15 14 16 19 7 14 15 16 14 16 15 8

2014

Aqua 62 60 67 58 83 59 63 67 65 70 60 63

Club 12 11 13 14 9 14 11 8 7 11 13 11

Vit 11 13 7 11 3 11 10 11 12 11 11 10

2 Tang 4 6 1 3 0 5 3 3 4 0 4 8

Viro 5 5 7 7 1 5 7 5 4 1 6 3

Sangua 0 0 0 0 0 0 0 0 0 0 0 0

Others 6 6 6 6 4 5 5 6 8 7 6 5

2010

Aqua 56 56 55 53 75 56 56 58 53 63 57 58

Club 10 10 11 11 10 10 10 12 13 12 11 19

Vit 10 10 10 9 4 9 11 10 11 8 10 3

2 Tang 7 7 9 7 2 7 8 5 7 5 7 7

Viro 2 3 1 2 0 3 2 2 1 1 2 0

Sangua 1 2 0 1 0 2 1 1 0 0 2 0

Others 12 12 14 17 9 13 12 12 14 12 11 13



Aqua is still most popular,

but is declining

Club is starting to gain

better popularity

05 April 2016


Instant noodles

Meanwhile, the consumption of instant noodles in Indonesia continues to remain high.

Undoubtedly, instant noodles are is popular in Indonesia, as a majority of the respondents

consume it. Instant noodles is the most affordable food item, priced as low as

Rp2,000/pack, and it offers convenience and one complete meal in a package

(carbohydrate and fat). Interestingly when one gets wealthier, instant noodles become a

luxury or a rewarding item to have. This can be seen as a majority of the respondents,

across all age groups and across all income levels, are still looking to consume more.

Figure 70: Consumption of instant noodles

2015 2014 2010






2015 2014 2010



in the past 3M 96 97 91 89 27 24 25 95 93 94 83 26 24 23 96 97 95 92 28 24 25

more in the next 3M 58 58 57 57 30 24 26 61 60 58 44 25 24 22 62 63 61 62 29 25 19



The instant noodle business in Indonesia is pretty much a two-player business, with Indofood

CBP (ICBP) as the leading player and unlisted Wings Group as the second-largest player. The

two of them had a combined market share of 89% in 2015.

ICBP is the leading player in the instant noodle business, with a total of 63% share in

2015, gaining from 59% in 2014 and 2010. ICBP has three major brands, namely Indomie,

Sarimi, and Supermie. Indomie continues to be the leading brand (37%), followed by Mie

Sedap (26%), manufactured by the unlisted Wings Group. Both Indomie and Mie Sedap's

shares declined in 2015, from 40% and 33% in 2014 and 38% and 29% in 2010,

respectively. We believe the trend might be due to consumers downtrading on the back of

weaker purchasing power. The lower end brands, such as Sarimi and Supermie are taking

some share at 10% each in 2015, from 7% in the previous years.

On the other hand, the premium product, that is noodle in a cup, PopMie, has retained a

relatively stable share at 5%, even though its share improved from 3% in 2010 as

consumers are looking for convenience. PopMie is consumed mostly by the high earners

and younger generations.

Indomie continues to be popular among all age groups and income levels, particularly the

higher income earners. Due to its intensive distribution network, its popularity is

widespread in both urban and rural areas, particularly Java. Interestingly, its competitor

Mie Sedap's popularity among the higher income earners declined and it is now most

popular amongst the lower income earners, in rural areas and outside Java.

Instant noodle is a defensive

staple

Lower end brands are

gaining shares

Stable share on the

premium product

Indomie vs Mie Sedap

05 April 2016


Figure 72: Noodle consumption, by brand—Indomie is still leading


% of respondents Total Urban Rural Java Ex-Java 18-29 30-45 46-55 56-65 Low Mid High

2015

Indomie 37 39 33 41 30 38 37 36 38 35 37 41

Mie Sedap 26 24 31 25 30 26 26 27 26 31 26 19

Sarimi 10 10 11 10 11 9 11 9 11 11 10 13

Supermi 10 10 10 9 10 9 10 10 10 13 9 7

Gaga Mie 1 0 1 1 0 0 1 1 2 1 1 1

ABC 2 2 2 2 2 0 0 0 0 1 2 2

Popmie 5 6 3 5 4 5 5 5 2 0 5 6

Salam Mie 0 0 1 0 0 0 0 1 0 1 0 0

Alhami 0 0 0 0 1 0 0 0 0 0 1 0

Mie 100 0 1 0 0 2 0 1 0 1 1 1 0

Others 7 8 7 7 11 0 0 0 0 7 8 11

2014

Indomie 40 42 36 44 32 40 40 41 44 41 41 41

Mie Sedap 33 31 39 32 38 33 33 34 35 37 33 32

Sarimi 7 6 9 8 4 6 7 6 8 6 7 6

Supermi 7 8 5 6 9 7 7 8 5 5 6 12

Gaga Mie 0 0 0 0 0 0 0 0 0 0 0 0

ABC 0 0 0 0 0 0 0 0 0 0 0 0

Popmie 5 6 3 6 4 7 5 3 3 4 6 5

Salam Mie 0 0 0 0 0 0 0 0 0 0 0 0

Alhami 0 0 0 0 0 0 0 0 0 0 0 0

Mie 100 1 1 0 0 3 1 1 1 0 1 1 1

Others 6 6 6 4 10 0 0 0 0 6 6 3

2010

Indomie 38 40 31 41 30 39 36 39 37 35 38 39

Mie Sedap 29 26 35 29 31 30 28 29 36 32 28 25

Sarimi 7 5 10 8 5 6 8 7 7 9 6 4

Supermi 11 11 12 11 13 11 12 12 11 13 11 6

Gaga Mie 1 1 1 0 2 1 1 1 0 1 1 0

ABC 1 1 1 1 2 1 1 1 3 1 2 2

Popmie 3 4 1 4 2 4 3 2 1 1 4 6

Salam Mie 0 0 0 1 0 0 0 0 0 0 1 0

Alhami 1 1 1 0 3 0 1 1 0 1 1 0

Mie 100 2 3 1 0 6 3 2 1 1 2 2 0

Others 6 7 5 5 6 0 0 0 0 4 6 18



Dairy products

As a majority of dairy products are being consumed by our respondents, we view that

this product also serves as a defensive staple. Growing popularity is seen in the rural area

(67% in 2015 vs 59% in 2010). While the urge to consume more remains high, the urge is

not as high as bottled water and instant noodles. Do note that the dairy products surveyed

included sweet condensed milk (SCM), liquid milk, which is mostly UHT (ultra high

temperature) products, and powdered milk, as well as margarine and cheese.

Dairy products are starting

to be defensive as well

05 April 2016


Figure 73: Consumption of dairy products

2015 2014 2010





Figure 74: Consumption of dairy products

2015 2014 2010



in the past 3M 79 79 68 63 18 20 19 81 76 71 62 17 20 21 81 80 70 58 19 21 23

more in the next 3M 51 50 44 45 19 21 19 56 53 50 35 18 22 25 55 55 46 36 20 22 24



Our survey indicated that Frisian Flag continues to be the most popular in dairy products.

However, its share declined from 34% in 2010 to 23% in 2015, mostly losing to other

smaller brands. Again, we believe that this is due to downtrading as consumer purchasing

power was weaker during the period. Frisian Flag, whose product is better known under

the brand "Susu Bendera", is manufactured by the unlisted company PT Frisian Flag

Indonesia, which started producing SCM products since 1971. In addition, it also produces

liquid milk and milk powder. The brand is popular across all age groups and income

segments, particularly in rural areas and outside Java.

Indomilk is manufactured by PT Indolakto, a subsidiary of Indofood CBP. It is the second

most popular dairy product, according to our survey. Its popularity rose to 21% in 2015

from 19% in 2010. Indomilk is popular across all age groups, and the lower and middle

income segment, particularly in the rural areas and Java.

The third most popular dairy product is Milk Ultra, which is manufactured by PT Ultrajaya.

Its popularity improved to 15% in 2015 from 12% in 2010. Its main products belong to the

liquid category with the UHT process and aseptic packaging technology. It also

manufactures the SCM product under the "Cap Sapi" brand. Ultra is popular amongst the

younger generation, across all income segments, particularly in urban areas and Java.

Nestlé is ranked fourth in terms of its popularity based on our survey. PT Nestlé Indonesia

is the subsidiary of Switzerland based, Nestlé SA, and has been operating in Indonesia

since 1971. The company's biggest brand is its milk powder brand—Dancow—which saw

its shares declining to 8% in 2015 from 10% in 2010.

The survey also indicated Blue Band as one of the popular products, with 7%

respondents. Blue Band is owned by Unilever Indonesia and is a manufacturer of

margarine.

Frisian Flag losing share

Indomilk gaining share

Susu Ultra losing share

Dancow is also losing

shares

05 April 2016


Figure 75: Dairy products consumption, by brand—Frisian Flag still dominates


% of respondents Total Urban Rural Java Ex-Java 18-29 30-45 46-55 56-65 Low Mid High

2015

Frisian Flag 23 21 29 21 36 22 24 24 21 24 23 27

Indomilk 21 19 28 27 11 22 20 23 25 21 22 15

Milk Ultra 15 16 13 16 8 17 16 13 7 16 15 14

Nestlé 8 9 7 7 9 9 8 7 5 7 8 9

Blue Band 7 9 3 7 7 6 7 8 10 5 7 8

Others 26 27 20 23 30 24 25 24 31 28 24 27

2014

Frisian Flag 26 24 30 22 39 25 27 26 36 25 26 29

Indomilk 22 19 28 25 14 23 21 21 24 22 22 16

Milk Ultra 18 20 13 19 14 21 18 17 6 18 19 14

Nestlé 10 11 6 9 9 9 10 10 7 9 10 7

Blue Band 9 10 5 9 7 8 9 11 11 9 9 12

Others 16 16 16 16 17 16 17 16 16 17 15 21

2010

Frisian Flag 34 31 44 31 43 33 34 40 38 44 34 19

Indomilk 19 17 23 22 12 19 18 20 21 23 18 14

Milk Ultra 12 13 9 11 11 13 12 9 8 10 12 19

Nestlé 10 11 7 11 8 11 10 9 9 5 11 14

Blue Band 0 0 0 0 0 0 0 0 0 0 0 0

Others 25 28 17 25 25 24 26 22 25 18 24 35



Cigarettes

On the other hand, our respondents are shying away from cigarettes, which have seen a

decline in consumption in the past six years (57% in 2015 vs 64% in 2010). This might be

due to higher cigarette prices as the GoI continues to raise taxes, but it could also be due

to the increase of health awareness as the GoI is implementing stricter measures on

packaging as well as advertising and promotion on cigarettes. The urge to consume more

has also declined from 40% in 2010 to 34% in 2015. Interestingly, the younger generation

is less interested in smoking (56% in 2015 vs 67% in 2010).

Figure 76: Consumption of cigarettes

2015 2014 2010





Figure 77: Consumption of cigarettes

2015 2014 2010



in the past 3M 56 61 52 48 17 14 15 56 60 52 45 14 14 14 67 65 59 51 18 17 10

more in the next 3M 33 35 35 28 15 14 14 34 36 31 26 15 14 12 43 40 38 30 18 16 11



Indonesia is the second largest cigarette market in the world, after China, followed by

Russia (310 bn sticks) and Japan (186 bn sticks), according to Philip Morris International's

(PMI) estimates. Indonesia is the only country in the three largest markets in the world to

Respondents are shying

away from cigarettes

Indonesia is a large

cigarette market

05 April 2016


have registered positive growth in 2010–14. It sold 314 bn sticks of cigarettes in 2015,

according to PMI estimates.

Figure 78: Indonesia—cigarettes volume

217

229

238

247 251

255

280

302 308

314 314

-2%

0%

2%

4%

6%

8%

10%

12%

200

220

240

260

280

300

320

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Industry vol (bn sticks) YoY growth (RHS)

CAGR10-15: 4.3%CAGR13-15: 1.0%

Source: Phillip Morris International estimates, based on market share data from Nielsen Retail Audit,

internal sales data, and other estimates, and publicly reported data by industry players

Figure 79: The forty largest cigarette markets globally (2014)

* Markets selected represent 80% of total industry volumes excluding China, the US and Duty Free.

Source: Philip Morris International estimates

Amongst the different types of cigarettes in Indonesia, the majority of cigarettes sold are

kreteks, better known as clove cigarettes. Kretek cigarettes are made with a blend of

tobacco, cloves and other flavors (sauces), and are uniquely an Indonesian creation.

Around 94% of the cigarettes sold in Indonesia were kretek, while white cigarettes (SPM

or Sigaret Putih Mesin) accounted for the remaining 6%.

Kretek is uniquely

Indonesia's creation

05 April 2016


There are two types of kretek cigarettes, namely SKT (Sigaret Kretek Tangan, or hand-

rolled) and SKM (Sigaret Kretek Mesin, or machine-made). The difference between the

two is in terms of tar and nicotine content, with SKT being stronger in tar and nicotine and,

therefore, having a stronger flavour, whereas SKM contains a filter. There are two types of

SKM cigarettes—the full-flavoured (FF), and the low-tar and low-nicotine (LTLN), which

differ in terms of tar and nicotine content; SKM LTLN has a milder taste.

GoI excise tax tariff and target

Other than the taste and content, cigarettes differ in prices as well, mostly due to the

difference in the excise tax that is regulated by the GoI. The GoI commonly revises its

excise tariff regulation once a year, even though it can also be revised at any time during

the year. This is to meet the GoI target on total customs and excise tax of Rp186.5 tn in

2016. For the excise tax revenue alone, it is targeting Rp146 tn in 2016, whereby up to

Feb-2016 excise tax revenue accounted only for 2% of the FY16 target.

Figure 80: Excise tax revenue Figure 81: % excise tax to total tax revenue

332563777244680

5125256718

6616677010

95028

108452118086

144600146430

126100

0%

5%

10%

15%

20%

25%

0

20000

40000

60000

80000

100000

120000

140000

160000

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

E

2015

exc

l. on

e-of

f

Excise tax revenue (Rp bn) YoY growth (%)

10%

9%

11%11%

10%

10%

9% 9%

8%

9% 9%9%

10%

10%10%

10%9%

8%

7%

8%

9%

10%

11%

12%

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

E

2015

exc

l. on

e-o

ff

Source: Ministry of Finance Source: Ministry of Finance, Credit Suisse estimates

Based on the latest regulation on excise tariff, the Ministry of Finance's Decree No.

198/PMK.010/2015—signed on 6 Nov 15 and effective 1 Jan 16 onwards—states that the

highest excise duty tax increase on SPM is of 16.5%, followed by SKM of 15.7%, while

SKT had the lowest increase of 10.3%. This is based on tier-one cigarette producers,

those that are producing more than 2 bn sticks per year. This said SPM is now taxed at

Rp495/stick, SKM at Rp480/stick and SKT at Rp320/stick in 2016, as compared to

Rp425/stick, Rp415/stick and Rp290/stick in 2015, respectively.

At the same time, the minimum retail price (MRP) for SPM also increased by 13%, SKM

by 25% and SKT by 35%. That said, the MRP for SPM is now at Rp930/stick, SKM at

Rp1,000/stick and SKT Rp1,115/stick, as compared to Rp820/stick, Rp800/stick and

Rp825/stick in 2015, respectively.

Additionally, the government increased its value added tax (VAT) to 8.7% from 8.4%,

which is calculated based on the banderole prices, and continues to apply a 10% regional

tax, based on the excise tax tariff per stick.

Two types of kretek: hand-

rolled (SKT) and machine-

made (SKM). SKM types:

full flavoured (FF), low-tar,

low-nicotine (LTLN)

Higher tax on SPM on per

stick basis

MRP for SKT is most

expensive

VAT increase to 8.7% this

year

05 April 2016


Figure 82: 2016 excise tax regulation—Ministry of Finance Decree No. 198/PMK.010/2015, signed on 6 Nov 15 and

effective 1 Jan 16

Type* Tier Annual output MRP (Rp/stick) Tax (Rp/stick)

(sticks) Old New Chg Old New Chg

SKM I > 2 bn Above Rp1,000 800 1000 25.0% 415 480 15.7%

II < 2 bn Above Rp744 588 740 25.9% 305 340 11.5%

Below Rp740 min at Rp590 511-588 590-740 15.5%-25.9% 265 300 13.2%

SPM I > 2 bn Below at Rp930 820 930 13.4% 425 495 16.5%

II < 2 bn Above Rp800 520 800 53.8% 270 305 13.0%

Below Rp800, min at Rp505 425-520 505-800 18.8%-53.8% 220 255 15.9%

SKT I > 2 bn Above Rp1,115 825 1115 35.2% 290 320 10.3%

Below Rp1,115, min at Rp775 606-825 775-1115 27.9%-35.2% 220 245 11.4%

II 350 mn - 2 bn Above Rp605 417 605 45.1% 140 155 10.7%

Rp430-Rp605 385-417 430-605 11.7%-45.1% 125 140 12.0%

IIIA 50 mn - 350 mn Min price at Rp400 286 400 39.9% 85 90 5.9%

IIIB < 50 mn Min price at Rp370 286 370 29.4% 80 80 0.0%

* SKT: Hand-rolled kretek cigarette, SKM: Machine-made kretek cigarette, SPM: White cigarette.

Source: Ministry of Finance

Figure 83: Historical excise tax duty

Type* Tier Annual output Tax (Rp/stick)

(sticks) 1-Feb-09 2010 1-Jul-10 2011 2012 2013 2015 2016

SKM I > 2 bn 290 310 310 325 355 375 415 480

II < 2 bn 210 230 230 245 270 285 305 340

175 195 195 210 235 245 265 300

SPM I > 2 bn 290 310 310 325 365 380 425 495

II < 2 bn 170 200 200 215 235 245 270 305

135 165 165 175 190 195 220 255

SKT I > 2 bn 200 215 215 235 255 275 290 320

130-150 145-165 145-165 155-180 195 205 220 245

II 350 mn - 2 bn 90 105 105 110 125 130 140 155

80 95 95 100 115 120 125 140

IIIA 50 mn - 350 mn 40 65 50 65 75 80 85 90

IIIB < 50 mn 80 80

YoY growth:

SKM I > 2 bn 6.9% 0.0% 4.8% 9.2% 5.6% 10.7% 15.7%

II < 2 bn 9.5% 0.0% 6.5% 10.2% 5.6% 7.0% 11.5%

11.4% 0.0% 7.7% 11.9% 4.3% 8.2% 13.2%

SPM I > 2 bn 6.9% 0.0% 4.8% 12.3% 4.1% 11.8% 16.5%

II < 2 bn 17.6% 0.0% 7.5% 9.3% 4.3% 10.2% 13.0%

22.2% 0.0% 6.1% 8.6% 2.6% 12.8% 15.9%

SKT I > 2 bn 7.5% 0.0% 9.3% 8.5% 7.8% 5.5% 10.3%

( 10-11.5% 0.0% 6.9-9.1% 8.3-25.8% 5.1% 7.3% 11.4%

II 350 mn - 2 bn 16.7% 0.0% 4.8% 13.6% 4.0% 7.7% 10.7%

18.8% 0.0% 5.3% 15.0% 4.3% 4.2% 12.0%

IIIA 50 mn - 350 mn 62.5% -23.1% 30.0% 15.4% 6.7% 6.3% 5.9%



05 April 2016


Figure 84: Historical Minimum Retail Price (MRP)

Type Tier Annual output Minimum Retail Price (MRP)

(sticks) 1-Feb-09 2010 1-Jul-10 2011 2012 2013 2015 2016

SKM I > 2 bn 660 660 660 660 660 669 800 1000

II < 2 bn 430 430 430 430 430 549 588 740

374-380 374-380 374-380 374-380 374-430 440-549 511-588 590-740

SPM I > 2 bn 600 600 600 600 375 680 820 930

II < 2 bn 300 300 300 300 300 444 520 800

254-300 254-300 254-300 254-300 254-300 345-444 425-520 505-800

SKT I > 2 bn 590 590 590 590 590 749 825 1115

520-550 520-550 520-550 520-550 520-590 550-749 606-825 775-1115

II 350 mn - 2 bn 379 379 379 379 379 379 417 605

349-379 349-379 349-379 349-379 349-379 349-379 385-417 430-605

IIIA 50 mn - 350 mn 234 234 234 234 234 250 286 400

IIIB < 50 mn 286 370

YoY growth

SKM I > 2 bn 0.0% 0.0% 0.0% 0.0% 1.4% 19.6% 25.0%

II < 2 bn 0.0% 0.0% 0.0% 0.0% 27.7% 7.1% 25.9%

0.0% 0.0% 0.0% 0-13.2% 17.6-27.7% 7.1-16.1% 15.5-25.9%

SPM I > 2 bn 0.0% 0.0% 0.0% -37.5% 81.3% 20.6% 13.4%

II < 2 bn 0.0% 0.0% 0.0% 0.0% 48.0% 17.1% 53.8%

0.0% 0.0% 0.0% 0.0% 35.8-48% 17.1-23.2% 18.8-53.8%

SKT I > 2 bn 0.0% 0.0% 0.0% 0.0% 26.9% 10.1% 35.2%

0.0% 0.0% 0.0% 0-7.3% 5.8-26.9% 10.1-10.2% 27.9-35.2%

II 350 mn - 2 bn 0.0% 0.0% 0.0% 0.0% 0.0% 10.0% 45.1%

0.0% 0.0% 0.0% 0.0% 0.0% 10.0-10.3% 11.7-45.1%

IIIA 50 mn - 350 mn 0.0% 0.0% 0.0% 0.0% 6.8% 14.4% 39.9%

IIIB < 50 mn 29.4%



SKM LTLN continues to gain popularity

Our survey indicates that the popularity of SKT continues to decline, from 27% in 2010 to

19% in 2015, while white cigarettes disappear in the popularity stance, which we believe

could be due to pricing. SKM FF's popularity also declined to 35% in 2015 from 39% in

2010, whereas SKM LTLN's popularity surged to 31% in 2015 from 23% in 2010.

SKM LTLN is popular amongst the younger generation and the higher income earners in

outside Java and urban areas. Nevertheless, its popularity surged amongst the low income

earner as well, which can be seen from its popularity increasing from 16% respondents in

2010 to 26% in 2015. Its popularity also shifted from being in Java in 2010 to outside Java in

2015. In 2010, only 14% of the respondents outside Java preferred SKM LTLN, and this

increased to 40% in 2015, and only 13% rural areas in 2010 to 25% in 2015.

Nevertheless, SKM FF is still a go-to cigarette, with it being the most popular with 35%

respondents in 2015. It is preferred amongst all age groups and income level, particularly

the older generation (43%) and the lower and middle income segment (only 29% on the

higher income earners vs 32% on the lower income and 36% on the middle income). SKM

FF is popular in both urban and rural areas (at 35% and 36% respectively) and mostly in

Java (37% vs outside Java at 27%).

SKT cigarettes, on the other hand, have seen their popularity declining to 19% in 2015,

from 27% in 2010. This is due to a couple of reasons (1) the taste is too strong for the new

smokers, (2) SKT's prices have become more expensive (from the tax perspective, though

still cheaper compared to that of SKM) and (3) the cost of manufacturing SKT is also

getting more expensive due to the higher usage of clove and the continuous increase in

labour costs. Our survey indicates that SKT continues to be popular in rural areas (21%)

SKT continues to lose its

popularity

Surging popularity of SKM

LTLN

SKM FF is still the most

popular

05 April 2016


as compared to urban areas (17%), in Java (26%) as compared to outside Java (5%), and

amongst the older generation on the lower income level.

Figure 85: Cigarette consumption by cigarette types


% of respondents** Total Urban Rural Java Ex Java 18-29 30-45 46-55 56-65 Low Mid High

2015

SKM FF 35 35 36 37 27 33 36 33 43 32 36 29

SKM LTLN 31 35 25 27 40 43 30 19 6 26 33 40

SKT 19 17 21 26 5 10 19 33 36 23 19 18

White 0 0 0 0 0 0 0 0 0 0 0 0

Others 14 13 18 11 27 14 14 15 16 19 12 14

2014

SKM FF 33 34 32 36 27 32 36 32 29 37 35 25

SKM LTLN 28 31 22 24 38 36 25 15 17 27 26 36

SKT 22 20 24 25 8 14 21 33 33 17 21 15

White 6 7 5 7 7 9 4 5 4 10 6 9

Others 12 8 17 7 20 9 13 15 17 8 11 15

2010

SKM FF 39 38 41 41 34 37 40 41 29 44 36 18

SKM LTLN 23 26 13 33 14 33 18 6 10 16 27 26

SKT 27 28 30 17 37 20 32 33 45 27 28 10

White 4 5 2 4 3 4 5 6 0 2 7 13

Others 7 4 14 5 11 6 5 14 15 11 2 33


** SKT: Hand-rolled kretek cigarette, SKM FF: Machine-made full-flavour cigarette, SKM LTLN: Machine-made low-tar low-nicotine cigarette,

SPM: White cigarette.


The three largest producers

On the producers' level, HM Sampoerna (HMSP), which is owned by Philip Morris

International, continues to be the leader with 36% popularity, despite coming off from 40%

in 2010 and 43% in 2014, due to the losing popularity of its SKT products (Dji Sam Soe).

However, its SKM LTLN (A-Mild) continues to gain popularity. Sampoerna is liked amongst

the high-income earners (47% of respondents) as its products are premium priced, the

younger generation, in urban areas (38%) and in Java (36%).

The second largest cigarette producer is Gudang Garam (GG), which has been gaining

popularity from 23% in 2010 and 19% in 2014 to 25% in 2015. This is underpinned by the

continuous popularity of its major brand in SKM FF (Surya) and its new penetration in

SKM LTLN (Pro Mild). GG is well liked across all age and generations, particularly the

older generations (39%) and the lower and middle income segment. It is more popular in

urban areas (26%) as compared to rural areas (23%) and outside Java (27%) as

compared to in Java (23%).

The unlisted Djarum maintained its position as the third largest cigarette producer, with

16% respondents in 2015, as compared to 21% respondents in 2010. Djarum is well liked

in rural areas (21% vs urban 12%), with popularity in Java (24%), across all age and

income groups.

Bentoel, which is owned by BAT, maintained its fourth position, while Wismilak was in the

fifth position. The gap between Bentoel and Wismilak as compared to the largest three

continues to be wide and does not seem to be narrowing, due to the tax scheme on the

product.

HMSP is Indonesia's largest

cigarette producer

...followed by Gudang

Garam

And Djarum

With a huge gap with

Bentoel and Wismilak

05 April 2016


Figure 86: Cigarette consumption—by cigarette manufacturer

By cigarette Area Region Age Income*

manufacturer Total Urban Rural Java Ex Java 18-29 30-45 46-55 56-65 Low Mid High

2015

HM Sampoerna 36 38 32 36 29 38 35 37 26 32 36 47

Gudang Garam 25 26 23 23 27 22 25 27 39 22 25 15

Djarum 16 12 21 24 1 14 17 14 16 19 16 18

Bentoel 2 2 1 2 1 3 2 2 0 2 3 0

Wismilak 0 0 1 0 0 0 0 0 2 0 0 0

Others 21 22 22 15 43 24 22 20 17 25 19 20

2014

HM Sampoerna 43 48 36 43 37 47 41 39 38 45 42 53

Gudang Garam 19 21 17 20 27 18 20 23 21 22 20 13

Djarum 19 17 23 24 1 16 21 20 18 19 20 13

Bentoel 2 2 3 3 4 4 1 2 0 2 2 3

Wismilak 0 0 0 0 0 0 0 0 0 0 0 0

Others 16 13 20 10 31 15 16 17 23 12 15 18

2010

HM Sampoerna 40 46 28 36 32 43 40 32 35 25 50 44

Gudang Garam 23 23 25 23 33 19 27 30 17 28 23 18

Djarum 21 19 26 30 1 22 19 19 27 26 16 0

Bentoel 3 3 2 2 5 4 4 2 0 4 3 0

Wismilak 0 0 1 1 1 0 1 0 0 2 0 0

Others 12 9 18 9 27 12 9 17 22 16 8 38



Most popular product is A-Mild

A-Mild (SKM LTLN), owned by HMSP, continues to be the most popular product, with its

popularity surging from 14% of respondents in 2010 to 18% in 2015. The product is most

popular amongst the younger generation (42%) and high income earners (30%), outside

Java (23% vs Java 15%) and in urban areas (19% vs rural 16%).

Gudang Garam Surya (SKM FF) is the second most popular product, with its share

increasing from 12% in 2010 to 15% in 2015. It is popular amongst those in urban areas

(16% vs rural areas 13%), outside Java (26% vs in Java 12%), the older generation (43%)

and low and mid-income earners (28%).

Djarum Super (SKM FF) is now the third most popular product, together with Dji Sam Soe

(SKT) by HMSP, with 10% respondents each. The popularity of Djarum Super declined

from 15% respondents and Dji Sam Soe from 17% in 2010. Djarum Super continues to be

popular in the rural area (13% vs urban 8%), in Java (14%), amongst the younger

generations and higher income earners (15% vs low and mid income at 11% each). There

is a shift compared to 2010 where it was most popular with the low and mid income

earners. Dji Sam Soe, on the other hand, is popular in the urban areas (11% vs rural at

9%) and in Java (12%), amongst the older generation (38%) and middle income earners

(11% vs low and high income at 8% each).

GG FIM (SKM FF) is the fifth most popular product, with 9% respondents in 2015, a

decline from 12% in 2010. This is followed by Clas Mild (SKM LTLN) by unlisted Nojorono

with 6% respondents in 2015, up from 4% of respondents in 2010. U-Mild (SKM LTLN),

Sampoerna Hijau (SKT), both by HMSP, and Djarum Coklat (SKT), each have 4%

respondents. The popularity of U-Mild surged from 1% in 2010.

