Indonesia Consumer Survey 2017

27 March 2017
Asia Pacific/Indonesia
Equity Research
Consumer Staples & Consumer Durables
Indonesia Consumer Survey 2017

Research Analysts
THEME
Ella Nusantoro
62 21 2553 7917
ella.nusantoro@credit-suisse.com Rising optimism
Calvin Tjahjono
Contents
Key themes from Indonesia..............................………………………………6
Key stock preferences ………………………………………………………….7
The seventh Credit Suisse Indonesia Consumer Survey……………….…10
Companies………………………………………………………………………85
DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES, ANALYST
CERTIFICATIONS, LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS. US Disclosure: Credit
Suisse does and seeks to do business with companies covered in its research reports. As a result, investors should be aware
that the Firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report
as only a single factor in making their investment decision.
27 March 2017
Introduction
Urs Rohner, Chairman We are delighted to present the seventh edition of the Credit Suisse Research Institute's
Credit Suisse Research Emerging Consumer Survey. This publication traditionally explores the growth
Institute opportunities presented by the new consumer cultures developing across the emerging
world, which continue to show vastly different; often more dynamic, demographic profiles
compared with those of developed economies. The report reflects an ongoing
collaboration between the Credit Suisse Research Institute and our research partner, the
leading market research firm, Nielsen, which has delivered data from 14,000 face-to-face
interviews with consumers across the emerging economies of Brazil, China, India,
Indonesia, Mexico, Russia, South Africa and Turkey as a basis for our research.
In this year’s edition, our findings suggest that a consumer culture within emerging
markets may be developing more rapidly than anticipated: a further 10% of surveyed
households have succeeded in entering middle-income territory in the past three years,
creating a consumer base of 1.25 bn people across the eight countries covered by our
survey alone.
We find the immediate measures of consumer confidence improving from a year ago, with
consumers in the major Asian economies of India, China and Indonesia reflecting the most
optimistic outlook and topping our emerging consumer scorecard as we look into 2017.
More than 40% of Asian consumers expect to see their financial circumstances improve in
the six months ahead. We provide a special focus on several key themes within these
countries, such as the consequences of the reform to the one-child policy in China or
demonetisation and tax reform in India. Generally, there is a noticeable lifestyle "upgrade"
under way in Asia.
We further observe that pressure has eased for consumers in commodity-sensitive
countries, such as Russia, South Africa and Brazil. Although considerable economic
fragility and inequality among consumers remains here, a firmer growth outlook supporting
commodities and reduced currency risk offers better consumer prospects for the year
ahead.
Interestingly, we observe the ongoing changing pattern in the spending of the emerging
middle class. Spending on travel and entertainment in China is booming and reached over
10% of household income. A new theme we find at work is that of a more "conscious"
consumer, focused on a more active, healthy lifestyle and one engaged with the sharing
economy. Local, rather than global, companies and brands are emerging to capitalise on
this trend. Also importantly, digital technology is and will continue to be the facilitator of
changing consumer behaviour with more than a billion consumers yet to come online in
our surveyed countries. We estimate that online retail spending can rise from a current
US$1 tn to US$2.5 tn by 2025.
Finally, these themes are elements of the broader rebalancing in growth that we are
witnessing in the emerging world from its undue reliance on fixed investment and external
trade to more domestic consumption. This provides a powerful internal dynamic to growth
in the countries concerned—a feature of considerable significance should the global
economic landscape become more multipolar and less globalised in nature, as is currently
the debate.
We hope that our analysis helps our readers better understand the nature of these
dynamic economies and that you enjoy reading the 2017 Emerging Consumer Survey.
Indonesia Consumer Survey 2017 2

27 March 2017
Table of contents
Focus charts and table 5
Key themes from Indonesia 6
Key stock preferences 7
The seventh Credit Suisse Indonesia Consumer Survey 10

2016 was a year full of hope... ............................................................................... 11
...and improving economic growth.......................................................................... 13
Rising optimism ...................................................................................................... 20
Time to spend! ........................................................................................................ 22
Indonesians are not migrating ................................................................................ 26
Automotive sector 27
Key stock ................................................................................................................ 27
Four-wheelers......................................................................................................... 27
Two-wheelers ......................................................................................................... 29
Food and beverages 33

Key stocks .............................................................................................................. 33
Unrivalled noodles consumption ............................................................................ 33
Instant noodles ....................................................................................................... 36
Carbonated drinks .................................................................................................. 39
Bottled water........................................................................................................... 40
Dairy products ........................................................................................................ 42
Cigarettes ............................................................................................................... 43
Personal care products 51

Key stocks .............................................................................................................. 51
Shift in spending ..................................................................................................... 51
Branded goods 53
Key stocks .............................................................................................................. 53
Fashion items are favoured .................................................................................... 53
Internet and e-commerce 62
Mobile phones 68
Key stocks .............................................................................................................. 68
The world at your fingertips .................................................................................... 68
Healthcare 72
Key stocks .............................................................................................................. 72
Improved access to state healthcare ..................................................................... 72

27 March 2017
Property 76
Key stocks .............................................................................................................. 76
Potential demand continues to be high .................................................................. 76
Banks 82
Key stocks .............................................................................................................. 82
Auto interest on lower interest ................................................................................ 82
Astra International (ASII.JK / ASII IJ) 85
Indofood CBP (ICBP.JK / ICBP IJ) 87
Hanjaya Mandala Sampoerna (HMSP.JK / HMSP IJ) 89
Gudang Garam (GGRM.JK / GGRM IJ) 91
Matahari Department Store (LPPF.JK / LPPF IJ) 93
Mitra Adiperkasa (MAPI.JK / MAPI IJ) 95
PT Telkom (Telekomunikasi Indo.) (TLKM.JK / TLKM IJ) 97
XL Axiata Tbk (EXCL.JK / EXCL IJ) 99
Siloam International Hospitals (SILO.JK / SILO IJ) 101
PT Mitra Keluarga Karyasehat Tbk (MIKA.JK / MIKA IJ) 103
Kalbe Farma (KLBF.JK / KLBF IJ) 105
PT Summarecon Agung Tbk (SMRA.JK / SMRA IJ) 107
PT Bank Pembangunan Daerah Jawa Timur Tbk (BJTM.JK / BJTM IJ) 109
PT Bank Negara Indonesia (Persero) Tbk (BBNI.JK / BBNI IJ) 111
Appendix 1: Respondents' summary 113

Demographics ...................................................................................................... 113
Automotive............................................................................................................ 117
Food and beverages ............................................................................................ 118
Personal care ....................................................................................................... 119
Luxury goods ........................................................................................................ 119
Technology and internet ....................................................................................... 120
Telecommunications ............................................................................................ 120
Travel .................................................................................................................... 122
Education.............................................................................................................. 123
Healthcare ............................................................................................................ 124
Appendix 2: Indonesia macro 125

27 March 2017
Focus charts and table

Figure 1: Indonesia’s rank improved to second, from fourth the previous year, as optimism improves
Inflation expectation Personal finances Household income Household income Time for major Rank based on five
expectation history purchases sectors
2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016
India 3 4 1 2 3 1 3 2 5 1 1 3 2 2 1 1 1 1
Indonesia 6 7 6 3 2 2 2 1 1 2 2 1 4 4 3 3 4 2
China 4 3 5 4 1 4 5 4 3 4 4 2 3 3 2 5 2 3
Brazil 2 8 3 1 6 3 1 3 2 5 9 8 4 9 8 2 7 4
South Africa 8 9 8 7 8 5 8 6 4 9 6 4 8 6 5 9 7 5
Mexico 7 6 7 6 5 6 4 8 6 8 8 7 9 5 4 7 6 6
Turkey 1 1 2 9 6 8 9 7 8 7 5 5 7 8 7 6 5 6
Russia 9 5 4 8 9 7 7 9 7 6 7 6 6 7 6 8 9 6
Note: Ranks go from 1 (highest) to 9 (lowest). Source: Credit Suisse Indonesia Consumer Survey 2017
Figure 2: Indonesia—State of personal finances Figure 3: Indonesia—State of personal finances

over next six months (2016) over next six months (2017)
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
< 1000 1250 1750 2500 4000 6250 8750 > 10000 < 1000 1250 1750 2500 4000 6250 8750 > 10000
Income (IDR) This survey average Income (IDR) This survey average
Last survey average Last survey average
Source: Credit Suisse Emerging Consumer Survey 2016 Source: Credit Suisse Emerging Consumer Survey 2017
Figure 4: Indonesia's spending momentum 2016 vs Figure 5: Indonesia's spending momentum 2016 vs
2015 (a year ago) 2010 (seven years ago)
10 Smartphone
60 Smartphone
Internet
8 access
Property 50
6
Recorded spending in 2016 vs. 2010
Internet
Holidays access
40
4 2-wheelers
2 30
Instant noodle
0 4-wheelers 20 Mobile phones 2-wheelers

Cigarettes
-2 Holidays
10 Property
Carbonated
-4 Extra Cosmetics Mobile phones 4-wheelers drinks Instant noodle
education Dairy 0
-6 Dairy
Carbonated Cosmetics
TV drinks
-10 TV
-8
Cigarettes
-10 -20
0 20 40 60 80 100 0 20 40 60 80 100
2016 respondents that own or have bought each item (%) 2016 respondents that own or have bought each item (%)
Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Credit Suisse Indonesia Consumer Survey 2017

27 March 2017
Key themes from Indonesia

2016 was a year full of hope...
Indonesia moves to Overall, Indonesia is ranked second (behind India) within the eight emerging countries that
second rank from we surveyed in 2016. This is an improvement from the fourth place in the previous year,
fourth in the previous with Indonesia overtaking China which fell to third position this time, from second in the
survey previous year. Despite the many challenges, we see this improvement stemming from
Indonesia being more defensive compared to the other emerging countries.
...and improving economic growth
Indonesia's GDP reached 5.02% in FY16, improving from 4.8% in FY15. Private
consumption continued to be the largest contributor of GDP, accounting for 55%, and
growing at around 5% each year. Within the sector, the largest contributor to the economy
is manufacturing (21%), followed by retail (13%), agriculture (11%), construction (10%),
mining (8%), among others. However, the highest growth is in the IT and financial sectors,
each growing at 9% in 2016.
Indonesia reached its lowest inflation in 2016 of 3.7%, from 6.4% over the past three
decades. This lower inflation was driven down on the back of lower transportation costs
(lower fuel costs) and food costs (lower soft commodities prices).
Rising optimism
The highest earners hit Compared to the other emerging countries that we surveyed, Indonesians maintained their
the most, but stable for second ranking in terms of personal finances. In fact, on average, Indonesian personal
those with low and finances were better off than in the previous year, even though, on average, they are still
middle incomes lower compared to two years ago. We believe that this is due to still-low commodity prices,
that only started to pick up in early 4Q16.
Those on higher Interestingly, for Indonesians, the highest earners saw their personal finances not as great
incomes experienced as in the previous year. The lower-middle income earners, however, continued to have a
lower wealth similar outlook in the survey. We think that the significant shift for the highest earners
could be attributed to penalty payments during the tax amnesty programme, which mostly
impacted them. The first phase of the tax amnesty programme ended on 30 September
2016. Meanwhile, middle-upper income earners saw their personal finances better off.
Minimum wage is now In terms of income, Indonesians are less optimistic in this survey, even though they are
regulated still the most optimistic compared to the other emerging countries that we surveyed
(Indonesia maintained its number one rank). This lower optimism compared with a year
ago might be due to the government introducing a fixed formula (GDP growth plus
inflation) for the increase in the minimum wage level starting from 2016. Thus, with
inflation reaching its lowest level of 3.7%, expectations on household incomes declined.
Time to spend!
Time to spend! As optimism and confidence grows, Indonesians are ready for major purchases. Indonesia
moved up to third position, from number four in the past two consecutive years.
Smartphone and With Indonesians becoming wealthier, seeking improved lifestyles, and with growing
internet access please optimism and confidence, they are spending more on discretionary items. Indonesia's
GDP per capita reached US$3,643 last year, from US$2,357 in 2009. Similar to previous
years, Indonesians continue to spend the most on smartphones (+9%) followed by internet
access (+7%), holidays (+6%), property (+6%), two-wheelers (+5%), and instant noodles
(+3%). Indonesians are not spending on TV (-8%), dairy (-6%), carbonated drinks (-5%),
mobile phones (-3%), extra education (-3%), cosmetics (-3%), cigarettes (-2%), and four-
wheelers (-2%). It has always been interesting that despite instant noodles and two-
wheelers being highly penetrated segments, consumers still continue to spend on them.

27 March 2017
Key stock preferences

Astra International
■ Astra’s auto business benefits from lower financing rates. Thus, in the 4W segment, it
has launched new affordable models (Low Cost Green Car, or “LCGC”), while 2W
market share gain has been due to new model launches and improved after-sales
services.
■ Rising commodity prices should also benefit Astra, whereby those living in commodity
resource-based areas have better purchasing power.
HM Sampoerna
■ The largest cigarette producer in Indonesia, according to Philip Morris International
estimates, is facing the challenge of lower consumption given higher prices and
lifestyle changes. Its brands continue to appeal more to younger generations, those in
urban areas in Java, and within the middle and higher income segments.
Unilever Indonesia
■ The brand, Blue Band, continues to be the leader in margarine. The F&R (Food and
Refreshment) division is a smaller portion for the company compared to Home and
Personal Care (HPC), but it offers more potential upside with consumers’ growing
wealth.
■ While our survey indicates a slowdown in skin care spending, the company’s abundant
portfolio might continue to provide growth.
Indofood CBP
■ Indomie, Sarimi, Supermie and PopMie are the main brands favoured by consumers
and continue to help support the company’s free cash flow, as noodles continue to be
defensive staples for Indonesians. Indomilk is gaining popularity in the dairy segment,
as is Club in bottled water, while Pepsi maintained its favoured status in carbonated
drinks.
Gudang Garam
■ The second-largest cigarette producer, according to Philip Morris International
estimates, in Indonesia is facing the challenge of lower consumption given higher
prices and lifestyle changes. Its brands appeal to those in rural areas, outside Java, the
middle generation and those on higher incomes. Gudang Garam Surya emerged as
the most favoured brand in our survey.
Matahari Department Store
■ This company is the prime beneficiary of Indonesia's rising middle-income segment. Its
higher exposure to outside Java (40% of gross sales) is a catalyst for growth as the
area tends to do well when commodity prices rise.
■ Nevertheless, contrary to our survey findings, Matahari's private label booked 10%
higher gross sales YoY in 4Q16, boosted by better performance in its number one
brand, Nevada. However, intensifying competition saw margins decline slightly during
the period.
Mitra Adiperkasa
■ The company continuously shows improvement following the involvement of CVC
Capital Partners in the active division and General Atlantic in the F&B division.
Improvements in inventory days and margins are both ahead of schedule.

27 March 2017
■ The company is also closing down department stores and cutting brands that are not
performing to allocate more space for better performing specialty stores. We also
expect the company to turn free cash flow positive by the end of the year.
Siloam International Hospital
■ We continue to like the company as room for downside surprises from current levels
are low after past disappointments and expansion plans would fuel additional growth.
There could be upside post CVC's involvement and execution progress in light of
higher-than-expected FY17 guidance. An initial look into the private equity, CVC
Capital Partners’ experience underscores encouraging turnaround outcomes.
Mitra Hospital
■ We continue to view the company as an attractive long-term holding due to its mid-teen
growth profile, margin expansion opportunity and balance sheet optionality (Rp2.4 tn in
cash). After recent weakness, the stock looks interesting at 33x 2017 EBITDA, below
its historical average. Its premium valuation is supported by best-in-class margins and
ROIC profile.
PT Telekomunikasi Indonesia (Telkom)
■ Rising smartphone and fixed broadband data usage drove consolidated EBITDA and
net profit growth of 15.7% YoY and 24.9% YoY in FY16 respectively. While TLKM is a
'consensus buy', it is slightly expensive versus regional peers. The company has
outperformed the regional telecommunication sector over the past 12 months.
■ It remains the only liquid (large cap) way to invest in the successful monetisation of
Indonesia's data boom.
XL Axiata
■ Over the past 18 months, the company has made significant progress in strengthening
its balance sheet (through both a rights issue and a tower sale) and reducing its heavy
USD-denominated debt exposure. Furthermore, a return to top-line growth means that
XL is now finally emerging from its investment phase.
Bumi Serpong Damai
■ Last year, the company had the best pre-sales target achievement record, thanks to its
focus on landed residential property. We expect that to continue this year. It also has
the lowest net debt-to-equity among peers. As pre-sales were primarily landed
products, earnings recognition should not be a drag on profits this year.
Bank Negara Indonesia
■ Loan growth has been strong across the board generally, but it is the state-owned
enterprise (SOE) corporate (one third of incremental loans) and medium commercial
loans (one fifth of incremental loans), in particular, that have underpinned robust loan
growth at BNI. With similar ROAs and ROEs, BNI is trading at a 27% discount to
Mandiri on P/E (and a 30% discount on P/B), far ahead of its historical average of 14%.
Bank Jatim
■ Bank Jatim is the regional development bank for East Java and the smallest bank by
assets among the nine banks in our coverage. It is focused on the consumer (67% of
loan, 87% of which is payroll loan) and commercial/SME (33%) segments. Jatim's ROA
was the third highest last year at 2.4%, behind that of BCA and BRI. Superior
profitability can be attributed to the higher proportion of cheaper current/saving
deposits (81%), fee income and cost efficiency.

27 March 2017
Figure 6: Indonesia’s stock picks

Ticker Ratg Price Upside Market cap Last EPS growth (%) PE EV/EBITDA ROE (%) 6M ADTO
Current* Target (%) (US$ mn) FYE (T) T+1 T+2 T+3 T+1 T+2 T+3 T+1 T+1 T+1
Automobiles & Components
Astra International ASII.JK O 8,450 9,800 16 25,674 Dec-16 42 9 n.a. 15.9 14.5 n.a. 12.6 18.7 17.6
Banks 6 93,740 Dec-15 0 16 19 15.4 13.3 11.2 n.a. 15.4
Bank Central Asia BBCA.JK O 16,600 18,100 9 30,717 Dec-16 8 13 15 18.4 16.3 14.2 n.a. 18.3 19.3
Bank Danamon BDMN.JK N 4,740 4,950 4 3,376 Dec-16 48 12 12 11.5 10.3 9.2 n.a. 10.5 0.6
Bank Jabar Banten BJBR.JK U 2,200 1,650 (25) 1,585 Dec-16 43 12 10 13.0 11.6 10.6 n.a. 16.2 4.1
Bank Jatim BJTM.JK O 635 690 9 705 Dec-16 11 14 2 8.3 7.2 7.1 n.a. 16.5 2.1
Bank Mandiri BMRI.JK N 11,900 11,600 (3) 20,631 Dec-16 47 27 18 13.7 10.8 9.1 n.a. 12.9 16.6
Bank Negara Indonesia BBNI.JK O 6,900 7,800 13 9,561 Dec-16 16 19 17 9.7 8.2 7.0 n.a. 14.3 9.6
Bank Rakyat BBRI.JK O 13,150 14,500 10 24,128 Dec-16 3 20 19 11.9 9.9 8.3 n.a. 17.4 19.0
Bank Tabungan Negara BBTN.JK N 2,320 2,350 1 1,844 Dec-16 11 20 19 8.5 7.1 5.9 n.a. 14.4 2.5
BTPN BTPN.JK N 2,750 2,650 (4) 1,193 Dec-16 9 11 16 8.4 7.6 6.6 n.a. 11.4 0.0
Consumer Staples 7 81,638 Dec-15 12 7 9 32.7 30.5 28.0 20.6 27.0
Gudang Garam GGRM.JK N 65,450 74,100 13 9,451 Dec-15 9 10 14 18.2 16.5 14.4 11.7 17.8 3.9
HM Sampoerna HMSP.JK N 3,960 4,340 10 34,571 Dec-15 18 4 6 37.4 36.0 34.1 28.9 38.5 4.8
Indofood CBP ICBP.JK N 8,775 9,500 8 7,680 Dec-15 21 4 9 28.1 27.1 24.9 16.3 22.0 3.0
Indofood Sukses INDF.JK O 8,075 8,700 8 5,321 Dec-14 (3) (3) 6 18.9 19.4 18.3 8.9 14.1 5.2
Kino KINO.JK U 2,580 2,360 (9) 277 Dec-15 (36) 9 9 21.9 20.0 18.4 13.5 9.2 0.2
Unilever Indonesia UNVR.JK N 42,500 42,700 0 24,338 Dec-15 11 13 10 49.7 44.1 40.0 35.1 126.3 5.7
Healthcare 2 9,769 Dec-15 18 18 14 37.5 31.8 27.8 22.2 19.8
Kalbe Farma KLBF.JK U 1,490 1,350 (9) 5,242 Dec-14 8 16 16 31.4 27.0 23.2 20.8 22.1 2.9
Mitra Keluarga MIKA.JK O 2,580 3,110 21 2,818 Dec-15 22 15 13 54.0 46.8 41.6 38.7 20.7 1.1
Prodia PRDA.JK O 4,800 7,460 55 338 Dec-15 41 62 16 53.0 32.8 28.2 15.6 11.0 0.1
Siloam Hospitals SILO.JK O 14,050 12,840 (9) 1,371 Dec-15 33 39 13 n.m. n.m. n.m. 26.6 5.3 0.3
Media 26 4,871 Dec-15 16 11 18 20.6 18.5 15.7 13.8 23.1
MNCN MNCN.JK O 1,760 2,300 31 1,886 Dec-15 34 3 19 15.9 15.5 13.0 10.2 15.4 1.8
SCMA SCMA.JK O 2,720 3,350 23 2,985 Dec-15 3 20 17 25.3 21.1 18.0 18.0 46.8 2.7
Real Estate 33 10,849 Dec-15 4 15 21 17.5 15.2 12.5 11.7 10.7
Alam Sutera ASRI.JK N 366 450 23 540 Dec-15 49 (16) 4 8.1 9.6 9.2 12.8 12.7 1.1
Bekasi Fajar BEST.JK O 306 330 8 222 Dec-15 23 17 36 11.2 9.6 7.0 9.8 8.7 1.1
BSD BSDE.JK O 1,845 2,620 42 2,665 Dec-15 (8) 16 21 17.8 15.4 12.7 12.8 10.0 3.2
Ciputra Development CTRA.JK O 1,270 1,860 46 1,769 Dec-15 (10) 17 23 16.9 14.4 11.7 11.4 13.0 2.2
Jababeka KIJA.JK O 322 350 9 499 Dec-15 4 17 26 19.0 16.2 12.9 8.5 7.3 0.4
Lippo Karawaci LPKR.JK N 745 1,080 45 1,290 Dec-15 43 18 18 22.2 18.8 16.0 11.7 5.5 5.1
Pakuwon PWON.JK O 600 730 22 2,169 Dec-15 48 19 19 15.4 12.9 10.8 11.5 23.3 4.1
Summarecon SMRA.JK O 1,370 1,600 17 1,483 Dec-15 (67) 72 61 70.3 40.9 25.4 17.8 4.6 1.9
Surya Semesta SSIA.JK O 600 960 60 212 Dec-14 16 2 6 6.3 6.2 5.8 3.2 16.1 0.5
Retailing 14 5,496 Dec-15 19 15 14 22.5 19.6 17.1 12.6 23.1
Ace ACES.JK O 810 1,050 30 1,043 Dec-15 3 18 13 23.0 19.5 17.3 16.0 20.9 0.3
MAPI MAPI.JK O 5,800 6,400 10 723 Dec-15 443 73 59 47.5 27.5 17.3 9.3 7.7 0.4
Matahari Dept Store LPPF.JK O 14,250 16,100 13 3,121 Dec-16 11 9 8 18.5 17.0 15.7 13.2 38.4 8.8
Ramayana RALS.JK U 1,145 1,100 (4) 610 Dec-15 26 3 8 19.1 18.6 17.3 8.0 12.1 0.8
Telecommunication Services 17 42,635 Dec-15 38 26 13 21.2 16.8 14.9 7.0 21.0
Indosat ISAT.JK O 6,975 8,800 26 2,845 Dec-16 104 20 15 16.8 14.0 12.2 4.1 16.2 0.2
Protelindo TOWR.JK O 5,325 8,300 56 1,216 Dec-15 30 38 24 19.5 14.1 11.4 8.9 20.7 0.9
Telkom TLKM.JK O 4,000 4,500 13 3,063 Dec-16 1 16 13 13.2 11.4 10.1 9.6 26.2 0.1
Tower Bersama TBIG.JK O 4,090 4,750 16 30,942 Dec-16 22 10 6 17.0 15.5 14.6 6.3 26.2 24.6
XL Axiata EXCL.JK N 5,700 5,650 (1) 1,939 Dec-15 17 53 15 16.0 10.4 9.1 14.0 84.3 1.2
* Share price as of 23 March 2017, denominated in IDR. Note: O = Outperform, N = Neutral, U = Underperform,
Source: Company data, Thomson Reuters, Credit Suisse estimates

