This week in [email protected] sees an eclectic mix of bottom up, top down, and thematic insights across the region. I would also add one interesting development in Indonesia this week, where XL Axiata Tbk PT (EXCL IJ) and SK Planet of Korea sold their entire stake (50/50) in loss-making e-commerce Elevenia to two parties for an undisclosed amount. This signifies a continuing pick up in M&A activity in the online space. This comes after the recent move by Alibaba Group Holding Ltd (BABA US) to invest US$1.1bn into Tokopedia, which has sent a cat amongst the pigeons. Please see the third in a series of insights, The World of the Worlds (Part 3) - Going Nuclear. Scroll down to the end of this insight for more details on this deal.
Summary of this week's insights in [email protected]
In his retail insight, Matahari Putra Prima - Hypermarkets Still Slow, Angus Mackintosh finds little to cheer about following a company visit to PT Matahari Putra Prima (MPPA IJ) out in Lippo Karawaci. The hypermarket space is still a challenging area, with high single digit declines in Same Store Sales Growth (SSSG).
In Indonesia: Baby Steps on the Long Road of Reforms, Manu Bhaskaran Comments on Indonesia's outlook following President Jokowi's Independence Day speech. Jokowi announced that the government is targeting growth of 5.4% in 2018, up from the 5.1% projected for 2017 but substantially lower than his campaign promise of 7%.
In Malaysia: Expect Upside Surprises for 2017, Manu Bhaskaran comments on recent GDP numbers from Malaysia extending a streak of rapid growth, with an increase of 5.8% YoY in 2Q17, up from 5.6% YoY in 1Q17.
In Singtel’s Results Broadly in Line With (Weak) Expectations Ahead of TPG’s Entry, our friends at New Street Research comment on the company's 1Q18 results, which came in in-line with expectations.
In Thailand: Potential Trigger for Political Tensions, Jason Tan examines near term triggers which could inflame politician tensions in Thailand. Most importantly, former Prime Minister Yingluck Shinawatra’s court case will culminate on 25th August when the Supreme Court issues its verdict.
In AOT: Airport Services Set Altitude Record, Dr. Andrew Stotz, CFA notes that total passenger volume through the six airports run by AOT grew 12% YoY in 2016, achieving a record high. The trend continues in 2017 supported by strong Russian and Indian tourist growth. Several renovations and developments of its airports planned over the next 5-7 years should improve efficiency and service quality.
In their inaugural insight on Smartkarma, Does Size Matter in SG? Retail Returning to XL, Jones Lang Lasalle examines recent moves by retailers to take larger spaces to showcase their products. Despite retailers struggling to pinpoint the best formula to tackle the structural challenges in the market and the exit of larger format departmental stores, it seems the latest trend is for retailers to upsize their space.
In Philippines: Economy Still Growing but Downside Risks Remain, Jason Tan comments on recent Philippine GDP figures where growth came in at 6.6% y/y in 2Q17, up marginally from 6.5% in 1Q17.
In Economic Growth Rate, Although High, Remains Below the Govnt’s Expectation, Yu Mitsuhashi from Euromonitor International Ltd. focuses on one of the key emerging markets with immense growth potential. To accelerate economic growth amidst numerous global challenges, Indonesia has been implementing various reforms.
In World War Three: Part 2 – Growth, No Deus Ex Machina, Dr. Jim Walker continues his World War Three series where he turns his attention to growth rates. In Asia, there is a North-South divide but some parts of the region have done surprisingly well despite weak export growth in recent years.
In Indonesian Telcos See Good Revenue Growth and Margin Progression as Data Monetization Improves. , our friends at New Street Research note that competition in the Indonesian telecom industry eased further in 2Q, as promotional packages continued to be reduced/withdrawn. In a change of trend, the smaller operators emerged as winners capturing share in service revenues in an accelerating market.
In Erajaya Swasembada: Early Round Loser in Offline-To-Online Consumption Shift?, Johannes Salim, CFA looks at this mobile distributor post a conference call with the IR. He sees Erajaya's smartphone business appears vulnerable to offline-to-online Consumption Shift although the shift remains in early innings.
In Blue Bird Group - Hailing at the Kerb, at the Mall and Online, Angus Mackintosh sees Blue Bird Tbk Pt (BIRD IJ) as a great way to play the rising middle class in Indonesia and with its alliance with GOJEK, it is already plugged into App based demand in one foul swoop. Its focus on better utilization of the fleet will improve average revenue per taxi and hence returns.
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