A-Mild is for urban and

younger generation

GG Surya is for the urban

and older generation

Djarum Super and

Sampoerna's Dji Sam Soe

is the third most popular

products

GG FIM is the fifth most

popular product

05 April 2016


Figure 87: Cigarette consumption, by brand

% of respondents Area Region Age Income*

that smoke Total Urban Rural Java Ex Java 18-29 30-45 46-55 56-65 Low Mid High

2015

Sampoerna A Mild 18 19 16 15 23 26 16 8 4 15 18 30

Gudang Garam Surya 15 16 13 12 26 10 17 17 26 13 15 7

Other brands 13 12 17 10 20 12 14 14 17 19 12 12

Djarum Super 10 8 13 14 1 12 11 8 4 11 11 15

Dji Sam Soe 10 11 9 12 5 6 10 18 20 8 11 8

Gudang Garam Filter 9 9 8 10 1 11 7 9 14 9 9 7

Clas Mild 6 6 3 2 19 8 6 4 0 6 5 4

U Mild 4 5 2 4 1 3 5 4 0 2 4 2

Sampoerna Hijau 4 3 5 5 1 2 4 8 2 6 3 7

Djarum Coklat 4 3 6 8 0 2 4 7 10 7 4 3

Star Mild 2 2 1 2 1 2 2 2 0 2 3 0

LA Lights 2 2 1 2 1 2 2 1 2 0 2 2

Pro Mild 1 0 2 2 0 1 1 1 0 1 1 0

Djarum 76 1 0 1 1 0 0 1 0 2 2 0 0

Djarum Black 1 1 1 1 0 1 1 0 0 0 1 0

2014

Sampoerna A Mild 19 21 14 15 24 25 17 8 11 17 18 25


Other brands 11 8 15 9 14 8 12 13 17 9 10 15

Djarum Super 14 13 14 16 1 14 16 8 8 16 15 11

Dji Sam Soe 14 15 11 15 6 11 14 18 17 10 14 15


Clas Mild 4 4 4 1 13 6 3 2 4 3 4 3

U Mild 5 6 4 0 0 5 5 5 2 7 4 8

Sampoerna Hijau 2 1 4 3 1 1 2 4 6 4 3 0

Djarum Coklat 5 3 8 7 0 3 4 10 10 4 5 0

Star Mild 0 0 0 0 0 0 0 0 0 0 0 0

LA Lights 0 0 0 0 0 0 0 0 0 0 0 0

Pro Mild 0 0 0 0 0 0 0 0 0 0 0 0

Djarum 76 1 1 1 1 0 0 1 2 0 0 0 0

Djarum Black 0 0 0 0 0 0 0 0 0 0 0 2

2010

Sampoerna A Mild 14 16 7 10 17 22 10 2 6 7 18 22


Other brands 1 1 2 1 3 1 1 2 0 3 1 0

Djarum Super 15 14 16 19 0 17 14 10 12 15 12 0

Dji Sam Soe 17 20 11 17 12 12 19 22 25 8 20 10


Clas Mild 4 5 3 1 19 6 4 2 4 4 5 5

U Mild 1 1 0 1 2 1 1 1 0 0 1 0

Sampoerna Hijau 4 4 8 6 2 4 6 2 4 7 4 0

Djarum Coklat 5 4 9 11 1 4 5 8 11 8 3 0

Star Mild 2 2 2 2 3 3 2 0 0 2 2 0

LA Lights 1 1 1 1 1 1 1 0 0 1 1 0

Pro Mild 0 0 0 0 0 0 0 0 0 0 0 0

Djarum 76 1 1 1 1 0 0 1 1 4 2 1 0

Djarum Black 1 1 0 0 1 1 0 0 0 0 1 0



05 April 2016


Personal care products Key stocks

Unilever Indonesia

■ A well known name for household and personal care, with dominance in most of the

categories.

Kino Indonesia

■ Its continuous product innovation, new product launches as well as the expansion of

its distribution network should drive Kino’s growth.

■ In addition, several acquisition and JV plans on Koni's pipeline are expected to

strengthen its position in Indonesia’s personal care and F&B market.

Defensive goods

Spending on personal care is stable at 8% of household spending over the last six years

that we surveyed. The consumption of feminine hygiene continues to be high at 82%

respondents, and the rise of tissue consumption is seen, from 50% respondents in 2010 to

57% in 2015. The consumption of cosmetic and skin care, on the other hand, declined

from 62% respondents in 2010 to 55% in 2015 due to weaker purchasing power, in our

view.

Figure 88: Consumption of personal care products

2015 2014 2010

% of respondents Total Urban Rural Java Ex Java Total Urban Rural Java ExJava Total Urban Rural Java Ex Java

Tissue

in the past 3M 57 64 45 62 46 61 70 45 65 53 50 57 36 53 41

more in the next 3M 35 40 27 42 20 38 44 28 36 43 27 33 16 29 22

Feminine hygiene

in the past 3M 82 82 81 84 77 79 81 73 80 76 81 85 73 83 76

more in the next 3M 48 48 49 53 38 50 50 49 46 58 48 53 37 49 46

Cosmetic and skin care

in the past 3M 55 57 50 58 48 61 63 59 62 60 62 65 57 63 61

in the next 3M 34 35 31 38 22 38 37 39 33 48 37 40 32 38 36


Needless to say, the brands that are popular continue to be the Unilever-owned brands.

With an existence in Indonesia for more than eight decades, the brands are unrivalled,

coupled with a strong distribution network. However, despite the popularity of the brands,

due to weaker purchasing power, our survey indicated downtrading to smaller and unkown

brands.

Unilever's Ponds continues to be the most popular with 18% respondents. However, this is

a decline from 24% in 2010. Citra, also owned by Unilever, also saw its popularity

declining to 17% from 19% in 2010. Ponds is the most popular amongst the younger

generation in Java, in urban areas and within the middle and low income earners, while

Citra is popular amongst all age groups and income levels, in rural areas, and outside

Java.

05 April 2016


Figure 89: Cosmetics and skin care consumption, by brand—Unilever products are still dominant


Total Urban Rural Java Non Java 18-29 30-45 46-55 56-65 Low Mid High

2015

Ponds 18 19 16 25 18 20 17 14 10 24 24 18

Citra 17 16 19 22 28 18 16 15 16 24 23 23

Viva 9 7 12 15 9 5 9 18 19 10 11 7

Lux 8 7 9 11 7 6 7 9 14 8 10 6

Sariayu 6 6 7 10 7 6 6 8 6 7 9 6

Other brands 43 46 37 17 31 44 45 36 34 27 22 40

2014

Ponds 21 22 19 26 20 24 19 15 14 33 39 61

Citra 20 18 23 23 33 20 21 20 14 0 0 0

Viva 10 10 8 9 17 9 10 10 15 9 14 12

Lux 8 6 13 15 3 4 8 13 29 25 17 7

Sariayu 7 6 8 11 4 6 7 9 8 1 1 0

Other brands 35 38 28 16 22 37 34 34 20 33 30 20

2010

Ponds 24 24 22 33 24 30 20 17 13 42 52 69

Citra 19 18 23 23 38 21 17 19 17 0 0 0

Viva 12 11 14 14 18 11 13 12 8 10 12 15

Lux 11 10 14 18 8 6 12 20 18 32 22 8

Sariayu 5 6 4 7 5 3 8 4 5 5 1 0

Other brands 29 32 24 6 8 28 31 28 38 11 13 8



05 April 2016


Branded goods Key stocks

Matahari Department Store

■ We believe Matahari will be the main beneficiary on the back of the rising middle class

segment.

■ Its main exclusive label, Nevada, continues to be the top fashion brand favoured by

our respondents. We believe this is due to its nice design and quality supported by its

affordable price points.

Mitra Adiperkasa

■ Post CVC private equity's involvement in MAPI's sports division since May-15, we

have seen positive progress in inventory days and margins pick-up.

■ The impact from higher import duty on fashion products, which clouded MAPI's 2015

margins performance has now been fully passed on. We should see a margin

turnaround coming this year.

Ramayana Lestari Sentosa

■ Being the second largest nationwide department store player in Indonesia, we believe

its SSG has bottomed in 2015 (-3%).

■ This year can be the earnings turnaround after a few years of declining profits, as

Ramayana's price-sensitive low-end customers see better purchasing power from

increased employment, lower inflation and increased government social spending.

Aspiring for premium brands

By and large, we see that the expectation of branded goods consumption will improve in

the next 12 months vs in the past 3 and 12 months. This is especially true for the fashion

segment. Although people did not buy much fashion in the past three months, their

optimism level has improved since last year. People living in Java are especially optimistic

about purchasing new clothes, as the economic recovery in the region became more

visible in 4Q15 while inflation is falling. However, this is not true for people living outside

Java, which is affected by the commodity price decline.

For those who can afford premium brand purchases, the aspiration to purchase Western

brand discretionary consumer goods remains strong in the emerging countries that were

surveyed. In particular, Indonesians are inclined towards wanting to purchase branded

western fashion goods such as leather goods, bags, shoes, sportswear and perfumes.

However, given the affordability, only the higher income earners can afford to buy foreign

branded goods, and most consumers ended up buying domestic products.


is our pick on the rising

middle income class play

Indonesians are always

inclined towards premium

brands

05 April 2016


Figure 90: Consumption of branded goods

2015 2014 2010


Fashion

Purchased in the past 3M 43 49 32 45 39 44 52 29 36 62 63 63 62 66 61

Planning to purchase in 12M 56 61 46 60 45 50 53 43 49 52 77 76 79 80 72

Leather

Purchased in the past 3M 17 20 12 19 12 17 20 11 14 23 n/a n/a n/a n/a n/a

Planning to purchase in 12M 22 24 19 26 13 21 25 14 18 29 n/a n/a n/a n/a n/a

Sport Shoes



Jewellery



Perfumes



Watches




Figure 91: Except for jewellery, Indonesians always aspired to buy foreign brands when it comes to discretionary

goods…

6-year avg 2015 2014 2013 2012 2011 2010

Fashion Apparel

% planning to buy western brands 44 48 45 50 43 39 36

% planning to buy domestic brands 56 52 55 50 57 61 64

Leather Goods, Bags and Shoes

% planning to buy western brands 50 59 48 63 51 30 n.a.

% planning to buy domestic brands 50 41 52 37 49 70 n.a.

Sports shoes & wear



Jewellery



Perfumes




05 April 2016


Figure 92: …especially for high income earners

2015 2010

Overall Low Mid High Overall Low Mid High

Fashion Apparel

% planning to buy western brands 47 40 49 52 35 21 33 52

% planning to buy domestic brands 53 60 51 48 65 79 67 48

Leather Goods, Bags and Shoes

% planning to buy western brands 58 52 59 64 n/a n/a n/a n/a

% planning to buy domestic brands 42 48 41 36 n/a n/a n/a n/a

Sports shoes & wear



Jewellery



Perfumes




Fashion

The popularity of Matahari's private label, Nevada, has been growing from only 10%

respondents favouring the brand for their next fashion apparel purchase in 2010 to 27%

over a span of five years. Nevada is favoured across Indonesian consumers regardless of

location, age profile and income segment. Thanks to its domestic sourcing, Matahari's

product price increase is more tolerable than peers who import. During the weak Rupiah

period, we believe this is one of the reasons that respondents favour Nevada compared to

imported brands.

Zara, one of MAPI's most famous brands, launched first in 2005, is the second most

appealing fashion brand for respondents' next purchase. Over the past five years, its

brand loyalty has increased from 1% to 6% respondents wanting to purchase Zara

products over the next 12 months period. We believe this is also in line with Indonesia's

rising middle-upper consumer class over the years.

Nevada remains on the top

of both customers' wish list

and 'worth-it' list in the past

five years, even gaining

more popularity

05 April 2016


Figure 93: Which brand of fashion apparel will you purchase in the next 12 months?



2015

Nevada 27 27 28 28 22 25 28 27 29 27 27 25

Zara 6 6 5 6 4 6 5 6 2 3 6 5

Guess 4 4 4 4 4 5 4 3 1 3 4 3

Gucci 5 5 4 4 6 5 5 2 3 4 4 8

Polo Ralph Lauren 4 5 2 4 3 4 4 3 3 3 4 5

Calvin Klein 4 5 2 3 5 4 5 3 1 4 4 0

Unbranded 20 17 30 23 17 17 21 26 29 24 20 18

Others 32 33 25 28 38 34 29 31 30 32 31 36

2014

Nevada 14 14 13 15 10 14 13 16 6 3 15 6

Zara 8 8 6 6 9 10 5 3 8 6 6 12

Guess 7 7 7 6 8 8 6 4 6 4 7 3

Gucci 6 5 9 6 7 8 6 6 2 7 7 2


Hammer 4 4 4 5 1 5 4 4 2 1 5 1

Calvin Klein 4 5 2 4 5 5 4 3 2 1 4 8

Unbranded 17 16 20 16 22 11 19 26 40 22 18 16

Others 36 36 36 35 37 34 39 33 32 53 32 50

2010

Nevada 10 11 6 8 15 12 9 7 3 6 11 8

Zara 1 2 0 1 1 1 1 1 - 1 1 3

Guess 4 5 1 4 3 4 3 5 5 3 4 6

Gucci 4 5 3 4 3 5 2 3 7 1 5 9


Hammer 2 2 2 2 2 2 2 3 - 1 3 3

Calvin Klein 2 3 2 2 3 3 2 2 3 2 3 0

Unbranded 47 40 63 54 36 40 51 52 65 61 44 25

Others 26 28 20 22 32 30 25 24 16 22 26 41



05 April 2016


Figure 94: In your opinion, are any of the following brands worth paying more for?



2015

Nevada 21 21 22 22 18 20 21 25 24 22 21 18

Zara 4 4 5 5 3 6 3 3 3 6 5 3

Guess 5 5 5 6 5 6 5 4 6 7 5 8

Gucci 6 6 7 7 5 6 7 6 4 5 6 9


Calvin Klein 6 6 5 5 6 7 5 4 4 5 6 4

Unbranded 5 3 12 6 6 4 5 9 7 9 5 5

None/Don't know 7 7 10 5 18 6 8 11 11 11 7 8

Others 40 41 26 37 34 38 40 32 32 26 39 42

2014

Nevada 9 7 13 10 8 8 11 8 3 5 10 1

Zara 5 5 6 4 7 9 2 6 2 10 4 9

Guess 8 9 6 7 9 9 8 9 3 7 8 3

Gucci 7 7 10 8 7 9 6 9 6 10 8 4


Calvin Klein 5 6 1 4 4 5 5 3 3 2 4 7

Unbranded 5 4 8 6 5 4 5 9 10 10 5 2

None/Don't know 11 8 19 11 14 9 12 10 30 22 9 28

Others 43 47 30 40 43 41 44 39 36 34 44 42

2010

Nevada 9 10 8 7 12 10 9 8 5 8 9 5

Zara 1 1 1 1 1 1 1 1 - 1 1 1

Guess 4 4 5 4 4 5 4 3 5 4 4 3

Gucci 6 6 6 5 7 6 6 5 2 5 6 5


Calvin Klein 5 6 3 4 6 6 4 2 5 5 5 1

Unbranded 9 7 14 13 3 8 10 10 11 18 8 8

None/Don't know 32 30 36 39 23 28 34 32 47 36 31 53

Others 30 33 23 24 39 33 27 33 25 19 32 18



Sports shoes and wear

Indonesian consumers continue to favour buying western brands in the sport shoes and

wear categories. Adidas, Nike and Reebok are among the consistently leading brands

over the past five years, although in 2015 they lost market share to Bata and some other

brands which we suspect were of cheaper price points. MAPI distributes Adidas, Nike,

Reebok and up to 40 other foreign sport brands through its sports concept stores (i.e.

Sports Station, Planet Sports, Golf House and The Athlete's Foot) as well as in

department stores (including Sogo, and also consignment in Matahari, and Ramayana).

Bata eroded some of Nike's

and Adidas' market share

due to a slow economy in

2015

05 April 2016


Figure 95: Which brand of fashion apparel will you purchase in the next 12 months?



2015

Adidas 24 24 24 24 23 26 23 19 23 27 23 33

Nike 17 18 15 17 13 19 16 14 11 16 18 8

Bata 11 11 13 11 14 8 11 16 26 13 12 2

Reebok 6 6 7 7 5 7 6 6 8 2 6 5

Unbranded 9 6 17 13 14 7 11 10 4 14 8 4

Others 32 35 24 29 31 33 32 34 29 27 32 48

2014

Adidas 37 35 44 42 29 36 39 40 13 35 41 29

Nike 23 23 21 21 20 26 20 17 25 25 23 17

Bata 0 0 0 0 0 0 0 0 0 0 0 0

Reebok 8 9 5 7 5 7 11 8 0 4 8 14

Unbranded 6 8 1 2 9 5 8 2 25 4 7 5

Others 26 26 29 28 37 26 23 34 38 32 21 35

2010

Adidas 17 17 14 15 29 16 17 18 15 22 14 65

Nike 9 10 7 7 5 11 7 9 7 8 9 6

Bata 10 11 7 7 12 7 12 15 21 9 12 0

Reebok 4 5 2 3 3 5 2 5 0 3 4 0

Unbranded 30 25 43 35 15 27 35 21 36 28 24 7

Others 29 32 27 33 36 34 27 32 21 30 37 23



Figure 96: In your opinion, are any of the following brands worth paying more for?



2015

Adidas 20 20 21 23 18 19 22 19 18 20 21 24

Nike 17 18 14 18 14 17 18 14 21 12 18 19

Bata 6 6 10 7 7 6 6 8 15 10 6 6

Reebok 9 9 7 10 6 7 9 12 15 10 9 11

Unbranded 3 1 7 2 7 1 4 6 0 7 2 2

Others 45 46 40 39 47 50 41 42 30 40 44 38

2014

Adidas 36 33 46 40 32 32 40 36 37 34 37 27

Nike 22 22 23 26 18 26 21 19 0 25 23 18

Bata 0 0 0 0 0 0 0 0 0 0 0 0

Reebok 8 9 4 9 6 8 9 6 13 7 8 6

Unbranded 1 2 0 1 1 1 1 1 0 0 1 1

Others 32 34 26 25 42 34 30 38 50 35 31 47

2010

Adidas 17 18 13 16 18 18 18 16 0 13 18 8

Nike 8 8 8 6 10 10 7 5 0 5 8 3

Bata 5 5 6 4 7 4 5 8 8 5 5 0

Reebok 7 8 5 5 10 8 6 6 0 6 7 7

Unbranded 7 5 12 11 1 6 5 14 17 13 5 13

Others 56 57 57 58 54 55 59 50 75 58 56 69



05 April 2016


Internet and e-commerce Indonesia's internet penetration has risen to 48% of our surveyed respondents compared

to only 14% five years ago—thanks to its smartphone devices. When asked about the

services that respondents have used on the internet over the last six months, social

network appeared to be the most used by Indonesians (92%), followed by instant

messaging (57%) and gaming (39%).

Interestingly, the proportion of online shopping behaviour has increased to 26% in 2015

from only 7% five years ago. Notably, we saw internet purchase activities triple among

rural areas and the low-income segment population, and doubled among outside Java

residents in just one year.

Figure 97: Indonesia's internet access has been rising… Figure 98: …although still one of the lowest in the region

14 15

9

28

38

48

-

10

20

30

40

50

60

2010 2011 2012 2013 2014 2015

30%31%

49%49%50%

58%60%

71%84%85%

87%87%88%

91%92%92%93%93%94%94%95%96%96%96%

0% 20% 40% 60% 80% 100%

IndiaIndonesia

South AfricaMexicoChinaBrazil

TurkeyRussiaFrance

BelgiumSwitzerland

USAGermany

JapanUK

South KoreaCanada

AustraliaFinland

New ZealandSweden

NetherlandsDenmark

Norway

Source: Credit Suisse Indonesia Consumer Survey 2016 Source: Credit Suisse Emerging Consumer Survey 2016

Figure 99: Internet accessibility (2015) Figure 100: Internet accessibility (2013)

Yes - via PC/Computer

10%

Yes - via Mobile/Smartph

one84%

Yes - via tablet6%

Yes - via PC/Computer

28%

Yes - via Mobile/Smartph

one69%

Yes - via tablet3%


Indonesia's internet access

is largely driven by

smartphone penetration

05 April 2016


Figure 101: What services have you used on the internet in the last six months?



2015

Social network 92 91 94 92 92 94 89 79 83 86 91 97

Instant messaging 57 59 50 61 41 57 57 53 67 56 58 54

Gaming 39 42 30 38 33 42 36 24 33 30 40 40

Shopping 26 29 18 24 25 26 27 15 50 21 26 37

Banking 10 11 8 11 6 8 11 18 50 2 10 15

Travel 9 9 8 9 9 8 12 6 17 7 8 10

Nothing of the above 2 2 1 1 3 1 3 3 0 2 2 0

2014

Social network 92 91 94 93 94 95 89 78 50 96 91 96


Gaming 29 30 22 22 37 30 26 19 67 22 27 38

Shopping 11 13 6 10 7 11 13 9 17 6 12 18

Banking 7 6 7 6 4 5 8 9 0 0 6 9

Travel 5 5 4 5 2 4 6 3 0 2 4 14

Nothing of the above 2 3 1 1 3 2 2 6 17 5 3 1

2010

Social network 88 88 88 89 91 93 75 67 100 90 89 67


Gaming 36 36 38 43 43 40 31 0 0 32 37 17

Shopping 7 7 4 6 5 7 6 0 0 0 8 8

Banking 5 6 0 4 2 3 10 17 0 0 7 0

Travel 5 6 0 3 2 3 6 33 0 3 5 17



Indonesia is behind China, India and Brazil on online shopping activities among other

emerging markets. To put things in perspective, compared to China's 15% online retail

penetration and $490 online spending per capita, Indonesia's penetration is below 2% and

only $13 spending on a per capita basis.

Figure 102: Indonesia is an underpenetrated market…

Online retail as % of total retail

Figure 103: …on online retailing

Online spending per capita ($)

0% 5% 10% 15% 20%

Mexico

Indonesia

India

Italy

Brazil

Spain

France

Australia

Japan

Germany

World

US

South Korea

UK

China

2015 2014

1148

935

813738

657 656646614

557497493

244

155143117 9847

13 11

0

200

400

600

800

1000

1200

UK

US

Aus

Ger

man

y

Sou

th K

orea

Fra

nce

Can

ada

Sw

eden

Japa

n

Net

herla

nds

Chi

na

Spa

in

Pol

and

Italy

russ

ia

Bra

zil

Mex

ico

Indo

nesi

a

Indi

a

Source: eMarketer, Credit Suisse research Source: eMarketer, Statista, retailresearch, Thomson Reuters,

Worldbank, Credit Suisse research

05 April 2016


Figure 104: Indonesians are heavy social media users, but in the middle of the pack in terms of online shopping

-

5

10

15

20

25

30

35

40

45

50

Mexico Indonesia South Africa Turkey Russia Brazil Saudi Brazil India China

Social network Instant messaging Gaming Shopping Banking Travel Other


In general, 68% Indonesian respondents believe that their internet purchase behaviour will

continue to be the same. However, the proportion of respondents who think they will do

more online shopping increased from only 12% five years ago to 23% in 2015. We believe

this is on the back of the emergence of more e-commerce players that have been doing

aggressive advertising and promotions to attract customers.

Figure 105: How do you think your purchasing on the internet is likely to change in the next six months?



2015

More 23 24 21 22 28 22 25 24 33 12 24 26

The same 68 67 71 69 65 69 67 70 33 67 67 72

Less 9 9 8 9 7 9 8 6 33 20 9 2

2014

More 20 21 13 21 15 21 19 6 33 5 19 28

The same 68 68 71 67 72 68 66 91 50 87 69 56

Less 12 11 16 12 13 11 15 3 17 8 12 16

2010

More 12 13 4 9 19 14 6 0 0 21 10 10

The same 78 79 73 83 69 79 78 83 100 61 82 80

Less 10 8 23 8 13 7 16 17 0 18 8 10



Lazada and OLX are among the most used websites for online shopping, with 23%

respondents having used them in the past 12 months. Lazada is more popular across the

middle to high income segments, while OLX appeals more tow the lower income

consumers. They are followed by Tokopedia (16%) and Zalora (8%). Lippo Group's

MatahariMall was used by 1% of our survey respondents as the website was only

launched officially in Sep-15.

Lazada, high income

earners' favourite, and OLX,

low income earners'

favourite, are the two most

popular websites

05 April 2016


Figure 106: Have you used any of the following e-commerce websites in the past 12 months? (%)



OLX 23 23 28 24 21 27 19 20 17 42 23 18

Lazada 23 22 25 23 26 21 25 20 50 14 22 32

Tokopedia 16 16 15 18 10 16 16 20 17 10 17 11

Bukalapak 10 11 6 10 10 10 12 0 0 11 10 8

Zalora 8 8 5 7 9 9 6 0 17 14 7 13

Traveloka 7 7 10 7 6 5 10 0 0 0 8 2

BliBli 5 4 9 4 7 3 8 0 0 0 5 8

Others 3 3 2 2 5 3 2 20 0 0 3 0

Elevenia 2 3 0 2 3 3 1 20 0 4 2 0

BerryBenka 1 1 0 0 2 1 0 0 0 4 0 2

Mataharimall 1 0 2 1 0 0 2 0 0 0 0 5

Tiket.com 1 1 0 1 1 1 1 0 0 0 1 0

VIP Plaza 0 0 0 0 1 0 0 0 0 0 0 0



In general, customers prefer a trustworthy website while conducting their online purchase.

This is especially true for the older generations (above 40 years old). Some also choose a

website based on the comprehensiveness of the product listings. For the lower income

group, cheaper price is also one of the dominant factors to consider.

Figure 107: Reasons to choose the mentioned websites (%)



2015

Trustworthiness 37 37 36 38 36 35 41 40 33 30 37 47

Comprehensiveness 30 30 29 31 27 31 28 40 0 20 31 23

Low cost 14 14 18 15 13 16 13 0 0 20 15 6

Well-known brand 10 10 11 13 4 9 11 0 33 10 11 6

Friends referral 6 7 4 4 12 6 5 20 33 10 5 18

Others 2 2 4 0 8 3 2 0 0 10 2 0



Figure 108: With the exception of Russia, emerging consumers remained focused on a

site's trustworthiness

1219

12

3023

159

17 14

44

50

49

37

34

10

34

4443

33 1119

1424

48

26

16 24

312 14 10 9

5 16

21 11

3 6 66 7

1810

26

5 1 2 3 4 5 2

0

10

20

30

40

50

60

70

80

90

100

Brazil China India Indonesia Mexico Russia South Africa Saudi Arabia Turkey

%

Comprehensive products listings Trustworthiness Low cost Well known brand Friends referral Others


05 April 2016


Mobile phones Key stocks

Link Net (LINK.JK, Rp4,035.00, OUTPERFORM, TP Rp8,300.00)

■ Fixed internet access is also undergoing something of a renaissance in Indonesia, as

demand for access to high-speed content and gaming increases. Thus, it is still our

view that there is plenty of room for growth in the Indonesian broadband market.

■ We believe that as the market develops, competitors will learn to target their rollouts in

greenfield areas which are not yet covered by an existing player (such as Link Net),

since this will result in a much higher return on their investment. Link Net offers high

growth and high return on invested capital, and therefore offers an attractive way to

invest in rising fixed internet penetration in Indonesia.

Telkom (TLKM.JK, Rp3,350.00, OUTPERFORM, TP Rp3,800.00)

■ Indonesia’s cellular market continues to look attractive, with good monetisation of very

high demand for cellular data services (driven by social networking). This has been

made possible by an improving competitive environment, as the industry consolidates

towards a three-player market.

■ There is still a long way to go in growing data volume; smartphone penetration on

Telkomsel's network reached just 40.4% as at December 2015. In addition, 4G launch

can add further impetus to this improving monetisation, with an additional 40% uplift in

ARPU from 3G to 4G currently being experienced.

Tiphone Mobile Indonesia (TELE.JK, Rp775, OUTPERFORM, TP Rp900)

■ As the largest prepaid mobile phone voucher distributor in Indonesia, Tiphone Mobile

Indonesia is a beneficiary of higher data service consumption from rising internet

access needs.

■ Telkomsel owns a 25% stake (effective Sep-14) in the company, and thus it is now an

exclusive distributor for Telkomsel, a market leader in Indonesia’s telecom industry

(30% market share in Telkomsel distribution). It is the only dealer who distributes

through three diversified channels (traditional, modern retail, and banks.

Erajaya Swasembada

■ Different to TELE’s stable mobile phone vouchers business (70% of sales), Erajaya's

business is more concentrated in handset distribution, accounting for ~90% of sales.

■ ERAA saw its 2015 performance clouded by slower handset sales amidst weak

Rupiah and the clearance of its aging handset inventory hurting the company's

margins. We wait to see an improvement in margins as the company claims that

inventory is now in a healthier position.

Rising smartphone penetration

Of 87% mobile phone users in Indonesia, almost half (48%) are on smartphones,

compared to only 9% five years ago. We believe this is due to smartphones getting more

affordable, with the influx of cheap smartphones from China and Taiwan. Smartphones are

one of the items that have continued to be bought by consumers over the years regardless

of Indonesia's economic cycle. Despite the rising penetration, 61% of our survey

respondents are planning to upgrade to a smartphone in the next 12 months. This is up

from only 37% in 2010.

Tiphone Indonesia is one of

our top picks to ride the

improving low-end and

rising data consumption

05 April 2016


Figure 109: Rising internet access through smartphones

Age Income*


2015

Mobile phone ownership 87 92 77 86 88 96 87 78 58 73 90 80

Smart phone ownership 48 56 32 51 40 70 45 20 15 32 52 56

Bought handset in last 12M? 43 44 40 42 44 47 38 33 22 40 43 46

Upgrade to smartphone? 61 53 72 65 52 70 61 58 31 50 62 64

Access to internet 48 56 32 49 44 75 42 17 6 32 49 58

2014






2010








Samsung remains the leading mobile phone brand

Samsung has been leading the handset industry among Indonesian consumers, with 50%

of our respondents wanting to buy the brand as their next handset purchase. This is

different from 2010 where Nokia was pretty much at 70% market share and 2012 where

Blackberry peaked around 30%; an evidence of how dynamic the handset market is.