27 March 2017
The seventh Credit Suisse Indonesia

Consumer Survey
Our seventh Credit We have arrived at our seventh Credit Suisse Indonesia Consumer Survey, which is part
Suisse Indonesia of the Credit Suisse Research Institute’s (CSRI) Emerging Consumer Survey and
Consumer Survey conducted in eight emerging countries (Brazil, China, India, Indonesia, Russia, South
Africa, Turkey and Mexico). CSRI 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 14,000 participants. This survey is a comprehensive
and exclusive study of the consumption patterns in each country as well as individuals'
outlook about the future. The survey was conducted between mid-November and early
December 2016.
Ten areas: six in Java, For Indonesia, we asked 1,534 participants from ten exclusive areas, similar to the
four outside Java previous surveys. The areas include six in Java (Jakarta, Bogor/Tangerang/Bekasi,
Surabaya, Gresik/Lamongan/Sidoarjo, Bandung, and Kabupaten Bandung) and four
outside Java (Medan, Deli Serdang, Makassar, and Gowa). These areas, in our view, sit
well with Indonesia's population and economy, with around 57% and 59% of the country's
GDP derived from Java, respectively, while the remaining 43% and 41% are from outside
Java, in 2016, according to Indonesia's BPS (Bureau of Statistics).
66% in urban areas, Our survey respondents, similar to the previous surveys, feature 66% living in urban areas
51% female, and 72% and 34% in rural areas. Some 51% were female and 49% male. In addition, 76% of
aged below 45 respondents were aged below 45, in line with Indonesia's young demographic profile.
We asked each respondent a total of 86 questions divided into 12 categories: (1) general;
(2) auto; (3) food and beverage; (4) personal care; (5) branded goods; (6) healthcare; (7)
computers and TV; (8) mobile phones; (9) internet access; (10) property; (11) travel; and
(12) education.
Figure 7: Indonesia's key economic indicators and survey profile
Source: Ministry of Finance, Central Bureau of Statistics ("BPS"), Bank Indonesia ("BI"), CEIC, World Bank, Credit Suisse estimates, Emerging Market Quarterly Q1 2017, Credit Suisse

27 March 2017
2016 was a year full of hope...

Indonesia moves up to Overall, Indonesia ranks second (behind India) within the eight emerging countries that we
second ranking from surveyed in 2016. This is an improvement from being fourth in the previous year, with
fourth in the previous Indonesia overtaking China which fell into third place this time from second in the previous
survey year. Despite the many challenges, we see this improvement stemming from Indonesia
being more defensive compared to the other emerging countries. China’s ranking declined
mainly due to a fall in personal finances while expectations for inflation are rising, along
with a slowdown in its economy.
Figure 8: Indonesia’s ranking improved to second from fourth in the previous year as optimism improves
Inflation expectation Personal finances Household income Household income Time for major Rank based on five
expectations history purchases sectors
2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016
India 3 4 1 2 3 1 3 2 5 1 1 3 2 2 1 1 1 1
Indonesia 6 7 6 3 2 2 2 1 1 2 2 1 4 4 3 3 4 2
China 4 3 5 4 1 4 5 4 3 4 4 2 3 3 2 5 2 3
Brazil 2 8 3 1 6 3 1 3 2 5 9 8 4 9 8 2 7 4
South Africa 8 9 8 7 8 5 8 6 4 9 6 4 8 6 5 9 7 5
Mexico 7 6 7 6 5 6 4 8 6 8 8 7 9 5 4 7 6 6
Turkey 1 1 2 9 6 8 9 7 8 7 5 5 7 8 7 6 5 6
Russia 9 5 4 8 9 7 7 9 7 6 7 6 6 7 6 8 9 6
Note: Ranks go from 1 (highest) to 9 (lowest).
Source: Credit Suisse Indonesia Consumer Survey 2017
Indonesians worry The greatest worry for Indonesians, according to our survey, is inflation, which has been
most about inflation... the greatest concern since we first conducted the survey in 2011. However, compared to a
year ago, Indonesians were slightly less worried as they realised that inflation was lower in
the past 12 months, as seen in our survey. Indonesia's inflation in 2016 reached 3.7%, its
lowest ever in the past three decades, compared to 6.4% in 2015.
However, compared to the other emerging countries we surveyed, Indonesia still ranks
sixth. We believe that the worry is whether this low inflation is sustainable, given that in
2017, the government plans to remove subsidies for electricity tariffs for the mid-low end
household incomes, increase the liquified petroleum gas (LPG) price for the low end, and
increase tariffs for auto registration licences. Our economist estimates inflation will reach
4.5% in 2017.

27 March 2017
Figure 9: Indonesians worry over whether inflation will move higher

90%
83%
80% 76%
72%
70% 65% 64% 64%
60%
50%
40%
31% 31% 32%
30% 24%
20%
20% 14%
10%
3% 4% 4% 3% 4% 4%
0%
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 2016
Figure 10: What level of inflation have you seen over the past 12 months on basic food and drink?
% of respondents Total Area Region Age Income
Urban Rural Java Ex. Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High
2016
Below 1% 7% 7% 7% 7% 7% 7% 7% 6% 8% 5% 7% 18%
1%-3% 25% 27% 21% 24% 27% 25% 26% 25% 21% 20% 28% 22%
3.1%-5% 15% 17% 12% 15% 15% 18% 14% 14% 13% 10% 17% 26%
5.1%-7% 6% 6% 6% 7% 3% 6% 6% 6% 6% 6% 6% 4%
7.1%-10% 3% 4% 3% 4% 3% 2% 4% 5% 3% 3% 4% 0%
Above 10% 4% 2% 6% 2% 8% 4% 4% 5% 2% 4% 4% 4%
Did not notice any inflation 12% 12% 13% 13% 11% 13% 12% 12% 7% 14% 12% 10%
I don't know 27% 25% 32% 28% 26% 24% 27% 29% 40% 36% 22% 16%
2015
Below 1% 5% 6% 4% 5% 6% 6% 4% 7% 3% 6% 5% 1%
1%-3% 28% 30% 26% 30% 25% 28% 29% 25% 28% 30% 29% 18%
3.1%-5% 24% 26% 20% 27% 18% 23% 27% 25% 16% 21% 24% 34%
5.1%-7% 8% 9% 7% 8% 10% 7% 9% 7% 12% 8% 9% 8%
7.1%-10% 7% 7% 5% 7% 5% 8% 7% 5% 3% 3% 8% 13%
Above 10% 3% 3% 3% 4% 2% 4% 3% 3% 3% 2% 4% 6%
I don't know 12% 9% 18% 10% 18% 11% 10% 13% 27% 14% 11% 15%
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%
* Income is on monthly basis: Low <Rp1.5 mn; Mid Rp1.5-7.5 mn: High >Rp7.5 mn
...but otherwise In terms of personal finances, Indonesians remain optimistic with the country’s second
remain optimistic ranking maintained (after India, which rose from third in the previous year). Indonesians

27 March 2017
also remain the most optimistic in regard to household income expectations. This said,
Indonesians think that now is the time to make major purchases (third, and up from fourth
in the previous year).
...and improving economic growth

Indonesia's GDP reached 5.02% in FY16, improving from 4.8% in FY15. Private
consumption continues to be the largest contributor of GDP, accounting for 55% and
growing at around 5% each year. The second-largest contributor to the economy is
investment at around 34% which grew at 4.5% in 2016, down from 6.4% in 2015. The third
largest is government spending at 8% with flat growth in 2016, though this improved from -
5.3% in 2015. The lowest contributor is net exports contributing 2% to the economy with
5.1% growth in 2016 from 138.1% growth in 2015.
Within the sector, the largest contributor to the economy is manufacturing (21%), followed
by retail (13%), agriculture (11%), construction (10%) and mining (8%), among others.
However, the highest growth is from the IT and financial sectors, each expanding 9% in
2016.
Figure 11: Indonesia’s GDP quarterly and annual growth

7.0
6.8
6.5 6.5
6.5 6.4
6.3
6.2 6.2 6.2
6.1 6.1
6.0 6.0
6.0 5.9 5.9
GDP growth (%)
5.9
5.6 5.6 5.6

5.5 5.5
5.5
5.2 5.2
5.1
5.0 5.0 5.0
5.0
5.0 4.9 4.9 4.9 4.9
4.9
4.8
4.7 4.8
4.5
FY10
FY11
FY12
FY13
FY14
FY15
FY16
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
Source: Bank Indonesia (BI)
Figure 12: GDP breakdown by segment Figure 13: GDP breakdown by sector
100% 2% 1% 0% 2% 0% 1% 2% 100%
90% 90% 18% 18% 18% 18% 18% 19% 22%
31% 32% 33% 32% 33% 33% 80%

80% 34% 4% 4% 4% 4% 5% 5%
5%
11% 10% 10% 10% 10% 9%
70% 8%
70% 4% 4%
4% 4% 4% 4%
4%
60%
60% 12% 12% 12% 12% 12% 12% 8% 14% 14% 14% 14% 14% 14%
11%
50%
50% 9% 10% 10% 10% 10% 10% 10%
40%
40% 14% 14% 14% 14% 14%
14% 13%
30%
30% 4% 4% 4% 4% 4% 4% 4%
54% 54% 55% 54% 55% 54% 55% 20%
20%
10% 23% 23% 22% 22% 22% 22% 21%
10%
0%
2010 2011 2012 2013 2014 2015 2016
0% Manufacturing Financial & insurance Wholesale & retail trade
2010 2011 2012 2013 2014 2015 2016 Construction Agriculture, forestry & fishing Transportation & storage
Private consumption Government consumption Investments Net exports Mining & quarrying Information & communication Others
Source: Bank Indonesia (BI) Source: Bank Indonesia (BI)

27 March 2017
Figure 14: GDP growth, by segment

2010 2011 2012 2013 2014 2015 2016 9.1%
8.9%
9%
7% 6.7% 6.7%
6.4%
6.2%
6.0%
5.6% 5.5% 5.5% 5.5%
5.3% 5.3%
5.0% 4.9% 5.0% 5.1% 5.0% 5.0% 5.0%
4.8%
5% 4.5% 4.5%
4.4%
4.1% 4.0%
3%
1.2%
1%
-0.1%
-1%
GDP Private consumption Government expenditure Investments
Figure 15: Net export growth—2010-16

Net exports (bn) Net exports growth
160,000 138% 150%
131%
140,000
100%
120,000
50%
100,000
12%
2% 5%
80,000
0%
-24%
60,000
-50%
40,000 -76%
20,000 -100%
2010 2011 2012 2013 2014 2015 2016
Source: Bank Indonesia
Figure 16: GDP growth, by sector

2011 2012 2013 2014 2015 2016
13%
11%
9%
7%
5%
3%
1%
Construction
Electricity & gas
Education
Other Services Activities

Manufacturing
Wholesale & retail trade

Mining & quarrying
communication
Financial & insurance
Human Health and Social

Public administration &
Water supply, sewerage,
Accommodation & food

Agriculture, forestry &
Transportation & storage
Real estate activities
Business Services
Information &
waste management &

remediation activities
service activities
-2%
Work Activities
defence
fishing
-4%
-6%

27 March 2017
With Indonesia being an archipelago, each region has a different background and growth
rate. Growth in Kalimantan is starting to improve along with the increase in the coal prices,
as well as in Sumatra where CPO prices are starting to rise. Higher construction activity in
Sulawesi area has helped growth there as well. Java is a manufacturing-based region and
has seen its growth slowing down.
Figure 17: Indonesia’s GDP growth by region in 2016—Kalimantan’s is starting to improve
Source: Bank Indonesia, Indonesia Bureau of Statistics
Figure 18: Indonesia’s GDP growth by region in 2015—weak growth in Kalimantan
Source: Bank Indonesia, Indonesia Bureau of Statistics

27 March 2017
Figure 19: Palm oil (RM/tonne) Figure 20: Coal (US$/tonne)

3,600
115
3,400
average YTD17: 3,247.4 105
3,200
3,000 95
USD / Metric ton

MYR / ton
2,800 85 average YTD17: 83

average 2016: 2,655.2
2,600
75
average 2014: 2,421.9 average 2014: 70
2,400
average 2016: 66
65
2,200
average 2015: 59
average 2015: 2,165.9
55
2,000
1,800 45
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Source: Bloomberg Source: Bloomberg
Figure 21: Brent crude oil price (US$/barrel) Figure 22: Indonesia's retail fuel price (Rp/l)
115
105
average 2014: 97.5
95
85
USD / barrel
75
65
average YTD17: 55.7

55
average 2015: 54.4
45
average 2016: 45.9
35
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17
Inflation has reached an all-time low

Indonesia’s inflation in 2016 fell to its lowest of 3.7%, from 6.4%, over the past three years.
This lower inflation was driven down on the back of lower transportation costs (lower fuel
costs) and food costs (lower soft commodities’ prices).

27 March 2017
Figure 23: Inflation in Indonesia reached an all-time low last year at 3.7%
9
8.0 8.0
7.8
8
7.1 7.1 7.1
6.8
7 6.5 6.5
6.3 6.4 6.4 6.4
6.2
5.9
6
5.4
5.1 5.1
4.8
Inflation (%)
5 4.6 4.5
4.4 4.4 4.4 4.3
4.1 4.0 4.0
3.9
4 3.6 3.7 3.7
3.5
3.3
3.0
3
FY13
FY10
FY11
FY12
FY14
FY15
FY16
1Q10
2Q10
3Q10
4Q10
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
Figure 24: Inflation component breakdown*—significant drop in transportation and food

2013 2016
17
15.4
15
13
11.4
11
Inlfation (%)
9
7.5
7 6.2
5.4 5.7
5
3.7 3.9 3.9
2.7 3.1
3
1.9
1 0.5
(0.7)
-1
Processed food, Food Transport and finance Housing and utilities Health Education, recreation, Clothing
beverages, and tobacco and sports
* 2010 constant; Source: Indonesia Bureau of Statistics
Figure 25: Wheat (US$/50kg) Figure 26: Skimmed milk (US$/tonne)

9.5
5,500
5,000
8.5
4,500
7.5
USD / Metric tonne
4,000
average 2014: 3,752.9
USD / 50 kg
6.5 3,500
average 2014: 5.9

3,000
5.5
average 2015: 5.1
average YTD17: 2,418.8
2,500
average 2015: 2,164.9
4.5
average YTD17: 4.2
2,000 average 2016: 1,978.5
average 2016: 4.3
3.5 1,500
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

27 March 2017
Figure 27: Sugar (US$/50kg) Figure 28: Corn (US$/bushel)
35 8.5
average 2014: 4
7.5
30 average 2015: 3.6
average 2016: 3.4
average YTD17: 27.2 average YTD17: 3.5
6.5
USD / bushel
25
USD / 50 kg
average 2016: 24.8

5.5
20 average 2014: 21.1
4.5
average 2015: 16.8

15
3.5
10 2.5
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
The highest inflation is still seen outside Java. Java itself recorded its inflation at 2.59% in
2016, down from 3.12% in 2015. Sumatra saw its inflation higher at 4.53%, from 3.05%.
Figure 29: Indonesia—2016 inflation by region
Source: Bank Indonesia
Rising middle class and affluent consumers (MAC)

According to Boston Consulting Group, Indonesia's population is becoming more affluent.
The middle class and affluent consumers (“MAC”) population in Indonesia is expected to
reach half of the entire population by 2020 from the current 37%. We believe that
Indonesia offers the potential to be developed into a larger base economy given its high
population base with most being of productive age. Unemployment is benign, at 5.6%, and
declining. Meanwhile, Indonesia’s GDP per capita has risen to US$3,643 in 2016, from
US$3,268 in 2010.

27 March 2017
Figure 30: Indonesia's population is growing and Figure 31: Middle class and affluent consumers are
becoming more affluent prominent in Java and Sumatra
Poor Aspirant Emerging middle Rest of Indonesia Sulawesi Kalimantan
300
Middle Upper middle Affluent Sumatra Rest of Java Greater Jakarta
140
7 30
250 5 17
3 12
7 120
23 36 49
24 47
200 42
100
Population (millions)
Population (millions)
55
68 80 36
150 44
18
47
60
34
100 65 51 24
26
40
57
50 48 17 10
20 8
65 9
46 5
7
28 5
4
8 10
0 0
2012 2016 2020 2012 2016 2020
Source: Boston Consulting Group (BCG) Source: BCG
Figure 32: Indonesia's GDP per capita Figure 33: Average exchange rate IDR/USD
50 4000 15,000
48.6
IDR (million) USD (RHS) average 2014: 11,869
3900 average 2015: 13,377
45.7 14,500 average 2016: 13,314
3780
45 3756 3800 average YTD17: 13,337
3682 42.5 14,000
3643
3700
3574 13,500
40 38.9 3600
USD / IDR
3500
35.6 3398 13,000
35 3400
3268 33.0 12,500
3300
29.7 12,000
30 3200
3100 11,500
25 3000
2010 2011 2012 2013 2014 2015 2016 11,000
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17
Figure 34: Consumer Confidence index Figure 35: Retail Sales index
125
220
CCI February 2017: 117.1

120 210
213
200
115
190
110 180
170
105
160
100
150
95
140
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jan-14 Jan-15 Jan-16 Jan-17

27 March 2017
Figure 36: Bank Indonesia rate Figure 37: Unemployment rate in Indonesia
8.0 12%
11.2%
11%
7.5 10.3%
9.9%
10%
9.5%
9.1% 9.1%
7.0
9%
8.4%
8.1%
7.9%
8%
6.5 7.5%
7.1%
7%
6.0 6.1% 6.2% 6.2%

6.0% 6.1% 5.9%
6% 5.6%
5.5 5%
Mar-10
Mar-11
Mar-12
Mar-13
Mar-14
Mar-15
Mar-16
Sep-10
Sep-11
Sep-12
Sep-13
Sep-14
Sep-15
Sep-16
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Source: Bank Indonesia (BI) * Employment rates are as at August of every full year
Source: Indonesia Bureau of Statistics
Rising optimism
The highest earners hit Compared to the other emerging countries that we surveyed, Indonesians were still
the most, stable for the second in terms of personal finances. In fact, on average, Indonesian personal finances
low and middle income are better off than in the previous year, even though, on average, they are still lower than
two years ago. We believe that this is due to the still-low commodity prices, that only
started to pick up in early 4Q16.
Interestingly, for Indonesians, the highest earners are seeing weaker personal finances
versus the previous year. Lower-middle income earners, however, retained a somewhat
similar trend in the survey. We think that the significant shift for the highest earners could
be attributed to penalty payments during the tax amnesty programme, which are mostly
impacting them. The first phase of the tax amnesty programme ended on 30 September
2016. Middle-upper income earners saw their personal finances better off.
Figure 38: Indonesia—state of personal finances Figure 39: Indonesia—state of personal finances
over next six months, 2016 over next six months, 2017
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10% 10%
0% 0%
< 1000 1250 1750 2500 4000 6250 8750 > 10000 < 1000 1250 1750 2500 4000 6250 8750 > 10000
Income (IDR) This survey average Income (IDR) This survey average
Last survey average Last survey average
Source: Credit Suisse Emerging Consumer Survey 2016 Source: Credit Suisse Emerging Consumer Survey 2017
Indonesians are less optimistic about their income than last year, according to our survey,
even though they are still the most optimistic compared to the other emerging countries
that we surveyed (Indonesia maintains its No.1 rank). The reduced optimism compared to

27 March 2017
a year ago, in our view, could be attributed to Government of Indonesia's introduction of a

fixed formula (GDP growth plus inflation) to determine the percentage increase in
minimum wage starting from 2016; thus with inflation reaching its lowest level at 3.7% in
2016, expectations on household income declined.
Figure 40: Indonesians are less optimistic about their household income in the last 12 months*
Total Area Region Age Income
% of respondents Urban Rural Java Ex-Java 18-29 30-45 46-55 56-65 Low Mid High
2016
Down to flat 59% 57% 64% 55% 68% 59% 57% 64% 62% 75% 54% 47%
Flat to +10% 31% 34% 26% 35% 21% 31% 33% 29% 30% 20% 35% 31%
More than +10% 10% 10% 10% 10% 11% 11% 11% 7% 8% 6% 11% 23%
2015
Down to flat 57% 54% 63% 58% 56% 57% 54% 63% 62% 72% 52% 33%
Flat to +10% 30% 31% 27% 28% 33% 31% 31% 27% 21% 23% 33% 33%
More than +10% 13% 15% 10% 14% 11% 12% 14% 10% 17% 5% 15% 35%
2010
Down to flat 64% 62% 68% 65% 62% 60% 66% 63% 76% 70% 59% 46%
Flat to +10% 26% 27% 23% 26% 27% 28% 25% 27% 19% 24% 29% 35%
More than +10% 10% 10% 8% 9% 12% 11% 9% 9% 5% 6% 13% 19%
* Question: To what extent has your household income changed in the last 12 months?
Note: Income is on monthly basis: Low <Rp1.5 mn; Mid Rp1.5-7.5 mn, High >Rp7.5 mn
Figure 41: Indonesians are also expecting lower future household income than a year ago *
Total Area Region Age Income*
2016
Down to flat 43% 43% 41% 42% 44% 41% 42% 47% 46% 54% 39% 33%
Flat to +10% 37% 36% 38% 37% 37% 37% 37% 35% 41% 32% 38% 33%
More than +10% 20% 20% 20% 21% 19% 22% 21% 18% 13% 13% 23% 34%
2015
Down to flat 39% 35% 46% 38% 41% 37% 38% 41% 50% 54% 34% 19%
Flat to +10% 34% 35% 33% 32% 40% 36% 34% 35% 25% 31% 36% 37%
More than +10% 27% 30% 21% 30% 19% 27% 28% 24% 25% 15% 30% 43%
2010
Down to flat 37% 36% 39% 36% 39% 37% 37% 33% 49% 44% 28% 36%
Flat to +10% 38% 38% 39% 40% 33% 37% 37% 42% 37% 37% 41% 21%
More than +10% 25% 27% 21% 23% 28% 26% 26% 25% 14% 19% 30% 43%
* Question: In what way do you expect your household income to change in the next 12 months?
*Income is on monthly basis: Low <Rp1.5 mn; Mid Rp1.5-7.5 mn, High >Rp7.5 mn