Samsung continues to be favoured across Indonesia, by different age and income level

consumers owing to its wide product range from low-to-high end, in our view. Samsung

also continues to be the leading international hardware brand in emerging markets,

especially in the smartphones category.

Samsung essentially drove

Nokia out of the market

05 April 2016


Figure 110: Future preference of mobile phone brands

Age Income*


2015

Nokia 13 11 18 10 21 4 17 24 42 23 13 8

Cross 3 2 5 4 0 3 4 2 6 2 3 1

Blackberry 3 3 2 3 2 3 2 5 0 2 3 2

Samsung 50 52 47 49 50 52 50 45 33 48 50 62

Mito 1 1 1 1 2 0 1 1 6 3 1 0

Apple 7 8 3 6 9 10 5 1 3 1 7 10

Others 24 23 23 27 16 28 22 23 9 21 24 17

2014

Nokia 18 14 28 15 25 10 22 24 44 15 19 15

Cross 2 2 2 2 2 2 2 1 3 0 2 1

Blackberry 8 8 8 8 7 8 7 8 6 13 8 6

Samsung 46 50 35 47 42 51 44 38 21 36 45 51

Mito 1 2 1 1 2 2 1 2 0 0 1 4

Apple 5 6 2 5 4 7 3 3 0 5 4 10

Others 20 18 24 23 18 20 21 24 26 31 21 13

2010

Nokia 70 69 71 66 79 65 71 79 79 73 68 83

Cross 0 0 0 0 0 0 0 0 0 0 0 0

Blackberry 11 14 6 12 9 14 10 10 0 11 12 17

Samsung 2 3 1 2 2 2 2 4 0 1 2 0

Mito 0 0 0 0 0 0 0 0 0 0 0 0

Apple 1 1 0 0 0 1 1 0 0 0 1 0

Others 16 13 22 18 10 18 16 7 21 15 17 0



Figure 111: Samsung is No.1 in terms of brand preference

Brazil China India Indonesia Mexico Russia Saudi Arabia South Africa Turkey

Smartphones

2015 Samsung Apple Samsung Samsung Samsung Samsung Apple Samsung Samsung

2014 Samsung Apple Samsung Samsung Samsung Samsung Samsung Nokia Samsung

PCs

2015 Samsung Apple Samsung Samsung Acer Samsung Apple Samsung Samsung/Apple

2014 Samsung Apple DELL Samsung Samsung Samsung Samsung Nokia Samsung


The era of smartphones and LCD TVs

Smartphones were the most sought after electronic items by Indonesian consumers since

last year, and continue to be on the top wish list, replacing basic mobile phones five years

ago. On the customers' wish list for other electronic purchases in the next 12 months, LCD

TV is second most sought item, as opposed to traditional TV in 2010.

Excluding smartphones,

LCD TVs are Indonesians'

favourite electronic

purchase

05 April 2016


Figure 112: Which of the following products/services have

you purchased in the last 12M? (2015)

Figure 113: Which of the following products/services have

you purchased in the last 12M? (2010)

Smartphone26%

Mobile Phone (Basic)14%

DVD Player12%

LCD TV11%

Traditional TV9%

Notebook PC5%

Tablet5%

Flat screen TV4%

Desktop computer

1%Gaming facility1%

Netbook1%

Smartphone5%

Mobile Phone (Basic)39%

DVD Player20%

LCD TV3%

Traditional TV13%

Notebook PC4%

Tablet0%

Flat screen TV5%

Desktop computer

3%

Gaming facility3%

Netbook1%


Figure 114: Which of the following products/services are

you most likely to purchase in the next 12M? (2015)

Figure 115: Which of the following products/services are

you most likely to purchase in the next 12M? (2010)

Smartphone26%

LCD TV21%

Notebook PC9%

Digital Camera6%

DVD Player6%

Mobile Phone (Basic)

6%

Flat screen TV6%

Tablet6%

Desktop computer

3%

Traditional TV3% Gaming facility

2%

Internet Service (Broadband /

Dial Up)2% MP3

1%

Netbook1%

Smartphone 10%

LCD TV10%

Notebook PC10%

Digital Camera2%

DVD Player10%Mobile Phone

(Basic)26%

Flat screen TV6%

Tablet0%

Desktop computer

6%

Traditional TV12%

Gaming facility2%

Internet Service (Broadband /

Dial Up)2%

MP32%

Netbook2%


05 April 2016


Healthcare Key stocks

Siloam International Hospital

■ We expect Siloam's top-line growth to continue with its pipeline expansion plans and

the increase in healthcare spend as a percentage of total spend. By 2017, Siloam

targets to achieve 10,000 beds from the current 4,800 and have over 50 hospitals in

more than 25 cities.

■ We believe in the medium term, Siloam could be the best play to leverage on the

healthcare under-penetration story in Indonesia as it builds a hospital network

unrivalled in scope and scale across Indonesia. Margin issues are likely to be short

lived.

Mitra Hospital

■ Mitra stands out as one of the best-run hospital operators in the region on almost all

efficiency and profitability measures. Its management has an almost impeccable track

record of delivering optimal profitability at mature hospitals as well as incubating new

hospitals.

■ Mitra's uncompromising focus on more profitable locations, conservative greenfield

expansion pipeline and reluctance to offer BPJS services, among others, has ensured

a steady and profitable growth profile.

Kalbe Farma

■ The pharma division is facing a challenge on adapting with the GoI's available health

care scheme as consumers downtrade from branded generic.

■ Nutritionals division is now the largest contributor to revenue and will continue to grow.

The lower skim milk prices should help expand margin.

Availability of Jamkesnas reduces healthcare

spending

Indonesians spending on healthcare are below our overaLl average survey. Compared to

2010, spending on healthcare declined from 7% to 6% in 2015. We believe this was due to

the availability of the Universal Health Care program (Jamkesnas—Jaminas Kesehatan

Nasional), administered by BPJS Kesehatan, that started on 1 Jan 2014. The target is that

by 1 Jan 2019, all of Indonesia will participate in the programme and have access to

healthcare. As of 25 Mar 2016, there are 164.1 mn Indonesians registered for the

programme, or around 64% of total population. As of 1 Mar 2016, there are 1,749

hospitals participating in the programme, as well as 9,811 facility health centres

(Puskesmas), 4,760 clinics, 4,441 doctors, 1,150 dentists, and 907 optics with 1,876

drugstores.

Our survey indicates that the access to state healthcare improved from 34% in 2010 to

41% in 2015, both in the urban and rural areas. Those outside Java have better access to

state health care as compared to those in Java, which we believe could be due to lesser

availability of private healthcare in the area.

As such, Indonesians do not expect to pay more on medicines, as 67% respondents are

expecting to pay a similar amount, down from 74% respondents in 2014, and 31%

respondents expecting to pay less, up from 23% in 2014. This is also due to the

expectation that the GoI is going to put a capped price on branded generics, while the

Around 64% of Indonesians

are participating in the

Jamkesnas programME

Improved access to state

healthcare

Expecting to pay less for

medicine

05 April 2016


price of generic drugs has been unchanged since 2011. Therefore, Indonesians are also

unwilling to pay extra for international brands as compared to locally produced brands.

Figure 116: Access to state healthcare has improved

4143

38 37

50

45

48

37 38

61

34 3533

27

51

0

10

20

30

40

50

60

70

Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java

2015 2014 2010


Figure 117: Lesser expectation to spend more on medicine over the next 12 months

2 2 1 2 2 2 2 3 15

67 67 6870

61

7471

80

72

79

31 31 3128

37

2327

17

26

17

0

10

20

30

40

50

60

70

80

90

Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java

More Same Less

20142015


05 April 2016


Figure 118: International medicine brand vs locally produced product

Paying extra? Total Less than

Rp1,000k

Rp1,000k -

1,500k

Rp1,500k

- 2,000k

Rp2,000k

- 3,000k

Rp3,000k

- 5,000k

Rp5,000k -

7,500k

Rp7,500k -

10,000k

Rp10,000k

- 15,000k

Above

15,000k

Would prefer

not to answer

Not prepared 72 85 79 73 73 66 66 71 65 80 80

1-10% extra 23 12 18 22 21 29 25 24 18 12 0

11-20% extra 5 0 1 5 6 4 7 4 18 0 20

21-30% extra 1 3 1 0 0 0 0 0 0 8 0

> 30% extra 0 0 1 0 0 0 1 0 0 0 0


05 April 2016


Property Key stocks

We like those stocks that are less exposed to foreign debt, have a good track record, a

large low-cost land-bank, and those that are conservative and strategically positioned. We

also like companies with a sizeable recurring income when earnings visibility is not too

high.

Summarecon Agung

■ It has a good track record in township development in Indonesia and has been

successful in strengthening recurring income through rental income from retail spaces.

■ Around 70% of SMRA’s operating income is still being generated from the property

development segment. Additionally, we like the name given its exposure to medium

segment as well as its diversified land bank.

Bumi Serpong Damai

■ It has unmatched access to a vast, strategically located landbank which comes with

better pricing control as well as a relatively healthier balance sheet.

Pakuwon Jati

■ It has a sizeable recurring income when earnings visibility is not so high. As of 3Q15,

48% of PWON's income was recurring, >80% of which came from retail malls.

■ We expect recurring income to see 28% CAGR over 2015-17E, thanks to rental

income from malls as more than 50% of net leasable area (NLA) is due for rental

reversion before 2018. On top of that, 134k sq m of new NLA is expected to come by

2017E.

Figure 119: Developers' quarterly pre-sales progression

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

2Q

15

3Q

15

4Q

15

(Rp bn)

SMRA ASRI CTRA BSDE

Source: Company data, Credit Suisse

Good track record on

township development is

key for SMRA

BSDE has unmatched

access to a low-cost land

bank

As of 3Q15, 48% of

PWON's income was

recurring, >80% of which

came from retail malls

We expect overall

aggregate pre-sales to see

12% CAGR over the next

two years

05 April 2016


Potential demand continues to be high

Our 2015 survey found that about 80% of the respondents either have houses or their

family members own houses—higher than the 73% back in 2010. Separately, 20% of the

respondents are planning to buy houses in the next two years, which is much lower than

31% in the previous year. This is not a surprise given the high inflationary environment as

well as high interest rate environment during the year which has led to lesser financing

affordability.

Figure 120: Property ownership and potential purchase

Age Income*


2015

Property ownership 80 72 94 81 77 76 79 85 89 75 79 88

Planning to buy in next 2 years? 20 25 12 21 19 24 21 18 7 8 22 23

2014



2013



2012



2011



2010





Figure 121: Policy rate vs property purchasing plan Figure 122: Mortgage and total loan growth

Source: Credit Suisse Indonesia Consumer Survey 2016, BI Source: Bank Indonesia

As a reminder, most respondents are significantly dependent to external financing i.e.,

mortgage from banks, especially those with low to mid income individuals.

Only 20% of respondents

are planning to buy a piece

of property vs 31% last year,

but the improvement in

overall economy should help

demand

05 April 2016


Figure 123: Indonesia fell to third place in 2015 after being the leader last year in terms of

the numbers of respondents planning to buy a property in the next two years

0

5

10

15

20

25

30

35B

razi

l

Mex

ico

Indo

nesi

a

Chi

na

Indi

a

Sau

di

Sou

th A

fric

a

Tur

key

Rus

sia

% o

f res

pond

ents

wan

ting

to b

uy a

hou

se in

2 y

ears

2015 2014 2010


Going forward, we believe that the improvement in the overall economy as well as lower

inflationary and interest rate environment ahead should re-attract property demand.

Price expectations

When asked about local property price expectations over the next 12 months, 30% of the

respondents said they thought property prices would increase. Those who are bullish on

property prices generally are rural residents and those who live in Java.

Figure 124: Respondents have turned a bit more

pessimistic on property prices…

Figure 125: …in contrast to last year's survey…

30 26

39

25

40

25 26

25

26

22

45 48 37

48 38

-

10

20

30

40

50

60

70

80

90

100

Total Urban Rural Java Non-Java

Increase Flat Decrease

43 40 48

43 42

24 26 21

26 21

33 34 30 31 38

-

10

20

30

40

50

60

70

80

90

100

Total Urban Rural Java Non-Java

Increase Flat Decrease


However, this condition is in contrast with our findings of last year's survey in which 33%

respondents thought that local property prices would go down. Urban residents and those

living in the Java area believe that property prices would decrease in the near future. In

the longer term, we believe that Indonesia property prices are more resilient compared to

certain other countries in the region. Historically, Indonesian property developers are more

inclined to absorb lower sales volumes compared to lowering prices given Indonesia's

05 April 2016


relatively low mortgage loans penetration implying that even during bad times, most

owners are not necessarily exposed to forced selling, limiting downward pressure on

prices.

Figure 126: Indonesia has the second lowest mortgage to

GDP penetration ratio…

Figure 127: …and third lowest mortgage to loan

penetration ratio


Young population is key

We are positive on the Indonesian property sector’s long-term potential on the back of the

country's large and relatively young population as well as low mortgage penetration ratio.

We also expect a sustainable increase in wages and a decreasing number of members

per household, hence resulting in higher demand on housing going forward. More than 60

percent of Indonesia's residents are currently aged 20 to 65—the principal working years.

Another 27 percent of its population is below age 15, giving the country a large incoming

workforce and a low dependency ratio.

Figure 128: % of respondents planning to buy property in

the next two years by age

Figure 129: Indonesian's median age in 2020E

24

27

30 30 30

24

21

27

3334

35

21

1820

29

2627

18

7

11

15

2018

7

0

5

10

15

20

25

30

35

40

2010 2011 2012 2013 2014 2015

(%)18-29 30-45 46-55 56-65

Source: Credit Suisse Indonesia Consumer Survey 2015 Source: UN population division

One of the key factors to have robust growth in the property sector is a young, growing

population with the capability to purchase big-ticket items such as property. According to

Young population Is key to

higher projected demand

05 April 2016


the UN population division, Indonesia has a relatively young demographic profile, with an

estimated median age of 31 by 2020.

High disposable income growth

People with higher monthly income have more interest in buying property in the next two

years. Indonesia's labour population growth is expected to see a 0.9% CAGR over 2010-

20E, ahead of Thailand and China. We believe these should enhance an average

Indonesian's ability to own property ahead.

Figure 130: % of respondents planning to buy property in

the next two years by income level

Figure 131: Labour population CAGR over 2010-20E

1517

21

28 28

8

27 27

3230 31

22

42

37

43 44 43

23

0

5

10

15

20

25

30

35

40

45

50

2010 2011 2012 2013 2014 2015

< Rp 1.5mn Rp 1.5mn-Rp 7.5mn > Rp 7.5mn

Source: Credit Suisse Indonesia Consumer Survey 2015 Source: UN population division

Euromonitor expects the increasing trend in annual disposable income to witness 12.4%

CAGR in 2016. This would then shift the proportion of households from low income

(households with disposable income below US$10,000) towards higher-income brackets

over the years. With a high level of income comes high expenditure. Euromonitor also

projected consumer expenditure to witness CAGR of 12.3% over 2013-16E.

Figure 132: Among highest disposable income growth… Figure 133: …and consumer expenditure growth

Source: Euromonitor Source: Euromonitor

These rates compare favourably with the growth rates of other select countries. With

increased consumer spending, Indonesian consumers are in a position to afford a higher

Increasing middle income

bracket in Indonesia due to

rising disposable income to

further help demand

05 April 2016


quality of life, and we will subsequently see an increasing demand for big-ticket items,

particularly property.

Rising middle class and affluent consumers (MAC)

Based on a research by the Boston Consulting Group, Indonesia's population is becoming

more affluent. The MAC population in Indonesia is expected to reach half of the entire

population by 2020 from currently 37% of total population.

Figure 134: Indonesia's population is growing and

becoming more affluent

Figure 135: MAC population of Java and Sumatera

dominates

Source: BCG Source: BCG

We believe that this will be positive for the Indonesian property sector, both for

development property as well as investment property.

05 April 2016


Banks Key stocks

Bank Tabungan Pensiunan Nasional

■ As the central bank now embarks on a lower rate environment with policy rate

standing at 6.75% currently, BTPN having 85% deposits as time deposits should

benefit most as compared to other banks under our coverage.

■ For this year, we expect another 25 bp rate cut bringing the policy rate down to 6.5%.

As a reminder, when BI hiked the policy rate by 175 bp between June and November

2013, the net interest margins of the top-four banks expanded, while that of second-

tier banks compressed sharply over the next quarters.

Auto interest on lower interest

In this year's survey, we witnessed a slight increase, from 61% to 74%, in the percentage

of respondents who plan to use financing facilities to finance motorbike purchases. Of the

respondents who live in rural areas, 66% plan to use financing facilities for motorbike

purchases. This is higher than the previous year's survey of 57%. Similarly, 75% of Java

residents thought they would use financing facilities, which is higher than 62% from last

year's survey. The percentage of urban residents who thought they would use financing

facilities also increased to 78% vs 64% in the previous year.

Figure 136: How do you plan to finance this motorbike purchase?

74

78

66

75

71

61

64

57

62 60

58 59 57

58 59

45

50

55

60

65

70

75

80

85

90


% o

f res

pond

ents

pla

n to

use

fina

ncin

g fa

cilit

ies

2015 20102014


The chart below shows that only investment loan has started to pick up, while overall

consumption loans as well as working capital loans remain flat.

85% of BTPN's third-party

funds are time deposits

while CASA funds only

account for 15%

We see higher interest for

financing facilities in this

2015's survey

05 April 2016


Figure 137: Loan growth by segment

Consumption loan has not picked up recently

Figure 138: Reported NPL situation improved in 4Q15

ID: Commercial banks' NPL ratio by type of loans (%)


The percentage of respondents saving through bank accounts has also decreased from 40%

in 2014 to 39% in 2015, while most other methods of savings witnessed an increase if not

remaining flat. This is expected as overall deposit rate was pointing south during the period.

Figure 139: Methods of savings by areas

% of respondents 2015 2014 2010


Bank account 39 43 27 39 34 40 48 22 38 42 33 39 19 32 35

Life insurance 4 5 3 5 3 3 5 1 4 3 2 3 1 1 4

Stock market - - - - - 1 1 - 0 1 - - - 0 1

Cash 30 29 32 31 26 29 25 36 28 30 31 30 36 37 19

Property 4 5 2 2 7 3 3 2 2 5 4 4 6 0 7

No extra money for saving 24 18 36 22 30 24 18 39 28 18 29 25 39 28 34


As a reminder, the banking sector regulator (OJK) introduced a cap on time deposit rates back

in 2014 where banks could only offer deposit rates of 200-225 bp above the policy rate. Just

recently, OJK imposed a lower cap of 75-100 bp above the policy rate for deposit rates offered

by large banks. There is concern in the markets that the OJK may eventually regulate lending

rates as well. For now, no such caps will be introduced for lending rates, but the OJK has

hinted that the deposit rate cap is meant to encourage banks to trim their lending rates as well.

In its communications with banks, the OJK suggested it aims to see lending rates eventually in

the single-digit territory, down from the current 12-13% levels.

05 April 2016


Figure 140: Deposit rates trending south Figure 141: Lending rate by loan segment


In this year's survey, we also found that respondents who live in the Java areas exhibited

a higher level of savings in proportion to their income than non-Java residents. In addition,

we have seen a slightly higher savings rate in Indonesia in 2015.

Figure 142: Methods of savings by income

% of respondents 2015 2014 2010

Low Mid High Low Mid High Low Mid High

Bank account 19 39 46 20 41 46 12 45 39

Life insurance 1 4 11 - 3 8 1 2 12

Stock market - - - - 0 3 - 0 3

Cash 26 31 17 27 29 25 27 32 18

Property - 4 6 4 2 5 2 5 9

No extra money for saving 55 21 20 50 24 14 57 17 17



Figure 143: Indonesia—savings as a percentage of

income

Figure 144: Indonesia—income versus savings (Rp mn)

11.0%

12.4%

6.2%

11.0%

9.8%

10.8% 10.8%10.5%

8.8%

16.1%

5%

7%

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11%

13%

15%

17%

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al

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Income Savings

2015 2010


05 April 2016


Key stock selections

05 April 2016


Asia Pacific / Indonesia

Integrated Telecommunication Services

Telkom (Telekomunikasi Indo.)

(TLKM.JK / TLKM IJ) COMPANY UPDATE

FY15: Strong revenue and EBITDA, but a 'miss'

on bottom line

■ Results snap reaction. A 'beat' on service revenue and EBITDA, but a

'miss' on net profit. Telkomsel delivered 14.8% revenue growth, 14.3%

EBITDA growth and 15.4% earnings growth across FY15, beating our

revenue and EBITDA forecasts by 1.6% and 1.8%, respectively, but missing

our net profit forecast by 1.5%.

■ Telkomsel's management team has clearly executed well on voice tariffs

(with voice revenue still growing by 10.1% YoY), and crucially, with data

price per MB now stabilising, data revenue grew by 43.9% YoY in FY15.

■ Tweaks to our numbers. We recently revised up FY16 EBITDA 2.3% but

trimmed EPS 0.8%. While PT Telkom is (1) a 'consensus buy', (2) slightly

expensive versus regional peers and (3) has outperformed the market

materially over the last 12 months, it remains the only liquid (large cap) way

to invest in the successful monetisation of Indonesia's data boom.

■ Valuation. We reflect this by lowering our WACC from 10.5% to 9.8%; this,

together with higher EBITDA forecasts, resulted in us recently raising our

DCF-based target price by 13.4% to Rp3,800. Maintain OUTPERFORM.

Share price performance

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2000

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3000

3500

4000

Apr-14 Aug-14 Dec-14 Apr-15 Aug-15 Dec-15

Price (LHS) Rebased Rel (RHS)

The price relative chart measures performance against the JSX

COMPOSITE INDEX which closed at 4843.19 on 01/04/16

On 01/04/16 the spot exchange rate was Rp13155./US$1

Performance over 1M 3M 12M Absolute (%) 0.3 7.9 18.6 — Relative (%) 0.2 2.4 29.8 —

Financial and valuation metrics

Year 12/15A 12/16E 12/17E 12/18E Revenue (Rp bn) 102,470.0 112,056.7 119,386.2 125,538.6 EBITDA (Rp bn) 51,415.0 56,166.0 59,826.2 63,061.4 EBIT (Rp bn) 32,881.0 36,796.0 39,904.5 42,535.5 Net profit (Rp bn) 15,489.0 19,153.8 21,210.0 22,948.8 EPS (CS adj.) (Rp) 156 191 212 229 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 182 205 227 EPS growth (%) 4.0 22.7 10.7 8.2 P/E (x) 21.5 17.5 15.8 14.6 Dividend yield (%) 2.8 3.4 4.4 5.5 EV/EBITDA (x) 6.6 6.1 5.6 5.2 P/B (x) 4.5 4.1 3.8 3.6 ROE (%) 21.7 24.3 24.7 25.1 Net debt/equity (%) 3.9 5.0 Net cash Net cash

Source: Company data, Thomson Reuters, Credit Suisse estimates.

Rating OUTPERFORM* Price (01 Apr 16, Rp) 3,350.00 Target price (Rp) 3,800.00¹ Upside/downside (%) 13.4 Mkt cap (Rp bn) 337,680.0 (US$25.7 mn) Enterprise value (Rp bn) 342,753 Number of shares (mn) 100,800.00 Free float (%) 48.8 52-week price range 3,500.0-2,600.0 ADTO - 6M (US$ mn) 20.5

*Stock ratings are relative to the coverage universe in each

analyst's or each team's respective sector.

¹Target price is for 12 months.

Research Analysts

Colin McCallum, CA

852 2101 6514

[email protected]

05 April 2016


Telkom (Telekomunikasi Indo.) TLKM.JK / TLKM IJ

Price (01 Apr 16): Rp3,350.00, Rating: OUTPERFORM, Target Price: Rp3,800.00, Analyst: Colin McCallum

Target price scenario

Scenario TP %Up/Dwn Assumptions

Upside 4,000.00 19.40 Target EV/EBITDA +1 Central Case 3,800.00 13.43 Base case Downside 1,950.00 (41.79) Target EV/EBITDA -1

Key earnings drivers 12/15A 12/16E 12/17E 12/18E

Cellular subscribers (000s)

152,640 156,512 159,012 160,012 Cellular ARPU 43,229 45,535 47,687 49,592 Revenue growth 14.2 9.4 6.5 5.2 EBITDA margin 50.2 50.1 50.1 50.2 Capex to sales ratio 27.3 23.7 18.1 16.0

Income statement (Rp bn) 12/15A 12/16E 12/17E 12/18E

Sales revenue 102,470 112,057 119,386 125,539 Cost of goods sold 51,055 55,891 59,560 62,477 SG&A — — — — Other operating exp./(inc.) — — — — EBITDA 51,415 56,166 59,826 63,061 Depreciation & amortisation 18,534 19,370 19,922 20,526 EBIT 32,881 36,796 39,905 42,536 Net interest expense/(inc.) 1,074 78 (72) (299) Non-operating inc./(exp.) (463.0) — 100.0 100.0 Associates/JV (2.0) 548.3 643.5 728.8 Recurring PBT 31,342 37,267 40,720 43,664 Exceptionals/extraordinaries — — — — Taxes 8,025 9,317 10,180 10,916 Profit after tax 23,317 27,950 30,540 32,748 Other after tax income — — — — Minority interests 7,828 8,796 9,330 9,799 Preferred dividends — — — — Reported net profit 15,489 19,154 21,210 22,949 Analyst adjustments — — — — Net profit (Credit Suisse) 15,489 19,154 21,210 22,949

Cash flow (Rp bn) 12/15A 12/16E 12/17E 12/18E

EBIT 32,881 36,796 39,904 42,536 Net interest (1,074) (78) 72 299 Tax paid (8,025) (9,317) (10,180) (10,916) Working capital 2,320 (4,552) 711 533 Other cash & non-cash items 16,887 19,370 19,922 20,526 Operating cash flow 42,989 42,220 50,429 52,978 Capex (27,938) (26,550) (21,620) (20,117) Free cash flow to the firm 14,378 20,221 28,098 32,328 Disposals of fixed assets — — — — Acquisitions — — — — Divestments 742 1,739 — — Associate investments — — — — Other investment/(outflows) (243.0) — — — Investing cash flow (27,439) (24,811) (21,620) (20,117) Equity raised 73.0 — — — Dividends paid (16,596) (18,805) (22,584) (26,469) Net borrowings 11,439 (1,739) — — Other financing cash flow — — — — Financing cash flow (5,084) (20,544) (22,584) (26,469) Total cash flow 10,466 (3,135) 6,224 6,391 Adjustments — — — — Net change in cash 10,466 (3,135) 6,224 6,391

Balance sheet (Rp bn) 12/15A 12/16E 12/17E 12/18E

Cash & cash equivalents 30,935 27,800 34,025 40,416 Current receivables — — — — Inventories — — — — Other current assets 16,977 18,594 19,853 20,918 Current assets 47,912 46,394 53,878 61,333 Property, plant & equip. 103,700 111,330 113,029 112,620 Investments 1,807 5,936 6,386 6,896 Intangibles 3,056 2,606 2,606 2,606 Other non-current assets 9,698 9,698 9,698 9,698 Total assets 166,173 175,964 185,597 193,154 Accounts payable — — — — Short-term debt 4,444 4,340 4,340 4,340 Current provisions — — — — Other current liabilities 30,969 33,518 35,388 36,886 Current liabilities 35,413 37,858 39,728 41,226 Long-term debt 30,168 28,533 28,533 28,533 Non-current provisions 4,672 4,672 4,672 4,672 Other non-current liab. 2,492 2,492 2,492 2,492 Total liabilities 72,745 73,555 75,425 76,923 Shareholders' equity 75,136 82,798 89,161 93,750 Minority interests 18,292 19,611 21,011 22,481 Total liabilities & equity 166,173 175,964 185,597 193,154

Per share data 12/15A 12/16E 12/17E 12/18E

Shares (wtd avg.) (mn) 99,435 100,177 100,177 100,177 EPS (Credit Suisse) (Rp) 156 191 212 229 DPS (Rp) 95 115 148 183 BVPS (Rp) 750 827 890 936 Operating CFPS (Rp) 432 421 503 529

Key ratios and valuation 12/15A 12/16E 12/17E 12/18E

Growth(%) Sales revenue 14.2 9.4 6.5 5.2 EBIT 14.5 11.9 8.4 6.6 Net profit 5.8 23.7 10.7 8.2 EPS 4.0 22.7 10.7 8.2 Margins (%)

EBITDA 50.2 50.1 50.1 50.2 EBIT 32.1 32.8 33.4 33.9 Pre-tax profit 30.6 33.3 34.1 34.8 Net profit 15.1 17.1 17.8 18.3 Valuation metrics (x) P/E 21.5 17.5 15.8 14.6 P/B 4.47 4.05 3.76 3.58 Dividend yield (%) 2.83 3.42 4.42 5.47 P/CF 7.75 7.95 6.65 6.33 EV/sales 3.33 3.06 2.82 2.63 EV/EBITDA 6.64 6.10 5.63 5.24 EV/EBIT 10.4 9.3 8.4 7.8 ROE analysis (%) ROE 21.7 24.3 24.7 25.1 ROIC 26.3 27.0 27.6 29.3 Asset turnover (x) 0.62 0.64 0.64 0.65 Interest burden (x) 0.95 1.01 1.02 1.03 Tax burden (x) 0.74 0.75 0.75 0.75 Financial leverage (x) 1.78 1.72 1.68 1.66 Credit ratios Net debt/equity (%) 3.94 4.95 (1.05) (6.49) Net debt/EBITDA (x) 0.07 0.09 (0.02) (0.12) Interest cover (x) 31 474 (554) (142)


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2011 2012 2013 2014 2015 2016

12MF P/E multiple

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1.0

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4.5

2011 2012 2013 2014 2015 2016

12MF P/B multiple

Source: IBES

05 April 2016



Automobile Manufacturers

Astra International

(ASII.JK / ASII IJ) COMPANY UPDATE FOCUS LIST STOCK

Improving prospects and direct beneficiary of

economic growth

■ One of the largest and most liquid names in Indonesia. Astra

International is one of the largest listed companies in Indonesia. It is involved

in four main businesses: automotive, financial services, heavy machinery

(and mining contracting) and agribusiness. It also has other businesses

(infrastructure, water distribution, it solution and property) that are less

prominent. The auto and auto related financing business is still the largest

component of ASII, contributing 62%/76% of revenue/net profit in 2015.