27 March 2017
Figure 42: Minimum wage increase over the years in Indonesia

National minum wage (IDR) YoY growth
20%
2,075,529
2,000,000 1,933,633
1,703,617
1,506,238
1,500,000
15%
1,296,908
1,088,903
988,829
1,000,000 908,825
841,530
745,709
672,428 10%
603,327
500,000
0 5%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E
Source: Ministry of Labour
Time to spend!
As optimism and confidence grow, it appears Indonesians are ready to make major
purchases. Indonesia's rank among the countries surveyed has moved up to No. 3, from
No. 4, in the past two consecutive years—this is true, particularly in the rural area and in
Java, and for the middle- and higher-income earners. However, the optimism is yet to
reach the 2010 level.
Figure 43: In your opinion, is now a good time to make a major purchase? – Area
2016 2015 2010
% of respondents Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java
Excellent time 2% 2% 1% 2% 2% 5% 6% 4% 5% 6% 6% 7% 5% 6% 7%
Good time 34% 33% 34% 35% 30% 30% 31% 28% 29% 31% 50% 48% 54% 55% 39%
Not such a good time 60% 60% 61% 59% 63% 59% 57% 61% 59% 58% 40% 40% 39% 36% 48%
A bad time 5% 5% 5% 4% 5% 7% 6% 7% 7% 5% 4% 5% 3% 4% 6%
Figure 44: In your opinion, is now a good time to make a major purchase? – Age
2016 2015 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 2% 1% 2% 2% 2% 5% 5% 5% 6% 4% 6% 6% 6% 6% 6%
Good time 34% 37% 31% 35% 30% 30% 28% 33% 27% 25% 50% 53% 49% 50% 45%
A bad time 5% 5% 5% 3% 6% 7% 7% 6% 6% 8% 4% 3% 5% 4% 4%

27 March 2017
Figure 45: In your opinion, is now a good time to make a major purchase? – Income*
2016 2015 2010
% of respondents Total Low Mid High Total Low Mid High Total Low Mid High
Excellent time 2% 1% 1% 6% 5% 3% 6% 6% 6% 5% 7% 4%
Good time 34% 29% 35% 47% 30% 32% 29% 27% 50% 46% 53% 68%
Not such a good time 60% 64% 59% 44% 59% 57% 59% 65% 40% 44% 36% 21%
A bad time 5% 6% 4% 3% 7% 8% 6% 2% 4% 5% 3% 7%
* Income is on monthly basis: Low <Rp1.5 mn; Mid Rp1.5-7.5 mn,: High >Rp7.5 mn
Smartphones and With Indonesians getting wealthier and seeking to lead a better lifestyle, on top of their
internet access growing optimism and confidence, they are spending more on discretionary items.
continue to be the most Indonesia's per capita GDP reached US$3,643 last year, from US$2,357 in 2009. Similar
important items that to the previous years, Indonesians continue to spend the most on smartphones (+9%)
Indonesians are followed by internet access (+7%), holidays (+6%), property (+6%), two-wheelers (+5%),
spending on and instant noodles (+3%). Indonesians are not spending on TV (-8%), dairy (-6%),
carbonated drinks (-5%), mobile phones (-3%), extra education (-3%), cosmetics (-3%),
cigarettes (-2%), and four-wheelers (-1%). Interestingly, despite the high penetration of
instant noodles and two-wheelers, consumers continue to spend on these items.
Over the last seven Based on our survey, 2016 saw the highest spending momentum growth over the last
years, consumers are seven years. Our survey captured Indonesians' increasing interest in buying smartphones
switching to (+55%), internet access (+37%) and mobile phones (+17%), in line with their growing
discretionary items wealth, changing lifestyle, and technological advancement. This is followed by the
spending increase on two-wheelers (+16%) and property (+13%) as financing for both has
become more affordable. On the other hand, the areas on which consumers have been
spending less and less over the last seven years are cigarettes (-13%), followed by
cosmetics (-10%) and dairy (-8%).
Figure 46: Indonesia's spending momentum in 2016 Figure 47: Indonesia's spending momentum in 2016
vs 2015 (a year ago) vs 2010 (seven years ago)
10 Smartphone
60 Smartphone
Internet
8 access
Property 50
6
Internet
Holidays access
40
4 2-wheelers
2 30
Instant noodle
0 4-wheelers 20 Mobile phones 2-wheelers

Cigarettes
-2 Holidays
10 Property
Carbonated
-4 Extra Cosmetics Mobile phones 4-wheelers drinks Instant noodle
education Dairy 0
-6 Dairy
Carbonated Cosmetics
TV drinks
-10 TV
-8
Cigarettes
-10 -20
0 20 40 60 80 100 0 20 40 60 80 100
2016 respondents that own or have bought each item (%) 2016 respondents that own or have bought each item (%)
Maximum use of Interestingly, while spending on smartphones and internet access continues to rise, the
internet is for use of internet in Indonesia is mostly to access social media (39%) and instant messaging
accessing social media (25%), rather than to shop online (4%). While this is also true for most of the other
emerging countries that we surveyed, Indonesia ranks the highest on this parameter. This
might be one of the reasons as to why e-commerce in Indonesia is yet to pan out as fast
as other countries have. Another possible reason for the country's still-low internet
penetration (less than 50%) is higher cost. Despite coming from a lower base comparison,
the rise of internet penetration definitely offers significant potential.
27 March 2017
Figure 48: Social media is the main purpose for needing internet access
45
Indonesia Mexico Russia Brazil Turkey India China
39
40
35 33
30
27
% of respondents
26 25
25
25 24
22
21 21
21
19 19
20 19
18 18 18
17
17
15 15
15 14 14
13 12
11 11 11 11
11
10 10 10
9
10 8 8
9
7 7
6 6
6 5
4
5 3
3
4
2 2 2
1 1 1 0
- 0
-
Social network Music & videos Instant messaging Gaming Banking Shopping Travel Other
Figure 49: Internet penetration in Indonesia is the

lowest among other countries… Figure 50: ...but it has outgrown in the last six years
20% 60%
54%
51%
Indonesia
50%
15%
Internet penetration growth
India 40%
Internet penetration
40%
South Africa Brazil
10%
29%
Mexico
30%
Turkey
5% Russia
20%
15%
China 14%
9%
0% 10%
45% 55% 65% 75% 85% 95%
0%
-5% 2010 2011 2012 2013 2014 2015 2016
Size of the bubble represents each country's size of population relative to one another Source: Credit Suisse Indonesia Consumer Survey 2017
: Represents country's population relative to one another.
Indonesia differs from While the other emerging countries that we surveyed prefer to spend more on fashion
others apparel (65%), holidays (60%), perfumes (49%), and shoes (45%) among others,
Indonesians, on the other hand, would like to spend more on holidays (70%), instant
noodles (64%), bottled water (62%), and dairy (50%), among others. Only 48% of the
Indonesians we surveyed would prefer to spend on fashion apparel and only 42% on
perfumes. We believe that this is because Indonesians are still planning to spend more on
basic items (staples) than discretionary items, when it comes to allocating their spending,
with the exception of holiday.

27 March 2017
Figure 51: Indonesians would want to spend more on holidays and staples
80%
70% 65%
60%
57%
60%
49% 49%
50% 45%
38%
40% 36%
33%
30% 26%
19% 19%
20% 16% 15%
15% 14%
10% 6% 5%
3% 3%
70% 64% 62% 50% 48% 42% 37% 35% 26% 21% 19% 17% 16% 11% 11% 5% 3% 2% 2% 1%
0%
Car
Fashion apparel
Perfumes
Tablet
Instant noodles
Dairy
Carbonated drinks
Cigarettes
Motorbike
Watches
Leather goods
Jewellery
Bottled water
Education
Sport shoes
Notebook PC
Desktop computer
Holiday
Mobile phones
Smartphone
Indonesia 2016 Indonesia 2010 2016 emerging market average
* Instant noodle – emerging market average consists of only two countries: Indonesia (64%) and India (51%)
** Motorcycle – emerging market average consists of only Indonesia (26%).
Spending on food This is in line with food being the largest component in Indonesians' monthly spending
increased basket, much higher than the average eight emerging countries that we surveyed.
According to our survey, spending on food accounted for 35% of the total spending in
Indonesia in 2016, up from 32% in the previous year; followed by spending on housing
and public utilities at 8%, down from 11% in the previous year. Savings dropped to only
8% of the total, from 12% in the previous year.
Figure 52: 32% of monthly spending by Indonesians

was on food in 2015… Figure 53: …and it increased to 35% in 2016
Indonesian monthly spending Overall survey average Indonesian monthly spending Overall survey average
40% 40%
35%
35% 32% 35%
31%
30% 30%
24%
25% 25%
20% 20%
15% 15%
12%
11%
10% 10% 8% 8%
5% 5%
4% 4%
5% 3% 3% 5% 3%
4%
2%
3%
1% 1% 1% 1%
0% 0%
Healthcare
HPC
HPC
Clothing
Clothing
Other
Other
Food
Entertainment
Savings
Public Utilities
Food
Entertainment
Savings
Public Utilities
Autos
Autos
Education
Property & Local
Healthcare
Education
Property & Local

Housing &
Housing &
Travel &
Travel &
Taxes
Taxes
Savings declined With the decline in savings, Indonesia's rank remains the lowest among the emerging
countries we surveyed. Savings only accounts for 10.3% of total income—versus China's
(which remains the highest) 40.7%—followed by Russia's 24.1% and Turkey's 21%.

27 March 2017
Figure 54: China has the highest savings Figure 55: Indonesia's savings percentage in total
percentage in total income income declined in 2016
45% 16%
40.7% 14.8%
40%
14%
35% 12.2% 12.3%
11.6%
12% 10.8%
Savings as % of income
30% 10.4% 10.3%
24.1%
25% 10%
21.0%
20%
8%
13.9%
15% 12.2% 11.3% 10.5% 10.3% 6%
10%
5% 4%
0% 2%
India
China
Russia
Mexico
Brazil
South
Turkey
Indonesia
Africa
0%
2010 2011 2012 2013 2014 2015 2016
Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Company data, Credit Suisse estimates
Indonesians are not migrating

In Indonesia, fewer people are interested in migrating, compared to those in China and
India. In fact, the number of people not migrating has increased. Some 15% Indonesians
migrated in 2016 as compared to 19% in China and 36% in India.
However as a percentage to total population, Indonesians were the highest to move in
order to earn a better income (92%), compared to those in China (69%) and India (86%).
Figure 56: Fewer Indonesians are migrating

Migrated Did not migrate Moved to earn better income
100%
93% 92%
86%
90%
79%
80%
69%
70% 66%
60%
50%
40% 64%
30% 76% 74%

81% 81%
20% 85%
36%
24% 26%
10% 19% 19% 15%
0%
2015 2016 2015 2016 2015 2016
China India Indonesia

27 March 2017
Automotive sector
Key stock
Astra International
■ Astra’s auto business benefits from lower financing rates; thus in the four-wheeler (4W)
market, the company is likely to gain by launching new affordable models (the likes of
low cost green car, or “LCGC”), while its two-wheeler (2W) market share gain is
dependent on new model launches and improvement in after-sales services.
■ Rising commodity prices should also benefit Astra, as people living in commodity
resource-rich areas have better purchasing power.
Four-wheelers
According to Indonesia Auto Association (Gaikindo), Indonesia's 4W sales reached 1.06
mn in 2016, up 5% YoY—the first year of positive growth after declining for three years
from the peak of 1.2 mn units in 2013-14. The improvement, we believe, could be
attributed to a few factors: (1) lower financing rates, (2) launching of new affordable
models, (3) increase in commodity prices, and (4) a better macroeconomic environment
than 2015.
Last year, about 20% of the auto sector’s sales were contributed by low-cost green cars
(LCGC), which were priced below Rp150 mn/unit (US$12k). Astra launched two seven-
seater LCGCs (Toyota Calya and Daihatsu Sigra) in 2H16, which have been well accepted
in the market. Overall, we remain positive on Indonesia's structural story as 4W
penetration has only reached 5% as compared to its ASEAN peers' 10-15%.
Figure 57: Indonesia has lower 4W penetration than Figure 58: …but, historically, sales pick up with
peers… higher coal prices
40% 120%
35% 100%
35%
30% 80%
30%
27% 60%
25% 40%
20%
20%
0%
15%
-20%
10%
10% -40%
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Apr-16
Dec-16
Apr-10
Aug-10
Apr-11
Aug-11
Apr-12
Aug-12
Apr-13
Aug-13
Apr-14
Aug-14
Apr-15
Aug-15
Aug-16
5%
5%
2%
1%
0% Coal Price YoY 3mma 4W sales YoY
PH IN ID TH TW KR MY
Source: CEIC Source: Bloomberg, Gaikindo (Indonesia 4W Association)
Our survey indicates that while Indonesia's 4W penetration remained low at 6% (a slight
decline from 7% in the previous survey), interestingly, there is a shift in the ownership
profile. The 4W ownership in rural areas declined from 6% in 2015 to 4% in 2016;
however, in urban areas, it increased to 8% from 7% in the previous year. The increase in
urban ownership in 2016 was driven by buyers who live outside Java—they might have
benefited from higher commodity prices (palm oil and coal).

27 March 2017
Compared to our previous surveys, we observed higher confidence among the

respondents on a probable purchase of 4W within the next twelve months (11%) than the
previous year (8%), or seven years ago when we started out (7%). We believe the
increased optimism to purchase 4W is due to: (1) cheaper financing driven by lower rates
and extension of loan tenor; (2) more affordable LCGC models (the likes of Toyota Calya
and Daihatsu Sigra, which were launched last year); and (3) a modest recovery in the
economy. And according to our survey, the increase is mostly on the back of the low-
income segment at 8% of our respondents—up from 6% in 2015, and 3% in 2010.
Figure 59: Increased confidence in the low-income segment to buy a 4W

% of respondents Urban Rural Java Ex Java 18 - 29 30 - 45 46 - 55 56 - 65 Low Mid High
2016
Ownership 6% 8% 4% 6% 7% 4% 6% 11% 8% 1% 7% 30%
Probability of purchase in 12M
Potentially yes 11% 11% 10% 13% 8% 10% 12% 11% 8% 8% 12% 18%
Unsure 38% 39% 36% 52% 49% 39% 35% 37% 43% 37% 38% 28%
Potentially no 51% 50% 54% 35% 44% 50% 53% 52% 49% 54% 50% 53%
2015
Ownership 7% 7% 6% 7% 6% 6% 7% 5% 9% 3% 7% 25%
Potentially yes 8% 9% 7% 9% 8% 9% 8% 11% 4% 6% 9% 16%
Unsure 28% 29% 27% 61% 68% 27% 29% 29% 30% 30% 27% 31%
Potentially no 63% 62% 66% 30% 24% 65% 63% 60% 66% 64% 64% 53%
2010
Ownership 6% 6% 5% 6% 6% 3% 7% 6% 10% 1% 8% 50%
Potentially yes 7% 8% 6% 6% 8% 4% 8% 10% 6% 3% 10% 38%
Unsure 26% 27% 23% 66% 69% 30% 23% 25% 24% 23% 27% 42%
Potentially no 67% 65% 71% 27% 22% 66% 69% 65% 71% 74% 63% 21%
* Income is on monthly basis: Low <Rp1.5 mn; Mid Rp1.5-7.5 mn, High >Rp7.5 mn
Toyota widened the gap again following the launch of its LCGC Calya
Based on our 2015 survey, the respondents willing to purchase a Toyota car fell by a huge
swing as Honda was catching up with new hit models such as Honda Mobilio, BR-V and
HR-V. However, in 2016, Toyota managed to widen the gap again with new models,
namely new Toyota Innova (completely new) and Toyota Calya (7-seater LCGC with a
pricing of around US$11k). These two models have proven to be the missing catalyst that
Toyota needs to widen its gap from Honda.
The market right now is turning into a duopoly between Toyota and Honda. Other players
such as Mitsubishi and Suzuki have not really launched new models while Honda and
Toyota are playing catch-up. We expect things to change this year as Mitsubishi is
expected to launch its new MPV in 2H17, and a new entrant from China (Wuling) is
expected to tighten the competitive landscape.

27 March 2017
Figure 60: Astra gained market share in 2016 on the back of LCGCs
Astra 4W Honda
70%
60%
50%
40%
30%
20%
10%
0%
May-11 Nov-11 May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 Nov-15 May-16 Nov-16
Source: Company data,
Figure 61: Toyota maintained its market leader in 4W, gaining back some of its lost market share
% of respondents Urban Rural Java Ex-Java 18 - 29 30-45 46-55 56-65 Low Mid High
2016
Toyota 41% 40% 42% 37% 56% 46% 37% 39% 40% 31% 43% 50%
Honda 28% 25% 33% 31% 15% 23% 29% 32% 40% 26% 29% 29%
Daihatsu 10% 12% 4% 10% 9% 11% 10% 10% 0% 21% 6% 7%
Nissan 4% 2% 6% 4% 3% 0% 7% 3% 0% 0% 5% 0%
BMW 2% 2% 1% 2% 3% 3% 1% 3% 0% 3% 2% 0%
Mazda 2% 2% 3% 3% 0% 5% 1% 0% 0% 3% 2% 7%
Others 14% 16% 10% 14% 15% 12% 14% 13% 20% 18% 12% 7%
2015
Toyota 23% 17% 37% 19% 36% 12% 36% 20% 17% 14% 26% 21%
Honda 22% 24% 18% 22% 24% 24% 18% 24% 33% 21% 21% 36%
Daihatsu 10% 12% 5% 11% 6% 8% 12% 8% 17% 3% 13% 7%
Nissan 5% 7% 3% 6% 3% 4% 2% 12% 17% 3% 7% 0%
BMW 8% 11% 3% 9% 6% 10% 8% 8% 0% 14% 8% 0%
Mazda 3% 4% 0% 4% 0% 6% 0% 0% 17% 7% 1% 7%
Others 28% 25% 34% 29% 24% 35% 24% 28% 0% 38% 24% 29%
2010
Toyota 52% 49% 58% 45% 63% 43% 50% 63% 63% 52% 51% 60%
Honda 15% 14% 19% 15% 17% 17% 15% 15% 13% 23% 13% 10%
Daihatsu 10% 13% 3% 15% 2% 11% 13% 4% 0% 3% 13% 0%
Nissan 3% 3% 3% 4% 2% 3% 5% 0% 0% 3% 2% 10%
BMW 2% 1% 3% 1% 2% 0% 2% 0% 13% 3% 1% 0%
Mazda 1% 0% 3% 0% 2% 3% 0% 0% 0% 3% 0% 0%
Others 18% 20% 11% 21% 13% 23% 15% 19% 13% 13% 19% 20%
Two-wheelers
According to AISI (Indonesia Motorcycle Association), 2W sales reached 5.9 mn units in
2016, or 8% lower YoY. This came after a 25% drop in 2015, as 2W sales were at their
peak of 7.9 mn units in 2014. We view this as underpinned by the already high penetration

27 March 2017
of 2W. In our view, 2017’s sales are better as the increase in commodity prices has
historically been positive for 2W sales.
Figure 62: 2W sales tend to improve with

commodity prices, including coal price… Figure 63: …as well as CPO prices
Coal Price YoY 3mma 2W sales YoY CPO Price YoY 3mma 2W sales YoY
120%
60%
100%
80%
40%
60%
20%
40%
20%
0%
0%
-20%
-20%
-40%
-40%
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-14
Dec-15
Dec-16
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Dec-14
Dec-09
Dec-10
Dec-11
Dec-12
Dec-13
Dec-15
Dec-16
Jun-10
Jun-11
Jun-12
Jun-13
Jun-14
Jun-15
Jun-16
Source: Company data, Credit Suisse estimates Source: Company data, Credit Suisse estimates
2W penetration at 89% was at its highest level since we started this survey in 2010.
Interestingly, those who own more than one motorcycle dropped from 37% in 2015 to 29%
in 2016. Moreover, penetration outside the Java region increased to 88% , from 81% in the
previous year; according to AISI (Indonesia Motorcycle Association) 2W sales declined
10% YoY in 2016. This phenomenon, we believe, indicates that the secondary market is
becoming more active as well as competitive in terms of pricing. Our conclusion is also
supported by the increase in average motorcycle ownership to four years, from 3.7 years
in the previous year’s survey.
Contrary to the survey result for 4W, the respondents were not as keen to purchase a 2W
in the next 12 months: the respondents declined slightly from 28% to 26%. We believe this
could mean two things: (1) the economy in the lower stratum of the society has not really
picked up, while inflation surprises on the upside further impede purchasing power, or (2)
2W penetration is already too high.

27 March 2017
Figure 64: Two-wheeler ownership demographics

2016
Ownership % respondents 89% 89% 87% 89% 88% 89% 91% 83% 85% 81% 92% 93%
Number of 2W(s) per household
1 Motorbike % owners 71% 69% 76% 73% 67% 70% 74% 71% 65% 83% 67% 49%
> Motorbike % owners 29% 31% 24% 27% 33% 4% 5% 4% 4% 17% 33% 51%
Period purchased Years ago 4.1 4.1 3.9 4.0 4.2 3.6 4.3 4.6 4.3 4.1 3.9 3.9
Ownership turnover Years 5.3 5.5 5.0 5.1 5.3 4.8 5.6 6.1 5.1 4.5 5.7 5.4
Potentially yes % respondents 26% 26% 24% 27% 22% 24% 28% 26% 21% 27% 26% 27%
Unsure % respondents 41% 42% 39% 39% 46% 43% 39% 34% 47% 39% 41% 20%
Potentially no % respondents 34% 32% 36% 34% 32% 33% 32% 40% 32% 34% 33% 53%
2015
2010
* Income is on monthly basis: Low <Rp1.5 mn; Mid Rp1.5-7.5 mn, High >Rp7.5 mn.
Honda stays on top

Honda and Yamaha remain the two favourite brands in 2W in Indonesia, accounting for
95% of the total market according to our survey. Among the spectrum of earners, Honda is
popular among the low- and the middle-income segments, while Yamaha is popular with
the high-income segment.
Honda is also gaining traction among the younger generation compared to the previous
year, which we believe is attributable to its new model launches, which cater to the taste of
the younger generation.