■ Market leader in the auto industry. Astra International is the leader in both

4W and 2W industries with 47% and 69% market share as of 2M16. It is

responsible for the distribution of Toyota, Daihatsu and Isuzu for 4W and

Honda for 2W, while they also have a stake in the manufacturing entities in

Indonesia. Astra has an extensive network of marketing and distribution,

which enables it to maintain its dominance within the auto industry.

■ Positive outlook for 2016. We are more positive on the auto division

outlook this year due to improvement in leading indicators such as

consumption growth and GDP growth. Monetary easing has also started as

BI has cut its reference rate by 75 bp YTD and is expected to be fully

reflected in an improved auto sales volume in 2-3 quarters. Model lineups

this year are also looking decent, which we believe should be able to support

4W sales. Further, discounts are normalising after peaking in 3Q15 last year,

which should bode well with Astra’s profitability and inventory levels.

■ Maintain OUTPERFORM. We maintain our OUTPERFORM rating on Astra

International with a target price of Rp7,600 based on an SOTP methodology,

which implies 15x FY16E P/E. We are forecasting 28% two-year earnings

CAGR.


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Performance over 1M 3M 12M Absolute (%) 3.2 22.1 -9.3 — Relative (%) 3.0 16.6 2.0 —


Year 12/14A 12/15E 12/16E 12/17E Revenue (Rp bn) 201,701.0 188,538.3 213,926.2 240,898.9 EBITDA (Rp bn) 27,957.0 23,201.0 26,026.8 30,431.9 EBIT (Rp bn) 20,163.0 16,154.6 17,581.5 21,595.7 Net profit (Rp bn) 19,582.0 17,283.7 20,093.3 23,699.9 EPS (CS adj.) (Rp) 484 427 496 585 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 461 456 514 EPS growth (%) 0.9 -11.7 16.3 17.9 P/E (x) 15.1 17.2 14.8 12.5 Dividend yield (%) 3.4 3.9 3.5 4.1 EV/EBITDA (x) 12.4 15.2 13.5 11.8 P/B (x) 3.1 3.0 2.7 2.5 ROE (%) 21.8 17.8 19.5 20.8 Net debt/equity (%) 40.9 44.6 40.4 43.0


Rating OUTPERFORM Price (01 Apr 16, Rp) 7,325.00 Target price (Rp) 7,600.00¹ Upside/downside (%) 3.8 Mkt cap (Rp bn) 296,542.0 (US$ 22.5) Enterprise value (Rp bn) 351,893 Number of shares (mn) 40,483.55 Free float (%) 45.2 52-week price range 8,200.0 - 5,125.0 ADTO - 6M (US$ mn) 19.9




Research Analysts

Jahanzeb Naseer

62 21 2553 7977

[email protected]

05 April 2016


Astra International ASII.JK / ASII IJ

Price (01 Apr 16): Rp7,325.00, Rating: OUTPERFORM, Target Price: Rp7,600.00, Analyst: Jahanzeb Naseer



Upside 9,000.00 22.87 Based on strong recovery on auto volumes in 16/17

Central Case 7,600.00 3.75 SOTP Downside 5,500.00 (24.91) due to delay in economic recovery


4W sales volume 614,171 504,954 557,784 632,533 LCGC sales volume 107,849 93,600 106,470 137,592 4W ASP 164.4 172.7 184.8 188.4 Policy rate 0.08 0.07 0.07 0.07 — — — —


Sales revenue 201,701 188,538 213,926 240,899 Cost of goods sold 162,892 152,567 174,375 195,254 SG&A 18,646 19,816 21,970 24,049 Other operating exp./(inc.) (7,794) (7,046) (8,445) (8,836) EBITDA 27,957 23,201 26,027 30,432 Depreciation & amortisation 7,794 7,046 8,445 8,836 EBIT 20,163 16,155 17,582 21,596 Net interest expense/(inc.) (151.0) 88.2 180.8 169.5 Non-operating inc./(exp.) 7,439 9,077 10,730 11,800 Associates/JV — — — — Recurring PBT 27,753 25,144 28,131 33,226 Exceptionals/extraordinaries — — — — Taxes 5,227 4,736 5,298 6,258 Profit after tax 22,526 20,408 22,833 26,969 Other after tax income — — — — Minority interests 2,944 3,124 2,739 3,269 Preferred dividends — — — — Reported net profit 19,582 17,284 20,093 23,700 Analyst adjustments — — — — Net profit (Credit Suisse) 19,582 17,284 20,093 23,700


EBIT 20,163 16,155 17,582 21,596 Net interest — — — — Tax paid — — — — Working capital (7,877) (2,906) (11,306) (13,937) Other cash & non-cash items 2,677 5,741 8,340 8,289 Operating cash flow 14,963 18,990 14,615 15,948 Capex (13,235) (13,162) (14,149) (14,331) Free cash flow to the firm 1,728 5,828 466 1,617 Disposals of fixed assets — — — — Acquisitions — — — — Divestments — — — — Associate investments — — — — Other investment/(outflows) 3,671 4,985 8,509 (1,534) Investing cash flow (9,564) (8,176) (5,639) (15,865) Equity raised — — — — Dividends paid (10,201) (11,509) (10,370) (12,056) Net borrowings 7,996 (8,128) 10,374 10,487 Other financing cash flow (1,840) (3,261) 281 361 Financing cash flow (4,045) (22,897) 284 (1,208) Total cash flow 1,354 (12,084) 9,260 (1,126) Adjustments 1,013 (22) — — Net change in cash 2,367 (12,106) 9,260 (1,126)


Cash & cash equivalents 20,902 8,818 18,078 16,952 Current receivables 24,462 19,428 21,016 23,330 Inventories 16,986 13,808 14,818 16,286 Other current assets 34,891 42,421 49,394 57,247 Current assets 97,241 84,476 103,306 113,815 Property, plant & equip. 47,257 50,937 54,023 56,867 Investments 27,250 30,184 33,798 37,937 Intangibles — — 1.00 1.00 Other non-current assets 64,281 62,444 61,249 70,380 Total assets 236,029 228,041 252,377 279,000

Accounts payable 18,839 18,050 19,756 21,719 Short-term debt 37,421 31,207 35,896 39,914 Current provisions 430.0 421.1 491.8 571.8 Other current liabilities 16,833 15,257 17,437 19,525 Current liabilities 73,523 64,934 73,581 81,730 Long-term debt 32,651 32,963 36,813 40,904 Non-current provisions 3,402 3,116 3,639 4,232 Other non-current liab. 6,129 2,828 3,209 3,613 Total liabilities 115,705 103,841 117,241 130,479 Shareholders' equity 95,611 98,125 108,130 120,134 Minority interests 24,713 26,075 27,005 28,385 Total liabilities & equity 236,029 228,041 252,376 278,999


Shares (wtd avg.) (mn) 40,484 40,484 40,484 40,484 EPS (Credit Suisse) (Rp) 484 427 496 585 DPS (Rp) 252 284 256 298 BVPS (Rp) 2,362 2,424 2,671 2,967 Operating CFPS (Rp) 370 469 361 394


Growth(%) Sales revenue 4.0 (6.5) 13.5 12.6 EBIT 8.4 (19.9) 8.8 22.8 Net profit 0.9 (11.7) 16.3 17.9 EPS 0.9 (11.7) 16.3 17.9 Margins (%) EBITDA 13.9 12.3 12.2 12.6 EBIT 10.0 8.6 8.2 9.0 Pre-tax profit 13.8 13.3 13.1 13.8 Net profit 9.7 9.2 9.4 9.8 Valuation metrics (x) P/E 15.1 17.2 14.8 12.5 P/B 3.10 3.02 2.74 2.47 Dividend yield (%) 3.44 3.88 3.50 4.07 P/CF 19.8 15.6 20.3 18.6 EV/sales 1.71 1.87 1.64 1.50 EV/EBITDA 12.4 15.2 13.5 11.8 EV/EBIT 17.1 21.8 20.0 16.7 ROE analysis (%) ROE 21.8 17.8 19.5 20.8 ROIC 10.2 7.5 7.7 8.7 Asset turnover (x) 0.85 0.83 0.85 0.86 Interest burden (x) 1.38 1.56 1.60 1.54 Tax burden (x) 0.81 0.81 0.81 0.81 Financial leverage (x) 1.96 1.84 1.87 1.88 Credit ratios Net debt/equity (%) 40.9 44.6 40.4 43.0 Net debt/EBITDA (x) 1.76 2.39 2.10 2.10 Interest cover (x) (134) 183 97 127


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2011 2012 2013 2014 2015 2016

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2011 2012 2013 2014 2015 2016

12MF P/B multiple

Source: IBES

05 April 2016



Packaged Foods

Indofood CBP

(ICBP.JK / ICBP IJ) COMPANY UPDATE

A play in staples

■ A play in staples. Indofood CBP is an established and leading consumer

branded products company in Indonesia, with a diverse product range. With

a rise in consumer confidence along with the improved macro, we believe it

will help consumption growth. In addition, we have seen that during the

interest rate cut environment, purchasing power showed improvement, and

thus consumer stocks outperformed. Our economist’s expectations of

another 50 bp cut this year will allow ICBP to benefit, as it owns five

business portfolios in consumer staples, with noodle as the major contributor.

■ Noodles is the backbone. ICBP’s instant noodles, Indomie, has a strong

brand equity with market share of 75%. We expect noodles volume to grow

at 3% CAGR 2016-18E, with 5% ASP during the same period. The company

launches several new Indomie flavours every year, and recently, it launched

“My Noodlez” which is targeted for kids. We believe the noodles division will

continue to be the company’s backbone in the coming years.

■ Second largest contributor is dairy. The dairy division reported 29%

higher volume YoY in 3Q15 on the back of additional contribution from the

latest acquired Milkuat in 2014. ASP, however, was 8% lower YoY. The

decline in skim milk and sugar prices benefitted the dairy division; however,

with the still weak Rupiah to USD exchange rate, operating margin is yet to

be back at its normalised basis. We are estimating 9% YoY volume growth

this year on 6% higher ASP YoY.

■ Maintain OUTPERFORM. We continue to like the stock within the

Indonesian consumer space. Our target price of Rp18,300 is derived from

SOTP and market relative performance (in a 50:50) ratio. It implies 27.8x

2016E P/E with 13% earnings growth over the next two years.


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Performance over 1M 3M 12M Absolute (%) -3.3 13.7 7.0 — Relative (%) -3.5 8.3 18.2 —


Year 12/14A 12/15E 12/16E 12/17E Revenue (Rp bn) 30,022.5 32,433.2 36,499.2 40,999.9 EBITDA (Rp bn) 3,748.1 5,013.3 5,968.4 6,618.7 EBIT (Rp bn) 3,128.7 4,154.0 4,839.0 5,339.4 Net profit (Rp bn) 2,604.2 3,248.2 3,835.4 4,296.7 EPS (CS adj.) (Rp) 447 557 658 737 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 515 596 674 EPS growth (%) 17.0 24.7 18.1 12.0 P/E (x) 34.3 27.5 23.3 20.8 Dividend yield (%) 1.2 1.5 1.8 2.2 EV/EBITDA (x) 22.8 17.0 14.1 12.4 P/B (x) 6.4 5.6 4.9 4.3 ROE (%) 19.5 21.6 22.4 22.1 Net debt/equity (%) Net cash Net cash Net cash Net cash


Rating OUTPERFORM Price (01 Apr 16, Rp) 15,325 Target price (Rp) 18,300¹ Upside/downside (%) 19.4 Mkt cap (Rp bn) 89,359.4 (US$6.8 bn) Enterprise value (Rp bn) 85,020 Number of shares (mn) 5,830.95 Free float (%) 19.4 52-week price range 16,600.0-11,250.0 ADTO - 6M (US$ mn) 2.7




Research Analysts

Ella Nusantoro

62 21 255 37917

[email protected]

05 April 2016


Indofood CBP ICBP.JK / ICBP IJ

Price (01 Apr 16): Rp15,325, Rating: OUTPERFORM, Target Price: Rp18,300, Analyst: Ella Nusantoro


Scenario TP %Up/Dwn Assumptions Upside 18,950.00 23.65 STDEV+1: 28.8x

Central Case 18,300.00 19.41 SOTP-based on average 2015E & 2016E at P/E of 27.8x

Downside 17,650.00 15.17 STDEV-1: 26.8x


GDP growth (%) 5.00 4.60 5.20 5.20 Average inflation (%) 8.40 3.20 5.30 5.30 Avg. exchg rate (IDR/USD) 12,000 13,700 14,450 14,774 — — — — — — — —


Sales revenue 30,022 32,433 36,499 41,000 Cost of goods sold 21,963 22,399 25,288 28,100 SG&A 4,931 5,880 6,373 7,561 Other operating exp./(inc.) (619) (859) (1,129) (1,279) EBITDA 3,748 5,013 5,968 6,619 Depreciation & amortisation 619 859 1,129 1,279 EBIT 3,129 4,154 4,839 5,339 Net interest expense/(inc.) (260.7) (114.0) (100.2) (193.9) Non-operating inc./(exp.) — — — — Associates/JV (0.7) (84.9) — — Recurring PBT 3,389 4,183 4,939 5,533 Exceptionals/extraordinaries — — — — Taxes 857 1,058 1,249 1,399 Profit after tax 2,532 3,125 3,690 4,134 Other after tax income — — — — Minority interests (72.6) (123.1) (145.4) (162.9) Preferred dividends — — — — Reported net profit 2,604 3,248 3,835 4,297 Analyst adjustments — — — — Net profit (Credit Suisse) 2,604 3,248 3,835 4,297


EBIT 3,129 4,154 4,839 5,339 Net interest 260.7 114.0 100.2 193.9 Tax paid (857) (1,058) (1,249) (1,399) Working capital 377.4 (365.0) (225.5) (315.3) Other cash & non-cash items 31 1,263 1,500 1,758 Operating cash flow 2,941 4,108 4,965 5,576 Capex (1,331) (2,400) (2,700) (1,500) Free cash flow to the firm 1,610 1,708 2,265 4,076 Disposals of fixed assets — — — — Acquisitions — — — — Divestments — — — — Associate investments — — — — Other investment/(outflows) 10.9 (336.0) (207.9) (285.0) Investing cash flow (1,320) (2,736) (2,908) (1,785) Equity raised — — — — Dividends paid (1,108) (1,302) (1,624) (1,918) Net borrowings 299.3 — — — Other financing cash flow 992.2 572.4 358.0 436.8 Financing cash flow 184 (730) (1,266) (1,481) Total cash flow 1,804 642 791 2,310 Adjustments — — — — Net change in cash 1,804 642 791 2,310


Cash & cash equivalents 7,343 7,985 8,776 11,086 Current receivables 2,902 3,062 3,378 3,832 Inventories 2,822 2,855 3,250 3,596 Other current assets 536.7 593.3 668.3 742.8 Current assets 13,604 14,495 16,072 19,257 Property, plant & equip. 5,839 7,379 8,950 9,171 Investments 655.4 655.4 655.4 655.4 Intangibles 4,186 4,052 3,919 3,786 Other non-current assets 626.9 731.2 846.8 949.7 Total assets 24,910 27,314 30,443 33,819

Accounts payable 2,813 2,720 3,074 3,414 Short-term debt 1,816 2,093 2,068 2,081 Current provisions — — — — Other current liabilities 1,601 1,579 1,786 2,006 Current liabilities 6,231 6,393 6,928 7,501 Long-term debt 1,590 1,612 1,612 1,612 Non-current provisions — — — — Other non-current liab. 2,050 2,200 2,437 2,699 Total liabilities 9,870 10,204 10,977 11,811 Shareholders' equity 14,078 16,024 18,235 20,614 Minority interests 962 1,085 1,231 1,394 Total liabilities & equity 24,910 27,314 30,443 33,819




Growth(%) Sales revenue 19.6 8.0 12.5 12.3 EBIT 12.9 32.8 16.5 10.3 Net profit 17.0 24.7 18.1 12.0 EPS 17.0 24.7 18.1 12.0 Margins (%) EBITDA 12.5 15.5 16.4 16.1 EBIT 10.4 12.8 13.3 13.0 Pre-tax profit 11.3 12.9 13.5 13.5 Net profit 8.7 10.0 10.5 10.5 Valuation metrics (x) P/E 34.3 27.5 23.3 20.8 P/B 6.35 5.58 4.90 4.33 Dividend yield (%) 1.24 1.46 1.82 2.15 P/CF 30.4 21.8 18.0 16.0 EV/sales 2.84 2.62 2.31 2.00 EV/EBITDA 22.8 17.0 14.1 12.4 EV/EBIT 27.3 20.5 17.4 15.3 ROE analysis (%) ROE 19.5 21.6 22.4 22.1 ROIC 22.0 26.1 26.7 27.6 Asset turnover (x) 1.21 1.19 1.20 1.21 Interest burden (x) 1.08 1.01 1.02 1.04 Tax burden (x) 0.75 0.75 0.75 0.75 Financial leverage (x) 1.66 1.60 1.56 1.54 Credit ratios Net debt/equity (%) (26.6) (25.4) (26.5) (33.9) Net debt/EBITDA (x) (1.07) (0.87) (0.86) (1.13) Interest cover (x) (12.0) (36.4) (48.3) (27.5)


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2011 2012 2013 2014 2015 2016

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2011 2012 2013 2014 2015 2016

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Source: IBES

05 April 2016



Food Producers

Indofood Sukses Makmur

(INDF.JK / INDF IJ) COMPANY UPDATE

Fully integrated food company

■ A play in staples. Indofood Sukses Makmur is a fully integrated food

company with strong brand equity across Indonesian households. Most of its earnings are derived from the listed Indofood CBP (ICBP) where we see that the valuation gap between the two is still wide. ICBP is operating under five business segments (noodles, dairy, food seasonings, nutrition and special foods, and beverage), and contributed around 50% and 55% to Indofood’s

total revenue and operating profit, respectively, in 9M15.

■ The flour business. Bogasari is the number one flour producer in Indonesia—100% owned by Indofood. The division contributes 24% in revenue and 67% in operating profit in 9M15. Bogasari has a market share of around 50.8% in 1Q15, with 3.3 mtpa flour mills operating currently. It produces wheat flour, feed meal, pre-mix flour, as well as by-products such as pasta, under the La Fonte brand. Around 30% of Bogasari’s flour sales are sold to ICBP. We estimate sales volume to grow by 3% over the next two years with 2% higher ASP. The business has a somewhat fixed margin. Its price increases are mostly

depending on wheat prices as well as IDR/USD exchange rate.

■ The integrated agri player. IFAR owns one of the largest plantations in Indonesia with almost 300,000 ha of planted area, as of Sep-2015. It focuses on oil palm plantations (28% of its total planted ha), rubber (7%), sugar (4%), and other crops. The group also operates the downstream refinery business, and overseas sugar operations in Brazil and Philippines. We estimate IFAR’s revenue to grow by 10% CAGR16-18E on 19% operating profit based on our CPO price assumption of RM2,400 in 2016E, and RM2,600 in 2017E and 2018E.

■ Maintain OUTPERFORM. In all, even though the stock is more of a holding company, the market is yet to value its flour and distribution businesses. Both flour and distribution businesses account for 26% of revenue and 22% of operating profit in 9M15, respectively. While its earnings are mostly derived from ICBP, its valuation between the two continues to widen. Our TP of Rp8,700 implies 18.7x P/E 2016E with 8% estimated growth over the next two years. Maintain OUTPERFORM.


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Performance over 1M 3M 12M Absolute (%) -0.7 39.6 -2.0 — Relative (%) -0.8 34.2 9.2 —


Year 12/14A 12/15E 12/16E 12/17E Revenue (Rp bn) 63,594.5 64,403.2 70,767.8 78,359.5 EBITDA (Rp bn) 9,675.9 9,266.1 10,206.4 10,776.5 EBIT (Rp bn) 7,208.7 7,726.0 8,277.9 8,615.5 Net profit (Rp bn) 3,885.4 3,753.3 3,655.4 3,881.7 EPS (CS adj.) (Rp) 443 427 416 442 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 293 454 526 EPS growth (%) 55.2 -3.4 -2.6 6.2 P/E (x) 16.3 16.9 17.4 16.3 Dividend yield (%) 2.0 3.1 3.0 3.2 EV/EBITDA (x) 7.4 8.1 7.3 6.6 P/B (x) 2.5 2.3 2.1 2.0 ROE (%) 15.8 14.1 12.8 12.6 Net debt/equity (%) 19.9 26.8 23.9 15.9


Rating OUTPERFORM Price (01 Apr 16, Rp) 7,225.00 Target price (Rp) 8,700.00¹ Upside/downside (%) 20.4 Mkt cap (Rp bn) 63,438.6 (US$4.8 bn) Enterprise value (Rp bn) 75,026 Number of shares (mn) 8,780.43 Free float (%) 49.9 52-week price range 7,475.0-4,680.0 ADTO - 6M (US$ mn) 4.4




Research Analysts

Ella Nusantoro

62 21 255 37917

[email protected]

05 April 2016


Indofood Sukses Makmur INDF.JK / INDF IJ

Price (01 Apr 16): Rp7,225.00, Rating: OUTPERFORM, Target Price: Rp8,700.00, Analyst: Ella Nusantoro


Scenario TP %Up/Dwn Assumptions Upside 9,180.00 27.06 STDEV+1 - P/E: 19.7x

Central Case 8,700.00 20.42 SOTP-based & Market relative performance, P/E: 18.7x

Downside 8,250.00 14.19 STDEV-1 - P/E: 17.7x


GDP growth (%) 5.00 4.60 5.20 5.20 Population (mn) 252.3 255.8 259.4 263.0 Average inflation (%) 8.40 3.20 5.30 5.30 Average exchange rate (IDR/USD)

12,000 13,700 14,450 14,774 — — — —


Sales revenue 63,594 64,403 70,768 78,360 Cost of goods sold 46,545 47,182 51,880 57,727 SG&A 10,175 9,856 10,705 12,154 Other operating exp./(inc.) (2,802) (1,901) (2,024) (2,298) EBITDA 9,676 9,266 10,206 10,777 Depreciation & amortisation 2,467 1,540 1,929 2,161 EBIT 7,209 7,726 8,278 8,616 Net interest expense/(inc.) 860.4 784.8 697.8 589.6 Non-operating inc./(exp.) (119.1) (378.3) (378.3) (378.3) Associates/JV — — — — Recurring PBT 6,229 6,563 7,202 7,648 Exceptionals/extraordinaries — — — — Taxes 1,828 1,903 2,088 2,218 Profit after tax 4,401 4,660 5,113 5,430 Other after tax income 745.2 422.1 — — Minority interests 1,261 1,328 1,458 1,548 Preferred dividends — — — — Reported net profit 3,885 3,753 3,655 3,882 Analyst adjustments — — — — Net profit (Credit Suisse) 3,885 3,753 3,655 3,882


EBIT 7,209 7,726 8,278 8,615 Net interest (860.4) (784.8) (697.8) (589.6) Tax paid (1,828) (1,903) (2,088) (2,218) Working capital (6,012) (1,888) (617) (655) Other cash & non-cash items 1,832 255 515 657 Operating cash flow 341 3,405 5,389 5,810 Capex (902) (5,549) (4,791) (2,644) Free cash flow to the firm (561) (2,144) 598 3,166 Disposals of fixed assets — — — — Acquisitions — — — — Divestments — — — — Associate investments — — — — Other investment/(outflows) 393.2 (322.5) (516.6) (546.4) Investing cash flow (509) (5,872) (5,308) (3,191) Equity raised — — — — Dividends paid (1,279) (1,943) (1,877) (2,039) Net borrowings 6 2,254 297 — Other financing cash flow 4,375 2,809 1,111 (3,795) Financing cash flow 3,102 3,120 (469) (5,833) Total cash flow 2,934 654 (387) (3,214) Adjustments — — — — Net change in cash 2,934 654 (387) (3,214)


Cash & cash equivalents 14,823 13,858 14,209 17,325 Current receivables 4,340 4,615 5,070 5,642 Inventories 8,455 8,635 9,181 9,946 Other current assets 13,378 14,581 14,720 14,868 Current assets 40,996 41,688 43,180 47,782 Property, plant & equip. 22,011 25,489 27,862 27,902 Investments 1,878 1,966 1,966 1,966 Intangibles 6,738 6,738 6,738 6,738 Other non-current assets 14,316 15,082 16,087 17,077 Total assets 85,939 90,963 95,834 101,465

Accounts payable 5,151 4,802 4,991 5,456 Short-term debt 6,173 9,339 9,339 9,339 Current provisions — — — — Other current liabilities 6,453 6,796 7,049 7,328 Current liabilities 17,777 20,936 21,380 22,123 Long-term debt 16,838 16,107 16,107 16,107 Non-current provisions — — — — Other non-current liab. 10,096 10,684 11,356 12,126 Total liabilities 44,711 47,726 48,842 50,355 Shareholders' equity 25,700 27,511 29,712 31,977 Minority interests 15,528 15,726 17,280 19,133 Total liabilities & equity 85,939 90,963 95,834 101,465




Growth(%) Sales revenue 10.2 1.3 9.9 10.7 EBIT 17.9 7.2 7.1 4.1 Net profit 55.2 (3.4) (2.6) 6.2 EPS 55.2 (3.4) (2.6) 6.2 Margins (%) EBITDA 15.2 14.4 14.4 13.8 EBIT 11.3 12.0 11.7 11.0 Pre-tax profit 9.8 10.2 10.2 9.8 Net profit 6.11 5.83 5.17 4.95 Valuation metrics (x) P/E 16.3 16.9 17.4 16.3 P/B 2.47 2.31 2.14 1.98 Dividend yield (%) 1.97 3.06 2.96 3.21 P/CF 186 19 12 11 EV/sales 1.13 1.16 1.06 0.91 EV/EBITDA 7.40 8.10 7.32 6.64 EV/EBIT 9.9 9.7 9.0 8.3 ROE analysis (%) ROE 15.8 14.1 12.8 12.6 ROIC 10.6 10.5 10.4 10.4 Asset turnover (x) 0.74 0.71 0.74 0.77 Interest burden (x) 0.86 0.85 0.87 0.89 Tax burden (x) 0.71 0.71 0.71 0.71 Financial leverage (x) 2.08 2.10 2.04 1.99 Credit ratios Net debt/equity (%) 19.9 26.8 23.9 15.9 Net debt/EBITDA (x) 0.85 1.25 1.10 0.75 Interest cover (x) 8.4 9.8 11.9 14.6


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2011 2012 2013 2014 2015 2016

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Source: IBES

05 April 2016



Department Stores


(LPPF.JK / LPPF IJ) COMPANY UPDATE

Riding the improving consumer trend

■ Exposure to the emerging consumer. Matahari Department Store targets the growing base of the Indonesian middle-class segment, currently about 125 mn people (53% of the population). Matahari sells quality designed fashion products at attractive price points for Indonesian consumers. Thanks to its >90% domestic source and its 'value-for-money' promotions strategy to always sell affordable products to customers, the company delivered better-than-peers same-store sales growth (SSSG) despite last year's Indonesian economic downturn.

■ Improving consumer trend. Recent data points have shown that Indonesia's consumer sentiment and consumption trend have improved since 4Q15. More importantly, recovery has been driven by volumes, and not only price increases. Matahari saw a similar uptick trend in its SSG to 7.6% YoY, largely driven by volume (5.3%). We expect broader macro improvement to continue in 2016, supported by investment and government spending. Being the largest stock in Indonesia’s consumer discretionary space, Matahari is one of the beneficiaries of the improving consumer demand trend.

■ Testing the waters on e-commerce. Matahari has effectively owned a 10% stake in Lippo group's e-commerce venture, MatahariMall. An interesting point to note is that it will book this investment under the cost method as an asset in the balance sheet. Thus, there will be no share of losses in the P/L. This should ease investors' concern that MatahariMall's initial losses will drag LPPF's earnings. The department store will be supplying its private label goods exclusively to MatahariMall, leveraging on e-commerce opportunities, and management has control over the products' pricing.

■ OUTPERFORM rating. We favour Matahari Department Store within

Indonesia's consumer discretionary sector. Our Rp19,400 target price is

based on 26x FY16 P/E, in line with its three-year historical average, and at

a premium to peers due to its higher earnings growth (17% CAGR in the

next two years), and higher ROE.