27 March 2017
Figure 65: Honda maintains market leadership, gaining more market share than last year
% of respondents Urban Rural Java Ex-Java 18 - 29 30-45 46-55 56-65 Low Mid High
2016
Honda 59% 56% 64% 64% 46% 56% 60% 62% 60% 60% 60% 38%
Yamaha 36% 39% 29% 32% 45% 37% 35% 34% 32% 32% 36% 56%
Suzuki 5% 4% 5% 3% 8% 6% 4% 4% 5% 6% 4% 3%
Kawasaki 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Others 1% 1% 2% 1% 1% 1% 1% 1% 3% 2% 0% 3%
2015
Honda 57% 53% 64% 62% 43% 51% 59% 61% 62% 58% 55% 65%
Yamaha 36% 39% 28% 31% 47% 40% 34% 30% 32% 34% 37% 33%
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 1% 1% 1% 1% 0% 1% 0% 2% 1% 2% 1% 2%
2010
Honda 50% 48% 54% 54% 42% 46% 54% 48% 53% 50% 50% 45%
Yamaha 33% 36% 28% 31% 37% 35% 30% 39% 24% 32% 34% 18%
Suzuki 13% 12% 14% 11% 17% 15% 12% 7% 18% 15% 11% 27%
Kawasaki 2% 2% 2% 2% 1% 2% 1% 2% 4% 1% 2% 9%
Others 2% 2% 3% 2% 3% 2% 2% 4% 2% 3% 2% 0%
* Income is on monthly basis: Low <Rp1.5mn; Mid Rp1.5-7.5mn, High >Rp7.5mn

27 March 2017
Food and beverages

Key stocks
Indofood CBP
■ Indomie, Sarimi, Supermie and PopMie are the main brands that are favoured by
consumers, and continue to help support the company’s free cash flow—as noodles
continue to be defensive staples for Indonesians. Indomilk is gaining popularity in the
dairy segment, as does Club in bottled water, while Pepsi maintains its favoured status
in carbonated drinks.
Unilever Indonesia
■ The brand Blue Band continues to be the leader in margarine. The F&R (Food and
Refreshment) division is a smaller portion for the company than the HPC (Home and
Personal Care) one, but it offers more upside potential given the growing wealth of
consumers.
HM Sampoerna
■ The largest cigarette producer in Indonesia is facing the challenge of lower
consumption, given higher prices and changes in lifestyle. Its brands continue to
appeal more to the younger generation, and those in urban areas (in Java) and within
middle- and higher-income segments.
Gudang Garam
■ The second-largest cigarette producer in Indonesia is facing the challenge of lower
consumption, given higher prices and changes in lifestyle. Its brands appeal to people
living in rural areas, outside Java, the middle-aged generation, and the higher-income
segment. Gudang Garam Surya came out to be most favoured brand in our survey.
Unrivalled noodles consumption

Instant noodles Consumption of instant noodles continues to remain high at 94%, with the urge to
consume more also remaining high at 64% of total respondents. This is the highest among
the other staples that we surveyed (carbonated drinks, bottled water, dairy products, and
cigarettes), and higher than a year ago of 58% of total respondents that wanted more
noodles.
The popularity of noodles remains across the board, even though in urban areas it is
getting more popular than in rural. We believe this might be due to the launch of premium
noodle brands (Real Meat by Indofood and Bakmi Mewah by Mayora Group), which are
targeting a niche market. Noodles are popular across all generations, even though the
younger generation tends to consume more than the older. While it is consumed broadly
across all income segments, there is a shift towards lower consumption by the middle- and
higher-income segments, although their level of consumption remains high.
We still believe that for Indonesians noodles are basic staples, such as rice, as they are
filling and the most affordable source of carbohydrates; the lower-income segment is seen
to be more defensive with the consumption trend.
Carbonated drinks Consumption of carbonated drinks declined to 61% of total respondents, from 66% in the
previous year. This is at a similar level to seven years ago, when we started our consumer
survey. Those that would likely want to consume more is somewhat maintained, at 58%.
The popularity of carbonated drinks remains in urban areas and in Java, mostly by the
younger generation, and among the middle and higher-income segment.
Bottled water

27 March 2017
Bottled water, seen both as convenient and healthier (than carbonated drinks), continues
be popular with 88% of the respondents, rising from 82% when we first did the survey
seven years ago. Popularity remains in urban areas, across all generations, but mostly
towards the younger generation and across all income segments, even though we saw
higher consumption for the higher-income segment.
Dairy products To our surprise, consumption of dairy products (includes sweet condensed milk, liquid
milk, margarine, and cheese) fell to 70% of respondents, from 76% a year ago, and 78%
in 2010. Consumers seem to prefer bottled water to dairy products. Interestingly, the
decline in the consumption of dairy products is mostly in urban areas and in Java, while
outside Java, consumption of dairy products increased to 71% of total respondents, from
63% in the previous year. The highest consumption of dairy products remains with the
younger generation and the middle-income segment, while we observe the most decline in
Cigarettes According to our survey, cigarette consumption in Indonesia declined to 51% of total
respondents, from 57% in the previous year, and 64% in 2010. This is in line with the
industry volume as reported by Philip Morris International—that volume was down 1% to
316 bn sticks in FY16.
The decline in cigarette consumption, according to our survey, was mostly in Java (from
58% of respondents in 2015, to 50% in 2016), while the outside Java region was stable.
Those in rural areas saw the most decline (-7%) as compared to those in urban (-5%),
which leads us to believe that the decline in consumption is due to: (1) affordability—as
cigarette prices continue to rise and are getting more expensive, which is why the low
income segment saw a 4% decline, (2) shift towards healthier lifestyle—we saw a 6%
decline for the middle- and higher-income segment, and a decline in the younger
generation as well.
Figure 66: Consumption of food and beverages—by area

2016 2015 2010
% of respondents Total Urban Rural Java Ex-Java Total Urban Rural Java Ex-Java Total Urban Rural Java Ex-Java
Instant noodles
-in the past 3 months 94% 95% 92% 95% 91% 95% 94% 97% 97% 91% 96% 97% 95% 98% 93%
-more in the next 12 months 64% 62% 69% 68% 55% 58% 58% 57% 64% 43% 63% 65% 59% 62% 63%
Carbonated drinks
Bottled water
Dairy products
Cigarettes

27 March 2017
Figure 67: Consumption of food and beverages—by age and income

2016 2015 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
Instant Noodles
-in the past 3 months 96% 95% 90% 85% 93% 94% 84% 96% 97% 91% 89% 93% 96% 99% 96% 97% 95% 92% 95% 97% 100%
-more in the next 12 months 65% 66% 60% 58% 66% 64% 60% 58% 58% 57% 57% 57% 56% 76% 62% 63% 61% 62% 62% 64% 60%
Carbonated drinks
Bottled water
Dairy products
Cigarettes
Brand preference
In terms of preference for brands in staples, the survey shows respondents remain
relatively indifferent since we started our survey seven years ago. Preference towards
domestic brands in the staples sector in Indonesia continues to remain high, if not rising,
except for carbonated drinks where the sector is dominated by multinational companies.
Nevertheless, multinational companies do own domestic brands through acquisitions, such
as cigarettes Dji Sam Soe and A-Mild by HM Sampoerna (owned by Philip Morris
International), and bottled water Aqua by Danone.
Figure 68: Indonesians prefer domestic brands, except for carbonated drinks…
2010 2011 2012 2013 2014 2015 2016
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Instant noodles Cigarettes Dairy product Bottled water Carbonated drinks
Question: Which brands of goods have you purchased in the last three months?

27 March 2017
Figure 69: …this is more or less true for all income segments
2010 2011 2012 2013 2014 2015 2016
99% 99% 100% 99% 100%
99% 98% 97%
100% 97% 97% 97% 97%
93%
92%
89%
88%
90% 86%
83%
79%
80% 75% 76%
73%
70%
64%
60% 57%
50%
40%
30%
20%
11%
8% 8%
10% 4%
3%
0%
0%
Low Mid High Low Mid High Low Mid High Low Mid High Low Mid High
Instant noodles Bottled water Cigarettes Dairy product Carbonated drinks
Question: Which brands of goods have you purchased in the last three months?
At the same time, Indonesians prefer brands that are well recognised. The highest
preference for non-major brands is among carbonated drinks, whose popularity is the
lowest compared to other staples (instant noodles, dairy products, and bottled water).
Non-major cigarette brands are also popular, given that the major brands are pricier.
We classify non-major brands as those outside of the big four cigarette producers (HM
Sampoerna, Gudang Garam, Djarum, and BAT Indonesia). Meanwhile, in bottled water,
fewer respondents prefer non-major brands, but we believe that this might be skewed,
given that the brand "Aqua" (by Danone) is identical to bottled water.
Figure 70: Indonesians' preference for non-major brands
2010 2011 2012 2013 2014 2015 2016
30%
25%
20%
15%
10%
5%
0%
Bottled water Carbonated drinks Cigarettes Dairy products Instant noodles
Instant noodles
Consumption of instant noodles continues to remain high at 94%, with the urge to consume
more also remaining high at 64% of total respondents. This is the highest among the other
staples that we surveyed (carbonated drinks, bottle water, dairy products, and cigarettes),
and higher than a year ago of 58% of total respondents who wanted more noodles.

27 March 2017
Popularity of noodles remains across the board, even though in urban areas they are
getting more popular than in the rural. We believe this might be due to the launch of
premium noodle brands (Real Meat by Indofood and Bakmi Mewah by Mayora Group),
which target a niche market. Noodles are popular across all generations, even though the
younger generation tends to consume more than the older. While it is broadly consumed
across all income segments, there is a shift to lower consumption from the middle and
higher-income segments, although their level of consumption remains high.
For Indonesian,s we continue to believe that noodles are basic staples, such as rice, as
they are filling and the most affordable source of carbohydrates—the lower income
segment is seen to be more defensive with the consumption trend.
Figure 71: Consumption of instant noodles—by area

2016 2015 2010
Figure 72: Consumption of instant noodles—by age and income

2016 2015 2010
Indomie is the most Popularity of the No. 1 instant noodle brand, “Indomie”—manufactured by Indofood CBP,
popular instant noodle while the brand is owned by parent company, Indofood Sukses—continued to rise, to 40%
brand of total respondents, from 37% in the previous year. Its popularity remains across the
board. In the urban area Indomie's popularity is growing, as well as outside the Java
region. Its popularity has risen the most among the older generation and lower- and
middle-income segments. We think that the variety of products that the company
continuously launched has helped make consumers sticky with the brands. In addition to
Indomie, Indofood Sukses also owns brands like Supermie, Sarimi, and Pop Mie, which
were liked by a combined 64% of our total respondents, up from 62% in the previous year.

27 March 2017
Figure 73: Indofood's recently launched noodle products

Date Product
17-Oct-16 Supermi Chicken Opor
16-May-16 Indomie Bite Mie -three flavours: pizza barbeque, seaweed, tempura
16-May-16 Indomie Real Meat -two flavours: chicken mushroom, beef rendang
1-Feb-16 Indomie soupy flavor with no soup -two flavours: ayam bawang (garlic chicken broth),
soto
15-Oct-15 Indomie My Noodlez -first instant noodles made for children
-three flavours: salmon teriyaki, seaweed, pizza
cheese
18-Jun-15 Pop Mie Curry -two flavours: milk curry, cheese curry
18-Feb-15 Supermi Rasa Sop Buntut (oxtail soup flavor)
Sarimi Mie Goreng Rasa Pecel (with crunchy peanut sauce)
Sarimi Mie Goreng Rasa Sate Ayam (chiken satay)
17-Sep-14 Indomie Kuliner Indonesia series -Indomie Goreng Dendeng Balado
-Indomie Soto Lamongan
6-Feb-14 Sarimi Isi 2 Rasa Ayam Bawang (garlic chicken broth)
Sarimi Isi 2 Rasa Baso Sapi (beef meatballs)
16-Jan-14 Indomie Iga Penyet
14-Nov-13 Indomie Taste of Asia series - Indomie Tom Yum (Thailand style)
-Indomie Bulgogi (Korean style)
-Indomie Laksa (Singapore style)
13-Oct-13 Supermi Rasa Semur Ayam
8-Jun-13 New Pop Mie - relaunch
7-Jun-13 Sarimi Isi 2 Goreng Rasa Ayam Kremes
Sarimi Rasa Soto Koya Jeruk Nipis
6-Jun-13 Indomie Goreng Cabe Ijo
1-Jun-13 Indomie Goreng Rendang
Source: Indofood CBP website
Mie Sedap remains the The brand “Mie Sedap”, owned by the unlisted Wings Group, maintained its second
second preferred brand position, with 28% of total respondents, up from 26% in the previous year. The brand is
liked mostly in rural areas and outside Java, across all age groups—particularly it is more
popular with the younger generation, but mostly among lower- and middle-income
segments. This is the difference between Mie Sedap and Indomie. Indomie is mostly liked
in urban areas and in Java, across all age groups, but it is mostly popular among the older
generation, and across all income levels, but mostly among the middle- and higher-income
segments.
Smaller brands have The rise in popularity of both Indomie and Mie Sedap comes at the expense of smaller
become less preferred brands. Each Sarimi and Supermie are liked by 9% of our total respondents, down from
10% in the previous year, while other small brands combined only account for 8% of the
total respondents, down from 12% last year.
Popularity of cup The exception is Pop Mie, a cup noodle brand saw an increase to 6% of total respondents,
noodle rising from 5% in the previous year, and has doubled from 3% in 2010, when we first did the
survey. Pop Mie is liked by those living in urban areas, in Java, among the younger
generation (due to convenience), and the higher income segment (due to higher pricing as
compared to the packed noodle). This can be a good indication that consumers are getting
wealthier, and thus seeking convenience.

27 March 2017
Figure 74: Indomie, followed by Mie Sedap, remains as the most popular brand in instant noodle
2016
Indomie 40% 43% 36% 42% 36% 40% 39% 41% 47% 38% 41% 42%
Mie Sedap 28% 25% 34% 26% 33% 28% 29% 28% 26% 29% 28% 18%
Sarimi 9% 8% 12% 9% 10% 8% 10% 8% 9% 11% 8% 12%
Supermi 9% 9% 9% 9% 9% 9% 9% 9% 9% 8% 9% 12%
Popmie 6% 7% 3% 7% 2% 7% 6% 4% 2% 4% 6% 12%
Others 8% 9% 6% 7% 9% 8% 7% 10% 7% 10% 7% 3%
2015
Indomie 37% 39% 33% 40% 30% 37% 37% 36% 38% 35% 38% 41%
Mie Sedap 26% 24% 31% 25% 30% 26% 27% 27% 26% 29% 26% 18%
Sarimi 10% 10% 11% 10% 11% 9% 11% 9% 11% 10% 9% 16%
Supermi 10% 10% 10% 10% 10% 9% 10% 10% 10% 12% 9% 8%
Popmie 5% 6% 3% 5% 3% 5% 5% 5% 2% 3% 6% 6%
Others 12% 12% 12% 10% 15% 12% 11% 13% 13% 12% 12% 11%
2010
Indomie 37% 40% 31% 41% 30% 38% 36% 39% 37% 36% 39% 39%
Mie Sedap 29% 26% 35% 28% 31% 30% 28% 29% 36% 32% 27% 24%
Sarimi 7% 5% 10% 8% 5% 6% 8% 7% 7% 8% 6% 4%
Supermi 12% 11% 13% 11% 13% 11% 12% 12% 11% 12% 12% 6%
Popmie 3% 4% 1% 4% 2% 4% 3% 2% 1% 2% 5% 6%
Others 12% 13% 9% 8% 19% 12% 12% 11% 8% 11% 12% 20%
Carbonated drinks
Consumption of carbonated drinks declined to 61% of total respondents, from 66% in the
previous year. This is at the similar level seven years ago, when we first did the survey.
Those that would likely want to consume more is somewhat maintained, at 58%. The
popularity of carbonated drinks remains in the urban area and in Java, mostly by the
younger generation, and among the middle- and higher-income segments.
Figure 75: Consumption of carbonated drinks—by area

2016 2015 2010
Figure 76: Consumption of carbonated drinks—by age and income

2016 2015 2010
The popularity of products from Coca-Cola Amatil remains, with a combined 76% of the
total respondents consuming Coca-Cola, Sprite, and Fanta, as compared to 70% in the
previous year. However, this is still below the 83% it had in 2010 when we first did the
survey. Coca-Cola has seen a slight increase in preference at 28%, well liked in both
urban and rural areas, mostly in Java, for most of the lower-income segment.

27 March 2017
Sprite and Fanta were liked by 24% of the total respondents, each—up from 22% and
21%, respectively, in the previous year. Sprite is liked in rural areas, outside Java, mostly
among the lower- and middle-income segment. Fanta, on the other hand, is liked mostly
by the higher-income segment, and is popular in urban areas and in Java.
Interestingly, Big Cola (manufactured by Spain-based AjeGroup) continues to see
popularity decline—to 12% from 16% in the previous year, from its peak of 20% in 2014.
While its popularity came from being cheaper than Coca-Cola in a larger volume, this
might not have sustained, when Coca-Cola started offering promotions as well.
Pepsi Cola, on the other hand, remains at 4% in popularity. It continues to be the fifth
ranked, and it is manufactured by PT Pepsi-Cola Indobeverages, a joint-venture between
Indofood CBP and Japan-based Asahi Group Holdings.
Figure 77: Coca-Cola continues to dominate in carbonated drinks

2016
Coca-Cola 28% 28% 28% 29% 26% 29% 24% 7% 2% 30% 28% 28%
Sprite 24% 22% 32% 23% 29% 23% 21% 6% 2% 25% 24% 21%
Fanta 24% 25% 21% 25% 22% 24% 21% 5% 2% 23% 25% 27%
Big Cola 12% 12% 13% 11% 14% 12% 10% 3% 1% 15% 11% 8%
Pepsi Cola 4% 5% 2% 4% 3% 5% 3% 1% 0% 2% 4% 3%
Others 8% 9% 5% 8% 6% 7% 22% 78% 93% 5% 8% 13%
2015
Coca-Cola 27% 28% 26% 28% 24% 28% 25% 8% 2% 27% 28% 23%
Sprite 22% 21% 26% 22% 23% 22% 21% 6% 3% 24% 22% 20%
Fanta 21% 21% 21% 20% 23% 21% 20% 6% 3% 17% 23% 23%
Big Cola 16% 15% 18% 14% 19% 15% 15% 5% 1% 22% 13% 14%
Pepsi Cola 4% 4% 2% 4% 4% 4% 4% 1% 0% 2% 4% 6%
Others 10% 11% 8% 11% 8% 9% 15% 75% 91% 9% 10% 15%
2010
Coca-Cola 30% 31% 27% 29% 34% 23% 23% 6% 2% 29% 31% 41%
Sprite 22% 21% 25% 22% 23% 16% 18% 4% 1% 23% 21% 21%
Fanta 31% 30% 34% 31% 30% 25% 23% 5% 2% 33% 28% 35%
Big Cola 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Pepsi Cola 4% 5% 2% 4% 3% 4% 2% 0% 0% 4% 5% 0%
Others 13% 13% 12% 15% 9% 32% 33% 85% 94% 12% 15% 3%
Bottled water
Bottled water, seen both as a convenience and healthier (than carbonated drinks),
continues to remain popular with 88% of the respondents, rising from 82% when we first
did the survey seven years ago. Popularity remains in urban areas, across all generations,
but mostly among the younger generation and across all income segments, although we
saw higher consumption for the higher-income segment.
Figure 78: Consumption of bottled water—by area

2016 2015 2010

27 March 2017
Figure 79: Consumption of bottled water—by age and income segment

2016 2015 2010
The brand “Aqua” is also identical with bottled water in general. As such, it is not a
surprise that the brand remains the most popular in our survey, with 53% of the
respondents, up from 50% in the previous year, even though it is still lower than 2010's
56%. We believe that over the past seven years, more brands have been introduced in the
market, such as Pure Life (by Nestlé), Le Minérale (by unlisted Mayora Group), and the
recently launched Mandalika Eco Water (a joint venture of PT Wijaya Karya), among
others. Aqua is known across the nation and consumed by all income segments; however,
it is the most preferred by the older generation, which we believe is due to the familiarity of
the name itself.
The second preferred brand, Club, is manufactured by a joint-venture between Indofood
CBP and Japan-based Asahi Group Holdings. The brand has consistently gained
popularity after it was acquired. In 2010, only 10% of our respondents favoured the brand,
and it improved to 13% in 2015 and to 15% in 2016. We think that the strong distribution
that it has (through sister company, Indomarco, under Indofood Sukses) has helped widen
the penetration of Club nationwide. Our survey indicated that Club is popular mostly
outside the Java region, and mostly among the younger generation, and for the lower- and
middle-income segments.
Interestingly, VIT (by unlisted PT Tirta Investama) is the No. 3 preferred brand for bottled
water. It is liked by 14% of the total respondents, up from 12% in the previous year. VIT is
preferred in urban areas and in Java, across all generations, among the higher-income
segment.

27 March 2017
Figure 80: Club increase in popularity in the bottled water, although Aqua remains the most popular
2016
Aqua 53% 50% 61% 50% 66% 54% 51% 54% 62% 53% 53% 52%
Club 15% 15% 14% 13% 21% 15% 15% 14% 12% 15% 15% 13%
Vit 14% 15% 11% 16% 6% 13% 14% 15% 14% 14% 14% 20%
2 Tang 4% 4% 4% 5% 2% 4% 4% 4% 3% 5% 3% 4%
Ron 88 3% 3% 3% 4% 0% 3% 4% 3% 2% 4% 3% 1%
Others 11% 12% 7% 12% 5% 10% 13% 10% 7% 9% 11% 10%
2015
Aqua 50% 51% 48% 46% 66% 50% 52% 46% 51% 47% 51% 62%
Club 13% 14% 12% 13% 14% 14% 12% 14% 14% 12% 14% 10%
Vit 12% 12% 12% 13% 10% 13% 11% 13% 13% 13% 12% 12%
2 Tang 5% 4% 5% 5% 2% 4% 5% 5% 5% 5% 4% 5%
Ron 88 4% 4% 3% 5% 0% 4% 4% 3% 3% 6% 3% 0%
Others 16% 14% 20% 18% 8% 15% 16% 18% 13% 17% 16% 12%
2010
Aqua 56% 56% 55% 52% 67% 56% 56% 57% 54% 58% 54% 58%
Club 10% 10% 11% 9% 14% 10% 10% 12% 13% 9% 10% 19%
Vit 10% 10% 10% 12% 5% 9% 11% 11% 11% 9% 11% 3%
2 Tang 7% 6% 9% 9% 3% 7% 8% 5% 7% 7% 7% 6%
Ron 88 4% 4% 3% 5% 0% 4% 3% 4% 5% 5% 3% 0%
Others 13% 13% 12% 14% 11% 14% 13% 11% 11% 11% 14% 13%
Dairy products
To our surprise, consumption of dairy products (includes sweet condensed milk, liquid
milk, margarine, and cheese) fell to 70% of respondents, from 76% a year ago, and 78%
in 2010. Consumers seem to prefer bottled water than dairy products. Interestingly, the
decline in dairy products is mostly in urban areas and in Java, while outside Java,
consumption of dairy products rose to 71% of total respondents, from 63% in the previous
year. The highest consumption of dairy products remains with the younger generation and
the middle-income segment, while we see the most decline for the high-income segment.
Figure 81: Consumption of dairy products—by area

2016 2015 2010
Figure 82: Consumption of dairy products—by age and income

2016 2015 2010
Age Income* Age Income* Age Income*
Frisian Flag, or better known locally as “Susu Bendera” (by unlisted PT Frisian Flag
Indonesia) and Indomilk (by PT Indolakto, a susbsidiary of Indofood CBP) continue to be
head-to-head as being the most favoured brands within the dairy product segment. Frisian

27 March 2017
Flag is favoured by 24% of the total respondents, up from 23% in 2016. We believe that
respondents are mostly referring to its sweet condensed milk product, which is preferred
by the low-income segment, across all ages. It remains popular in rural areas and outside
Java.
Indomilk is the second most favoured brand within the dairy product, with 22% of the total
respondents, up slightly from 21% in 2015. In addition to sweet condensed milk, Indolakto
also manufactures liquid milk and ice cream. The product is more popular in Java rather
than outside Java, in rural areas, across all ages and mostly among the lower-income
segment.
The third most favoured brand is Susu Ultra (by PT Ultrajaya), which is still liked by 15% of
the respondents. It is favoured in urban areas, in Java, across all ages, particularly among
the younger generation, and across all income segments, particularly the middle income.
Nestlé is ranked the fourth favoured brand with 9% respondents, up slightly from 8% in the
previous year. It is liked in the urban area, outside Java, among the younger generation,
and within the middle- and high-income segments.
As the survey also includes margarine, Blue Band is the most popular brand in the
category. It is owned by Unilever, and favoured by 7% of the total respondents, the
middle-income segment, across all ages, and in Java.
Figure 83: Susu Bendera remains the most favoured product in the dairy products category
2016
Frisian Flag 24% 22% 32% 21% 36% 24% 24% 28% 24% 33% 22% 19%
Indomilk 22% 21% 24% 23% 18% 22% 22% 20% 24% 25% 20% 20%
Milk Ultra 15% 16% 12% 17% 8% 16% 15% 15% 12% 13% 16% 14%
Nestlé 9% 10% 7% 9% 12% 10% 9% 8% 7% 8% 10% 13%
Blue Band 7% 7% 6% 7% 4% 6% 6% 9% 8% 4% 8% 6%
Others 23% 24% 19% 23% 22% 22% 23% 20% 26% 17% 24% 27%
2015
Frisian Flag 23% 21% 29% 20% 30% 22% 24% 24% 22% 22% 23% 27%
Indomilk 21% 19% 28% 25% 12% 22% 20% 23% 26% 23% 22% 15%
Milk Ultra 15% 16% 13% 17% 11% 17% 16% 13% 7% 15% 15% 14%
Nestlé 8% 8% 7% 7% 10% 9% 8% 7% 5% 7% 8% 9%
Blue Band 7% 8% 3% 7% 7% 7% 7% 8% 10% 6% 7% 8%
Others 25% 27% 20% 23% 30% 24% 26% 24% 30% 26% 25% 27%
2010**
Frisian Flag 34% 31% 44% 31% 42% 33% 34% 40% 38% 42% 30% 19%
Indomilk 19% 17% 24% 21% 13% 19% 18% 20% 21% 21% 17% 13%
Milk Ultra 12% 13% 9% 11% 12% 13% 12% 9% 8% 10% 12% 19%
Nestlé 10% 11% 7% 11% 9% 11% 10% 9% 9% 8% 12% 13%
Blue Band 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Others 25% 28% 17% 25% 24% 24% 26% 22% 25% 19% 29% 37%
** Margarine was not surveyed in 2010
Cigarettes
According to our survey, cigarette consumption in Indonesia declined to 51% of the total
respondents surveyed, from 57% in the previous year, and 64% in 2010. This is in line
with the industry volume as reported by Philip Morris International that volume was down
1% to 316 bn sticks in FY16.

27 March 2017
The decline in cigarette consumption, according to our survey, is mostly in Java (from 58%
of respondents in 2015, to 50% in 2016), while outside Java it is stable. Those in rural
areas saw the most decline (-7%) as compared to those in urban (-5%), which leads us to
believe that the decline in consumption is due to: (1) affordability, as cigarette prices
continue to rise and are getting more expensive, which is why the low-income segment
saw a 4% decline, (2) shift towards a healthier lifestyle—a 6% decline for the middle- and
higher-income segments, and a decline among the younger generation as well.
Figure 84: Consumption of cigarettes—by area

2016 2015 2010
Figure 85: Consumption of cigarettes—by age and income level

2016 2015 2010
For the first time, cigarette volumes in Indonesia declined in 2016, even though between
2010 and 2016, volumes still saw less than 4% CAGR. We believe that this is due to a
combination of: (1) weaker purchasing power, (2) cigarette prices getting more expensive
due to continuous hike in excise duty as well as GoI's guidance on the minimum retail
price (MRP), and (3) changes in consumer lifestyle towards a healthier life.
Figure 86: Indonesia's cigarette volumes

340 12%
Volume Yoy growth (RHS)
320
320 314 316 10%
308
CAGR FY10 - FY16: 3.6% 302
300 8%
280
280 6%
260 255 4%
251
247
238
240 2%
229
217
220 0%
200 -2%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Phillip Morris International Estimates, based on the market share data from Nielsen Retail Audit, internal sales data, other estimates,
and publicly reported data by industry players
Indonesia’s cigarette market is unique as it is mostly kretek (clove) cigarettes. And clove is
mostly grown in Indonesia, and Indonesia is the biggest user of clove in the world. Kretek
cigarettes are made with a blend of tobacco, clove, and other flavours (sauces). An
estimated 94% of cigarettes sold in Indonesia are kretek, while the remaining 6% are white
cigarettes (or SPM=Sigaret Putih Mesin) that are mostly dominated by the multinational
companies such as Philip Morris International and British American Tobacco.

27 March 2017
There are two types of kretek cigarettes, based on how they are made. One is hand-rolled
(SKT=Sigaret Kretek Tangan), and the other is machine-made (SKM=Sigaret Kretek
Mesin). The notable difference between the two is that SKM has filter, and SKT does not;
therefore, SKT is stronger in flavour and has higher tar and nicotine content. There are two
types of SKM: (1) SKM FF (full-flavoured), and (2) SKM LTLN (low-tar, low-nicotine); SKM
LTLN has a milder taste—thus a lower tar and nicotine content than SKM FF.
SKT accounts for around 18% of total cigarettes sold in Indonesia, whereas SKM FF
around 33%, and SKM LTLN accounts for around 43% in 2016, according to Philip Morris
International estimates.
As SKT is more labour-intensive, GoI ruled that the tax is cheaper at Rp345/stick for tier 1
(large producers, producing more than 2 bn sticks annually), compared to SKM which is
taxed at Rp530/stick for tier 1 (producing more than 3 bn sticks annually) or SPM at
Rp555/stick. In addition, the GoI also charges an additional 10% regional tax on excise
duty and 9.1% VAT (calculated based on banderole prices). GoI also regulates the
minimum retail prices (MRP) whereas for tier 1 in the SKT category, the minimum is at
Rp1,215/stick, Rp1,120/stick for SPM and Rp1,030 for SKT.
Most of the cigarettes sold in Indonesia fell into the tier 1 category; thus, this is in line with
our survey that the same brands continue to dominate the sector.
Figure 87: Indonesia excise tax regulation*

Type Tier Annual output (sticks) MRP (Rp/stick) Tax/stick (Rp)
Old New Price Old New Chg Old New Chg
SKM I > 2 bn >3 bn Above Rp1,120 1,000 1,120 12.0% 480 530 10.4%
(machine-made, kretek cigarettes) II < 2 bn <3 bn Above Rp820 740 820 10.8% 340 365 7.4%
Below Rp655, max at Rp820 590-740 655-820 10.8%-11.0% 300 335 11.7%
SPM I > 2 bn >3 bn Below at Rp1,030 930 1,030 10.8% 495 555 12.1%
(machine-made, white cigarettes) II < 2 bn <3 bn Above Rp900 800 900 12.5% 305 330 8.2%
Below Rp900, max at Rp585 505-800 585-900 12.5%-15.8% 255 290 13.7%
I > 2 bn >2 bn Above Rp1,215 1,115 1,215 9.0% 320 345 7.8%
Below Rp1,215, min at Rp860 775-1,115 860-1,215 9.0%-11.0% 245 265 8.2%
SKT II 350 mn - 2 bn 500 mn - 2 bn Above Rp730 605 730 20.7% 155 165 6.5%
(hand-rolled, kretek cigarettes) Rp470-Rp730 430-605 470-730 9.3%-20.7% 140 155 10.7%
IIIA 50 mn - 350 mn 10 mn - 500 mn Min price at Rp465 400 465 16.3% 90 100 11.1%
IIIB < 50 mn <10 mn Min price at Rp400 370 400 8.1% 80 80 0.0%
* Based on Ministry of Finance Decree No. 147/PMK.010/2016, signed on 30 September 2016 and effective starting 1 January 2017
Source: Ministry of Finance

27 March 2017
Figure 88: Most cigarettes fall under the tier 1 category

160 149 150
9M15 9M16
140
120
100
billion sticks
80
60
40
27 24
20 15 16 13 12 11 10
7 7
1 1 2 2 2 2 4 3 1 1
-
Tier I Tier II Unranked Tier I Tier II Unranked Tier I Tier II Tier IIIA Tier IIIB Unranked
SKM SPM SKT
Source: Nielsen Retail Audit Results. Philip Morris International estimates
The excise tariff regulation is commonly revised once a year, even though it does not
mean that the GoI cannot revise it during the course of the year. Excise tax revenue
accounts for around 10% of the total tax revenue, whereas GoI is targeting Rp157 tn in
2017, or a 7% increase YoY. The majority of the excise tax revenue (98%) is derived from
selling cigarettes, while alcoholic drinks account for the remaining 2% of the total.
Figure 90: Excise tax contributes around 10% to total

Figure 89: Indonesia excise tax revenue tax revenue
180 35% 12.0%
11.7%
Excise Tax (Rptn) YoY Chg (RHS)
160 30% 11.0%
11.0% 10.9%
140 10.5%
10.4% 10.3%
25% 10.2%
10.1%
120 10.0% 9.7%
20% 9.6%
9.4% 9.2% 9.3%
9.1%
100 9.1% 9.1%
15% 9.0% 8.8%
80
10%
60 8.0% 7.8%
5%
40
7.0%
20 0%
0 -5% 6.0%
2002
2004
2001
2003
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017E
2015*
2017E
2015*
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
* Number is adjusted for one-off items * Number is adjusted for one-off items
Source: Ministry of Finance Source: Ministry of Finance
Favouring machine-made full-flavoured (SKM FF)

SKM FF favoured most According to our survey, SKM FF continues to be the most popular type of cigarette, which
in the rural areas… is being favoured by 42% of the respondents, up from 35% in the previous year. SKM
LTLN and SKT, on the other hand, are slightly lower at 30% and 17%, respectively.
Surprisingly, SKM FF gained much in rural areas, where it is favoured by 48% of our
respondents, up from 35% in the previous year, while SKM LTLN and SKT are each
favoured by 19% of the respondents, down from 24% and 21%, in the previous year
survey, respectively.

27 March 2017
…among the middle Interestingly, in the previous year, SKM FF was favoured by the older generation (56-65
aged population years old); however, in 2016, this shifted to those in the age group of 30-55 years. It is still
mostly popular in Java with 45% of the respondents liking it, up from 38% in the previous
year, even though preference outside Java has also increased to 35%, from 28% in the
previous year.
Largest gainer since If we compared to 2010, when we first did the survey, the largest gainer is SKM LTLN—it
2010 is SKM LTLN was favoured by only 22% of the respondents then and increased to 30% in 2016,
followed by SKM FF, from 39% to 42%. The preference remains—SKM LTLN is preferred
by those living in urban areas, outside Java, as well as among the younger generation and
The loser is SKT SKT, on the other hand, it the least favoured kretek cigarette; it was initially favoured by
28% of the respondents in 2010, and that plummeted to 17% in 2016. The shift in
preference, we believe is due to the taste preference, as SKT has the highest tar and
nicotine among kretek cigarettes. As such, it is no surprise that SKT is still preferred by the
older generation, in rural areas and outside Java, mostly among the lower- and middle-
income segments.
Figure 91: Cigarette consumption—by cigarette type

2016
SKM FF 42% 38% 48% 45% 35% 36% 47% 45% 34% 45% 40% 41%
SKM LTLN 30% 35% 19% 28% 34% 43% 26% 17% 9% 22% 32% 41%
SKT 17% 16% 19% 21% 10% 9% 14% 31% 47% 18% 18% 10%
White 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Others 11% 10% 14% 7% 21% 11% 13% 8% 10% 14% 11% 7%
2015
SKM FF 35% 35% 35% 38% 28% 33% 36% 34% 42% 35% 36% 28%
SKM LTLN 31% 35% 24% 27% 42% 42% 29% 18% 5% 27% 33% 24%
SKT 18% 17% 21% 23% 7% 10% 19% 33% 34% 20% 17% 26%
White 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Others 16% 13% 20% 12% 24% 15% 16% 16% 19% 18% 14% 22%
2010
SKM FF 39% 38% 41% 40% 33% 37% 40% 41% 29% 40% 37% 25%
SKM LTLN 22% 26% 14% 17% 36% 34% 17% 7% 10% 20% 25% 33%
SKT 28% 27% 29% 33% 15% 20% 31% 34% 44% 27% 29% 17%
White 4% 5% 2% 4% 3% 4% 4% 5% 0% 3% 5% 17%
Others 7% 4% 14% 5% 13% 5% 7% 13% 17% 10% 4% 8%
Leading brands continue to dominate

The list of leading Gudang Garam Surya (SKM FF) was the most favoured brand, according to our survey, in
brands remains similar 2016. It is favoured by 21% of our respondents, up from 15% in the previous year, and it
was up from being the second ranked in 2015. Sampoerna A-Mild (SKM LTLN) is now the
second ranked, with 20% of the respondents, even though it was also up from 18% in the
previous survey. Djarum Super (SKM FF) was up slightly to 11%, from 10% in the
previous survey, while Sampoerna’s Dji Sam Soe (SKT) remains at 10% of the
respondents.
But the ranking has Compared to 2010, when we first did the survey, while the brands remain similar, the
changed preference has changed. In 2010, Dji Sam Soe was the most favoured (17% of the
respondents), followed by Djarum Super (15%), Sampoerna A-Mild (14%), and Gudang
Garam Surya and Gudang Garam FIM (12% each).

27 March 2017
Sampoerna A-Mild is Compared to the previous year’s survey, those in urban areas continue to prefer
preferred in urban Sampoerna A-Mild the most with 24% of the respondents liking it, up from 19%. This is
areas followed by Gudang Garam Surya (18%), Dji Sam Soe (12%), Djarum Super (11%), and
Gudang Garam FIM (9%). In 2010, however, those in urban areas preferred Dji Sam Soe
(20%), Sampoerna A-Mild (16%), Djarum Super (14%), Gudang Garam FIM (12%) and
Gudang Garam Surya (10%).
Gudang Garam Surya Meanwhile, those in rural areas prefer Gudang Garam Surya the most, with 27% of the
is preferred in rural respondents, up from 13% in the previous year. This is followed by Sampoerna A-Mild (13%
areas of respondents), Djarum Super (11%), Gudang Garam FIM (10%). The preference in rural
areas differs from the previous year, whereby Sampoerna A-Mild was preferred then,
followed by Djarum Super and Gudang Garam Surya with 13% respondents each, and
Gudang Garam Filter and Dji Sam Soe with 9% respondents each. Compared to 2010,
those in rural areas prefer either Gudang Garam Surya or Djarum Super, with 15%
respondents each, followed by Dji Sam Soe (11%), Gudang Garam FIM (10%), Sampoerna
A-Hijau (8%), while Sampoerna A-Mild is only favoured by 7% of the respondents.
Two brands dominate The preference among brands in Java is more balanced than that outside Java. The gap
in outside Java: between the two top brands and the rest is wide. Outside Java, Gudang Garam Surya is
Gudang Garam Surya the most favoured brand, with 32% of the respondents, up from 25% in the previous
and Sampoerna A-Mild survey, followed by Sampoerna A-Mild, with 24% of the respondents. The next favoured
brands are Dji Sam Soe and Clas Mild, each favoured by 8% of the respondents.
Meanwhile in Java, Sampoerna A-Mild is the most favoured brand, with 19% of the
respondents, followed by Gudang Garam Surya and Djarum Super, with 16% each.
Gudang Garam Filter is the fourth favoured brand with 12% of the respondents, and Dji
Sam Soe is next with 11%.
Compared to 2010, Gudang Garam Surya was the leading brand outside Java, with 24% of
the respondents, followed by Sampoerna A-Mild (18%), Dji Sam Soe (14%), Clas Mild (12%),
and Gudang Garam FIM (8%). While in Java, Djarum Super was the most favoured brand,
with 20% of the respondents, followed by Dji Sam Soe (18%), Gudang Garam FIM (13%),
Sampoerna A-Mild (12%), Gudang Garam Surya (7%), and Sampoerna A-Hijau (6%).
Sampoerna A-Mild The younger generation (between 18 and 29 years) continues to favour Sampoerna A-Mild
appeals to the younger (29% of the respondents). Next is Gudang Garam Surya with 18% of the respondents and
generation Gudang Garam FIM with 11% of the respondents. This is followed by Djarum Super with
8% of the respondents, while Dji Sam Soe, Sampoerna U-Mild, and Clas Mild are favoured
by 6% of the respondents each.
The middle generation The middle generation (between 30 and 55 years) prefers Gudang Garam Surya, followed
preference shifted to by Sampoerna A-Mild, Djarum Super, Dji Sam Soe, and Gudang Garam FIM. However,
Gudang Garam Surya compared to 2010, this generation's preference has shifted, whereas in 2010, Dji Sam Soe
was the most favoured, followed by Gudang Garam Filter, Gudang Garam Surya and
Djarum Super.
The older generation Meanwhile, the older generation (56 to 65 years) prefers Gudang Garam Surya and Dji Sam
favoured Gudang Soe, with 21% of the respondents each. This is followed by Djarum Coklat with 17% of the
Garam Surya and Dji respondents, and Sampoerna A-Hijau (9%), and Gudang Garam FIM (7%). Compared to
Sam Soe 2010, where the preference for Dji Sam Soe among the older generation was much larger, at
25% of the respondents, followed by Djarum Super (13%) and Djarum Coklat (10%).
Middle and high According to our survey, Sampoerna A-Mild (31% respondents) and Gudang Garam Surya
income segments (28%), and Dji Sam Soe (10%) appeal to the high-income segment, as these brands are
favoured Sampoerna A- pricier than the others. This is similar to the previous year’s survey and 2010's. The
Mild, while the low- middle-income segment also favours Sampoerna A-Mild (23%) and Gudang Garam Surya
income segment (21%), even though in 2010, Dji Sam Soe was the most favoured for this segment. The
favoured Gudang low-income segment favoured Gudang Garam Surya (22% respondents), followed by
Garam Surya Sampoerna A-Mild and Djarum Super, with 14% of the respondents each, while in 2010,
Djarum Super was the most favoured for this segment.

27 March 2017
Figure 92: Gudang Garam Surya (SKM FF) is favoured, followed by Sampoerna A-Mild (SKM LTLN)
2016
Gudang Garam Surya 21% 18% 27% 16% 32% 18% 23% 25% 21% 22% 21% 28%
Sampoerna A Mild 20% 24% 13% 19% 24% 29% 19% 11% 3% 14% 23% 31%
Djarum Super 11% 11% 11% 16% 1% 8% 16% 11% 7% 14% 10% 7%
Dji Sam Soe 10% 12% 6% 11% 8% 6% 8% 19% 21% 8% 10% 10%
Gudang Garam Filter 9% 9% 10% 12% 2% 11% 8% 10% 7% 9% 9% 7%
Sampoerna Hijau 4% 3% 7% 5% 2% 2% 5% 7% 9% 5% 4% 0%
U Mild 4% 4% 3% 5% 1% 6% 4% 3% 0% 1% 5% 3%
Clas Mild 3% 4% 1% 1% 8% 6% 2% 1% 3% 4% 3% 3%
Djarum Coklat 3% 2% 6% 5% 0% 1% 2% 4% 17% 5% 3% 0%
Others 13% 12% 16% 9% 22% 14% 14% 10% 12% 17% 12% 10%
2015
Sampoerna A Mild 18% 19% 16% 15% 24% 26% 16% 8% 3% 15% 20% 14%
Djarum Super 10% 9% 13% 14% 1% 12% 11% 8% 3% 13% 9% 6%
Dji Sam Soe 10% 11% 9% 13% 5% 6% 10% 18% 20% 10% 10% 12%
Sampoerna Hijau 4% 3% 5% 5% 1% 2% 4% 8% 2% 4% 3% 10%
U Mild 4% 4% 2% 5% 1% 3% 5% 4% 0% 1% 5% 2%
Clas Mild 6% 6% 4% 2% 14% 7% 5% 4% 0% 6% 5% 6%
Djarum Coklat 4% 3% 6% 5% 0% 2% 4% 7% 10% 6% 3% 4%
Others 20% 19% 24% 18% 27% 21% 21% 18% 22% 23% 19% 24%
2010
Sampoerna A Mild 14% 16% 7% 12% 18% 22% 10% 2% 6% 11% 16% 25%
Djarum Super 15% 14% 15% 20% 0% 17% 14% 10% 13% 16% 13% 0%
Dji Sam Soe 17% 20% 11% 18% 14% 12% 20% 22% 25% 14% 21% 17%
Sampoerna Hijau 5% 3% 8% 6% 1% 4% 6% 3% 4% 5% 4% 0%
U Mild 1% 1% 0% 1% 2% 1% 0% 1% 0% 1% 1% 0%
Clas Mild 4% 5% 3% 1% 12% 6% 3% 3% 4% 4% 4% 8%
Djarum Coklat 5% 4% 9% 7% 0% 4% 5% 8% 10% 7% 4% 0%
Others 16% 14% 21% 14% 22% 15% 15% 21% 21% 19% 13% 25%
Gudang Garam is the largest gainer

The top three largest cigarette producers combined are favoured by 85% of the total
respondents, according to our survey. HM Sampoerna remains the largest cigarette maker
in Indonesia, with a 39% share, followed by Gudang Garam at 30%, and Djarum at 16%,
while BAT Indonesia stood at 1%, according to our survey.
The gainer on this survey is Gudang Garam, which saw a 6% increase in respondents
compared to the previous year. And compared to 2010, it was a 7% increase. We believe
that as the company is consistently spending more on A&P (advertising and promotions),
its brands are getting more popular.
To conclude, HM Sampoerna's brands appeal more to the younger generation (43% of
respondents), those living in urban areas (43%), in Java (40%), and to the middle (42%)
and high (45%) income segments. Gudang Garam, on the other hand, appeals to those in
rural areas (37%), outside Java (34%), the middle age generation, and the high-income
segment (34%). Djarum appeals to those who live in Java (22%), in rural areas (19%), and
to the older generation (26%), and the low-income segment (21%).