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Performance over 1M 3M 12M Absolute (%) 3.0 3.3 -5.2 — Relative (%) 2.8 -2.2 6.0 —


Year 12/15A 12/16E 12/17E 12/18E Revenue (Rp bn) 9,006.9 10,402.2 11,752.5 13,500.5 EBITDA (Rp bn) 2,563.6 2,964.7 3,343.5 3,912.2 EBIT (Rp bn) 2,329.5 2,714.4 3,078.7 3,631.6 Net profit (Rp bn) 1,780.8 2,172.5 2,514.8 2,981.2 EPS (CS adj.) (Rp) 610 745 862 1,022 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 739 873 971 EPS growth (%) 25.5 22.0 15.8 18.5 P/E (x) 29.8 24.4 21.1 17.8 Dividend yield (%) 1.6 2.4 2.9 3.3 EV/EBITDA (x) 20.3 17.2 15.0 12.5 P/B (x) 11.3 9.5 8.0 6.8 ROE (%) 42.4 42.3 41.2 41.4 Net debt/equity (%) Net cash Net cash Net cash Net cash


Rating OUTPERFORM Price (01 Apr 16, Rp) 18,175 Target price (Rp) 19,400¹ Upside/downside (%) 6.7 Mkt cap (Rp bn) 53,033.2 (US$4.0 bn) Enterprise value (Rp bn) 51,137 Number of shares (mn) 2,917.92 Free float (%) 65.3 52-week price range 19,425.0-14,650.0 ADTO - 6M (US$ mn) 5.3




Research Analysts

Priscilla Tjitra

62 21 2553 7906

[email protected]

Ella Nusantoro

62 21 255 37917

[email protected]

05 April 2016


Matahari Department Store LPPF.JK / LPPF IJ

Price (01 Apr 16): Rp18,175, Rating: OUTPERFORM, Target Price: Rp19,400, Analyst: Priscilla Tjitra


Scenario TP %Up/Dwn Assumptions Upside 26,000.00 43.05 assume 12% SSG and 13 new stores p.a Central Case 19,400.00 6.74 assume 10% SSG and 12 new stores p.a Downside 15,000.00 (17.47) assume 7% SSG and 10 new stores p.a


GDP growth (%) 4.80 4.80 4.80 4.80 Inflation (%) 6.36 5.00 5.00 5.00 SSG (%) 6.80 7.50 8.80 8.80 No. of new stores 11.0 7.0 8.0 8.0 — — — —


Sales revenue 9,007 10,402 11,753 13,501 Cost of goods sold 3,336 3,871 4,375 5,009 SG&A 3,342 3,817 4,299 4,860 Other operating exp./(inc.) (234.1) (250.3) (264.8) (280.6) EBITDA 2,564 2,965 3,344 3,912 Depreciation & amortisation 234.1 250.3 264.8 280.6 EBIT 2,330 2,714 3,079 3,632 Net interest expense/(inc.) 92.8 (35.5) (64.8) (94.9) Non-operating inc./(exp.) 8.1 — — — Associates/JV — — — — Recurring PBT 2,245 2,750 3,144 3,727 Exceptionals/extraordinaries — — — — Taxes 464.0 577.5 628.7 745.3 Profit after tax 1,781 2,172 2,515 2,981 Other after tax income — — — — Minority interests — — — — Preferred dividends — — — — Reported net profit 1,781 2,173 2,515 2,981 Analyst adjustments — — — — Net profit (Credit Suisse) 1,781 2,173 2,515 2,981


EBIT 2,330 2,714 3,079 3,632 Net interest — — — — Tax paid — — — — Working capital 204.8 165.4 174.1 195.6 Other cash & non-cash items (285.3) (291.7) (299.1) (369.8) Operating cash flow 2,249 2,588 2,954 3,457 Capex (384.7) (404.4) (364.2) (393.7) Free cash flow to the firm 1,864 2,184 2,590 3,064 Disposals of fixed assets — — — — Acquisitions — — — — Divestments — — — — Associate investments — — — — Other investment/(outflows) (78.4) (58.5) (95.9) (128.3) Investing cash flow (463.1) (462.9) (460.1) (522.1) Equity raised — — — — Dividends paid (851) (1,247) (1,521) (1,760) Net borrowings (689.2) — — — Other financing cash flow (84.5) 68.8 41.3 45.4 Financing cash flow (1,625) (1,178) (1,479) (1,715) Total cash flow 161 947 1,014 1,220 Adjustments — — — — Net change in cash 161 947 1,014 1,220


Cash & cash equivalents 947 1,896 2,907 4,123 Current receivables 76.0 113.8 113.8 139.2 Inventories 1,008 1,154 1,305 1,496 Other current assets 242.4 259.4 293.1 336.6 Current assets 2,273 3,423 4,619 6,094 Property, plant & equip. 921 1,075 1,174 1,287 Investments — — — — Intangibles — — — — Other non-current assets 695.5 754.0 849.9 978.3 Total assets 3,889 5,252 6,643 8,360 Accounts payable 1,704 1,973 2,224 2,541 Short-term debt — — — — Current provisions — — — — Other current liabilities 735 832 940 1,078 Current liabilities 2,439 2,805 3,164 3,619 Long-term debt — — — — Non-current provisions — — — — Other non-current liab. 346.1 414.9 456.2 501.6 Total liabilities 2,785 3,220 3,620 4,121 Shareholders' equity 4,678 5,604 6,598 7,819 Minority interests — — — — Total liabilities & equity 3,891 5,252 6,646 8,368


Shares (wtd avg.) (mn) 2,918 2,918 2,918 2,918 EPS (Credit Suisse) (Rp) 610 745 862 1,022 DPS (Rp) 292 427 521 603 BVPS (Rp) 1,603 1,921 2,261 2,680 Operating CFPS (Rp) 771 887 1,012 1,185


Growth(%) Sales revenue 13.6 15.5 13.0 14.9 EBIT 10.3 16.5 13.4 18.0 Net profit 25.5 22.0 15.8 18.5 EPS 25.5 22.0 15.8 18.5 Margins (%) EBITDA 28.5 28.5 28.4 29.0 EBIT 25.9 26.1 26.2 26.9 Pre-tax profit 24.9 26.4 26.7 27.6 Net profit 19.8 20.9 21.4 22.1 Valuation metrics (x) P/E 29.8 24.4 21.1 17.8 P/B 11.3 9.5 8.0 6.8 Dividend yield (%) 1.61 2.35 2.87 3.32 P/CF 23.6 20.5 18.0 15.3 EV/sales 5.78 4.92 4.27 3.62 EV/EBITDA 20.3 17.2 15.0 12.5 EV/EBIT 22.4 18.8 16.3 13.5 ROE analysis (%) ROE 42.4 42.3 41.2 41.4 ROIC 1,665 1,451 1,930 2,390 Asset turnover (x) 2.32 1.98 1.77 1.61 Interest burden (x) 0.96 1.01 1.02 1.03 Tax burden (x) 0.79 0.79 0.80 0.80 Financial leverage (x) 3.52 2.58 2.20 1.97 Credit ratios Net debt/equity (%) (85.6) (93.3) (96.1) (97.1) Net debt/EBITDA (x) (0.37) (0.64) (0.87) (1.05) Interest cover (x) 25.1 (76.4) (47.5) (38.3)


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Source: IBES

05 April 2016



Real Estate Management & Development

Summarecon Agung Tbk

(SMRA.JK / SMRA IJ) COMPANY UPDATE

Strategically established

■ Good track record. SMRA has had a good track record in township development in Indonesia and has been successful in strengthening recurring income through rental income from retail space. Around 80% of its operating income is still generated from the property development segment. SMRA has three main prime property development locations, namely: Kelapa Gading (Jakarta), Serpong and Bekasi (Greater Jakarta).

■ Growing property development. SMRA made its name after successfully

transforming 550 ha of a backwater area in North Jakarta into one of the most prestigious landed residential areas. It then repeated its success in the 750 ha Serpong township, located in West Jakarta. SMRA is now expanding east to the Bekasi area with 523 ha of land bank and also to Bandung and Bogor with 314 ha and 390 ha land bank, respectively. As of December 2015, the company has a total of 1,908 ha land bank available for development, with the two largest being 530 ha in Serpong and 523 ha in Bekasi. The company is currently in the process of acquiring additional land in Bandung and Bogor.

■ 2015 full-year result. Summarecon's FY15 revenue was down 2% YoY,

accounting for 99%/94% of our and consensus estimates. Separately, net profit was down 38% YoY, accounting for 68% of our estimates. 4Q15 recorded the lowest net profit in a decade of Rp48 bn (down 83% QoQ and 91% YoY). This was mainly curbed by higher interest expense on its Rp6.2 tn debt at 10.6% blended cost as well as higher overall operating expenses, i.e., marketing expenses which came from the recently launched Bandung township back in November-2015.

■ SMRA as top pick. We continue to believe that Indonesia property sector should benefit from a falling interest rate environment which should lead banks to lower their lending rate, i.e., mortgage rate to trend south. This will boost mortgage affordability hence be positive for the sector. Among the developers, we like those who (1) are less exposed to foreign debt, (2) have good corporate governance and (3) conservative and strategically positioned.


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Performance over 1M 3M 12M Absolute (%) -1.5 -1.8 -10.5 Relative (%) -1.7 -7.3 0.7


Year 12/14A 12/15E 12/16E 12/17E Revenue (Rp bn) 5,757.7 5,718.7 6,588.9 7,763.7 EBITDA (Rp bn) 2,305.2 2,130.9 2,400.2 2,745.7 EBIT (Rp bn) 2,096.4 1,910.5 2,154.1 2,470.4 Net attributable profit (Rp bn) 1,385.4 1,280.5 1,514.6 1,825.7 EPS (CS adj.) (Rp) 96 89 105 127 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 59 91 102 EPS growth (%) 27.2 -7.6 18.3 20.5 P/E (x) 16.9 18.3 15.4 12.8 Dividend yield (%) 1.4 1.5 1.5 1.8 EV/EBITDA (x) 11.3 12.9 11.3 9.6 ROE (%) 27.9 21.5 21.6 22.1 Net debt/equity (%) 40.7 56.4 42.6 28.7 NAV per share (Rp) — — — — Disc./(prem.) to NAV (%) — — — —






Research Analysts

Jahanzeb Naseer

62 21 2553 7977

[email protected]

Laurensius Teiseran

62 21 255 37931

[email protected]

05 April 2016


Summarecon Agung Tbk SMRA.JK / SMRA IJ

Price (01 Apr 16): Rp1,620.00, Rating: OUTPERFORM, Target Price: Rp1,960.00, Analyst: Jahanzeb Naseer


Scenario TP %Up/Dwn Assumptions Upside 2,450.00 51.23 33% Discount (2 STDEV away) Central Case 1,960.00 20.99 45% Discount (1 STDEV away) Downside 1,580.00 (2.47) 57% Discount (long term avg)


Real GDP growth (%) 5.02 4.61 5.23 — Inflation rate (%) 6.39 6.47 4.69 — Interest rate (%) 7.75 7.50 6.75 — Marketing sales (Rp bn) 4,601 4,172 4,773 5,583


Sales revenue 5,758 5,719 6,589 7,764 Cost of goods sold 2,700 2,842 3,309 3,961 SG&A 961 966 1,126 1,333 Other operating exp./(inc.) (208.8) (220.5) (246.1) (275.3) EBITDA 2,305 2,131 2,400 2,746 Depreciation & amortisation 208.8 220.5 246.1 275.3 EBIT 2,096 1,911 2,154 2,470 Net interest expense/(inc.) 158.9 268.7 260.2 208.9 Non-operating inc./(exp.) (0.89) — — — Associates/JV — — — — Recurring PBT 1,937 1,642 1,894 2,262 Exceptionals/extraordinaries — — — — Taxes 318.8 266.1 335.6 406.5 Profit after tax 1,618 1,376 1,558 1,855 Other after tax income — — — — Revaluations — — — — Minority interests 232.4 95.2 43.6 29.4 Preferred dividends — — — — Reported net profit 1,385 1,281 1,515 1,826 Analyst adjustments — — — — Net profit (Credit Suisse) 1,385 1,281 1,515 1,826


EBIT 2,096 1,910 2,154 2,470 Net interest — — — — Tax paid — — — — Working capital (2,267) (1,018) 96 139 Other cash & non-cash items (502.2) (409.5) (393.3) (369.5) Operating cash flow (673) 483 1,857 2,240 Capex (1,110) (491) (529) (546) Free cash flow to the firm (1,783) (9) 1,328 1,694 Acquisitions — — — — Divestments — — — — Associate investments — — — — Other investment/(outflows) — — — — Investing cash flow (3,385) (2,269) (1,633) (1,749) Equity raised — — — — Dividends paid (331.4) (346.4) (358.5) (424.1) Net borrowings 1,881 1,018 (148) (176) Other financing cash flow 33.4 (273.2) (289.6) (335.7) Financing cash flow 1,583 398 (796) (936) Total cash flow (2,475) (1,388) (573) (445) Adjustments — — — — Net change in cash (2,475) (1,388) (573) (445)


Cash & cash equivalents 1,771 1,217 1,566 2,164 Current receivables 87.2 108.7 125.2 155.3 Inventories 3,341 3,547 4,087 4,488 Properties under development — — — — Other current assets 656.3 712.3 791.8 821.6 Current assets 5,855 5,584 6,569 7,628 Property, plant & equip. 368.1 371.9 337.0 263.9 Properties under development — — — — Investment properties 4,019 4,286 4,603 4,947 Investment in Associates/JV — — — — Intangibles 7.0 8.0 9.0 9.0 Other non-current assets 9,643 11,512 12,694 14,100 Total assets 15,872 17,476 19,610 22,002 Accounts payable 222.3 244.4 248.2 269.3 Short-term debt 506.0 823.7 713.6 614.3 Current provisions — — — — Other current liabilities 2,966 2,522 3,331 4,065 Current liabilities 3,694 3,591 4,293 4,949 Long-term debt 3,876 4,576 4,538 4,461 Non-current provisions — — — — Other non-current liab. 1,886 1,885 2,129 2,453 Total liabilities 9,456 10,052 10,961 11,863 Shareholders' equity 5,484 6,418 7,575 8,976 Minority interests 993 1,056 1,151 1,246 Total liabilities & equity 15,872 17,476 19,610 22,002


Shares (wtd avg.) (mn) 14,427 14,427 14,427 14,427 EPS (Credit Suisse) (Rp) 96 89 105 127 DPS (Rp) 23.0 24.0 24.9 29.4 BVPS (Rp) 380 445 525 622 NAV per share (Rp) — — — —


Growth(%) Sales revenue 26.6 (0.7) 15.2 17.8 EBIT 28.6 (8.9) 12.7 14.7 Net profit 27.2 (7.6) 18.3 20.5 EPS 27.2 (7.6) 18.3 20.5 Margins (%) EBITDA 40.0 37.3 36.4 35.4 EBIT 36.4 33.4 32.7 31.8 Pre-tax profit 33.6 28.7 28.7 29.1 Net profit 24.1 22.4 23.0 23.5 Valuation metrics (x) P/E 16.9 18.3 15.4 12.8 P/B 4.26 3.64 3.09 2.60 Dividend yield (%) 1.42 1.48 1.53 1.81 EV/sales 4.51 4.82 4.11 3.39 EV/EBITDA 11.3 12.9 11.3 9.6 EV/EBIT 12.4 14.4 12.6 10.6 ROE analysis (%) ROE 27.9 21.5 21.6 22.1 ROIC 25.6 15.5 14.8 16.0 Asset turnover (x) 0.36 0.33 0.34 0.35 Interest burden (x) 0.92 0.86 0.88 0.92 Tax burden (x) 0.84 0.84 0.82 0.82 Financial leverage (x) 2.47 2.35 2.27 2.17 Credit ratios Net debt/equity (%) 40.7 56.4 42.6 28.7 Net debt/EBITDA (x) 1.13 1.96 1.54 1.06 Interest cover (x) 13.2 7.1 8.3 11.8


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2011 2012 2013 2014 2015 2016

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Source: IBES

05 April 2016



Regional Banks

Bank Tabungan Pensiunan Nasional Tbk (BTPN.JK / BTPN IJ)

COMPANY UPDATE

Benefitting from falling interest rate

■ Company background. Bank Tabungan Pensiunan Nasional (BTPN) was

established in 1958. Outside the top four banks in Indonesia, BTPN probably

has the best quality of management among the others. On the asset side, it

had the good luck of tying up one of the few banks used by the government

to distribute pension to its retired employees. Indonesia currently has around

3 mn retired government workers, with BTPN providing payment services of

monthly pensions to around 700k, translating into a 23.0% market share.

Aside from distributing, BTPN lends to pensioners who constitute two-third of

its loan book—this book is extremely profitable with virtually zero NPLs. After

TPG bought BTPN in 2008, the bank ventured into micro lending which now

accounts for one-quarter of its loans.

■ Massive underperformance in 2015. The stock price was hammered down

by 39% in 2015. To some extent like Danamon, BTPN’s business model has

been hit on most fronts. The fundamental reason for the derating was the

decline in ROA and earnings. ROA fell from 3.5% levels of 2011-13 to 2.31%

last year. Earnings growth was negative in 2014 and 2015 and ROEs fell

from the 2007-13 average of 27% to 14-15% levels. Loan growth faltered

because of increasing competition in the pension loan segment and as the

bank became cautious on its micro book on account of rising NPLs.

Operating costs have been rising as BTPN expands the physical branch

network as well as invests in digital technology and in an agent network so

as to access new customer segments.

■ Outperformance in 2016? The stock is up 17% YTD mainly driven by the

management buy-back in February. We expect the bank to be a beneficiary

in a falling interest rate environment, as it has the weakest deposit franchise

and consequently highest cost of funding within our coverage. We expect

earnings growth to rebound this year (+19% YoY) after two years of

consecutive decline. The stock seems attractive on valuations (1.0x P/B and

7.6x P/E 2016E) for the given ROAs and mid-teen ROEs.


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Performance over 1M 3M 12M Absolute (%) 1.3 16.5 -33.5 Relative (%) 1.1 11.0 -22.2


Year 12/15A 12/16E 12/17E 12/18E Pre-prov op profit (Rp bn) 3,121.7 3,484.9 3,936.4 4,339.7 Pre-tax profit (Rp bn) 2,432.6 2,812.8 3,240.7 3,547.9 Net attributable profit (Rp bn) 1,803.4 2,141.7 2,467.6 2,701.5 EPS (CS adj.) (Rp) 308.78 366.72 422.52 462.56 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 390 435 463 EPS growth (%) -2.4 18.8 15.2 9.5 P/E (x) 9.1 7.6 6.6 6.0 Dividend yield (%) 0.0 0.0 0.0 0.0 CS adj. BVPS (Rp) 2,324.5 2,706.2 3,128.7 3,591.3 P/B (x) 1.20 1.03 0.89 0.78 ROE (%) 14.2 14.6 14.5 13.8 ROA (%) 2.3 2.5 2.5 2.4 Tier 1 ratio (%) 22.9 24.8 24.9 25.2


Rating OUTPERFORM Price (01 Apr 16, Rp) 2,795.00 Target price (Rp) 3,500.00¹ Upside/downside (%) 25.2 Mkt cap (Rp bn) 16,160.4 (US$1.2 bn) Number of shares (mn) 5,781.88 Free float (%) 34.7 52-week price range 4,300.0-2,035.0 ADTO - 6M (US$ mn) 0.15




Research Analysts

Sanjay Jain

65 6306 0668

[email protected]

05 April 2016


Bank Tabungan Pensiunan Nasional Tbk BTPN.JK / BTPN IJ

Price (01 Apr 16): Rp2,795.00, Rating: OUTPERFORM, Target Price: Rp3,500.00, Analyst: Sanjay Jain


Scenario TP %Up/Dwn Assumptions Upside Central Case 3,500.00 25.22 Downside


Loans growth (%) 12.9 13.2 14.0 — Net interest margin (%) 10.5 10.7 10.8 — Fee growth (%) 2.6 18.1 14.2 — Cost to income ratio (%) 62.3 62.8 63.1 — P&L provision (as % of loans) 1.27 1.10 1.00 —

Valuation 12/15A 12/16E 12/17E 12/18E

EPS growth (%) (2.4) 18.8 15.2 9.5 P/E (x) 9.1 7.6 6.6 6.0 P/B (x) 1.20 1.03 0.89 0.78 P/TB (x) 1.20 1.03 0.89 0.78 Dividend yield (%) — — — —


Interest income 13,004 13,786 15,372 17,400 Interest expense 5,308 5,109 5,483 6,237 Net interest income 7,696 8,677 9,889 11,163 Fee and commission income 277.8 305.6 351.4 404.2 Trading income — — — — Insurance income (& premiums) — — — — Other income 304.1 381.7 433.6 495.0 Total non-interest income 581.9 687.3 785.1 899.1 Total income 8,278 9,364 10,674 12,062 Personal expense 2,764 3,151 3,592 4,095 Other expenses 2,392 2,728 3,145 3,627 Total expenses 5,156 5,879 6,738 7,722 Pre-provision profit 3,122 3,485 3,936 4,340 Loan loss provisions 662.0 643.4 663.6 755.6 Operating profit 2,460 2,841 3,273 3,584 Associates/JV — — — — Other non-operating inc./(exp.) (27.1) (28.7) (32.0) (36.3) Pre-tax profit 2,433 2,813 3,241 3,548 Taxes 680.0 731.3 842.6 922.5 Net profit before minorities 1,753 2,081 2,398 2,625 Minority interests (50.8) (60.3) (69.5) (76.0) Preferred dividends — — — — Exceptionals/extraordinaries — — — — Reported net profit 1,803 2,142 2,468 2,702 Analyst adjustments — — — — Net profit (Credit Suisse) 1,803 2,142 2,468 2,702


Assets Gross customer loans 59,207 67,035 76,428 87,216 Risk provisions 543.6 517.4 663.6 755.6 Net customer loans 58,664 66,518 75,765 86,461 Interbank Loans 1,767 1,943 2,138 2,351 Investment & Securities 15,296 16,826 18,508 20,359 Cash & cash equivalents 1,352 2,064 3,284 4,515 Fixed Assets 876.2 876.2 876.2 876.2 Intangibles — — — — Other assets 3,084 3,687 4,204 4,797 Total assets 81,040 91,914 104,775 119,359 Liabilities Interbank deposits — — — — Customer deposits 60,273 68,776 78,690 90,052 Total deposits 60,273 68,776 78,690 90,052 Other liabilities 6,842 6,985 7,464 7,986 Total liabilities 67,116 75,761 86,154 98,038 Shareholders' equity 13,576 15,805 18,273 20,974 Minority interests 347.8 347.8 347.8 347.8 Preferred stock — — — — Total liabilities & equity 81,040 91,914 104,775 119,359


Shares (wtd avg.) (mn) 5,840 5,840 5,840 5,840 EPS (Credit Suisse) (Rp) 308.78 366.72 422.52 462.56 BVPS (Rp) 2,325 2,706 3,129 3,591 Tangible BVPS (Rp) 2,325 2,706 3,129 3,591 DPS (Rp) — — — —

Key ratios 12/15A 12/16E 12/17E 12/18E

Profitability and margins (%)

ROE stated 14.2 14.6 14.5 13.8 ROE - CS adj. 14.2 14.6 14.5 13.8 ROA - CS adj. 2.31 2.48 2.51 2.41 Gearing (x) 6.15 5.89 5.77 5.71 Asset quality (%) NPL/ gross loans 0.62 0.59 0.62 0.64 B/S loan loss coverage — — — — Loan/ deposit ratio 97.3 96.7 96.3 96.0 Capital ratios (%) Capital adequacy ratio 23.8 25.8 25.9 26.3 Tier 1 ratio 22.9 24.8 24.9 25.2 Equity Tier 1 ratio 22.9 24.8 24.9 25.2 Growth(%) Revenue 8.8 13.1 14.0 13.0 Operating expense 14.5 14.0 14.6 14.6 Pre-provision profit 0.5 11.6 13.0 10.2 Net profit (2.4) 18.8 15.2 9.5 Deposit 13.0 14.1 14.4 14.4


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Source: IBES

05 April 2016



Integrated Telecommunication Services

Link Net Tbk

(LINK.JK / LINK IJ) COMPANY UPDATE

High growth, high return on capital

■ An underpenetrated market. There is plenty of room for growth in the

Indonesian broadband market. Indonesia's total broadband subscriber base

(i.e., including PT Telkom's xDSL customers) reached only 4.5 mn in

December 2015. This represents just 7.3% penetration of Indonesia's 62.3

mn households. Focusing only on the 1.1 mn high-speed (i.e. >3 Mbps)

broadband customers in Indonesia, the penetration rate was just 1.8% of

households. We expect that as the market develops, competitors will learn to

target their rollouts in greenfield areas that are not yet covered by an existing

player (such as Link Net), since this will result in a much higher return on

their investment.

■ Cherry-picking strategy. Furthermore, while total overall subscriber and

revenue shares are crucial in the cellular sector, given the need for basic

nationwide 'coverage' capex, in fixed broadband the critical factor is the

penetration of homes passed due to high rollout costs on a per-home basis.

Given this, Link Net's 'cherry-picking' strategy looks appropriate. Indeed, Link

Net's management has continually stated that 240,000 new homes passed per

annum is a sensible pace of rollout, given scarce engineering resources and

issues procuring local permits. Looking at the MNC Kabel's (Not listed) rollout

experience in 2015, and even that of PT Telkom, this seems to ring true.

■ Buy backs are a sensible use of cash. Link Net has announced that the

board has resolved to launch a share buyback programme. The resolution

allows Link Net to buy back up to 10% of its share capital, or 304.3 mn

shares, and purchases in the open market can commence following the

AGM on 15 April. We note that 304.3 mn shares represents 30.3% of the

free float, and therefore this buyback proposal is very material in size.

■ Valuation. Link Net's FY15 growth rate of 20.1% for top line and 14.7% in

earnings stands out relatively strong given Indonesia's poor macro backdrop

in 2015. Furthermore, that growth, combined with sharp share price declines

over the last 12 months, puts Link Net on very attractive-looking forward

multiples. OUTPERFORM rating maintained. Share price performance

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Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16





Performance over 1M 3M 12M Absolute (%) 8.2 0.9 -32.2 — Relative (%) 8.0 -4.6 -20.9 —


Year 12/15A 12/16E 12/17E 12/18E Revenue (Rp bn) 2,564.0 3,101.7 3,821.6 4,579.7 EBITDA (Rp bn) 1,450.3 1,767.7 2,219.4 2,696.2 EBIT (Rp bn) 935.3 1,117.4 1,461.3 1,829.6 Net profit (Rp bn) 640.1 845.0 1,188.3 1,498.6 EPS (CS adj.) (Rp) 210 278 390 492 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 257 319 407 EPS growth (%) 14.4 32.0 40.6 26.1 P/E (x) 19.2 14.5 10.3 8.2 Dividend yield (%) 0.0 1.7 2.9 4.9 EV/EBITDA (x) 8.3 6.7 5.1 4.0 P/B (x) 3.4 2.8 2.4 2.0 ROE (%) 19.1 21.1 25.0 26.6 Net debt/equity (%) Net cash Net cash Net cash Net cash






[V] = Stock considered volatile (see Disclosure Appendix).

Research Analysts

Colin McCallum, CA

852 2101 6514

[email protected]

05 April 2016


Link Net Tbk LINK.JK / LINK IJ

Price (01 Apr 16): Rp4,035.00, Rating: OUTPERFORM [V], Target Price: Rp8,300.00, Analyst: Colin McCallum


Scenario TP %Up/Dwn Assumptions Upside 8,643.00 114.20 FY14 EV/EBITDA +1 Central Case 8,300.00 105.70 FY14 EV/EBITDA 20.9X Downside 7,851.00 94.57 FY14 EV/EBITDA -1


Homes Passed (000s) 1,670 1,910 2,170 2,438 Residential ARPU (Rp 000s/month)

221.2 221.2 221.2 221.2 — — — — — — — — — — — —


Sales revenue 2,564 3,102 3,822 4,580 Cost of goods sold 569 695 857 1,024 SG&A 544.0 638.6 745.0 859.1 Other operating exp./(inc.) 0.65 — — — EBITDA 1,450 1,768 2,219 2,696 Depreciation & amortisation 515.0 650.3 758.1 866.7 EBIT 935 1,117 1,461 1,830 Net interest expense/(inc.) 57.5 (9.3) (24.1) (43.7) Non-operating inc./(exp.) — — — — Associates/JV (20.9) — — — Recurring PBT 857 1,127 1,485 1,873 Exceptionals/extraordinaries — — — — Taxes 216.7 281.7 297.1 374.7 Profit after tax 640 845 1,188 1,499 Other after tax income — — — — Minority interests 0.15 — — — Preferred dividends — — — — Reported net profit 640 845 1,188 1,499 Analyst adjustments — — — — Net profit (Credit Suisse) 640 845 1,188 1,499


EBIT 935 1,117 1,461 1,830 Net interest 7.0 9.3 24.1 43.7 Tax paid (271.0) (281.7) (297.1) (374.7) Working capital (16.9) (47.2) (63.2) (66.6) Other cash & non-cash items 515.0 650.3 758.1 866.7 Operating cash flow 1,169 1,448 1,883 2,299 Capex (1,108) (1,009) (1,093) (1,189) Free cash flow to the firm (32.4) 270.4 433.7 510.0 Disposals of fixed assets — — — — Acquisitions — — — — Divestments 22.0 — — — Associate investments (19.0) — — — Other investment/(outflows) — — — — Investing cash flow (1,105) (1,009) (1,093) (1,189) Equity raised — — — — Dividends paid — (169.0) (356.5) (599.4) Net borrowings (81.2) — — — Other financing cash flow — — — — Financing cash flow (81.2) (169.0) (356.5) (599.4) Total cash flow (16.9) 270.4 433.7 510.0 Adjustments — — — — Net change in cash (16.9) 270.4 433.7 510.0


Cash & cash equivalents 326 596 1,030 1,540 Current receivables 279.4 337.9 416.4 499.0 Inventories — — — — Other current assets — — — — Current assets 605 934 1,446 2,039 Property, plant & equip. 3,493 3,851 4,186 4,509 Investments 102.6 102.6 102.6 102.6 Intangibles 66.8 66.8 66.8 66.8 Other non-current assets 171.1 179.0 189.5 200.5 Total assets 4,438 5,134 5,991 6,917 Accounts payable 578.0 578.0 578.0 578.0 Short-term debt 69.8 20.2 20.2 20.2 Current provisions — — — — Other current liabilities — — — — Current liabilities 647.8 598.2 598.2 598.2 Long-term debt 31.4 81.0 81.0 81.0 Non-current provisions — — — — Other non-current liab. 91.6 110.8 136.5 163.6 Total liabilities 770.8 790.0 815.7 842.8 Shareholders' equity 3,668 4,344 5,175 6,075 Minority interests 0.33 0.33 0.33 0.33 Total liabilities & equity 4,439 5,134 5,991 6,918


Shares (wtd avg.) (mn) 3,043 3,043 3,043 3,043 EPS (Credit Suisse) (Rp) 210 278 390 492 DPS (Rp) — 69 117 197 BVPS (Rp) 1,205 1,427 1,700 1,996 Operating CFPS (Rp) 384 476 619 755


Growth(%) Sales revenue 20.1 21.0 23.2 19.8 EBIT 11.5 19.5 30.8 25.2 Net profit 14.4 32.0 40.6 26.1 EPS 14.4 32.0 40.6 26.1 Margins (%) EBITDA 56.6 57.0 58.1 58.9 EBIT 36.5 36.0 38.2 39.9 Pre-tax profit 33.4 36.3 38.9 40.9 Net profit 25.0 27.2 31.1 32.7 Valuation metrics (x) P/E 19.2 14.5 10.3 8.2 P/B 3.35 2.83 2.37 2.02 Dividend yield (%) — 1.72 2.90 4.88 P/CF 10.5 8.5 6.5 5.3 EV/sales 4.70 3.80 2.97 2.37 EV/EBITDA 8.31 6.67 5.11 4.02 EV/EBIT 12.9 10.5 7.8 5.9 ROE analysis (%) ROE 19.1 21.1 25.0 26.6 ROIC 22.2 23.0 28.9 33.0 Asset turnover (x) 0.58 0.60 0.64 0.66 Interest burden (x) 0.92 1.01 1.02 1.02 Tax burden (x) 0.75 0.75 0.80 0.80 Financial leverage (x) 1.21 1.18 1.16 1.14 Credit ratios Net debt/equity (%) (6.1) (11.4) (17.9) (23.7) Net debt/EBITDA (x) (0.15) (0.28) (0.42) (0.53) Interest cover (x) 16 (120) (61) (42)


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Source: IBES

05 April 2016



Healthcare Facilities

Siloam International Hospitals

(SILO.JK / SILO IJ) COMPANY UPDATE

Aggressive expansion plans ahead

■ Indonesia's largest private hospital group. PT Siloam International Hospitals

(Siloam), a subsidiary of PT Lippo Karawaci Tbk, is the largest private hospital

group in Indonesia operating 20 hospitals with a total capacity of more than

4,800 beds across the country. We believe Siloam's competitive positioning as

Indonesia’s premier hospital group is underpinned by its (1) holistic approach

targeting all healthcare segments; (2) state-of-the-art medical systems and the

'hub-and-spoke model' driving better business strategy; and (3) Lippo Group's

parentage helping execution certainty.