27 March 2017
Figure 93: The top three largest cigarette producers combined favoured by 85% of the total respondents
2016
HM Sampoerna 39% 43% 29% 40% 35% 43% 35% 40% 33% 29% 42% 45%
Gudang Garam 30% 27% 37% 29% 34% 29% 31% 34% 28% 31% 30% 34%
Djarum 16% 14% 19% 22% 2% 10% 19% 16% 26% 21% 14% 7%
Bentoel 1% 1% 1% 1% 0% 1% 1% 1% 0% 1% 0% 3%
Others 15% 15% 14% 8% 29% 17% 14% 9% 14% 18% 14% 10%
2015
HM Sampoerna 36% 37% 33% 37% 31% 38% 35% 37% 25% 30% 38% 38%
Gudang Garam 24% 25% 21% 23% 27% 21% 24% 26% 39% 22% 25% 22%
Djarum 17% 15% 21% 23% 2% 17% 18% 15% 17% 21% 16% 12%
Bentoel 2% 3% 1% 2% 1% 3% 2% 2% 0% 3% 2% 0%
Others 21% 20% 24% 14% 38% 22% 21% 20% 19% 24% 19% 28%
2010
HM Sampoerna 40% 45% 29% 42% 37% 43% 41% 33% 35% 34% 47% 58%
Gudang Garam 23% 23% 25% 20% 32% 19% 26% 31% 17% 24% 23% 25%
Djarum 22% 20% 26% 29% 2% 23% 21% 19% 27% 24% 19% 0%
Bentoel 3% 3% 2% 2% 5% 4% 2% 2% 0% 4% 2% 0%
Others 11% 9% 18% 6% 24% 10% 10% 15% 21% 14% 8% 17%

27 March 2017
Personal care products

Key stocks
Unilever Indonesia
■ While our survey indicates a slowdown in skin care spending, the company’s abundant
portfolio might continue to provide growth.
Kino Indonesia
■ Our survey indicates reduced spending on skin care, one of the company’s product
portfolios. We see the decline is in Java, which is its focus market.
Shift in spending
For Indonesians, spending on personal care is relatively stable at around 5% of monthly
spending, according to our survey. However, we see a shift in spending from cosmetics
and skin care, to feminine hygiene and tissue. Spending on cosmetics and skin care is
declining, from 62% of respondents in 2010, to 55% in 2015 and 52% in 2016. The decline
is seen mostly among the younger and oldest generations, in the low-income segment,
while that in the middle generation and the high-income segment is maintained.
Nevertheless, the younger generation is the biggest spender in this category.
On the other hand, spending for feminine hygiene and tissue is rising. For feminine
hygiene, it was from 81% in 2010, to 82% in 2015 and 84% in 2016, and for tissue, it was
from 50% in 2010 to 57% in 2015, and 56% in 2016. Tissue is also mostly consumed by
the younger generation, and the high-income segment.
For cosmetics and skin care, our survey indicates that the decline is seen in Java, while
outside Java, it is improving. For feminine hygiene, Java is stable, while improvement is
seen outside Java and in urban areas. And for tissue, Java is seen declining, and
improving outside Java.
Figure 94: Shift in spending on cosmetics and skin care towards feminine hygiene and tissue
2016 2015 2010
Cosmetics and skin care
In the past 3 months 52% 54% 47% 50% 55% 55% 57% 50% 58% 47% 62% 65% 57% 63% 60%
More in the next 12 months 35% 36% 34% 36% 35% 34% 35% 31% 38% 23% 37% 40% 32% 28% 34%
Feminine hygiene
Tissue

27 March 2017
Figure 95: Younger generation is the largest spender

2016 2015 2010
Cosmetics and skin care
In the past 3 months 58% 54% 44% 27% 45% 54% 52% 62% 55% 45% 38% 52% 57% 52% 70% 62% 50% 44% 60% 65% 63%
More in the next 12 months 35% 40% 36% 31% 33% 36% 36% 34% 38% 36% 23% 29% 35% 43% 37% 45% 34% 31% 37% 37% 38%
Feminine hygiene
Tissue

27 March 2017
Branded goods
Key stocks
Matahari Department Store
■ The company is a prime beneficiary of Indonesia's rising middle income segment. Its
higher exposure to the region outside Java (40% of gross sales) is a catalyst for growth
as the area tends to do well with the rise in commodity prices
■ Nevertheless, contrary to our survey findings, Matahari's private label booked 10%
higher gross sales YoY in 4Q16, boosted by better performance of its No. 1 brand,
Nevada. However, intensifying competition saw margins decline slightly during the
period.
Mitra Adiperkasa
■ The company has continuously shown improvement following the involvement of the
private equity, CVC Capital Partners, in the active division and General Atlantic in the
F&B division. Improvement in inventory days and margins are both ahead of schedule.
■ The company is also closing down department stores and cutting brands that are not
performing to allocate more space for better performing specialty stores. We also
expect the company to turn free cash flow positive by the end of the year.
Ramayana Lestari Sentosa
■ The company is likely to face headwinds this year on the back of higher inflation and
subsidy cuts by the government. Earnings growth is expected to be relatively soft with
its inability to increase product pricing
Fashion items are favoured

Our survey indicates that there is a significant decline in purchases and expectations to
purchase branded goods, in line with the decline in Indonesia’s aggregate income and
savings. We believe the decline is mostly in rural areas, with the exception of fashion
items.
Of the five segments of branded goods (fashion, leather, sport shoes, jewellery, perfumes,
watches) that we surveyed, fashion remains the type that people want to purchase the
most with 48% of the respondents planning to purchase fashion items in the next three
months. Note, however, this is lowered from 56% in 2015 and 77% in 2010.
Interestingly, the respondents of our survey outside Java show positive momentum, which
we believe is on the back of rising commodity prices. A high 52% of the respondents
outside Java do have plans to purchase a fashion item, with 43% of the respondents
outside Java having purchased a fashion item in the last three months. This is higher than
last year, at 45% and 38% of the respondents, respectively.
Of the other branded items, perfume is the other category that Indonesians purchased.
39% of the respondents had purchased perfume in the past 12 months, but it was down
from 47% in the previous year’s survey, particularly in rural areas and in Java.
Sport shoes also saw lower purchases, with 15% of the respondents, as compared to 23%
in the previous year’s survey, and 31% in 2010. Plans on future purchases are also
declining. This is mostly in rural areas, which saw a significant drop.
Leather purchases saw a decline, with 13% of the respondents, from 17% in the previous
year’s survey. The decline was mostly in rural areas and in Java.

27 March 2017
Jewellery also saw a decline, with 10% of the respondents having made purchases in the
last twelve months. We believe that the investment factor associated with jewellery
purchases might be one of the key reasons. There is a significant decline in rural areas
and in Java.
Watches also saw a significant decline to 9% of the respondents, from 19% in 2015 and
12% in 2010. Rural areas saw the most decline.
Figure 96: Perfume and fashion items are most favoured among the branded goods
2016 2015 2010
Fashion
Purchased in the last 3 months 38% 42% 31% 36% 43% 43% 49% 32% 45% 38% 63% 63% 62% 66% 55%
Planning to purchase in next 12 months 48% 48% 48% 47% 52% 56% 61% 46% 60% 45% 77% 76% 79% 80% 72%
Leather
Purchased in the last 3 months 13% 16% 7% 12% 15% 17% 20% 12% 19% 12% n.i n.i n.i n.i n.i
Planning to purchase in next 12 months 17% 18% 15% 14% 25% 22% 24% 19% 26% 13% n.i n.i n.i n.i n.i
Sport shoes
Jewellery
Perfumes
Watches
Branded item spending continued to disappoint

Indonesia continues to underperform while India continues to outpace the emerging
market average. Furthermore, the spending outlook for 2017 also does not look exciting
with only jewellery and perfumes coming close to the emerging market average.
Figure 97: Indonesia's historical spending on

branded goods has underperformed EM average Figure 98: Indonesians preferred less branded items
50% 70% 66%
Indonesia Emerging market average
45% 60%
40%
50% 47%
44%
39% 48%
35% 37% 37% 37%
37%
36% 40% 34%
42%
30% 31% 31%
30%
28%
25% 27%
17%
24% 20% 15%
20% 19%
21% 17% 16%
10%
15% 11%
2010 2011 2012 2014 2015 2016
Emerging markets average India Indonesia 0%

Fashion Leather Sport shoes Jewelry Perfumes Watches

27 March 2017
Figure 99: Appetite for branded goods consumption declined in 2016

90%
2010 2015 2016
80% 77%
70%
60% 56%
50%
48%
50%
42%
40% 37%
31%
29%
30%
22%
19% 21%
17% 18%19%16%
20%
11% 11%
10%
0%
Fashion Perfumes Sport shoes Leather Jewellery Watches
High-income segment recovering

The high-income segment is the only segment that showed improvement during our
survey. This is in line with our thesis that the lower-income segment will face purchasing
power erosion as the government cuts subsidies and inflation accelerates. The higher-
income segment, however, has mostly participated in the tax amnesty and now whitened
their money and should be ready to spend. The higher-income bracket should also be the
first beneficiary of a commodity price rally as miners and planters tend to wait for a stable
commodity price environment before hiring more workers to increase production.
Figure 100: The high-income segment is the only segment recovering in

branded goods consumption
60%
2010 2015 2016
53%
50% 46%
38%
40% 38%
36% 37%
35% 35% 35%
34%
31%
29% 29% 29% 29% 30%
30% 26% 27% 26% 27% 26%
28%
24% 24% 24%
23% 23% 22%
20%
20% 17%
10%
0%
Bought Will buy Bought Will buy Bought Will buy Bought Will buy Bought Will buy
Java Ex Java Low Mid High
Cities Income
Preference tilting towards foreign products with the passage of time…

There is a clear shift in preference from domestic items to foreign items in the high income
bracket. Take the example of fashion, 29% of the respondents preferred local products in
2010 but only 25% preferred local products in 2016 as there are many new foreign brands

27 March 2017
(take the example of Uniqlo, HnM) at reasonably affordable prices. Sport shoes also tell
the same story. There were only 4% of the respondents who preferred local branded sport
shoes in 2016, down from 8% in 2010, with many new foreign brands entering the market
(such as sport shoes brand: New Balance).
Figure 101: Indonesians' preference for foreign brands

2010 2015 2016
% plan to purchase Low Mid High Low Mid High Low Mid High
Fashion
domestic brand 11% 20% 29% 28% 28% 31% 25% 32% 25%
foreign brand 89% 80% 71% 72% 72% 69% 75% 68% 75%
Leather
domestic brand n.i n.i n.i 30% 25% 38% 31% 40% 53%
foreign brand n.i n.i n.i 70% 75% 63% 69% 60% 47%
Sport shoes
domestic brand 9% 8% 8% 8% 7% 11% 6% 18% 4%
foreign brand 91% 92% 92% 92% 93% 89% 94% 82% 96%
Jewellery
domestic brand 0% 0% 0% 2% 3% 8% 11% 14% 18%
foreign brand 100% 100% 100% 98% 97% 92% 89% 86% 82%
Figure 102: Percentage of people preferring unbranded goods

2010 2011 2012 2013 2014 2015 2016
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Fashion apparels Leather goods Sportshoes Jewelry Watches
Lower income people's foreign brand awareness increases over time

We have seen from our survey that people in the lower income bracket developed better
foreign brand awareness over time, except for jewellery where people in general are
inclined to buy domestic products over time. The arrival of foreign fashion brands, such as
Uniqlo and HnM, has increased the brand awareness of our respondents, especially in the
lower-income segment, where 75% of them answered they would prefer to purchase a
foreign fashion brand. This number was up from 72% in 2015 and was at a high of 89% in
2010.

27 March 2017
Figure 103: We observe increased awareness in foreign brands

2010 2015 2016
% plans to purchase Low Mid High Low Mid High Low Mid High
Fashion
-domestic brand 11% 20% 29% 28% 28% 31% 25% 32% 25%
-foreign brand 89% 80% 71% 72% 72% 69% 75% 68% 75%
Leather
-domestic brand n.i n.i n.i 30% 25% 38% 31% 40% 53%
-foreign brand n.i n.i n.i 70% 75% 63% 69% 60% 47%
Sport shoes
-domestic brand 9% 8% 8% 8% 7% 11% 6% 18% 4%
-foreign brand 91% 92% 92% 92% 93% 89% 94% 82% 96%
Jewelry
-domestic brand 0% 0% 0% 2% 3% 8% 11% 14% 18%
-foreign brand 100% 100% 100% 98% 97% 92% 89% 86% 82%
* Income is on monthly basis: Low <Rp1.5 mn; Mid Rp1.5-7.5 mn, High >Rp7.5 mn.
Fashion
Our survey result in 2016 showed that Levi's (an upper-end jeans brand that is distributed
under Matahari's consignment merchandise and through its own specialty stores), was the
preferred brand for 2016. This came as a surprise as Levi's never came up in our previous
surveys. On the other hand, the popularity of Matahari's private label, Nevada, declined
from 27% last year to 7% this year. This came as a surprise to us, as the portion of
"others" also increased significantly from 39% last year to 55% this year.
Zara, one of MAPI's most famous brands launched first in 2005, is the third most
appealing fashion brand for respondents' next purchase. Over the past five years, its
brand loyalty has increased from 1% to 5% 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.

27 March 2017
Figure 104: Which brand of fashion goods will you most likely purchase in the next 12 months?
2016
Levi's 11% 10% 14% 9% 15% 14% 10% 5% 6% 13% 9% 15%
Nevada 7% 8% 4% 6% 8% 7% 7% 5% 2% 4% 7% 18%
Zara 5% 7% 2% 6% 5% 5% 6% 3% 9% 6% 5% 8%
Gucci 5% 6% 4% 5% 6% 5% 6% 4% 9% 5% 6% 3%
Calvin Klein 5% 5% 3% 4% 6% 5% 4% 5% 9% 4% 5% 8%
Unbranded 12% 10% 16% 15% 5% 10% 13% 12% 17% 14% 11% 3%
Others 55% 55% 57% 55% 56% 54% 55% 65% 49% 54% 57% 44%
2015
Levi's 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Nevada 27% 26% 28% 28% 22% 25% 28% 27% 29% 27% 27% 26%
Zara 5% 6% 5% 6% 4% 6% 5% 6% 2% 5% 6% 6%
Gucci 4% 5% 4% 4% 6% 5% 5% 2% 4% 4% 4% 8%
Calvin Klein 4% 5% 2% 4% 5% 4% 5% 3% 1% 5% 4% 0%
Unbranded 20% 17% 31% 21% 17% 17% 21% 26% 29% 21% 20% 18%
Others 39% 42% 30% 37% 45% 43% 36% 37% 34% 39% 39% 43%
2010
Levi's 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Nevada 10% 12% 7% 8% 15% 13% 9% 7% 3% 7% 13% 9%
Zara 1% 1% 0% 1% 1% 1% 1% 1% 0% 0% 1% 3%
Gucci 4% 4% 2% 4% 3% 4% 3% 3% 8% 3% 4% 9%
Calvin Klein 2% 3% 1% 2% 3% 3% 2% 2% 3% 2% 3% 0%
Unbranded 47% 40% 63% 53% 35% 40% 51% 52% 65% 56% 39% 23%
Others 35% 40% 27% 32% 43% 38% 35% 35% 22% 30% 40% 57%

27 March 2017
Figure 105: In your opinion, are any of the following fashion goods brands worth paying more for?
2016
Levi's 9% 8% 12% 8% 13% 10% 7% 10% 12% 11% 9% 9%
Nevada 4% 5% 3% 4% 5% 4% 5% 5% 3% 4% 4% 9%
Zara 5% 6% 2% 5% 3% 6% 4% 3% 7% 5% 5% 3%
Gucci 8% 9% 7% 8% 8% 7% 9% 12% 3% 8% 8% 9%
Calvin Klein 7% 8% 6% 7% 10% 8% 7% 6% 9% 5% 8% 13%
Unbranded 3% 2% 5% 4% 1% 3% 3% 5% 2% 6% 2% 3%
Others 63% 62% 64% 64% 60% 62% 65% 59% 64% 61% 64% 56%
2015
Levi's 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Nevada 21% 21% 22% 22% 17% 20% 21% 24% 23% 19% 22% 17%
Zara 4% 4% 5% 5% 3% 6% 3% 3% 3% 5% 5% 2%
Gucci 6% 6% 7% 7% 5% 6% 7% 6% 4% 6% 6% 9%
Calvin Klein 6% 6% 5% 6% 6% 7% 5% 4% 4% 6% 6% 4%
Unbranded 5% 3% 12% 5% 6% 4% 5% 9% 7% 6% 4% 5%
Others 57% 60% 48% 56% 63% 56% 59% 54% 57% 58% 56% 62%
2010
Levi's 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Nevada 9% 9% 8% 8% 12% 10% 9% 8% 4% 8% 10% 7%
Zara 1% 1% 0% 1% 1% 1% 1% 1% 0% 0% 1% 2%
Gucci 6% 6% 6% 5% 7% 6% 6% 6% 2% 5% 6% 12%
Calvin Klein 5% 6% 3% 4% 6% 6% 4% 2% 4% 4% 6% 5%
Unbranded 9% 7% 14% 13% 3% 8% 10% 10% 11% 15% 5% 0%
Others 70% 71% 68% 69% 72% 69% 70% 73% 79% 67% 73% 73%
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 six years, although in 2015 they lost market share to Bata and some other
brands which we suspect were of cheaper price points. Nevertheless, both Adidas and
Nike made a comeback in 2016, attaining a record high combined "preference share" of
48%. 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).

27 March 2017
Figure 106: Which brand of sport shoes will you most likely purchase in the next 12 months?
2016
Adidas 30% 27% 38% 31% 27% 31% 27% 32% 60% 35% 28% 31%
Nike 18% 20% 14% 20% 15% 22% 16% 13% 0% 15% 19% 19%
Converse 8% 9% 4% 9% 6% 10% 6% 8% 0% 15% 6% 8%
Bata 7% 8% 6% 9% 5% 8% 7% 6% 20% 7% 7% 12%
Reebok 4% 4% 3% 3% 5% 4% 4% 2% 0% 4% 3% 8%
Unbranded 2% 1% 4% 2% 1% 0% 4% 0% 0% 3% 2% 0%
Others 31% 31% 31% 26% 42% 25% 36% 40% 20% 21% 35% 23%
2015
Adidas 24% 24% 25% 24% 24% 26% 24% 19% 22% 24% 24% 30%
Nike 17% 18% 14% 18% 13% 19% 16% 15% 11% 17% 18% 7%
Converse 3% 4% 0% 3% 2% 4% 2% 0% 0% 1% 3% 4%
Bata 11% 11% 13% 11% 12% 8% 12% 16% 26% 13% 11% 4%
Reebok 6% 6% 7% 7% 5% 7% 6% 6% 7% 4% 7% 11%
Unbranded 9% 6% 17% 8% 11% 7% 11% 10% 4% 10% 9% 7%
Others 29% 31% 24% 28% 34% 29% 29% 34% 30% 31% 28% 37%
2010
Adidas 17% 18% 14% 15% 21% 16% 17% 18% 14% 19% 14% 50%
Nike 9% 10% 6% 10% 7% 12% 6% 9% 7% 6% 11% 8%
Converse 3% 3% 2% 2% 4% 6% 0% 0% 0% 4% 2% 8%
Bata 10% 12% 6% 9% 16% 7% 12% 15% 21% 12% 10% 0%
Reebok 4% 4% 2% 3% 4% 5% 2% 5% 0% 2% 5% 0%
Unbranded 30% 25% 43% 32% 20% 27% 35% 21% 36% 31% 28% 8%
Others 28% 28% 26% 28% 27% 27% 27% 32% 21% 27% 30% 25%

27 March 2017
Figure 107: In your opinion, are any of the following sport shoes brands worth paying more for?
2016
Adidas 30% 28% 37% 29% 33% 30% 29% 37% 38% 37% 28% 34%
Nike 20% 21% 17% 21% 18% 22% 20% 16% 13% 20% 19% 28%
Reebok 7% 7% 7% 8% 6% 6% 10% 5% 0% 4% 9% 3%
Converse 7% 8% 3% 8% 5% 8% 5% 10% 0% 6% 7% 7%
Bata 4% 3% 4% 4% 4% 4% 3% 2% 25% 5% 3% 7%
Unbranded 1% 1% 1% 1% 0% 0% 2% 0% 0% 1% 1% 0%
Others 31% 31% 30% 30% 34% 30% 32% 32% 25% 26% 34% 21%
2015
Adidas 20% 20% 22% 20% 20% 19% 23% 18% 18% 15% 23% 24%
Nike 17% 18% 14% 18% 15% 17% 18% 14% 21% 12% 20% 20%
Reebok 9% 9% 8% 9% 7% 7% 9% 11% 15% 8% 9% 12%
Converse 4% 5% 1% 4% 1% 6% 3% 1% 0% 3% 4% 6%
Bata 7% 6% 10% 7% 7% 6% 6% 8% 15% 8% 6% 6%
Unbranded 3% 1% 8% 2% 6% 1% 4% 6% 0% 3% 3% 2%
Others 41% 41% 38% 40% 45% 44% 38% 41% 30% 52% 36% 31%
2010
Adidas 17% 19% 13% 17% 17% 18% 18% 16% 0% 15% 19% 26%
Nike 8% 8% 8% 7% 10% 10% 7% 5% 0% 5% 10% 9%
Reebok 7% 7% 5% 6% 10% 8% 6% 6% 0% 4% 9% 4%
Converse 4% 4% 4% 3% 6% 6% 2% 5% 0% 4% 4% 9%
Bata 5% 5% 6% 4% 6% 4% 5% 8% 8% 5% 5% 0%
Unbranded 7% 5% 12% 9% 1% 6% 6% 14% 17% 11% 4% 4%
Others 52% 52% 52% 54% 49% 48% 57% 46% 75% 57% 49% 48%
*Income is on monthly basis: Low <Rp1.5mn; Mid Rp1.5-7.5mn, High >Rp7.5mn

27 March 2017
Internet and e-commerce

According to our survey, Indonesia's internet penetration has improved to 52% of the
respondents compared to merely 48% in 2015 and 14% in 2010. The significant
improvement of internet penetration is mainly attributable to smartphone devices, which
currently 91% of the respondents are dependent on when it comes to internet access.
Smartphones offer a cheaper device option than personal computers, which have
significantly declined to 6% as a means to access the internet.
Despite having the highest internet penetration growth among our respondents last year
(which also may be attributable to the lower base), Indonesia is still behind the curve when
it comes to access to internet among the emerging markets. We have plotted population,
internet penetration and internet penetration growth to see the correlation between
population and internet access. Countries with smaller population tend to lead in terms of
internet access among its respondents. However, we can see that Indonesia is still behind
India and China; both countries have around 1.3 bn population each, which translates into
around five times Indonesia's population. We believe there is still plenty of room for
improvement in Indonesia's internet access.
Figure 108: Indonesia's internet access has been Figure 109: However, it is still the lowest among the
rising emerging markets
60% 20%
54%
51%
Indonesia
50%
15%
Internet penetration growth
40% India
40%
South Africa Brazil
10%
29% Mexico
30%
Turkey
5% Russia
20%
15%
14% China
9%
10% 0%
45% 55% 65% 75% 85% 95%
0%
-5%
2010 2011 2012 2013 2014 2015 2016 Internet penetration
Source: Credit Suisse Indonesia Consumer Survey 2017 Size of the bubble represents each country's size of population relative to one another
Size : Represents countries with population over 250 million as of 2016

27 March 2017
Figure 110: Internet accessibility in 2016 Figure 111: Internet accessibility in 2013
Tablet Computer Tablet
3% 6% 4%
Computer
27%
Mobilephone
Mobilephone or
or Smartphone
Smartphone 69%
91%
Asked about what internet services they used in the last six months, the majority
responded social network (39%, the highest), followed by instant messaging (25%). A
newly introduced and prominent service introduced in our survey this year is music and
videos, which accounts for 15% of the internet usage, according to our survey. Instant
messaging slightly improved in the past year, as it is being accessed more through the
mobile phone internet. It is worth mentioning that the popularity of internet phones (calling
phones using social media, or communication platforms such as WhatsApp and Line) has
also driven the use of instant messaging.
Online shopping among our respondents has remained relatively low at 4%, more than
50% decline from 2015's 11%. This also translates into one of the lowest shopping usage
among the emerging markets.

27 March 2017
Figure 112: What services have you used in the last six months?
2016
Social network 39% 38% 45% 39% 41% 38% 42% 36% 44% 38% 40% 27%
Instant messaging 25% 25% 25% 28% 19% 24% 27% 27% 34% 24% 26% 19%
Music & videos 15% 15% 15% 14% 16% 16% 13% 14% 9% 16% 14% 22%
Gaming 13% 13% 11% 12% 14% 14% 11% 11% 3% 16% 12% 15%
Shopping 4% 5% 2% 4% 6% 4% 3% 5% 3% 4% 4% 8%
Banking 2% 2% 1% 2% 2% 1% 3% 4% 6% 1% 2% 3%
Travel 2% 2% 1% 1% 3% 1% 2% 2% 0% 1% 1% 6%
Other 0% 0% 0% 0% 0% 0% 0% 2% 0% 0% 0% 0%
2015
Social network 39% 37% 45% 39% 39% 40% 38% 40% 28% 35% 44% 39%
Music & videos 0% 0% 0% 0% 0% 0% 0% 0% 0% 18% 12% 0%
Gaming 17% 17% 15% 16% 18% 18% 15% 12% 11% 14% 8% 17%
Shopping 11% 12% 8% 11% 12% 11% 12% 7% 17% 6% 4% 11%
Banking 4% 4% 4% 5% 3% 3% 5% 9% 17% 4% 1% 4%
Travel 4% 4% 4% 3% 5% 3% 5% 3% 6% 3% 2% 4%
Other 1% 1% 1% 1% 1% 0% 1% 1% 0% 1% 0% 1%
2010
Social network 47% 46% 48% 48% 43% 49% 40% 44% 100% 44% 49% 59%
Music & videos 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Gaming 19% 19% 21% 17% 24% 21% 17% 0% 0% 17% 17% 14%
Shopping 4% 4% 2% 4% 3% 4% 3% 0% 0% 8% 5% 2%
Banking 3% 3% 0% 3% 2% 2% 5% 11% 0% 5% 4% 3%
Travel 3% 3% 0% 3% 2% 2% 3% 22% 0% 6% 2% 2%
Other 0% 0% 0% 0% 0% 0% 0% 0% 0% 1% 1% 2%
According to data provided by Investment Relation Unit of the Republic of Indonesia (IRU),
Indonesia has only 27% of its population as active online shoppers, the lowest in the
ASEAN region according to IRU, with the market leader being Singapore. On the other
hand, online retail spending accounted for only 2% of the total retail spending in 2016.
Indonesia, however, has remained a market leader when it comes to social media and
instant messaging usage among the emerging markets. In retrospect, it is one of the
lowest when it comes to online services such as banking, travelling, and shopping.

27 March 2017
Figure 113: Total active online shoppers over total Figure 114: Online retail spending over total retail
population spending
70% 25%
60% 58%
20%
20%
50%
50%
44%
15%
40% 38%
12%
29%
30% 27%
10% 9%
8%
20%
5%
10% 2% 3%
0% 0%
Indonesia Philippines Vietnam Thailand Malaysia Singapore Indonesia Philippines Vietnam Thailand Malaysia Singapore
Source: Investor Relations Unit - Republic of Indonesia Source: Investor Relations Unit - Republic of Indonesia
Figure 115: Indonesia leads among the emerging markets in terms of social media usage but lags in
banking, travel, and shopping
45
39
40
35 33
30
27
26 25
25
25 22
24
21 21
21
19 19 19
20 17 18 18 18
17
15 15
15 13 12
14 14
11 11 11 11 11
10 10 10
9 8 9
10 8
7 7
6 6 6 5
4
5 3 3
4
2 2 2
1 1 1 0
- 0
-
Social network Music & videos Instant messaging Gaming Banking Shopping Travel Other
Indonesia Mexico Russia Brazil Turkey India China
In general, 68% of our respondents believe that their internet purchase will remain the
same. While the proportion of respondents who think that they will be spending more on
the internet increased to 20% from 12% in 2010, it is still a decline from 2015's 23%.
Nevertheless, we believe that the increase in expected internet spending is on the back of
the emergence of more e-commerce players that have been doing aggressive advertising
and promotions in recent years. However, we believe that overall coverage of internet will
improve as we also see an upward trend for internet purchase from regions outside Java
(32% from 28% in 2016) and the younger population (25% from 14% in 2010).

27 March 2017
Figure 116: How do you think your internet purchase is going to be in the next six months?
2016
More 20% 21% 17% 16% 32% 25% 15% 16% 5% 18% 20% 28%
Same 68% 66% 74% 70% 62% 63% 71% 75% 89% 73% 67% 63%
Less 12% 13% 9% 14% 6% 12% 13% 9% 5% 9% 13% 9%
2015
More 23% 24% 21% 22% 28% 22% 25% 24% 33% 25% 23% 26%
Same 68% 67% 71% 69% 65% 69% 67% 71% 33% 66% 68% 72%
Less 9% 9% 8% 9% 7% 9% 8% 6% 33% 9% 9% 2%
2010
More 12% 13% 4% 8% 19% 14% 6% 0% 0% 11% 5% 17%
Same 79% 80% 73% 83% 69% 79% 78% 83% 100% 81% 86% 83%
Less 10% 8% 23% 8% 13% 7% 16% 17% 0% 9% 9% 0%
Lazada, OLX, and Tokopedia remain the most widely used websites, collectively
representing 57% of the total website usage. Lazada stands at the top for website use,
overtaking OLX which was tied last year at 23%. Lippo Group's MatahariMall remains
stagnant at 1% of the share, which is the same as last year.
Lazada has a strong presence in the rural areas with 44% of the respondents saying that
they have used the website in the last 12 months. This is a significant gap from the close
second being OLX at 11% usage in the rural area.
In terms of income, people of low and high income are about the same when it comes to
Lazada and OLX. However, people in the middle income bracket prefer Lazada more at
31% compared to OLX at 15%.
Figure 117: Have you used any of the following e-commerce websites in the last 12 months?
Lazada 28% 27% 44% 29% 27% 30% 25% 29% 33% 25% 31% 21%
OLX 17% 17% 11% 15% 20% 18% 18% 14% 0% 22% 15% 21%
Tokopedia 12% 13% 0% 13% 11% 12% 12% 14% 0% 6% 14% 13%
Bukalapak 11% 11% 11% 12% 11% 9% 14% 14% 33% 13% 11% 13%
Traveloka 8% 9% 0% 6% 13% 8% 10% 7% 0% 3% 6% 21%
Elevenia 8% 7% 11% 10% 4% 7% 10% 7% 0% 13% 6% 8%
Zalora 7% 7% 11% 8% 5% 8% 6% 0% 33% 6% 9% 0%
Others 9% 9% 11% 9% 9% 10% 6% 14% 0% 13% 9% 4%
BliBli 3% 3% 0% 4% 2% 1% 6% 7% 0% 6% 3% 0%
BerryBenka 1% 1% 0% 2% 0% 2% 0% 0% 0% 0% 1% 4%
MatahariMall 1% 1% 0% 0% 2% 1% 0% 0% 0% 0% 1% 0%
Tiket.com 1% 1% 0% 1% 0% 1% 0% 0% 0% 0% 1% 0%
According to our survey, customers still largely emphasise on website trustworthiness

while conducting their online purchase. This is especially true for people living in rural
areas, as well as for people in the high-income bracket.
Low cost has also been an increasing concern, with 28% of our respondents saying that
they look at low costs when it comes to online shopping, from last year's 14%. It is also
worth mentioning that our survey suggests that senior citizens are absolutely concerned
about low cost when it comes to online purchases.

27 March 2017
Figure 118: What are the reasons you chose the mentioned websites?
Trustworthiness 32% 30% 50% 35% 27% 32% 33% 33% 0% 31% 29% 40%
Low cost 28% 29% 17% 26% 31% 27% 24% 33% 100% 31% 29% 20%
Comprehensive products listings 19% 20% 17% 22% 15% 18% 24% 17% 0% 31% 19% 10%
Well-known brand 11% 12% 0% 7% 19% 11% 14% 0% 0% 0% 13% 20%
Friends referral 7% 6% 17% 9% 4% 7% 5% 17% 0% 0% 8% 10%
Others 3% 3% 0% 2% 4% 5% 0% 0% 0% 8% 2% 0%
Figure 119: According to our respondents, low cost and comprehensive

product listing remains their top concern when it comes to online shopping
Low cost Comprehensive products listings Well known brand Friends referral Trustworthiness Others
100% 1% 2% 3% 2% 2%
4%
8%
90% 14% 17%
17% 21% 19% 23%
4% 1% 19%
80%
7% 5% 12% 7%
7%
70% 3% 7% 5%
12% 11% 5%
60% 18% 13%
12% 41%
50% 37%
28%
40% 28%
40%
30%
49% 51%
20%
32% 32% 32%
27%
10% 23%
0%
Brazil China India Indonesia Russia Turkey Mexico

27 March 2017
Mobile phones
Key stocks
PT Telekomunikasi Indonesia (Telkom)
■ Rising smartphone and fixed broadband data use drove consolidated EBITDA and net
profit growth of 15.7% YoY and 24.9% YoY across FY16 respectively. While Telkom is
a 'consensus buy', it is slightly expensive versus regional peers. The company has
outperformed the regional telecommunication sector over the last 12 months.
■ It remains the only liquid (large cap) way to invest in the successful monetisation of
Indonesia's data boom.
XL Axiata
■ Over the last 18 months, the company has made significant progress on strengthening
its balance sheet (through both a rights issue and a tower sale) and reducing its heavy
USD-denominated debt exposure. Furthermore, a return to top-line growth means that
XL is now finally emerging from investment phase.
The world at your fingertips

According to our survey, while the owners of mobile phones in Indonesia slightly declines
from 86% to 84% from 2015 to 2016, the number of smartphone owners increased to 64%
from 55% last year. This indicates that more than half of the mobile phone owners in our
survey are using smartphones, or 53.7% (compared to 47.3% in 2015) of the total
respondents are on smartphones instead of their outdated mobile phones.
We stand by our belief that the rising smartphone penetration is due to the increasing
affordability of smartphones due to the influx of cheap smartphones from China and
Taiwan. Regardless of Indonesia's economic cycle, the appetite for smartphones has
constantly remained strong for Indonesian consumers. There are still 30% of our
respondents who are looking to upgrade into a smartphone despite the already high
smartphone penetration.

27 March 2017
Figure 120: Indonesians’ ownership of smartphones continues to rise

2016
Mobile phone ownership 84% 91% 70% 82% 86% 93% 86% 70% 61% 74% 87% 95%
Smartphone ownership 64% 70% 50% 70% 51% 76% 63% 46% 35% 53% 67% 75%
Bought mobile phone in last 12 months? 37% 39% 33% 38% 37% 43% 38% 25% 30% 38% 36% 45%
Will upgrade to smartphone? 30% 30% 30% 30% 30% 42% 35% 19% 14% 30% 30% 53%
Access to internet using mobile phone 48% 57% 30% 52% 38% 68% 46% 23% 14% 35% 51% 60%
2015
2010
A common theme that we see from our survey, along with the increased internet
penetration, is the increase in internet access through smartphones. The relationship tells
us that people are starting to prefer convenience and mobility when it comes to
telecommunications and thus moving away from stationary devices, such as personal
computers, to more practical devices such as tablets and smartphones. Our survey
suggests that people have started preferring more mobile electronics such as mobile
phones, tablets, and notebook personal computers for quite some time now.
Figure 121: Increasing internet access through smartphones

Internet access with Smartphone Internet penetration Smartphone ownership
70%
64%
60%
55%
50%
40%
40%
30%
24%
22%
20% 17%
13%
10%
0%
2010 2011 2012 2013 2014 2015 2016
Interestingly, another strong trend that is picking up is the strong demand for smartphones.
Smartphone purchases rose from 6% in 2010 to 41% in 2016. Despite the high ownership
of smartphones, 46% of the respondents we surveyed said that they would likely purchase
smartphones in the next 12 months.

27 March 2017
Samsung continues to dominate the market

Samsung remains the preferred brand when it comes to mobile phones. Our survey shows
that 80% of the respondents preferred Samsung. This is a significant increase for
Samsung compared to merely 2% in 2010. In our view, due to Samsung's array of product
offerings from the low to high end, it continues to be favoured across Indonesia by
different age and income groups. To top it up, Samsung is the preferred brand across
emerging markets, with the exception of China where only 12% of the respondents
preferred the brand. On the other hand, Nokia which started with 70% in 2010, is now only
left with 7% in 2016. This displays how dynamic the electronics market is, especially for
handsets.
Figure 122: Samsung still dominates

2016
Samsung 80% 85% 74% 81% 78% 87% 80% 71% 67% 78% 81% 78%
Nokia 7% 4% 11% 7% 7% 0% 6% 13% 33% 7% 7% 11%
Xiaomi 2% 3% 1% 2% 1% 1% 3% 0% 0% 1% 2% 0%
Apple 1% 2% 1% 1% 1% 1% 1% 3% 0% 0% 2% 0%
Cross 1% 1% 2% 2% 0% 1% 1% 3% 0% 1% 2% 0%
Asus 1% 1% 1% 1% 0% 3% 0% 0% 0% 1% 1% 0%
Lenovo 1% 0% 2% 1% 1% 3% 0% 0% 0% 1% 1% 0%
Others 6% 5% 8% 4% 11% 3% 8% 10% 0% 10% 4% 11%
2015
Samsung 50% 51% 46% 49% 50% 52% 50% 46% 33% 49% 49% 64%
Nokia 13% 11% 18% 10% 21% 4% 17% 24% 42% 19% 11% 9%
Xiaomi 2% 2% 2% 2% 0% 2% 1% 3% 0% 1% 2% 0%
Apple 7% 8% 3% 6% 9% 10% 5% 1% 3% 3% 8% 15%
Cross 3% 2% 5% 4% 0% 3% 4% 2% 6% 2% 4% 0%
Asus 5% 5% 5% 6% 2% 8% 3% 4% 0% 5% 5% 3%
Lenovo 4% 4% 4% 5% 1% 5% 3% 1% 0% 5% 3% 3%
Others 17% 17% 16% 18% 16% 16% 18% 19% 15% 17% 18% 6%
2010
Samsung 2% 3% 1% 2% 2% 2% 2% 4% 0% 2% 3% 0%
Nokia 70% 69% 71% 66% 79% 65% 71% 79% 79% 72% 66% 83%
Xiaomi 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Apple 1% 1% 0% 1% 1% 1% 1% 0% 0% 0% 1% 0%
Cross 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Asus 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Lenovo 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Others 28% 28% 27% 31% 19% 32% 26% 17% 21% 26% 31% 17%
Figure 123: Samsung is preferred in all emerging countries except in China

2016 Samsung Huawei Samsung Samsung Samsung Samsung Samsung
2015 Samsung Apple Samsung Samsung Samsung Samsung Samsung
2014 Samsung Apple Samsung Samsung Samsung Samsung Samsung

27 March 2017
Figure 124: Share of Samsung continues to rise

2014 2015 2016
90%
80%
80%
61%
70%
50%
60%
48%
46%
46%
46%
44%
44%
44%
41%
41%
50%
36%
35%
31%
30%
40%
28%
27%
26%
30%
17%
12%
20%
10%
0%
Figure 125: Which of the following products have Figure 126: Which of the following products are you
you purchased in the last 12 months? (2016) likely to purchase in the next 12 months? (2016)
Desktop computer Desktop computer DVD Player
Notebook PC DVD Player 4%
2% Notebook PC 3% Gaming facility
Tablet 6% 9%
Gaming facility 12% 1%
5% Mobile Phone
1% Tablet 5%
6%
Internet Service
Mobile Phone 1%
TV
18% 15%
TV
18%
Digital Camera
2% Internet Service
1%
Smartphone
Digital Camera
46%
4%
Smartphone
41%
Figure 127: Which of the following products have Figure 128: Which of the following products are you
you purchased in the last 12 months? (2010) likely to purchase in the next 12 months? 2010
Notebook PC Desktop computer Notebook PC Desktop computer
4% 3% 11% 7%
DVD Player
DVD Player 10%
TV 21%
22% Gaming facility
2%
Gaming facility TV
Digital Camera 2%
1% 29%
Smartphone
6% Mobile Phone
27%
Internet Service
1%
Digital Camera
Mobile Phone 3% Smartphone Internet Service
40% 10% 1%

27 March 2017
Healthcare
Key stocks
Siloam International Hospital
■ We continue to like SILO as room for downside surprise from current levels is low after
past disappointments, and expansion plans could fuel additional growth.
■ There could be upside post the private equity, CVC Capital Partners involvement and
execution progress in light of higher-than-expected FY17 guidance. The initial look into
CVC Capital's experience underscores encouraging turnaround outcomes.
Mitra Hospital
■ We continue to view the company as an attractive long-term holding due to mid-teens
growth profile, margin expansion opportunity, and balance sheet optionality (Rp2.4 tn
in cash).
■ After the recent weakness the stock looks interesting at 33x 2017E EBITDA, below the
historical average. Its premium valuation is supported by best-in-class margins and
ROIC profile.
Prodia Widyahusada
■ Market leader with the largest labs network, Prodia Widyahusada is led by an
experienced management team with comprehensive test offerings through its “hub and
spoke” model. Its improving top line is driven by volume growth and pricing power with
double-digit EBITDA growth on the back of margin expansion and operating leverage.
■ Frost and Sullivan estimates Indonesia’s clinical laboratory testing market will record a
CAGR of 12.9% to reach US$1.8 bn by 2017, while the segment in which Prodia
operates should see a 16.3% CAGR.
Kalbe Farma
■ Challenges continue for the company with the availability of the government’s universal
healthcare programme as consumers are shifting towards generic drugs from branded
ones. Sales contribution from prescription drugs declined to 23% of the total in 2016,
from 25% in 2010, with gross margin declining to 58%, from 67%.
Improved access to state healthcare

Access to state healthcare in Indonesia is still below the average of the other emerging
countries we surveyed. Indonesia remains the second lowest for access to state
healthcare (52% of respondents), with India being the lowest (36% of respondents).
Indonesia is still lagging Mexico (64% respondents), South Africa (68% respondents), and
China (70% respondents).
However, Indonesia has seen a significant improvement where 52% of the respondents do
have access now, as compared to only 34% in 2010, when we first did the survey, or
improving from the previous year at 41%. In fact, Indonesia is the most improved! Thanks
to the continuous rise in enrollments to the government’s universal healthcare programme
(Jamkesnas=Jaminan Kesehatan Nasional).
As of 1 March 2017, there were 174.7 mn people enrolled in the programme, according to
BPJS-Kesehatan. This is an addition of 10.6 mn people enrolled in a year, or 6% higher
YoY. GoI is targetting that by 1 January 2019, all Indonesians will participate in the
programme and have access to healthcare.