■ Ambitious expansion plans to form unrivalled network across

Indonesia. Siloam has two completed hospitals awaiting operational licence

and 44 other sites earmarked for development. By 2017, Siloam targets to

achieve 10,000 beds from the current 4,800 and have over 50 hospitals in

more than 25 cities. While management has been able to deliver strong top-

line growth despite a weak demand environment, margins have disappointed

as a majority of hospitals are still in the ramp-up stage.

■ New format medical centre—Siloam Medika. These outlets will be

strategically placed in high traffic areas such as shopping malls. Offering a

limited variety of surgery options and key equipment with a GP approach,

this targeted format should prove effective with a new level of convenience

for those smaller medical situations and emergencies, and the opportunity

for prompt treatment and immediate referral.

■ Siloam is likely to build significant scale and competitive advantages

over the medium term. We believe that in the medium term, Siloam could

be the best play to leverage on the healthcare under-penetration story in

Indonesia as it builds a hospital network unrivalled in scope and scale across

Indonesia. Margin issues are likely to be shortlived. Siloam's profitability

metrics are likely to play catch-up as more hospitals mature.


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Performance over 1M 3M 12M Absolute (%) -6.6 -24.0 -44.2 — Relative (%) -6.7 -29.4 -33.0 —


Year 12/14A 12/15E 12/16E 12/17E Revenue (Rp bn) 3,340.8 4,215.0 5,747.3 7,846.5 EBITDA (Rp bn) 401.0 555.3 770.6 1,065.3 EBIT (Rp bn) 133.9 195.3 320.6 535.3 Net profit (Rp bn) 62.6 98.6 159.9 279.7 EPS (CS adj.) (Rp) 54 85 138 241 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 61 101 158 EPS growth (%) 13.6 57.4 61.9 74.9 P/E (x) 137.7 87.5 54.0 30.9 Dividend yield (%) 0.0 0.11 0.19 0.32 EV/EBITDA (x) 21.4 15.1 10.5 7.0 P/B (x) 5.2 5.0 4.6 4.1 ROE (%) 3.8 5.8 8.8 13.9 Net debt/equity (%) Net cash Net cash Net cash Net cash


Rating OUTPERFORM Price (01 Apr 16, Rp) 7,450.00 Target price (Rp) 13,000¹ Upside/downside (%) 74.5 Mkt cap (Rp bn) 8,612.94 (US$0.65 bn) Enterprise value (Rp bn) 8,412 Number of shares (mn) 1,156.10 Free float (%) 29.0 52-week price range 16,900.0-7,250.0 ADTO - 6M (US$ mn) 2.8




Research Analysts

Anand Swaminathan

65 6212 3012

[email protected]

Ella Nusantoro

62 21 255 37917

[email protected]

05 April 2016


Siloam International Hospitals SILO.JK / SILO IJ

Price (01 Apr 16): Rp7,450.00, Rating: OUTPERFORM, Target Price: Rp13,000, Analyst: Anand Swaminathan


Scenario TP %Up/Dwn Assumptions Upside Central Case 13,000.00 74.50 Downside


Number of beds 1,985 2,605 3,165 5,028 Revenue growth (%) 33.4 26.2 36.4 36.5 EBITDA margin (%) 13.8 14.5 14.5 14.6 Net margin (%) 1.87 2.34 2.78 3.56 — — — —


Sales revenue 3,341 4,215 5,747 7,847 Cost of goods sold 2,389 3,012 4,093 5,570 SG&A 727 842 1,132 1,447 Other operating exp./(inc.) (175.8) (193.9) (248.8) (236.3) EBITDA 401 555 771 1,065 Depreciation & amortisation 267.1 360.0 450.0 530.0 EBIT 133.9 195.3 320.6 535.3 Net interest expense/(inc.) 22.0 47.6 72.8 101.4 Non-operating inc./(exp.) (18.3) (10.0) (20.0) (30.0) Associates/JV — — — — Recurring PBT 93.5 137.7 227.8 403.9 Exceptionals/extraordinaries — — — — Taxes 33.8 44.1 72.9 129.3 Profit after tax 59.7 93.6 154.9 274.7 Other after tax income — — — — Minority interests (2.9) (5.0) (5.0) (5.0) Preferred dividends — — — — Reported net profit 62.6 98.6 159.9 279.7 Analyst adjustments — — — — Net profit (Credit Suisse) 62.6 98.6 159.9 279.7


EBIT 133.9 195.3 320.6 535.3 Net interest — — — — Tax paid — — — — Working capital 115.6 145.5 189.9 220.9 Other cash & non-cash items — — — — Operating cash flow 249.4 340.8 510.5 756.2 Capex (382.4) (350.0) (360.0) (360.0) Free cash flow to the firm (132.9) (9.2) 150.5 396.2 Disposals of fixed assets — — — — Acquisitions (128.7) — — — Divestments — — — — Associate investments — — — — Other investment/(outflows) 0.52 — — — Investing cash flow (510.6) (350.0) (360.0) (360.0) Equity raised — — — — Dividends paid — (9.9) (16.0) (28.0) Net borrowings — (100.0) 50.0 100.0 Other financing cash flow (7.5) 75.0 150.0 200.0 Financing cash flow (7.5) (34.9) 184.0 272.0 Total cash flow (268.7) (44.1) 334.5 668.2 Adjustments (1.1) — — — Net change in cash (269.7) (44.1) 334.5 668.2


Cash & cash equivalents 280 271 646 1,377 Current receivables 392.6 490.8 662.6 894.5 Inventories 105.9 165.0 185.0 205.0 Other current assets 9.4 15.0 15.0 15.0 Current assets 788 942 1,509 2,492 Property, plant & equip. 1,518 1,508 1,418 1,248 Investments — — — — Intangibles 292.2 200.0 200.0 70.0 Other non-current assets 247 1,616 1,826 1,845 Total assets 2,844 4,265 4,952 5,655 Accounts payable 192.8 269.9 377.8 528.9 Short-term debt 80.5 20.0 20.0 20.0 Current provisions 33.1 28.0 32.0 32.0 Other current liabilities 159.9 535.0 516.0 516.0 Current liabilities 466 853 946 1,097 Long-term debt 149.4 49.4 99.4 199.4 Non-current provisions 147.0 550.0 800.0 800.0 Other non-current liab. 428 1,041 1,191 1,391 Total liabilities 1,190 2,493 3,036 3,487 Shareholders' equity 1,648 1,737 1,881 2,133 Minority interests 5.5 35.0 35.0 35.0 Total liabilities & equity 2,844 4,265 4,952 5,655


Shares (wtd avg.) (mn) 1,156 1,158 1,160 1,160 EPS (Credit Suisse) (Rp) 54 85 138 241 DPS (Rp) — 8.5 13.8 24.1 BVPS (Rp) 1,426 1,500 1,621 1,838 Operating CFPS (Rp) 216 294 440 652


Growth(%) Sales revenue 33.4 26.2 36.4 36.5 EBIT 70.1 45.9 64.2 67.0 Net profit 25.4 57.6 62.2 74.9 EPS 13.6 57.4 61.9 74.9 Margins (%) EBITDA 12.0 13.2 13.4 13.6 EBIT 4.01 4.63 5.58 6.82 Pre-tax profit 2.80 3.27 3.96 5.15 Net profit 1.87 2.34 2.78 3.56 Valuation metrics (x) P/E 138 88 54 31 P/B 5.23 4.97 4.59 4.05 Dividend yield (%) — 0.11 0.19 0.32 P/CF 34.5 25.3 16.9 11.4 EV/sales 2.56 2.00 1.41 0.95 EV/EBITDA 21.4 15.1 10.5 7.0 EV/EBIT 64.0 43.1 25.2 13.9 ROE analysis (%) ROE 3.8 5.8 8.8 13.9 ROIC 5.8 8.4 14.7 30.4 Asset turnover (x) 1.17 0.99 1.16 1.39 Interest burden (x) 0.70 0.70 0.71 0.75 Tax burden (x) 0.64 0.68 0.68 0.68 Financial leverage (x) 1.72 2.41 2.58 2.61 Credit ratios Net debt/equity (%) (3.0) (11.4) (27.5) (53.4) Net debt/EBITDA (x) (0.12) (0.36) (0.68) (1.09) Interest cover (x) 6.08 4.10 4.40 5.28


0

20

40

60

80

100

120

Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16

12MF P/E multiple

0

2

4

6

8

10

12

Oct-13 Apr-14 Oct-14 Apr-15 Oct-15 Apr-16

12MF P/B multiple

Source: IBES

05 April 2016



Distributors

Tiphone Mobile Indonesia

(TELE.JK / TELE IJ) COMPANY UPDATE

Growing together with Telkomsel

■ Mobile phone vouchers are now staple items. Tiphone Mobile (TELE) is

the largest prepaid mobile phone voucher distributor in Indonesia,

distributing exclusively for Telkomsel (which has 25% stake in the

company). Indonesians' rising internet access translates to higher mobile

phone data service. These growing telecommunication needs benefit TELE

as a distributor.

■ 30% market share, what’s next? Post Telkom's stake acquisition, TELE's

subsidiaries (PT Telesindo, Simpatindo and Tiphone) became the top three

Telkomsel distributors—30% market share. In the traditional channel (85%—

250,000 reseller base), TELE now holds 29 out of 130 Telkomsel clusters.

Telkomsel's goal is to further cut from 130 to 100 clusters, and 60 to 40

distributors. TELE can still grow its cluster base when the re-arrangement

happens. Apart from traditional retail, TELE also distributes through the

modern retail (5%—25,000 Indomaret and Alfamart stores); and bank

channels (10%—all Indonesian private banks). It focuses on these channels

along with the shift of Indonesians' lifestyle towards a modern lifestyle.

■ Possibility of Telkomsel’s stake to rise. Telkomsel's main idea in

acquiring TELE was to secure its distribution network. TELE has been its

biggest and most performing dealer for ten years in a row. According to

TELE, Telkomsel is looking to acquire a controlling stake in the company,

while TELE's founder remains to have at least 20% stake. Both parties are

currently still in the discussion stage.

■ Future strategy to focus on vouchers. Management's long-term strategy

is to grow its vouchers distribution along with Telkomsel, keeping the

handset business as a complimentary only. In FY16, vouchers' contribution

to revenue is targeted to rise to 75% (from 70% in FY15). As the vouchers'

proportion grows, we believe margins and working capital should improve

over the years. Vouchers' net margin is 2.0% as compared to handset of just

1.2%. Vouchers' business in essence requires 25-30 days of WC cycle,

while handset's WC days can be up to twice longer.


80

100

120

140

600

800

1000

1200






Performance over 1M 3M 12M Absolute (%) -1.9 0.6 -19.3 — Relative (%) -2.0 -4.8 -8.0 —


Year 12/15A 12/16E 12/17E 12/18E Revenue (Rp bn) 22,039.7 27,024.3 29,955.7 33,201.3 EBITDA (Rp bn) 802.8 1,009.3 1,133.3 1,222.6 EBIT (Rp bn) 776.3 980.8 1,102.8 1,190.1 Net profit (Rp bn) 370.9 466.4 545.6 622.4 EPS (CS adj.) (Rp) 51.3 64.5 75.5 86.1 Change from previous EPS (%) n.a. 0.0 0.0 0.0 Consensus EPS (Rp) n.a. 65.2 80.8 86.1 EPS growth (%) 16.6 25.7 17.0 14.1 P/E (x) 15.1 12.0 10.3 9.0 Dividend yield (%) 1.3 1.7 2.1 2.4 EV/EBITDA (x) 9.7 8.4 7.2 6.6 P/B (x) 2.0 1.8 1.6 1.4 ROE (%) 14.0 15.5 16.0 16.1 Net debt/equity (%) 81.1 91.6 74.1 61.9


Rating OUTPERFORM Price (01 Apr 16, Rp) 775.00 Target price (Rp) 900.00¹ Upside/downside (%) 16.1 Mkt cap (Rp bn) 5,520.47 (US$0.42 bn) Enterprise value (Rp bn) 8,441 Number of shares (mn) 7,123.19 Free float (%) 22.1 52-week price range 1,045.0-630.0 ADTO - 6M (US$ mn) 0.23




Research Analysts

Priscilla Tjitra

62 21 2553 7906

[email protected]

05 April 2016


Tiphone Mobile Indonesia TELE.JK / TELE IJ

Price (01 Apr 16): Rp775.00, Rating: OUTPERFORM, Target Price: Rp900.00, Analyst: Priscilla Tjitra



Upside 1,250.00 61.29 Telkomsel market share increases at a faster pace

Central Case 900.00 16.13 Assume Telkomsel market share of 30% in 2016E

Downside 700.00 (9.68) Assume Telkomsel market share stays at 20%


Telkomsel distribution market share

21.2 28.0 29.0 30.0 Telkomsel sales growth 14.8 8.0 10.0 10.0 Inflation (%) 6.36 5.00 5.00 5.00 GDP growth (%) 4.80 5.70 6.00 6.00 — — — —


Sales revenue 22,040 27,024 29,956 33,201 Cost of goods sold 20,832 25,503 28,246 31,340 SG&A 458.0 561.8 628.1 692.2 Other operating exp./(inc.) (53.3) (49.9) (51.9) (53.9) EBITDA 803 1,009 1,133 1,223 Depreciation & amortisation 26.6 28.5 30.5 32.5 EBIT 776 981 1,103 1,190 Net interest expense/(inc.) 275.5 350.8 365.9 349.5 Non-operating inc./(exp.) — — — — Associates/JV — — — — Recurring PBT 500.7 629.9 736.9 840.7 Exceptionals/extraordinaries — — — — Taxes 130.1 163.8 191.6 218.6 Profit after tax 370.6 466.2 545.3 622.1 Other after tax income — — — — Minority interests (0.30) (0.30) (0.30) (0.30) Preferred dividends — — — — Reported net profit 370.9 466.4 545.6 622.4 Analyst adjustments — — — — Net profit (Credit Suisse) 370.9 466.4 545.6 622.4


EBIT 776 981 1,103 1,190 Net interest (275.5) (350.8) (365.9) (349.5) Tax paid (130.1) (163.8) (191.6) (218.6) Working capital (1,298) (928) (189) (347) Other cash & non-cash items 76.4 28.5 30.5 32.5 Operating cash flow (851.2) (433.8) 387.0 307.5 Capex (18.9) (20.0) (20.0) (20.0) Free cash flow to the firm (870.1) (453.8) 367.0 287.5 Disposals of fixed assets — — — — Acquisitions (400.0) — — — Divestments — — — — Associate investments — — — — Other investment/(outflows) 256.7 (99.1) (16.1) (17.9) Investing cash flow (162.2) (119.1) (36.1) (37.9) Equity raised 24.5 — — — Dividends paid (72.3) (92.6) (116.6) (136.4) Net borrowings 1,210 (24) 183 — Other financing cash flow 386.7 8.6 5.1 5.6 Financing cash flow 1,549 (108) 72 (131) Total cash flow 535.4 (661.1) 422.5 138.9 Adjustments — — — — Net change in cash 535.4 (661.1) 422.5 138.9


Cash & cash equivalents 1,173 511 934 1,073 Current receivables 2,428 3,206 3,307 3,575 Inventories 1,894 1,956 2,089 2,147 Other current assets 869 1,068 1,035 1,065 Current assets 6,364 6,742 7,366 7,860 Property, plant & equip. 163.6 155.1 144.6 132.1 Investments — — — — Intangibles 551.3 551.3 551.3 551.3 Other non-current assets 49.7 148.8 165.0 182.8 Total assets 7,129 7,597 8,227 8,726 Accounts payable 670.9 768.6 773.9 772.8 Short-term debt 931 907 1,007 1,007 Current provisions 56.9 69.7 77.3 85.7 Other current liabilities 91.5 91.5 91.5 91.5 Current liabilities 1,750 1,836 1,949 1,957 Long-term debt 2,525 2,525 2,608 2,608 Non-current provisions — — — — Other non-current liab. 38.1 46.7 51.8 57.4 Total liabilities 4,313 4,408 4,609 4,622 Shareholders' equity 2,814 3,188 3,617 4,103 Minority interests 1.6 1.6 1.6 1.6 Total liabilities & equity 7,129 7,598 8,228 8,726


Shares (wtd avg.) (mn) 7,227 7,227 7,227 7,227 EPS (Credit Suisse) (Rp) 51.3 64.5 75.5 86.1 DPS (Rp) 10.0 12.8 16.1 18.9 BVPS (Rp) 389 441 500 568 Operating CFPS (Rp) (118) (60) 54 43


Growth(%) Sales revenue 51.1 22.6 10.8 10.8 EBIT 43.8 26.3 12.4 7.9 Net profit 19.7 25.7 17.0 14.1 EPS 16.6 25.7 17.0 14.1 Margins (%) EBITDA 3.64 3.73 3.78 3.68 EBIT 3.52 3.63 3.68 3.58 Pre-tax profit 2.27 2.33 2.46 2.53 Net profit 1.68 1.73 1.82 1.87 Valuation metrics (x) P/E 15.1 12.0 10.3 9.0 P/B 1.99 1.76 1.55 1.37 Dividend yield (%) 1.29 1.65 2.08 2.44 P/CF (6.6) (12.9) 14.5 18.2 EV/sales 0.35 0.31 0.27 0.24 EV/EBITDA 9.7 8.4 7.2 6.6 EV/EBIT 10.1 8.6 7.4 6.8 ROE analysis (%) ROE 14.0 15.5 16.0 16.1 ROIC 13.2 13.0 13.2 13.6 Asset turnover (x) 3.09 3.56 3.64 3.80 Interest burden (x) 0.65 0.64 0.67 0.71 Tax burden (x) 0.74 0.74 0.74 0.74 Financial leverage (x) 2.53 2.38 2.27 2.13 Credit ratios Net debt/equity (%) 81.1 91.6 74.1 61.9 Net debt/EBITDA (x) 2.84 2.89 2.37 2.08 Interest cover (x) 2.82 2.80 3.01 3.41


0

2

4

6

8

10

12

14

16

18

20

Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16

12MF P/E multiple

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

Sep-12 May-13 Jan-14 Sep-14 May-15 Jan-16

12MF P/B multiple

Source: IBES

05 April 2016


Appendix 1: Respondents' summary Demographics

Figure 145: Could you please tell us your age? Figure 146: What is your total monthly income after tax?

37

39

16

8

5

10

15

20

25

30

35

40

18-29 30-45 46-55 56-65

% o

f res

pond

ents

4

7

19

30

25

9

31

2

0

5

10

15

20

25

30

<Rp1

,000

k

Rp1

,000

k-1,

500k

Rp1

,500

k-2,

000k

Rp2

,000

k-3,

000k

Rp3

,000

k-5,

000k

Rp5

,000

k-7,

500k

Rp7

,500

k-10

,000

k

Rp1

0,00

0k-1

5,00

0k

>Rp1

5,00

0k

% o

f res

pond

ents


Figure 147: Urban/rural split Figure 148: Male/female split

Urban66%

Rural34%

Male49%Female

51%


Figure 149: How many people live in your household?

Total < Rp 1,000k Rp 1,000k -

1,500k

Rp 1,500k -

2,000k

Rp 2,000k-

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp 10,000k

- 15,000k

>Rp15,

000k

Would prefer

not to answer

D.K

1 3 4 5 4 3 3 2 0 0 0 0 0

2 7 9 15 7 5 7 7 6 6 8 40 40

3 21 21 27 26 26 15 18 9 12 12 20 40

4 29 28 25 28 30 30 27 32 24 44 40 0

5 or more 39 37 28 34 36 45 46 53 59 36 0 20

Mean 3.94 3.85 3.56 3.81 3.93 4.06 4.07 4.32 4.35 4.08 3 3


05 April 2016


Income and others

Figure 150: What is the total after-tax monthly income of your household?

% of respondents Area Region Age

Total Urban Rural Java Ex Java 18-29 30-45 46-55 56-65

2015

Less than Rp1,000k 4 3 7 4 6 5 4 3 5

Rp1,000k-Rp1,500k 7 5 10 6 9 6 5 7 12

Rp1,500k-Rp2,000k 19 16 23 18 21 18 18 22 16

Rp2,000k-Rp3,000k 30 31 29 30 32 29 33 28 25

Rp3,000k-Rp5,000k 25 27 19 25 23 26 24 23 22

Rp5,000-Rp7,500k 9 12 5 11 5 9 9 11 7

Rp7,500k-Rp10,000k 3 4 2 3 2 2 3 4 5

Rp10,000k-Rp15,000k 1 1 1 1 1 1 1 1 2

Above Rp15,000k 2 1 2 2 1 2 2 0 3

2014

Less than Rp1,000k 3 3 5 4 2 3 3 3 4

Rp1,000k-Rp1,500k 6 5 7 6 6 6 4 7 11

Rp1,500k-Rp2,000k 13 10 20 14 14 12 14 14 13

Rp2,000k-Rp3,000k 29 25 38 31 29 28 30 29 30

Rp3,000k-Rp5,000k 24 28 16 26 24 23 24 26 27

Rp5,000-Rp7,500k 10 13 5 12 8 12 10 9 7

Rp7,500k-Rp10,000k 2 3 1 2 4 3 2 0 0

Rp10,000k-Rp15,000k 2 2 0 2 1 1 2 3 0

Above Rp15,000k 5 5 4 2 11 4 5 4 6

2010

Less than Rp1,000k 8 4 15 8 9 7 7 8 14

Rp1,000k-Rp1,500k 16 11 25 17 13 17 14 17 15

Rp1,500k-Rp2,000k 25 23 28 26 25 25 27 21 23

Rp2,000k-Rp3,000k 26 29 20 27 25 27 26 23 23

Rp3,000k-Rp5,000k 19 25 7 19 19 16 20 22 19

Rp5,000-Rp7,500k 3 4 1 3 4 3 3 4 3

Rp7,500k-Rp10,000k 1 1 0 0 2 1 0 1 1

Rp10,000k-Rp15,000k 1 1 0 0 1 0 1 0 2

Above Rp15,000k 1 1 0 0 1 1 0 0 1


Figure 151: Do you think the state of your own finances over the next six months will be better, worse, or about same?

2819

2430

3946 49

4148

67

7471

6657

53 4759

52

4 7 4 4 5 1 4

0

10

20

30

40

50

60

70

80

90

100

<Rp1,000k Rp1,000k -Rp1,500k

Rp1,500k -Rp2,000k

Rp2,000k -Rp3,000k

Rp3,000k -Rp5,000k

Rp5,000k -Rp7,500k

Rp7,500k -Rp10,000k

Rp10,000k -Rp15,000k

>Rp15,000k

% o

f res

pond

ents

Better About the same Worse


05 April 2016


Figure 152: Do you think the state of your own finances over the next six months will be better, worse, or about same?

Percentage of respondents who are positive minus percentage of respondents who are negative

24

12

20

26

34

45 45

41

48

0

10

20

30

40

50

60

<Rp1,000k Rp1,000k -Rp1,500k

Rp1,500k -Rp2,000k

Rp2,000k -Rp3,000k

Rp3,000k -Rp5,000k

Rp5,000k -Rp7,500k

Rp7,500k -Rp10,000k

Rp10,000k -Rp15,000k

>Rp15,000k

% o

f res

pond

ents


Figure 153: In your opinion, is now a good time to make a major purchase? (Area)

2015 2014 2010

Total Urban Rural Java Ex

Java


Java


Java

Excellent time 5 6 4 5 5 1 1 1 0 3 6 7 5 5 7

Good time 30 31 28 30 29 35 33 38 35 38 50 48 54 54 40


A bad time 7 6 7 7 6 6 5 8 6 9 4 5 3 5 4


Figure 154: In your opinion, is now a good time to make a major purchase? (Age)

2015 2014 2010

Total 18-29 30-45 46-55 56-65 Total 18-29 30-45 46-55 56-65 Total 18-29 30-45 46-55 56-65

Excellent time 5 5 5 6 4 1 1 1 0 0 6 6 6 6 6

Good time 30 28 33 27 25 35 37 34 34 28 50 53 49 50 45


A bad time 7 7 6 6 8 6 4 6 8 9 4 3 5 4 4


Figure 155: In your opinion, is now a good time to make a major purchase? (Income)

2015 2014 2010

Total Low Mid High Total Low Mid High Total Low Mid High

Excellent time 5 1 6 6 1 1 1 0 6 3 7 4

Good time 30 27 30 27 35 24 36 33 50 45 51 68

Not such a good time 58 64 57 66 58 68 58 63 40 46 38 21

A bad time 7 8 7 2 6 7 6 3 4 5 4 7


05 April 2016


Figure 156: What savings or investment channels, if any, does your household use to save money?

% of respondents Total Less than

Rp1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above

Rp15,000k

Would

prefer not

to answer

D.K

Bank account 47 25 16 29 42 64 76 72 47 60 20 0

Life insurance 5 0 1 1 4 8 14 13 18 20 0 0

Stock market 0 0 0 0 0 0 0 0 0 0 0 0

Cash 36 25 28 28 45 41 35 23 18 28 0 40

Mutual Fund 0 0 0 0 0 1 1 0 0 0 0 0

State Treasury bill-bond 0 0 0 0 0 0 0 0 6 0 0 0

Property 5 0 0 2 5 7 6 4 12 16 0 0

Collectables 0 0 0 0 0 0 0 0 0 0 0 0

Gold and Jewellery 0 0 0 0 0 0 0 0 0 0 0 0

No extra money for saving 29 54 58 47 25 16 6 21 41 32 80 60

Base : Unwtd 1530 67 100 287 461 376 140 47 17 25 5 5


Figure 157: To what extent has your household income changed in the last 12 months?


Rp1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above

Rp15,000k

Would

prefer not

to answer

D.K

Decline more than 20% 1 3 1 1 1 1 1 2 0 0 0 0

-10% to -20% 2 6 3 2 2 1 1 0 0 0 0 0

-10% to flat 9 10 16 11 8 8 6 6 0 0 20 0

Unchanged 43 54 57 51 48 33 27 36 12 16 60 20

Flat to +10% 28 19 16 24 29 33 34 19 41 44 0 0

10-20% 11 7 5 3 7 16 19 32 29 24 0 20

20-30% 1 0 0 1 1 1 7 2 0 4 0 0

30%+ 0 0 0 0 0 1 1 0 0 4 0 0

No income 12 months ago 5 0 2 6 5 5 4 2 18 8 20 60

Base : Unwtd 1530 67 100 287 461 376 140 47 17 25 5 5


Figure 158: In what way do you expect your household income to change in the next 12 months?


Rp1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above

Rp15,000k

Would

prefer not

to answer

D.K

Decline more than 20% 0 0 1 0 0 0 0 0 0 0 0 0

-10% to -20% 0 0 1 1 0 1 0 2 0 0 0 0

-10% to flat 4 4 9 5 4 3 4 0 0 0 0 0

Unchanged 33 48 49 44 36 23 17 21 12 12 60 0

Flat to +10% 33 34 27 29 36 35 29 30 24 52 20 20

10-20% 20 9 11 14 15 25 38 36 47 16 0 20

20-30% 4 3 0 2 3 7 8 6 0 12 0 0

30%+ 1 0 0 0 1 2 3 2 0 0 0 0

No income 12 months ago 4 1 2 4 4 5 2 2 18 8 20 60

Base : Unwtd 1530 67 100 287 461 376 140 47 17 25 5 5


Figure 159: How do you think your purchases on credit card are likely to change in the next 12 months?


Rp1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above

Rp15,000k

Would

prefer not

to answer

D.K

Rising 26 100 25 23 19 27 33 38 0 33 0 0

Staying the same 60 0 50 62 66 59 52 50 100 67 0 0

Decreasing 14 0 26 16 15 14 15 13 0 0 0 0

Base: Unwtd 151 1 8 26 41 41 21 8 2 3 0 0


05 April 2016


Figure 160: Have you migrated from your hometown to where you are currently living?

% of respondents Age Income*

Total Urban Rural Java Ex Java 18-29 30-45 46-55 56-65 Low Mid High

Yes 19 27 3 14 17 20 19 18 14 18 19 18

No 81 73 97 86 84 80 81 82 86 83 81 82



Figure 161: Did you migrate to earn better income?

% of respondents Age Income*

Total Urban Rural Java Ex Java 18-29 30-45 46-55 56-65 Low Mid High

Yes 93 94 75 91 66 90 95 95 94 93 93 96

No 7 6 25 9 34 10 5 5 6 7 7 4



Auto

Figure 162: Does your household currently own a car that is driven for personal use?


Rp1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above

Rp15,000k

Would

prefer not

to answer

D.K

Yes 7 6 2 3 5 6 14 25 13 32 20 0

No 93 94 98 97 95 94 86 75 87 68 80 100

Sum 100 100 100 100 100 100 100 100 100 100 100 100

Base : Unwtd 1441 64 99 275 442 342 128 44 15 22 5 5


Figure 163: Does your household own a motorcycle/two-wheeler for personal use?


Rp1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above

Rp15,000k

Would

prefer not

to answer

D.K

Yes 84 63 64 80 82 94 97 91 87 95 60 80

No 16 38 36 20 18 6 3 9 13 5 40 20

Sum 100 100 100 100 100 100 100 100 100 100 100 100

Base : Unwtd 1441 64 99 275 442 342 128 44 15 22 5 5


Figure 164: Will you or your family purchase or replace a passenger car in the next 12 months?

1 20 1 0

2 1 0

75

7 6 5 5 68

14

20

75

24

20 20

30

26

20 21

30

2018

26

19

22

26 2628

23

18

33

45

38

52

49

3537 37 38

27 27

18

0

10

20

30

40

50

60

Total Less than Rp1,000k

Rp 1,000k -1,500k

Rp 1,500k -2,000k

Rp 2,000k -3,000k

Rp 3,000k -5,000k

Rp 5,000k -7,500k

Rp 7,500k -10,000k

Rp 10,000k -15,000k

Above 15,000k

% o

f res

pond

ents

Definitely will Probably will Not sure Probably won’t Definitely won’t


05 April 2016


Figure 165: Will you or your family purchase or replace a motorbike in the next 12 months?

4

0

3 2 3

8

57 7

5

23 23 24 23 22 23

34

27

75

2523

20

31

27

21

13

20

53

32

29

19

28 27

30 30 30 30

33 32

16

33

21

14 15 16 17

11

0

18

0

10

20

30

40

50

60

Total Less than Rp1,000k

Rp 1,000k -1,500k

Rp 1,500k -2,000k

Rp 2,000k -3,000k

Rp 3,000k -5,000k

Rp 5,000k -7,500k

Rp 7,500k -10,000k

Rp 10,000k -15,000k

Above 15,000k

% o

f res

pond

ents

Definitely will Probably will Not sure Probably won’t Definitely won’t


Figure 166: How do you plan to finance this motorbike purchase?


Rp1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above

Rp15,000k

Would

prefer not

to answer

D.K

All cash 26 33 22 21 30 26 26 13 0 50 100 0

Cash + credit 58 47 44 57 57 65 56 67 100 50 0 0

All credit 15 20 33 19 14 8 18 20 0 0 0 0

D.K. 1 0 0 3 0 0 0 0 0 0 0 0

Sum 100 100 100 100 100 100 100 100 100 100 100 0

Base: unwtd 399 15 27 70 111 106 50 15 2 2 1 0


Food and beverages

Figure 167: Have you purchased any of these products in the last three months?


Rp1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above

Rp15,000k

Would

prefer not

to answer

D.K

Drinks: Yes 66 56 56 64 66 72 75 58 64 64 40 60

Drinks: No 34 44 44 36 34 28 25 42 36 36 60 40

Drinks: Base 1,290 63 96 253 393 303 101 38 11 22 5 5

Bottled Water: Yes 89 81 79 81 93 93 99 97 100 100 80 80

Bottled Water: No 11 19 21 19 7 7 1 3 0 0 20 20

Bottled Water: Base 1,290 63 96 253 393 303 101 38 11 22 5 5

Dairy: Yes 76 73 60 69 76 84 88 68 100 64 40 80

Dairy: No 24 27 40 31 24 16 12 32 0 36 60 20

Dairy: Base 1,290 63 96 253 393 303 101 38 11 22 5 5

Cigarettes: Yes 57 68 54 53 55 59 56 61 27 68 80 40

Cigarettes: No 43 32 46 47 45 41 44 39 73 32 20 60

Cigarettes: Base 1,290 63 96 253 393 303 101 38 11 22 5 5

Noodles: Yes 95 97 95 91 95 97 94 97 100 100 100 100

Noodles: No 5 3 5 9 5 3 6 3 0 0 0 0

Noodles: Base 1,290 63 96 253 393 303 101 38 11 22 5 5


05 April 2016


Figure 168: Do you expect to spend more on any of these products in the next 12 months?


Rp1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above

Rp15,000k

Would

prefer not

to answer

D.K

Drinks: Yes 36 11 33 42 33 42 38 32 27 50 40 20

Drinks: No 64 89 67 58 67 58 62 68 73 50 60 80

Drinks: Base 100 100 100 100 100 100 100 100 100 100 100 100


Bottled Water: No 58 22 50 56 57 65 59 76 73 100 80 40

Bottled Water: Base 42 78 50 44 43 35 41 24 27 0 20 60

Dairy: Yes 100 100 100 100 100 100 100 100 100 100 100 100

Dairy: No 1290 63 96 253 393 303 101 38 11 22 5 5

Dairy: Base 49 25 40 46 47 59 57 50 64 64 40 40

Cigarettes: Yes 51 75 60 54 53 41 43 50 36 36 60 60

Cigarettes: No 100 100 100 100 100 100 100 100 100 100 100 100

Cigarettes: Base 1290 63 96 253 393 303 101 38 11 22 5 5

Noodles: Yes 34 17 34 36 31 37 31 37 18 64 80 40

Noodles: No 66 83 66 64 69 63 69 63 82 36 20 60

Noodles: Base 100 100 100 100 100 100 100 100 100 100 100 100

Drinks: Yes 1290 63 96 253 393 303 101 38 11 22 5 5

Drinks: No 58 38 63 59 53 61 54 63 73 100 100 60

Drinks: Base 42 62 38 41 47 39 46 37 27 0 0 40


Bottled Water: No 1290 63 96 253 393 303 101 38 11 22 5 5


Personal care

Figure 169: Have you purchased any of these products in the last three months?


Rp1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above

Rp15,000k

Would

prefer not

to answer

D.K

Tissue: Yes 57 48 42 48 61 63 73 57 71 39 0 0

Tissue: No 43 52 58 52 39 37 27 43 29 61 100 100

Tissue: Base 1491 67 100 281 448 371 130 44 17 23 5 5

Fem hygiene: Yes 55 49 58 50 58 52 66 55 59 43 0 40

Fem hygiene: No 45 51 42 50 42 48 34 45 41 57 100 60

Fem hygiene: Base 1491 67 100 281 448 371 130 44 17 23 5 5

Cosmetics: Yes 82 83 74 74 82 89 93 74 64 89 0 100

Cosmetics: No 18 17 26 26 18 11 7 26 36 11 100 0

Cosmetics: Base 751 29 57 146 245 175 56 19 11 9 1 3


Figure 170: Do you expect to spend more on any of these products in the next 12 months?


Rp1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above

Rp15,000k

Would

prefer not

to answer

D.K

Tissue: Yes 35 15 25 32 35 41 40 41 65 48 0 0

Tissue: No 65 85 75 68 65 59 60 59 35 52 100 100

Tissue: Base 1491 67 100 281 448 371 130 44 17 23 5 5

Fem hygiene: Yes 34 18 30 31 35 34 40 43 47 39 0 0

Fem hygiene: No 66 82 70 69 65 66 60 57 53 61 100 100

Fem hygiene: Base 1491 67 100 281 448 371 130 44 17 23 5 5

Cosmetics: Yes 48 28 44 40 48 54 57 53 55 89 0 33

Cosmetics: No 52 72 56 60 52 46 43 47 45 11 100 67

Cosmetics: Base 751 29 57 146 245 175 56 19 11 9 1 3


05 April 2016


Luxury goods

Figure 171: Are you planning to purchase any goods from these categories in the next 12 months?


Rp1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above

Rp15,000k

Would

prefer not

to answer

D.K

Fashion: Yes 56 56 59 50 56 55 64 46 63 72 20 75

Fashion: No 44 44 41 50 44 45 36 54 38 28 80 25

Fashion: Base 1393 61 92 260 429 341 121 39 16 25 5 4

Shoes: Yes 29 23 22 28 27 31 40 31 13 16 40 25

Shoes: No 71 77 78 72 73 69 60 69 88 84 60 75

Shoes: Base 1393 61 92 260 429 341 121 39 16 25 5 4

Watches: Yes 21 11 10 18 24 21 23 26 13 12 20 25

Watches: No 79 89 90 82 76 79 77 74 88 88 80 75

Watches: Base 1393 61 92 260 429 341 121 39 16 25 5 4

Jewellery: Yes 19 7 13 15 22 20 25 18 19 8 0 0

Jewellery: No 81 93 87 85 78 80 75 82 81 92 100 100

Jewellery: Base 1393 61 92 260 429 341 121 39 16 25 5 4

Perfumes: Yes 50 34 35 48 50 59 60 46 38 28 40 25

Perfumes: No 50 66 65 52 50 41 40 54 63 72 60 75

Perfumes: Base 1393 61 92 260 429 341 121 39 16 25 5 4


Figure 172: Are you planning to purchase any goods from the fashion category in the next 12 months?

5659

50

56 55

64

46

63

72

0

10

20

30

40

50

60

70

80

Less than Rp1,000k

Rp 1,000k - Rp1,500k

Rp 1,500k - Rp2,000k

Rp 2,000k - Rp3,000k

Rp 3,000k - Rp5,000k

Rp 5,000k - Rp7,500k

Rp 7,500k - Rp10,000k

Rp 10,000k - Rp15,000k

Above Rp15,000k

% o

f res

pond

ents


Figure 173: Are you planning to purchase any goods from the shoes category in the next 12 months?

2322

2827

31

40

31

13

16

0

5

10

15

20

25

30

35

40

Less than Rp1,000k

Rp 1,000k - Rp1,500k

Rp 1,500k - Rp2,000k

Rp 2,000k - Rp3,000k

Rp 3,000k - Rp5,000k

Rp 5,000k - Rp7,500k

Rp 7,500k - Rp10,000k

Rp 10,000k - Rp15,000k

Above Rp15,000k

% of

resp

onde

nts


05 April 2016


Figure 174: Are you planning to purchase any goods from the watches category in the next 12 months?

1110

18

24

21

23

26

1312

0

5

10

15

20

25

30

Less than Rp1,000k

Rp 1,000k - Rp1,500k

Rp 1,500k - Rp2,000k

Rp 2,000k - Rp3,000k

Rp 3,000k - Rp5,000k

Rp 5,000k - Rp7,500k

Rp 7,500k - Rp10,000k

Rp 10,000k - Rp15,000k

Above Rp15,000k

% o

f res

pond

ents


Figure 175: Are you planning to purchase any goods from the jewellery category in the next 12 months?

7

13

15

22

20

25

1819

8

0

5

10

15

20

25

Less than Rp1,000k

Rp 1,000k - Rp1,500k

Rp 1,500k - Rp2,000k

Rp 2,000k - Rp3,000k

Rp 3,000k - Rp5,000k

Rp 5,000k - Rp7,500k

Rp 7,500k - Rp10,000k

Rp 10,000k - Rp15,000k

Above Rp15,000k

% o

f res

pond

ents


Figure 176: Are you planning to purchase any goods from the perfumes category in the next 12 months?

34 35

4850

59 60

46

38

28

0

10

20

30

40

50

60

Less than Rp1,000k

Rp 1,000k - Rp1,500k

Rp 1,500k - Rp2,000k

Rp 2,000k - Rp3,000k

Rp 3,000k - Rp5,000k

Rp 5,000k - Rp7,500k

Rp 7,500k - Rp10,000k

Rp 10,000k - Rp15,000k

Above Rp15,000k

% o

f res

pond

ents


05 April 2016


Technology and Internet

Figure 177: Which of the following electronic products/services have you purchased in the last 12 months?


Rp 1,000k

Rp 1,000k -

1,500k

Rp 1,500k -

2,000k

Rp 2,000k

- 3,000k

Rp 3,000k -

5,000k

Rp 5,000k -

7,500k

Rp 7,500k -

10,000k

Rp 10,000k -

15,000k

Above

15,000k

Blue-Ray DVD Player 0 0 0 0 0 0 1 2 0 0

Camcorder 0 0 0 0 0 0 0 0 0 0

Desktop computer 1 0 0 1 2 2 1 0 4 0

Digital Camera 1 0 1 1 1 1 3 2 9 0

DVD Player 8 0 6 8 11 7 7 3 0 5

E-Reader 0 0 0 0 0 0 0 0 0 0

Gaming facility 1 0 0 0 0 1 1 0 0 2

GPS/Navigation 0 0 0 0 0 0 1 0 0 0

Internet Service

(Broadband / Dial Up)

0 0 0 0 0 0 1 0 0 0

Mobile Phone (Basic) 9 9 13 11 10 7 5 5 13 8

Mobile Phone

(Smartphone)

22 26 11 19 19 25 26 27 29 26

MP3 1 2 1 1 1 2 1 2 4 0

Netbook 1 0 1 1 0 1 1 7 0 0

Notebook PC 3 4 3 1 2 2 4 7 0 8

Stereo HiFi 0 0 1 1 0 0 0 0 0 0

Traditional TV 6 4 11 10 6 4 1 2 0 0

LCD TV 7 0 4 3 8 9 12 5 13 8

Flat screen TV 2 2 0 2 2 3 3 3 4 5

Tablet 3 3 2 3 2 2 7 5 0 8

None of these 37 50 46 39 38 35 25 33 25 29

Sum 100 100 100 100 100 100 100 100 100 100


Figure 178: Which of the following electronic products/services are you most likely to purchase in the next 12 months?


Rp 1,000k

Rp 1,000k -

1,500k

Rp 1,500k -

2,000k

Rp 2,000k

- 3,000k

Rp 3,000k -

5,000k

Rp 5,000k -

7,500k

Rp 7,500k -

10,000k

Rp 10,000k -

15,000k

Above

15,000k

Blue-Ray DVD Player 0 0 0 0 0 1 0 0 0 0

Camcorder 0 0 1 0 0 0 0 2 0 0

Desktop computer 2 2 2 1 3 2 2 2 0 0

Digital Camera 3 3 3 4 3 4 2 3 0 0

DVD Player 3 3 4 5 4 2 2 2 0 0

E-Reader 0 0 0 0 0 0 0 0 0 0

Gaming facility 1 0 0 0 1 1 1 0 0 0

GPS/Navigation 0 0 0 0 0 0 0 0 0 0

Internet Service

(Broadband / Dial Up)

1 0 0 1 1 0 2 2 0 0

Mobile Phone (Basic) 3 10 7 4 3 2 1 2 0 0

Mobile Phone

(Smartphone)

16 12 14 14 17 19 21 16 6 4

MP3 1 0 2 1 1 0 1 0 0 0

Netbook 1 0 1 1 2 2 2 2 0 0

Notebook PC 5 8 1 3 4 6 12 15 6 4

Stereo HiFi 0 0 0 1 0 1 0 0 0 0

Traditional TV 2 4 2 3 1 2 0 0 0 0

LCD TV 12 4 15 14 12 14 10 11 6 4

Flat screen TV 3 10 1 3 3 2 4 2 6 4

Tablet 3 3 3 4 3 6 2 3 0 0

None of these 42 42 46 40 43 38 40 39 76 84

Sum 100 100 100 100 100 100 100 100 100 100


05 April 2016


Telecommunications

Figure 179: Do you currently own and use a handset for personal use?


Rp 1,000k

Rp 1,000k

- 1,500k

Rp 1,500k

- 2,000k

Rp 2,000k

- 3,000k

Rp 3,000k

- 5,000k

Rp 5,000k

- 7,500k

Rp 7,500k

- 10,000k

Rp 10,000k

- 15,000k

Above

15,000k

Would

prefer not

to answer

Yes, I own and pay for

my own mobile

phone/handset

80 67 66 77 81 85 88 73 47 84 40

Yes, I own my own

mobile phone/handset

but is paid for by my

employer

1 0 1 1 1 0 0 0 0 0 20

Yes, I own my own

mobile phone/handset

but is paid by

somebody else

6 8 5 6 5 6 7 9 24 0 0

No I do not own my

own mobile

phone/handset

14 26 28 16 13 8 4 18 29 16 40

Sum 100 100 100 100 100 100 100 100 100 100 100


Figure 180: Which brand of mobile handset will you buy?


Rp 1,000k

Rp 1,000k

- 1,500k

Rp 1,500k

- 2,000k

Rp 2,000k

- 3,000k

Rp 3,000k

- 5,000k

Rp 5,000k

- 7,500k

Rp 7,500k

- 10,000k

Rp 10,000k

- 15,000k

Above

15,000k

Would prefer

not to answer

Foreign 93 88 94 95 91 93 98 100 100 100 93

Nokia 13 21 24 17 13 11 8 8 20 0 13

Blackberry 7 3 0 3 5 11 8 13 20 25 7

Samsung 50 47 47 50 48 47 61 67 60 50 50

Local 4 9 2 2 5 5 1 0 0 0 4

Base 3 3 4 3 4 2 1 0 0 0 3


Figure 181: Have you bought a handset in last 12

months?

Figure 182: Is your next handset likely to be a 4G?

43%

44%

40%

42%

44%

38%

39%

40%

41%

42%

43%

44%

45%

Total Urban Rural Java Ex Java

Yes21%

No54%

Don't know25%


05 April 2016


Figure 183: % of respondents planning to upgrade to a

smartphone in the next 12 months (2015)

Figure 184: % of respondents planning to upgrade to a

smartphone in the next 12 months (2010)

6158

5552

50

36 36 36

29

0

10

20

30

40

50

60

70

Indo

nesi

a

Braz

il

Sout

h Af

rica

Saud

i

Chi

na

Indi

a

Turk

ey

Mex

ico

Rus

sia

57 56

49

37

12

2

0

10

20

30

40

50

60

Indi

a

Saud

i

Chi

na

Indo

nesi

a

Rus

sia

Braz

il


Figure 185: Samsung is most popular in Indonesia and a

large part of other emerging countries in 2015…

Figure 186: …while Nokia was the dominant leader in

2010

0

10

20

30

40

50

60

70

80

90

100

Indo

nesi

a

Turk

ey

Sau

di

Indi

a

Sou

th A

frica

Bra

zil

Mex

ico

Rus

sia

Chi

na

Samsung Nokia Blackberry Apple Others

0

10

20

30

40

50

60

70

80

90

100

Indo

nesi

a

Chi

na

Sau

di

Rus

sia

Bra

zil

Nokia Samsung Blackberry Apple Others


Figure 187: Samsung is the most likely purchased personal computer (PC) in 2015, while

ACER was the leader in 2010

0

10

20

30

40

50

60

Samsung Acer Apple Asus Toshiba Sony LG Lenovo Others

2015 2014 2013 2012 2011 2010


05 April 2016


Figure 188: Did you consume music via social media?

(2015)

Figure 189: Did you consume music via social media?

(2010)

Yes55%

No45%

Yes35%

No65%

Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates

Figure 190: Do you have access to the internet?


Rp 1,000k

Rp 1,000k

- 1,500k

Rp 1,500k

- 2,000k

Rp 2,000k

- 3,000k

Rp 3,000k

- 5,000k

Rp 5,000k

- 7,500k

Rp 7,500k

- 10,000k

Rp

10,000k -

15,000k

Above

15,000k

2015

Yes - via PC/Computer 5 6 2 4 3 7 8 9 - -

Yes - via Mobile/Smartphone 41 31 26 31 40 46 56 44 39 54

Yes - via tablet 3 3 - 1 2 2 7 8 6 11

No, don't 53 61 72 65 56 44 28 40 56 36

2014

Yes - via PC/Computer 7 2 3 5 4 8 14 14 10 15

Yes - via Mobile/Smartphone 30 25 23 21 22 34 45 39 38 29

Yes - via tablet 2 - 2 - 1 4 4 6 - 5

No, don't 62 73 72 75 73 55 37 41 52 50


Travel

Figure 191: Have you been/are you planning to go on a holiday in the next 12 months?

43

57

61

70

7371

47

28

40

48

57

64

72

77

67

47

32

40

20

30

40

50

60

70

80

<Rp1,000k Rp1,000k -Rp1,500k

Rp1,500k -Rp2,000k

Rp2,000k -Rp3,000k

Rp3,000k -Rp5,000k

Rp5,000k -Rp7,500k

Rp7,500k -Rp10,000k

Rp10,000k -Rp15,000k

>Rp15,000k

Taken holiday in the last 12 months Planning to take holiday in the next 12 months


05 April 2016


Figure 192: Where did you go on your last holiday?


Rp 1,000k

Rp 1,000k

- 1,500k

Rp 1,500k

- 2,000k

Rp 2,000k

- 3,000k

Rp 3,000k

- 5,000k

Rp 5,000k

- 7,500k

Rp 7,500k

- 10,000k

Rp 10,000k

- 15,000k

Above

15,000k

Would

prefer

not to

answer

D.K

At home 57 55 79 59 59 55 45 52 50 29 50 67

Elsewhere 43 45 21 39 41 45 55 48 50 71 50 33

Intl destination 0 0 0 1 0 0 0 0 0 0 0 0


Figure 193: What was the main form of transport that you used to reach your holiday destination?


Rp 1,000k

Rp 1,000k

- 1,500k

Rp 1,500k

- 2,000k

Rp 2,000k

- 3,000k

Rp 3,000k

- 5,000k

Rp 5,000k

- 7,500k

Rp 7,500k

- 10,000k

Rp 10,000k

- 15,000k

Above

15,000k

Would

prefer

not to

answer

D.K

Car 42 44 33 42 42 37 48 56 50 40 100 0

Bus 30 22 44 25 31 35 28 19 0 20 0 0

Train 6 0 0 6 4 10 6 0 25 20 0 0

Ship 1 0 0 4 1 1 0 0 0 0 0 0

Aeroplane 5 0 0 4 3 4 11 13 0 20 0 0

Other 16 33 22 18 18 12 7 13 25 0 0 100


Figure 194: Where are you planning to go for your next holiday?


Rp 1,000k

Rp 1,000k

- 1,500k

Rp 1,500k

- 2,000k

Rp 2,000k

- 3,000k

Rp 3,000k

- 5,000k

Rp 5,000k

- 7,500k

Rp 7,500k

- 10,000k

Rp 10,000k

- 15,000k

Above

15,000k

Would

prefer

not to

answer

D.K

At home 46 42 60 46 48 44 37 52 25 13 50 67

Elsewhere 54 58 40 54 51 56 62 48 75 75 50 33

Intl destination 0 0 0 0 0 0 1 0 0 13 0 0


Education

Figure 195: Do you intend to spend more, or less, on education or training courses in the next 12 months?

35 4

610 9

6

55

7876 76 75

79

74 75

68

42

2220 20 19

11

1719

32

0

10

20

30

40

50

60

70

80

90

Less than Rp1,000k

Rp 1,000k -1,500k Rp 1,500k - 2,000k Rp 2,000k - 3,000k Rp 3,000k - 5,000k Rp 5,000k - 7,500k Rp 7,500k -10,000k

Rp 10,000k -15,000k

Above Rp 15,000k

More About the same Less


Figure 196: Do you conduct any education online?

% of

respondents

Total Less than

Rp 1,000k

Rp 1,000k -

1,500k

Rp 1,500k

- 2,000k

Rp 2,000k

- 3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above Rp

15,000k

Would

prefer not

to answer

D.K

Yes 2 0 1 0 1 2 8 6 0 0 0 0

No 98 100 99 100 99 98 92 94 100 100 100 100

Sum 100 100 100 100 100 100 100 100 100 100 100 100

Base : Unwtd 1511 66 100 286 455 371 135 47 16 25 5 5


05 April 2016


Healthcare

Figure 197: Does your household have access to free or partially-free healthcare from the state?

% of

respondents

Total Less than

Rp 1,000k

Rp 1,000k -

1,500k

Rp 1,500k

- 2,000k

Rp 2,000k

- 3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above Rp

15,000k

Would

prefer not

to answer

D.K

Yes 41 37 46 36 44 44 41 42 24 12 20 60

No 59 63 54 64 56 56 59 58 76 88 80 40

Sum 100 100 100 100 100 100 100 100 100 100 100 100

Base : Unwtd 1499 67 100 285 454 362 134 45 17 25 5 5


Figure 198: What services, if any, could you get free from the state?

Sub-SEC Total Less than

Rp 1,000k

Rp 1,000k

-1,500k

Rp

1,500k -

2,000k

Rp 2,000k

- 3,000k

Rp

3,000k -

5,000k

Rp

5,000k -

7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above Rp

15,000k

Would

prefer not

to answer

D.K

Hospital 92 100 96 89 92 91 91 95 100 100 100 100

Emergency Room 34 28 33 34 26 37 42 58 75 100 100 0

Prescriptions 48 44 35 40 46 51 55 74 100 100 100 33

Vaccinations 12 8 7 9 13 16 11 5 0 0 0 0

Diagnostic tests 15 8 11 14 13 15 20 26 50 33 0 33

Outpatient service 0 0 0 0 0 0 0 0 0 0 0 0

Sum 200 188 180 187 189 209 218 258 325 333 300 167

Base : Unwtd 616 25 46 104 198 158 55 19 4 3 1 3


Figure 199: Do you trust local brands as much as international brands on efficacy and safety?

% of respondents Total 2015 Urban Rural Java Ex Java

Yes, I trust local brands on both efficacy and safety 71 70 73 74 62

I trust local brands on efficacy but not on safety 15 13 17 14 17

I trust local brands on safety but not on efficacy 9 12 4 8 13

No, I do not trust local brands neither on efficacy or on safety 2 2 1 1 3

Don't Know 3 2 6 3 5


Figure 200: Do you or your family or the company you work for pay for your healthcare?

% of respondents Total Less

than Rp

1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp 5,000k

- 7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above Rp

15,000k

Would

prefer not

to answer

D.K

Yes 33 22 20 21 33 41 51 42 29 24 20 40

No 67 78 80 79 67 59 49 58 71 76 80 60

Sum 100 100 100 100 100 100 100 100 100 100 100 100

Base : Unwtd 1499 67 100 285 454 362 134 45 17 25 5 5


Figure 201: And thinking about the person who spends the most on medicine in your household, do they…

Sub-SEC Total Less

than Rp

1,000k

Rp

1,000k -

1,500k

Rp

1,500k -

2,000k

Rp

2,000k -

3,000k

Rp

3,000k -

5,000k

Rp 5,000k

- 7,500k

Rp

7,500k -

10,000k

Rp

10,000k -

15,000k

Above Rp

15,000k

Would

prefer not

to answer

D.K

Pay the full cost of the

medicine

63 82 50 58 56 73 53 100 75 0 0 0

Pay part of the cost 28 18 0 29 28 23 41 0 25 0 0 100

Medication is free 9 0 50 13 16 4 6 0 0 0 0 0

Sum 100 100 100 100 100 100 100 100 100 0 0 100

Base : Unwtd 119 11 2 24 32 26 17 2 4 0 0 1


05 April 2016


Appendix 2: Indonesia macro Figure 202: Indonesia selected economic indicators

2008 2009 2010 2011 2012 2013 2014 2015 2016F 2017F

National accounts, population and unemployment

Real GDP growth (%) 6.0 4.7 7.7 6.2 6.0 5.6 5.0 4.8 5.2 5.4

Growth in real private consumption (%) 5.3 4.7 4.8 5.1 5.5 5.5 5.3 4.8 5.2 5.0

Growth in real fixed investment (%) 11.9 3.9 8.5 8.9 9.1 5.0 4.6 5.1 6.4 7.1

Fixed investment (% of GDP) 27.7 31.1 31.0 31.3 32.7 32.0 32.6 33.2 33.5 34.1

Nominal GDP ($bn) 510.6 538.6 756.1 892.7 914.8 903.8 889.0 857.6 886.5 938.9

Population (mn) 225.6 228.5 231.4 237.6 242.0 245.4 248.8 252.2 255.5 259.0

GDP per capita ($) 2262.8 2357.0 3268.0 3756.4 3780.1 3682.4 3573.1 3400.8 3470.2 3625.1

Prices, interest rates and exchange rates

CPI inflation (% YoY change, December over December) 10.2 2.8 7.0 3.8 3.7 8.1 8.4 3.4 4.4 4.6

CPI inflation (% change in average index for the year) 9.8 4.8 5.1 5.3 4.0 6.4 6.4 6.4 4.2 4.7

Exchange rate (IDR per USD, end-year) 10,950 9,400 8,991 9,068 9,670 12,189 12,440 13,795 14,700 14,900

Exchange rate (IDR per USD, average) 9,757 10,354 9,078 8,773 9,419 10,563 11,885 13,458 14,248 14,800

REER (% YoY change, December over December) (1)

-8.6 15.6 6.0 -1.2 -5.4 -11.6 10.0 -1.6 -0.5 -1.0

Nominal wage growth (% YoY change)(2)

7.6 5.3 12.2 3.4 20.4 14.9 13.8 5.0 5.0 5.0

Overnight rate (%, end-year) (3)

9.25 6.50 6.50 6.00 5.75 7.50 7.75 7.50 6.50 6.50

Fiscal data (4)

General government fiscal balance (% of GDP) -0.1 -1.6 -0.7 -1.1 -1.8 -2.2 -2.1 -2.5 -2.7 -2.6

General government primary fiscal balance (% of GDP) 1.7 0.1 0.6 0.1 -0.6 -1.1 -1.0 -1.4 -1.6 -1.5

General government expenditure (% of GDP) 19.9 16.7 15.2 16.5 17.3 17.3 16.8 15.6 15.8 16.0

General government revenue (% of GDP) 19.8 15.1 14.5 15.5 15.5 15.1 14.7 13.0 13.1 13.4

Gross general government debt (% of GDP, end-year) (5)

29.3 31.4 24.7 22.3 22.4 21.6 23.6 26.2 28.9 31.0

Money supply and credit

Broad money supply (M2, % of GDP) 35.0 35.6 36.0 36.7 38.4 39.1 39.5 39.4 40.3 41.4

Broad money supply (M2, % YoY change) 14.9 13.0 15.4 16.4 15.0 12.8 11.9 8.9 12.0 13.0

Domestic credit (% of GDP) 24.1 24.3 23.4 25.1 27.2 28.5 29.0 29.5 30.2 31.2

Domestic credit (% YoY change) 14.3 12.2 9.9 22.4 19.2 16.1 12.8 11.1 12.0 13.5

Domestic credit to the private sector (% of GDP) 24.3 23.4 24.5 27.0 30.0 32.5 33.0 33.1 33.7 34.8

Domestic credit to the private sector (% YoY change) 30.7 6.8 20.0 25.8 21.9 20.0 12.6 9.6 11.5 13.5

Balance of payments (6)

Exports (goods and non-factor services, % of GDP) 30.3 24.7 23.1 23.9 23.1 22.7 22.4 19.9 19.4 18.7

Imports (goods and non-factor services, % of GDP) 28.4 20.7 20.3 21.2 23.3 23.4 22.7 19.3 19.0 18.9

Exports (goods and non-factor services, % YoY change in $ value) 18.7 -14.2 25.5 27.8 -0.9 -2.8 -3.0 -14.4 1.0 2.0

Imports (goods and non-factor services, % YoY change in $ value) 32.3 -23.0 30.3 29.9 12.7 -0.8 -4.5 -18.0 2.0 5.0

Current account balance ($bn) 0.1 10.6 5.1 1.7 -24.4 -29.1 -27.5 -17.8 -19.4 -24.4

Current account balance (% of GDP) 0.0 2.0 0.7 0.2 -2.7 -3.2 -3.1 -2.1 -2.2 -2.6

Net FDI inflows ($bn) 3.4 2.6 11.1 11.5 13.7 13.7 15.9 15.9 16.0 18.0

Scheduled external debt amortization ($bn) 15.5 17.1 18.7 23.0 42.0 38.8 38.8 38.8 45.0 45.0

Foreign debt and reserves

Foreign debt ($bn) 155.1 172.9 202.4 225.4 252.4 266.1 293.8 310.7 300.0 290.0

Public 86.6 99.3 118.6 118.6 126.1 123.5 129.7 143.0 130.0 130.0

Private 68.5 73.6 83.8 106.7 126.2 142.6 164.0 167.7 170.0 160.0

Foreign debt (% of GDP) 30.4 32.1 28.5 26.7 28.8 29.4 33.0 36.2 33.8 30.9

Foreign debt (% of exports of goods and services) 100.1 130.2 123.4 111.7 124.8 129.8 147.8 182.5 174.5 165.4

Central bank gross FX reserves ($bn) 51.6 66.1 96.2 110.1 112.8 99.4 111.9 105.9 102.0 98.0

Central bank net non-gold FX reserves ($bn) 49.6 63.6 92.9 106.5 108.8 96.4 108.8 103.3 99.0 95.0

(1) Real effective exchange rate, increase indicates appreciation. (2) Nominal wage: manufacturing. (3) BI changed its policy target from 1m SBI

rate to overnight rate in 2008. (4) Refers to central government. (5) Excludes SOE and BI debt. (6) BoP number. Source: Bank Indonesia,

Ministry of Finance, Central Bureau Statistics, CEIC, World Bank, Credit Suisse Rating

05 April 2016


Companies Mentioned (Price as of 01-Apr-2016)

Ace Hardware Indonesia (ACES.JK, Rp885) Astra International (ASII.JK, Rp7,325, OUTPERFORM, TP Rp7,600) BMW (BMWG.DE, €78.0) Daihatsu Motor (7262.T, ¥1,525) Erajaya Swasembada (ERAA.JK, Rp695) Gudang Garam (GGRM.JK, Rp65,200) Hanjaya Mandala Sampoerna (HMSP.JK, Rp99,000) Honda Motor (7267.T, ¥2,942) Indofood CBP (ICBP.JK, Rp15,325, OUTPERFORM, TP Rp18,300) Indofood Sukses Makmur (INDF.JK, Rp7,225, OUTPERFORM, TP Rp8,700) Kalbe Farma (KLBF.JK, Rp1,450) Matahari Department Store (LPPF.JK, Rp18,175, OUTPERFORM, TP Rp19,400) Matahari Putra Prima (MPPA.JK, Rp1,700) Media Nusantara Citra (MNCN.JK, Rp2,150) Mitra Adiperkasa (MAPI.JK, Rp4,925) Mitsubishi Motors (7211.T, ¥803) Nissan Motor (7201.T, ¥997) PT Alam Sutera Tbk (ASRI.JK, Rp376) PT Bank Central Asia Tbk (BBCA.JK, Rp13,300) PT Bank Danamon Indonesia Tbk (BDMN.JK, Rp3,795) PT Bank Mandiri (Persero) Tbk (BMRI.JK, Rp10,100) PT Bank Negara Indonesia (Persero) Tbk (BBNI.JK, Rp5,100) PT Bank Pembangunan Daerah Jawa Barat dan Banten T (BJBR.JK, Rp900) PT Bank Rakyat Indonesia (Persero) Tbk (BBRI.JK, Rp11,100) PT Bank Tabungan Negara Persero Tbk (BBTN.JK, Rp1,730) PT Bank Tabungan Pensiunan Nasional Tbk (BTPN.JK, Rp2,795, OUTPERFORM, TP Rp3,500) PT Bumi Serpong Damai Tbk (BSDE.JK, Rp1,815) PT Ciputra Development TBK (CTRA.JK, Rp1,285) PT Indosat Tbk (ISAT.JK, Rp6,125) PT Kino Indonesia (KINO.JK, Rp4,975) PT Mitra Keluarga Karyasehat Tbk (MIKA.JK, Rp2,475) PT Pakuwon Jati Tbk (PWON.JK, Rp492) PT Sarana Menara Nusantara (TOWR.JK, Rp4,295) PT Summarecon Agung Tbk (SMRA.JK, Rp1,620, OUTPERFORM, TP Rp1,960) PT Telkom (Telekomunikasi Indo.) (TLKM.JK, Rp3,350, OUTPERFORM, TP Rp3,800) Pt Link Net Tbk (LINK.JK, Rp4,035, OUTPERFORM[V], TP Rp8,300) Ramayana Lestari Sentosa (RALS.JK, Rp715) Siloam International Hospitals (SILO.JK, Rp7,450, OUTPERFORM, TP Rp13,000) Surya Citra Media (SCMA.JK, Rp3,245) Suzuki Motor (7269.T, ¥2,859) Tiphone Mobile Indonesia (TELE.JK, Rp775, OUTPERFORM, TP Rp900) Tower Bersama (TBIG.JK, Rp5,850) Toyota Motor (7203.T, ¥5,771) Unilever Indonesia (UNVR.JK, Rp43,175) Yamaha Motor (7272.T, ¥1,796)

Disclosure Appendix

Important Global Disclosures

Ella Nusantoro and Priscilla Tjitra each certify, with respect to the companies or securities that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.

3-Year Price and Rating History for Astra International (ASII.JK)

ASII.JK Closing Price Target Price

Date (Rp) (Rp) Rating

25-Apr-13 7,350 9,000 O

24-Sep-13 6,400 8,370

25-Feb-14 6,700 8,370 *

16-Jun-14 7,250 9,000

30-Oct-14 6,900 8,000

01-Apr-15 8,175 9,800

15-Jul-15 6,825 8,400

21-Aug-15 6,050 7,500

30-Oct-15 5,900 7,600

* Asterisk signifies initiation or assumption of coverage.

O U T PERFO RM

05 April 2016


3-Year Price and Rating History for Indofood CBP (ICBP.JK)

ICBP.JK Closing Price Target Price


24-Sep-13 10,850 9,300 N

26-Aug-14 10,275 11,800 O

15-May-15 13,600 15,100 N

01-Aug-15 12,300 15,100 O

17-Feb-16 15,525 18,300


N EU T RA L

O U T PERFO RM

3-Year Price and Rating History for Indofood Sukses Makmur (INDF.JK)

INDF.JK Closing Price Target Price


24-Sep-13 6,700 8,100 O

18-May-15 7,050 10,600

17-Feb-16 6,525 8,700


O U T PERFO RM

3-Year Price and Rating History for Matahari Department Store (LPPF.JK)

LPPF.JK Closing Price Target Price


11-Dec-13 10,850 10,000 N *

17-Feb-14 13,575 16,800 O

04-Aug-14 14,750 17,700

18-Sep-14 16,700 19,900

29-Oct-14 15,150 19,400

30-Jul-15 17,000 19,200

27-Oct-15 18,025 19,700

23-Feb-16 16,250 19,400

* Asterisk signifies initiation or assumption of coverage. N EU T RA L

O U T PERFO RM

05 April 2016


3-Year Price and Rating History for PT Bank Tabungan Pensiunan Nasional Tbk (BTPN.JK)

BTPN.JK Closing Price Target Price


16-Sep-13 4,050 4,350 N

10-Feb-14 4,500 *

10-Mar-14 4,310 3,800 U

14-Oct-14 4,400 3,850

17-Nov-14 4,150 3,950

09-Apr-15 4,095 5,050 O

24-Jul-15 3,355 4,150

24-Sep-15 2,950 3,700

14-Dec-15 2,500 3,000

29-Mar-16 2,800 3,500


N EU T RA L

U N D ERPERFO RM

O U T PERFO RM

3-Year Price and Rating History for PT Summarecon Agung Tbk (SMRA.JK)

SMRA.JK Closing Price Target Price


09-Apr-13 1,112 1,325 N

06-May-13 1,312 1,525

05-Feb-15 1,635 2,020 O *

20-Oct-15 1,395 1,960 *


N EU T RA L

O U T PERFO RM

3-Year Price and Rating History for PT Telkom (Telekomunikasi Indo.) (TLKM.JK)

TLKM.JK Closing Price Target Price


12-Apr-13 2,236 2,606 O

30-Jul-13 2,356 R

01-Aug-13 2,406 2,606 O

28-Aug-13 2,150 2,600

24-Sep-13 2,200 2,400

04-Oct-13 2,250 2,400 N

16-Dec-13 2,075 2,550 O

13-Mar-14 2,190 2,500

05-Jun-14 2,520 2,750

25-Aug-14 2,685 2,950

25-Nov-14 2,785 3,100

30-Sep-15 2,645 3,250

09-Dec-15 3,015 3,350

04-Mar-16 3,415 3,800


O U T PERFO RM

REST RICT ED

N EU T RA L

05 April 2016


3-Year Price and Rating History for Pt Link Net Tbk (LINK.JK)

LINK.JK Closing Price Target Price


17-Nov-14 5,625 R

03-Dec-14 5,175 8,250 O *

17-Mar-15 6,250 8,450

22-Mar-16 3,945 8,300


REST RICT ED

O U T PERFO RM

3-Year Price and Rating History for Siloam International Hospitals (SILO.JK)

SILO.JK Closing Price Target Price


11-Dec-13 9,600 10,500 N *

12-Mar-14 11,275 R

21-Apr-14 10,700 10,500 N

29-Apr-14 10,900 13,000 O

10-Nov-14 14,250 13,000 N

05-Feb-15 13,350 R

17-Feb-15 12,225 13,000 N

08-Apr-15 13,100 13,600

05-Aug-15 16,350 14,250

03-Dec-15 9,700 13,000 O


N EU T RA L

REST RICT ED

O U T PERFO RM

3-Year Price and Rating History for Tiphone Mobile Indonesia (TELE.JK)

TELE.JK Closing Price Target Price


27-May-15 1,010 1,250 O *

19-Jan-16 700 880

18-Mar-16 755 900


O U T PERFO RM

The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse's total revenues, a portion of which are generated by Credit Suisse's investment banking activities

As of December 10, 2012 Analysts’ stock rating are defined as follows:

Outperform (O) : The stock’s total return is expected to outperform the relevant benchmark* over the next 12 months.

Neutral (N) : The stock’s total return is expected to be in line with the relevant benchmark* over the next 12 months.

Underperform (U) : The stock’s total return is expected to underperform the relevant benchmark* over the next 12 months.

*Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractiv e, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock’s total return relative to the analyst's coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non -Japan Asia stocks, ratings

05 April 2016


are based on a stock’s total return relative to the average total return of the relevant country or regiona l benchmark; prior to 2nd October 2012 U.S. and Canadian ratings were based on (1) a stock’s absolute total return potential to its current share price and (2) the relative attractiveness of a stock’s total return potential within an analyst’s coverage universe. For Australian and New Zealand stocks, the expected total return (ETR) calculation includes 12 -month rolling dividend yield. An Outperform rating is assigned where an ETR is greater than or equal to 7.5%; Underperform where an ETR less than or equal to 5%. A Neutral may be assigned where the ETR is between -5% and 15%. The overlapping rating range allows analysts to assign a rating that puts ETR in the context of associated risks. Prior to 18 May 2015, ETR ranges for Outperform and Underperform ratings did not overlap with Neutral thresholds between 15% and 7.5%, which was in operation from 7 July 2011.

Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications, including an investment recommendation, during the course of Credit Suisse's engagement in an investment banking transaction and in certain other circumstances.

Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24 months or the analyst expects significant volatility going forward.

Analysts’ sector weightings are distinct from analysts’ stock ratings and are based on the analyst’s expectations for the fundamentals and/or valuation of the sector* relative to the group’s historic fundamentals and/or valuation:

Overweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is favorable over the next 12 months.

Market Weight : The analyst’s expectation for the sector’s fundamentals and/or valuation is neutral over the next 12 months.

Underweight : The analyst’s expectation for the sector’s fundamentals and/or valuation is cautious over the next 12 months.

*An analyst’s coverage sector consists of a ll companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.

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Global Ratings Distribution

Rating Versus universe (%) Of which banking clients (%)

Outperform/Buy* 57% (39% banking clients)

Neutral/Hold* 31% (29% banking clients)

Underperform/Sell* 11% (45% banking clients)

Restricted 1%

*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to definitions above.) An investor's decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.

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Target Price and Rating Valuation Methodology and Risks: (12 months) for Astra International (ASII.JK)

Method: Our Rp7,600/share target price for Astra International is based on our sum-of-the-parts valuation analysis. Our TP implies 15.5x FY16E PE. Our OUTPERFORM rating is on the back of volume recovery in 4W sales and an improving macro-economic condition.

Risk: Potential risks to our Rp7,600/share target price and OUTPERFORM rating for Astra International include: competition risk, regulatory risk in the form of import duties, plus a significant deterioration in the macro economy, particularly at the consumer confidence level, which has a high correlation with car sales, and liquidity in auto financing, which has a high correlation with motorcycle sales volume.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Indofood CBP (ICBP.JK)

Method: Our target price of Rp18,300 for Indofood CBP is derived using the sum-of-the-parts (SOTP) and market relative performance method. For our SOTP calculation, we are using 12x 2016E EV/EBITDA multiple on each divisions. Thus, we arrive at a total value of Rp80.9 tn which is equal to Rp16,700/share. For the market relative performance, we are using 1.58x relative to market P/E since listing which is equal to Rp19,750/share. With 50:50 proportion of both SOTP and market relative performance, we arrive at our new TP of Rp18,300/share. Our OUTPERFORM rating is on the back of our belief that ICBP will be able to achieve our estimates; thus, we are not revising our estimates since the sell-off on the stock price provides an opportunity to accumulate.

05 April 2016


Risk: Risks that could impede achievement of our Rp18,300 target price and OUTPERFORM rating for Indofood CBP include: (1) competition from both existing and new players, (2) fluctuation of commodity prices, (3) completion of new capacity, (4) Indonesia's macro-economic situation, (5) fluctuation of exchange rates, and (6) regulatory risks.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Indofood Sukses Makmur (INDF.JK)

Method: Indofood Sukses Makmur's target price of Rp8,700 is derived using SOTP and market relative performance. Based on SOTP, we apply the implied valuations on each of the divisions (15.6x EV/EBITDA 2016E for CBP,9x EV/EBITDA 2016E for flour, 7.9x EV/EBITDA 2016E for agribusiness, and 10x EV/EBITDA 2016E for distribution). Based on market relative performance, we are using 1.0x Indofood relative to market P/E in 2016E. As such, using the proportion of 50:50 of both SOTP and market relative performance, we arrive at the new target price of Rp8,700. Our OUTPERFORM rating is on the back of improving low end consumption which is driven by government programmes.

Risk: The risks to our Rp8,700 target price and OUTPERFORM rating for Indofood Sukses Makmur include: (1) competition from both existing and new players, (2) fluctuation of commodity prices, (3) completion of new capacity, (4) Indonesia macro-economic stability, (5) fluctuation of exchange rate, and (6) regulatory risks.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Matahari Department Store (LPPF.JK)

Method: Our target price of Rp19,400 for Matahari Department Store is based on a multiple valuation. The target price is based on 26x FY16E price to earnings ratio (P/E), which is its historical three-year average, a premium to regional peers due to Matahari's higher and more resilient earnings. We have an OUTPERFORM rating on the company on the back of better position from forex pressure, manageable working capital days, healthy balance sheet, and resilient middle-income target market.

Risk: Key risks to our Rp19,400 target price and OUTPERFORM rating for Matahari Department Store include competition from both existing and incoming players, risk of meeting expansion target, regulatory risks and macro risks of Indonesia.

Target Price and Rating Valuation Methodology and Risks: (12 months) for PT Bank Tabungan Pensiunan Nasional Tbk (BTPN.JK)

Method: Our target price of Rp3,500/share for BTPN is derived based on Gordon's growth model, assuming a normalised return of equity (ROE) of 15-16%, beta of 1.2x, risk-free rate of 8% and market risk premium of 5.0%, implying 1.3x 2016E price-to-book ratio (P/B) and 9.5x 2016E price-to-earnings ratio (P/E). The bank should be one of the biggest beneficiaries next year when BI cuts rates. It earns the highest ROA among the small four banks. Hence, we have an OUTPERFORM rating.

Risk: Risks to our target price of Rp3,500/share and OUTPERFORM rating for BTPN include: (1) longer-than-anticipated high interest rates, (2) faster-than-expected recovery of the economy; (3) significant changes in global sentiment; (4) significant changes in the public's confidence in the bank; (5) risks relating to Indonesia, including macroeconomic, political and social risks; (6) currency risks.

Target Price and Rating Valuation Methodology and Risks: (12 months) for PT Summarecon Agung Tbk (SMRA.JK)

Method: Our target price of Rp1,960 for PT Summarecon Agung Tbk is based on the 40% discount to the RNAV of the company (a standard deviation away to its long-term average). The target price implies 22.1x 15E P/E. We have an OUTPERFORM rating on the back of potential policy rate cuts by the Central Bank, as well as improving demand to support pre-sales.

Risk: We recognise the strong track record of PT Summarecon Agung Tbk in property development and we are indeed positive on the long-term outlook of the company. Risks to our target price of Rp1,960 (based on 40% discount to the company's RNAV) for the company include macroeconomic risks such as changes in interest rates, inflation, regulatory risk coming from current government. Risks to our OUTPERFORM rating include further delay in interest rate cut and weak pre-sales progression.

Target Price and Rating Valuation Methodology and Risks: (12 months) for PT Telkom (Telekomunikasi Indo.) (TLKM.JK)

Method: Our target price of Rp3,800 for PT Telkom is based on discounted cash flow (DCF) analysis, based on an estimated 9.9% cost of capital and a 2.5% terminal growth rate for fixed line, 3.9% for cellular. We value Telkom's fixed-line business at Rp828 and its 65% holding in its cellular subsidiary, Telkomsel, at Rp2,899share. At Rp3,800, Telkom would trade at an enterprise value-to-earnings before interest, taxes, depreciation, and amortisation (EV/EBITDA) multiple of 9.5x for FY16E (using proportional consolidation), lower than the regional integrated average and Telkom still enjoys higher growth in a market with lower penetration. We rate the stock OUTPERFORM, due to the valuation.

Risk: Telkom's key asset, Telkomsel, is primarily a cellular operator within an eight-player market. The risks that may impede achievement of our target price of Rp3,800 and OUTPERFORM rating for PT Telkom on the cellular side are: (1) either faster-than-expected, or slower-than-expected growth in the cellular market, from the current level; (2) the prospect that competitors take a larger or smaller proportion of

05 April 2016


the market share of net additions; (3) that capex forecasts prove higher or lower than expected; and (4) that competition leads to higher or lower attrition of revenue per user than expected. Key risks to our target price on the fixed-line side are: (1) faster-or-slower cannibalisation of voice revenue per line by cellular competition; (2) faster-or-slower rollout of broadband lines than expected; (3) better success in reducing employment-related costs; and (4) better success in lowering capex requirements.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Pt Link Net Tbk (LINK.JK)

Method: Our discounted cash flow (DCF) analysis, based on an estimated 10.8% weighted average cost of capital and a 3.0% terminal growth rate, supports our Rp8,300 target price for Link Net. At Rp8,300, Link Net would trade at an FY16 enterprise value-to-earnings before interest, taxes, depreciation, and amortisation (EV/EBITDA) multiple of 14.0x. We rate the stock OUTPERFORM, due to the valuation and on the back of low fixed broadband penetration in Indonesia and benign industry competition. .

Risk: Risks to our Rp8,300 target price and OUTPERFORM rating for Link Net: A well-capitalised new entrant player, rolling out competing cable or iPTV infrastructure in the same areas, is arguably the greatest risk. This would likely result in lower ARPU, lower EBITDA margins and sharply lower ROIC. However, the new entrant would also likely experience very low returns, and so establishing a 'first mover' advantage is critical to Link Net's business model. There are also economic risks, regulatory risks (licences are required for broadband and Pay TV) and risks over network rollout and operations which need to be managed carefully.

Target Price and Rating Valuation Methodology and Risks: (12 months) for Siloam International Hospitals (SILO.JK)

Method: Our target price of Rp13,000 for Siloam International Hospitals is derived using DCF (discounted cash flow) methodology. We assume a weighted average cost of capital (WACC) of 14.6% assuming a risk-free rate of 8.0%, beta of 0.95x, a 12% average cost of debt and a 10% target debt-equity ratio. Looking beyond the near-term growth and margin issues, Siloam is probably one of the best growth stories in the region. Maintain OUTPERFORM

Risk: Risks that could impede achievement of our target price of Rp13,000 and OUTPERFORM rating for Siloam International Hospitals include: (1) execution risk (ability to sustainably operate a big network and deliver on expansion plans), (2) regulation (unforeseen and detrimental changes to the regulatory framework), and (3) competition (from operators both in Indonesia and neighbouring countries).

Target Price and Rating Valuation Methodology and Risks: (12 months) for Tiphone Mobile Indonesia (TELE.JK)

Method: Our target price of Rp900 for Tiphone Mobile Indonesia is based on 14x FY16 P/E (price-to-earnings), a 30% discount to weighted average Indonesia consumer and telco names. We have an OUTPERFORM rating on the company as we like its resilient voucher business which has been showing high sales growth and stable margins. Voucher sales proportion to revenue is expected to rise, leaving the handset business as complimentary only.

Risk: Key risks to our Rp900 target price and OUTPERFORM rating for Tiphone Mobile Indonesia include: (1) growth in the Telkomsel vouchers business, (2) volatility in handset margins, (3) high churn rate of Indonesia mobile subscribers, (4) its reliance on third party principal for products, (5) competition, (6) regulatory risk, and (7) Indonesia macro stability risk

Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures for the definitions of abbreviations typically used in the target price method and risk sections.

See the Companies Mentioned section for full company names

The subject company (ICBP.JK, INDF.JK, LPPF.JK, SMRA.JK, LINK.JK, BTPN.JK, SILO.JK, BMRI.JK, BDMN.JK, BBNI.JK, BBCA.JK, HMSP.JK, KINO.JK, UNVR.JK, BSDE.JK, CTRA.JK, ERAA.JK, ASRI.JK, MAPI.JK, TBIG.JK, ISAT.JK, 7203.T, 7267.T, 7262.T, BMWG.DE) currently is, or was during the 12-month period preceding the date of distribution of this report, a client of Credit Suisse.

Credit Suisse provided investment banking services to the subject company (ICBP.JK, INDF.JK, LINK.JK, BTPN.JK, SILO.JK, BMRI.JK, BDMN.JK, BBNI.JK, HMSP.JK, KINO.JK, UNVR.JK, BSDE.JK, BMWG.DE) within the past 12 months.

Credit Suisse provided non-investment banking services to the subject company (BMWG.DE) within the past 12 months

Credit Suisse has managed or co-managed a public offering of securities for the subject company (BDMN.JK, HMSP.JK, KINO.JK, BMWG.DE) within the past 12 months.

Credit Suisse has received investment banking related compensation from the subject company (ICBP.JK, INDF.JK, LINK.JK, BTPN.JK, SILO.JK, BMRI.JK, BDMN.JK, BBNI.JK, HMSP.JK, KINO.JK, UNVR.JK, BSDE.JK, BMWG.DE) within the past 12 months

Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (ICBP.JK, INDF.JK, LPPF.JK, SMRA.JK, LINK.JK, BTPN.JK, TELE.JK, SILO.JK, BMRI.JK, BBRI.JK, BDMN.JK, BBNI.JK, BBCA.JK, HMSP.JK, KINO.JK, GGRM.JK, UNVR.JK, MNCN.JK, PWON.JK, BSDE.JK, CTRA.JK, ERAA.JK, ASRI.JK, MAPI.JK, TBIG.JK, ISAT.JK, 7203.T, 7267.T, 7262.T, 7201.T, 7272.T, BMWG.DE) within the next 3 months.

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Credit Suisse has received compensation for products and services other than investment banking services from the subject company (BMWG.DE) within the past 12 months

As of the date of this report, Credit Suisse makes a market in the following subject companies (7203.T, 7267.T, 7201.T).

Credit Suisse may have interest in (TLKM.JK, ASII.JK, ICBP.JK, INDF.JK, LPPF.JK, SMRA.JK, LINK.JK, BTPN.JK, TELE.JK, SILO.JK, BJBR.JK, BMRI.JK, BBRI.JK, BDMN.JK, BBNI.JK, BBCA.JK, HMSP.JK, KINO.JK, MIKA.JK, GGRM.JK, KLBF.JK, UNVR.JK, MNCN.JK, SCMA.JK, ACES.JK, PWON.JK, BSDE.JK, CTRA.JK, MPPA.JK, ERAA.JK, RALS.JK, ASRI.JK, MAPI.JK, TOWR.JK, TBIG.JK, ISAT.JK, BBTN.JK)

Credit Suisse has a material conflict of interest with the subject company (BDMN.JK) . Credit Suisse is one of the joint financial advisors to DBS Group Holdings Limited in relation to the proposed acquisition of PT Bank Danamon Indonesia Tbk.

Credit Suisse has a material conflict of interest with the subject company (TOWR.JK) . Credit Suisse is financial advisor to iForte Solusi Infotek (private) relating to the acquisition by PT Profesional Telekomunikasi Indonesia, a 99.999% owned subsidiary of PT Sarana Menara Nunsatara Tbk.

For other important disclosures concerning companies featured in this report, including price charts, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

Important Regional Disclosures

Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.

The analyst(s) involved in the preparation of this report may participate in events hosted by the subject company, including site visits. Credit Suisse does not accept or permit analysts to accept payment or reimbursement for travel expenses associated with these events.

Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares; SVS--Subordinate Voting Shares.

Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.

For Credit Suisse Securities (Canada), Inc.'s policies and procedures regarding the dissemination of equity research, please visit https://www.credit-suisse.com/sites/disclaimers-ib/en/canada-research-policy.html.

The following disclosed European company/ies have estimates that comply with IFRS: (7201.T, BMWG.DE).

Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (TLKM.JK, LINK.JK, SILO.JK, BMRI.JK, BDMN.JK, HMSP.JK, KINO.JK, 7267.T, BMWG.DE) within the past 3 years.

As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.

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To the extent this is a report authored in whole or in part by a non-U.S. analyst and is made available in the U.S., the following are important disclosures regarding any non-U.S. analyst contributors: The non-U.S. research analysts listed below (if any) are not registered/qualified as research analysts with FINRA. The non-U.S. research analysts listed below may not be associated persons of CSSU and therefore may not be subject to the NASD Rule 2711 and NYSE Rule 472 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

PT Credit Suisse Securities Indonesia ...................................................................................................................... Ella Nusantoro ; Priscilla Tjitra

For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at https://rave.credit-suisse.com/disclosures or call +1 (877) 291-2683.

05 April 2016


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Indonesia Consumer Survey 2016 - Credit Suisse

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