27 March 2017
Figure 129: Access to state healthcare in Indonesia is still way below the EM countries, but it is improving
significantly
100%
2010 2011 2012 2013 2014 2015 2016
90%
80%
70%
60%
50%
40%
30%
20%
Russia Turkey Brazil China South Africa Mexico Indonesia India
While improvement in healthcare access is taking place across the board, interestingly,
those in urban and in Java have seen more improvement than those in rural and outside
Java. In urban areas, 55% of the respondents now have access to state healthcare
compared to 43% in 2015 or 35% in 2010. Similarly, of those in Java, 52% now have
access as compared to 37% in 2015 or 27% in 2010.
As such, with the improvement in access to state healthcare, the trend is declining on
spending for healthcare. Out of the total monthly spending, around 3.5% was spent on
healthcare in 2016, and a similar amount in 2015, but had declined since 2010, where
spending on healthcare was at 5% of the total.
Figure 130: Access to state healthcare has improved

2010 2015 2016
60%
55% 54%
52% 52%
48%
50%
43% 42%
41% 40%
40% 38% 37%
34% 35%
33%
30% 27%
20%
10%
0%
Total Urban Rural Java Ex Java

27 March 2017
Figure 131: Declining trend in self-reliance in affording healthcare

Insurance Company Selfpay
100%
90%
80%
44%
50% 49%
57% 57% 58% 55%
70% 59%
60% 76% 78%

92% 92% 93% 94% 93%
50%
40%
37%
31% 35%
30% 28% 28%
24% 28% 29%
20%
16% 14%
10% 18% 17% 20% 17% 17%
15% 14% 13%
8% 8% 7% 6% 7% 7% 9%
0%
Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java
2010 2015 2016
According to BPJS-Kesehatan, the number of providers that participate in the programme

also increased 7% YoY in total, reaching 26,314 providers, which consist of 1,957
hospitals (+12% YoY), 9,818 Puskesmas or facility health centres (flat), 5,383 clinics
(+13% YoY), 4,544 doctors (+2%), 1,150 dentists (flat), 975 optics (+7%), 2,150
drugstores (+15%), and 337 laboratories.
The increase in the number of providers is in line with the access to services given by the
government. Access to hospitals using the Jamkesnas increased to 45% of the
respondents, from 39% in 2010. A similar thing is observed with emergency room that
rose from 13% in 2010 to 18% in 2016. Contrary to what happened with drug companies,
access to prescription drugs declined to 19%, from 30% in 2010 or 24% in 2015. We
believe that this might be due to the administrative issue that could occur should the
tender get delayed. Vaccinations and diagnostic tests remained at 9% and 8% of the
respondents, respectively.
Figure 132: The increase in number of providers in line with the improvement in service offered
Total Urban Rural Java Ex Java Low Mid High
% of respondents 2010 2015 2016 2010 2015 2016 2010 2015 2016 2010 2015 2016 2010 2015 2016 2010 2015 2016 2010 2015 2016 2010 2015 2016
Hospital 39% 46% 45% 38% 44% 44% 39% 52% 47% 37% 49% 48% 41% 45% 39% 38% 50% 43% 39% 45% 45% 33% 35% 48%
Emergency Room 13% 17% 18% 13% 18% 19% 12% 15% 16% 12% 16% 19% 12% 20% 16% 11% 18% 20% 14% 16% 18% 17% 24% 10%
Prescriptions 30% 24% 19% 29% 24% 21% 32% 23% 15% 35% 22% 21% 33% 18% 16% 32% 21% 16% 28% 25% 20% 22% 29% 18%
Vaccinations 10% 6% 9% 11% 6% 7% 9% 5% 14% 8% 6% 6% 6% 8% 17% 11% 4% 12% 10% 7% 8% 17% 1% 11%
Diagnostic tests 8% 7% 8% 9% 8% 8% 8% 5% 7% 8% 7% 6% 7% 9% 12% 8% 7% 9% 9% 7% 8% 11% 11% 13%

27 March 2017
Figure 133: Number of participants and providers of Jamkesnas continue to

increase
1-Mar-16 1-Mar-17 % YoY chg
Number of participants of Jamkesnas (mn people) 164.1 174.7 6%
Number of providers:
Hospitals 1,749 1,957 12%
Puskesmas (facility health centers) 9,811 9,818 0%
Clinics 4,760 5,383 13%
Doctors 4,441 4,544 2%
Dentists 1,150 1,150 0%
Optics 907 975 7%
Drugstores 1,876 2,150 15%
Laboratories 337
Total 24,694 26,314 7%
Source: BPJS Kesehatan
There is no doubt that, with the availability of Jamkesnas, the willingness to pay for
premium medicine brands will continue to decline. Of our respondents, 77% are not willing
to, up from 72% in 2015.
Figure 134: Willingness to pay a premium, international vs local medicine brand

Total Area Region Income
% of respondents Urban Rural Java Ex Java Low Mid High
2016
No 77% 73% 83% 75% 79% 80% 77% 57%
1% - 10% 20% 23% 14% 21% 17% 17% 20% 33%
11% - 20% 2% 2% 2% 2% 3% 1% 3% 7%
21% - 30% 1% 0% 1% 0% 1% 1% 0% 2%
> 30% 1% 1% 1% 1% 1% 1% 0% 2%
2015
No 72% 67% 81% 73% 73% 76% 69% 72%
1-10% extra 23% 26% 16% 23% 23% 20% 25% 20%
11-20% extra 5% 6% 3% 4% 3% 3% 5% 6%
21-30% extra 1% 1% 0% 0% 1% 1% 0% 2%
30% extra 0% 0% 0% 0% 0% 0% 0% 0%
* Income is on monthly basis: Low <Rp1.5mn; Mid Rp1.5-7.5mn: High >Rp7.5mn

27 March 2017
Property
Key stocks
Bumi Serpong Damai
■ Last year, the company had the best pre-sales target achievement record, thanks to its
focus on landed residential property. We expect that to continue this year. The
company has the lowest net debt-to-equity among peers. As pre-sales had been
primarily landed products, earnings recognition should not be a drag for profits this
year.
Ciputra Development
■ We like companies with good project diversification. The company should benefit from
falling overall mortgage rates.
Summarecon Agung
■ Product mix was the main drag in SMRA's pre-sales last year. Company only achieved
67% of total target that was largely led by a big miss in apartment sales. For this year,
Summarecon allocates merely 15% for apartments while having more landed property.
We think the product mix looks more promising for the year. However, we still see risk
on company's earnings.
Potential demand continues to be high

While we are positive on the Indonesia property sector we think growth in 1H17 could be
hard to come by, given tax regulatory overhangs and political uncertainties as a result of
the current ongoing regional election. Nevertheless, our positive view on property is based
on three main factors. First, we have seen lower mortgage rates, e.g., BCA was among
the banks that lowered mortgage rates last year and, more recently, this year. Second,
higher loan-to-value for property financing should help improve affordability. Third, removal
of the second mortgage for pre-built houses and lastly property income tax was lowered to
2.5% from 5.0% previously. Despite the overhangs and short-term risks, we think the
macro and regulatory environments are in favour of a recovery in the sector. In addressing
the short-term risks, we prefer companies that are less leveraged, have more landed
residential property for pre-sales this year, and those that have access to large low-cost
land banks.

27 March 2017
Figure 135: Indonesia real estate developers—quarterly pre-sales progression
Source: Company data, Credit Suisse estimates
The number of respondents planning to purchase a property in the next two years
improved. Our 2016 survey found that about 86% of the respondents either have houses
or their family members own houses—higher than the 73% back in 2010. Separately, 22%
of the respondents are planning to buy houses in the next two years; this shows an
improvement from 20% in the previous year. We think this can be attributed to an overall
lower interest rate environment and flat property price growth in the past couple of years,
which consequently led to better affordability. However, this level is still lower than the
2014 peak at 31% of the respondents.
Figure 136: Property ownership and potential purchases

2016
Property ownership 86% 82% 95% 88% 83% 83% 85% 89% 97% 88% 86% 80%
Planning to buy in next 2 years 22% 24% 16% 20% 26% 25% 23% 17% 12% 16% 24% 44%
2015
2014
2013
2012
2011
2010
* Income is on monthly basis: Low <Rp1.5mn; Mid Rp1.5-7.5mn,: High >Rp7.5mn

27 March 2017
Figure 137: Indonesia remained third place in 2016 in terms of respondents

planning to buy a property in the next two years
35%
2011 2012 2013 2014 2015 2016 Average 2016
30%
25%
% of respondents
20%
15%
10%
5%
0%
Brazil China Indonesia Mexico India South Africa Russia Turkey
Historically, lower interest rates as a result of an easing monetary policy come with a lag of
3-9 months. We have seen banks starting to cut mortgage rates aggressively in the past
couple of months. The figure below shows that mortgage growth starts picking up as a
result.
Figure 138: Mortgage and total loan growth

Mortgage Loan
35
30
25
% YoY
20
15
10
5
Nov-12 Mar-13 Jul-13 Nov-13 Mar-14 Jul-14 Nov-14 Mar-15 Jul-15 Nov-15 Mar-16 Jul-16 Nov-16
Despite improving mortgage growth, we have not yet seen that translating into developer's
pre-sales improvement. We think 1H17 is a challenging period given the overhangs.
Price expectations
When asked about local property price expectations over the next 12 months, 30% of the
respondents said they expected property prices to increase. Those who are bullish on
property prices generally are rural residents. Against last year's outcome, only 36% of the
respondents expect declining prices for property (34% flat)—this is lower than the 43% in
the previous year's survey (28% expected prices to be flat in 2015).

27 March 2017
Figure 139: Respondents have turned a bit more optimistic on property prices
Increase Flat Decrease
100%
90%
25%
36% 34% 34% 36%
80% 41% 43% 43%
47% 46%
70%
60%
38%
50% 31% 30% 27%
34%
32% 28%
40%
39% 27% 29%
30%
20% 37% 38%

35% 36%
30% 27% 29% 25% 25%
10% 18%
0%
Total Urban Rural Java Ex Java Total Urban Rural Java Ex Java
2016 2015
In the longer term, we believe that Indonesia property prices are more resilient than certain
other countries in the region. Historically, Indonesian property developers are more
inclined to absorb lower sales volumes than lowering prices given Indonesia's 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 140: Indonesia has the second lowest Figure 141: …and third lowest mortgage-to-loan
mortgage-to-GDP penetration ratio… penetration ratio
Mortgage loans as % of GDP Mortgage loans as % of total loans
80% 80%
70% 70%
60% 60%
50% 50%
40% 40%
30% 30%
20% 20%
10%
10%
0%
0% PH IN ID CN TH HK SG JP MY KR TW AU
PH ID IN TH CN JP KR MY TW HK SG AU
Source: Central banks Source: Central Banks
Respondents with plan of buying a property within the next two years
has increased vs 2015 survey
On a breakdown by age, the percentage of respondents between the ages of 18 and 45
who plan to buy property in the next two years increased as compared to the 2015 survey.
For instance, in the age group of 18-29, about 25% said they planned to buy property in
the next two years, up from 24% in the previous year's survey, while in age group of 30-
45, the amount of respondents with similar answer is 23%, up from 21%.

27 March 2017
Figure 142: Percentage of respondents planning to

buy property in the next two years by age Figure 143: Indonesia’s median age (2020E)
40% 60
18-29 30-45 46-55 56-65
34% 35%
35% 33%
50 48
30% 30% 30% 45
30% 29% 43 43 43
27% 27%
27% 27%
26% 40 38 38 38
25%
25% 23%
24% 23%
22%
21% 31
20% 20%
29
20% 30 28
18% 18%
17% 25
15%
15%
12% 20
11% 11%
10%
7%
10
5%
0
0%
JP HK KR TW SG TH AU CN ID MY IN PH
2010 2011 2012 2013 2014 2015 2016
Source: Credit Suisse Indonesia Consumer Survey 2017 Source: Company data, Credit Suisse estimates
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% of Indonesia's residents are currently aged 20 to 65—the principal working years.
Another 27% of its population is below the age of 15, giving the country a large incoming
workforce and a low dependency ratio. One of the key factors to have robust growth in the
property sector is a young, growing population with the capability of purchasing big-ticket
items such as property. According to the UN population division, Indonesia has a relatively
young demographic profile, with an estimated median age of 31 by 2020.
On breakdown by income, respondents with lower income showed a small increase with
just 19% of total having a plan to purchase property in the next two years. The middle
income group surprisingly declined to 29% from 32% while there was a big jump for the
high-income population from 37% to 42% in 2015-16. We think this could be largely
attributed to: (1) falling deposit rates as high-income earners view deposits as an
alternative investment against property investment and (2) the recent tax amnesty having
unlocked previously hidden wealth in Indonesia.

27 March 2017
Figure 144: Percentage of respondents planning to

buy property in the next two years—income Figure 145: Labour force CAGR over 2010-20E
50% 1.8%
Low Mid High
1.6%
44% 43% 44% 43%
45% 42% 1.6% 1.5%
40% 1.4% 1.3% 1.3%

37%
35% 34% 1.2%

32%
31% 31%
1.0% 1.0%
30% 28% 28% 29% 1.0% 0.9%
24% 23% 24%

25% 23% 0.8%
20% 18% 19% 0.6%

16% 0.4% 0.4%
15% 14% 0.4% 0.3% 0.3%
10% 0.2%
5% 0.0% -0.1%
-0.2%
0%
PH MY AU IN HK SG ID TH CN KR TW JP
2010 2011 2012 2013 2014 2015 2016
Source: Credit Suisse Indonesia Consumer Survey 2017 Source: United Nations population division
Indonesia's labour force growth is expected to see a 0.9% CAGR over 2010-20E, ahead of
Thailand and China. We believe this should enhance an average Indonesian's ability to
own property ahead as well.

27 March 2017
Banks
Key stocks
Bank Negara Indonesia
■ Loan growth has been strong across the board generally, but it is the SOE-corporate
(one-third of incremental loans) and medium commercial loans (one-fifth of incremental
loans) in particular that have underpinned robust loan growth at BNI. For similar ROAs
and ROEs, BNI is trading at a 27% discount to Mandiri on P/E (and 30% discount on
P/B), far ahead of its historical average of 14%.
Bank Jatim
■ Bank Jatim is the regional development bank for East Java and the smallest bank by
assets among the nine banks in our coverage. It is focused on the consumer (67% of
loan, 87% of which is payroll loan) and commercial/SME (33%) segments. Jatim's ROA
was the third highest last year at 2.4%, behind that of BCA and BRI. Superior
profitability can be attributed to the higher proportion of cheaper current/saving
deposits (81%), fee income and cost efficiency.
Auto interest on lower interest

In this year's survey, we witnessed a decrease, from 73% (2015) to 67% (2016), in the
percentage of respondents who plan to use financing facilities to finance motorbike
purchases, this after an increase from 58% in 2014 going into 2015. This decline applies
across categories, mainly ex-Java at just 52% from 70% in the 2015 survey.
Figure 146: Indonesian planning to purchase their motorbike with a form of

90%
credit
80% 75% 77%
73% 73%
71% 70%
70% 67% 66%
59% 58% 58% 57% 58%
60% 55%
52%
50%
40%
30%
20%
10%
0%
Total Java Ex Java Urban Rural Total Java Ex Java Urban Rural Total Java Ex Java Urban Rural
2016 2015 2010
Of the respondents who live in rural areas, 59% plan to use financing facilities for
motorbike purchases. This is lower than the previous year's survey of 66%. Similarly, 73%
of Java residents thought they would use financing facilities, which is lower than 75% from
last year's survey. The percentage of urban residents who thought they would use
financing facilities also declined to 71% from 77% the previous year.

27 March 2017
Figure 147: Indonesia loan growth by segments

60 Working capital Investment Consumer
50
40
30
% YoY
20
10
-10
Dec-02 Jun-04 Dec-05 Jun-07 Dec-08 Jun-10 Dec-11 Jun-13 Dec-14 Jun-16
Source: Company data, Credit Suisse research
Savings trend
In contrast to the declining appetite to borrow, the percentage of respondents saving
through bank accounts has continuously increased from 33% in 2010 to 38% in 2015 and
45% in 2016 despite the lower deposit rates last year, i.e., in the past three years,
system's average deposit rates were down from 5.0% peak in Feb 2015 to 3.7% by end of
2016. The number of respondents that opted for cash dropped from 31% in 2010 to
30/25% for 2015/16. This indicates increasing savings awareness for the population in
general. Most other methods of savings showed no major changes with property sector
slightly up to 5% of total respondents from 4% in 2015 and 2010. The amount with no
extra money for saving had shown a decline from 29% in 2010 to 22% in 2016. While this
could be driven by factors such as inflation and wage growth, it can also be attributed to
lower consumption.
Figure 148: Methods of savings—geographical location

2016 2015 2010
Bank account 45% 50% 35% 44% 46% 38% 43% 26% 40% 34% 33% 40% 20% 32% 36%
Life insurance 4% 5% 1% 3% 5% 4% 5% 3% 5% 3% 2% 2% 1% 1% 4%
Cash 25% 22% 30% 21% 32% 30% 29% 32% 31% 26% 31% 30% 35% 37% 19%
Property 5% 4% 5% 4% 6% 4% 5% 2% 2% 7% 4% 3% 6% 3% 7%
No extra money for saving 22% 18% 29% 28% 9% 24% 18% 37% 21% 29% 29% 25% 38% 27% 33%
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.

27 March 2017
Figure 149: Deposit rates by type of deposits Figure 150: Lending yields by type of loan
Average deposit rate Policy rate Invt loans WC loans
Consumption loan yield 3M TD rate Cons loans Average IDR lending yield
21 20%
19
18%
17
15
16%
%
13
11
14%
7
12%
3 10%
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-10
Jan-11
Jan-12
Jan-13
Jan-14
Jan-15
Jan-16
Jan-17
Jan-10
Jan-15
Jan-02
Jan-03
Jan-04
Jan-05
Jan-06
Jan-07
Jan-08
Jan-09
Jan-11
Jan-12
Jan-13
Jan-14
Source: Bank Indonesia Jan-16 Source: Bank Indonesia
As opposed to the above, the breakdown by income level tells us a different story.
Respondents with higher income lowered their interest toward bank savings as opposed to
the lower income group. This tells us two things, first, deposit rates sensitivity is higher for
the high-income society as opposed to the mid-low income groups and second, the
increase of low-income respondents to saving account is in-line with the government's
attempt to improve banking sector penetration in Indonesia.
Figure 151: Methods of saving—income

2016 2015 2010
Low Mid High Low Mid High Low Mid High
Bank account 26% 52% 40% 24% 43% 45% 19% 45% 52%
Life insurance 1% 4% 14% 1% 5% 11% 1% 2% 14%
Cash 29% 24% 19% 26% 33% 17% 32% 32% 9%
Property 5% 4% 7% 1% 4% 6% 3% 5% 11%
Others 0% 0% 7% 0% 0% 1% 0% 0% 7%
No extra money for saving 40% 16% 12% 48% 15% 20% 44% 16% 7%
Source: Credit Suisse Indonesia Consumer Survey 2017>Rp7.5mn
Figure 152: Savings as a percentage of income Figure 153: Indonesia—income vs savings

Savings Income Low Mid High
22% 21.1%
100%
90% 20%
80% 18% 17.5%
70%
16%
60% 84%
90% 90% 89% 90% 89% 89% 89% 90% 91% 14% 13.5%
50%
12%
40% 11.0% 11.0% 11.1%
30% 10%
8.9% 8.6%
20% 8%
10% 16%
10% 10% 11% 10% 11% 11% 11% 10% 6% 5.1%
9%
0%
Urban
Urban
Rural
Rural
Java
Ex Java
Java
Ex Java
Total
Total
4%
2%
2016 2010 2010 2015 2016
Source: Credit Suisse Indonesia Consumer Survey 2017 * Income is on monthly basis: Low <Rp1.5mn; Mid Rp1.5-7.5mn,: High >Rp7.5mn

27 March 2017
Automobile Manufacturers
Astra International (ASII.JK / ASII IJ)

Rating OUTPERFORM
Price (24-Mar-17, Rp) 8,525 COMPANY UPDATE FOCUS LIST STOCK
Target price (Rp) 9,800
Upside/downside (%)
Mkt cap (Rp/US$ bn)
15.0
345,122 / 25.89
Improving urban profile
Enterprise value (Rp bn) 385,658
Number of shares (mn) 40,484 ■ As the biggest automobile and motorcycle manufacturer and
Free float (%) 45.2 distributor, Astra provides a unique exposure to the Indonesian consumer
52-wk price range (Rp) 8,775-6,200
ADTO-6M (US$ mn) 17.6
segment and is exposed to the rising middle class. It has over 60% share of
Target price is for 12 months. the four-wheeler market and over 70% share of the two-wheeler market. On
4Ws, it is the sole manufacturer and distributor of Toyota and Daihatsu, and
Research Analysts
for 2Ws, it is the sole manufacturer and distributor for Honda.
Jahanzeb Naseer
62 21 2553 7977 ■ Our Consumer survey shows that the “intention to buy” for cars has risen
jahanzeb.naseer@credit-suisse.com
from 8% to 11% in 2016 vs 2015. Toyota’s brand preference has risen from
23% to 41% over the same period as it launched a number of new models in
2016. The highest change is seen in the urban and high income segment. This
bodes well for Toyota’s ability to successfully defend its market share.
■ For two-wheelers the intention to buy has deteriorated from 28% to
26%. The biggest decline is seen in ex-Java which could be a result of lower
commodity prices. We could see a recovery in rural demand if the commodity
price rebound persists.
■ Risks include a plunge in commodity prices coupled with weaker-than-
expected economic recovery and losing market share to Honda. There is also
an increasing risk of margin compression from the financing arm as
regulators are striving to bring down lending rates to single digit.
Share price performance Financial and valuation metrics

Year 12/16A 12/17E 12/18E
Revenue (Rp bn) 181,084.0 202,297.1 225,855.9
EBITDA (Rp bn) 25,076.0 30,117.2 32,949.9
EBIT (Rp bn) 17,534.0 22,089.3 23,801.3
Net profit (Rp bn) 15,156.0 21,530.3 23,529.8
EPS (CS adj.) (Rp) 374.37 531.83 581.22
Change from previous EPS (%) n.a. 0.0 0.0
Consensus EPS (Rp) n.a. 495.71 556.22
EPS growth (%) 4.8 42.1 9.3
The price relative chart measures performance against the P/E (x) 22.8 16.0 14.7
JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 2.4 2.6 3.6
24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 15.4 12.7 11.4
Rp13,328/US$1 P/B (x) 3.08 2.92 2.68
Performance 1M 3M 12M ROE (%) 14.2 18.7 19.1
Absolute (%) 6.9 16.4 15.6 Net debt/equity (%) 29.7 25.0 18.7
Relative (%) 3.0 5.7 0.3 Source: Company data, Thomson Reuters, Credit Suisse estimates

27 March 2017
Astra International (ASII.JK / ASII IJ)

Price (24 Mar 2017): Rp8,525; Rating: OUTPERFORM; Target Price: Rp9,800; Analyst: Jahanzeb Naseer
Income Statement (Rp bn) 12/16A 12/17E 12/18E Company Background
Sales revenue 181,084 202,297 225,856 ASII is involved in 4 main businesses: automotive, financial services,
Cost of goods sold 144,652 160,291 180,150 UT and AALI. It also has various businesses that make up 4% of
EBITDA 25,076 30,117 32,950 revenues and 3% of net income (including some infrastructure,
EBIT 17,534 22,089 23,801 water distribution, IT, etc.).
Net interest expense/(inc.) 46 283 270
Recurring PBT 22,253 29,329 32,031 Blue/Grey Sky Scenario
Profit after tax 18,302 24,301 26,532
Reported net profit 15,156 21,530 23,530
Net profit (Credit Suisse) 15,156 21,530 23,530
Balance Sheet (Rp bn) 12/16A 12/17E 12/18E
Cash & cash equivalents 29,357 28,310 27,027
Current receivables 22,910 21,510 8,294
Inventories 17,771 15,125 7,363
Other current assets 40,365 43,812 48,275
Current assets 110,403 108,757 90,958
Property, plant & equip. 49,912 52,444 52,233
Investments 33,987 40,368 48,072
Intangibles 1 1 2
Other non-current assets 67,553 55,409 61,306
Total assets 261,856 256,980 252,570
Current liabilities 89,079 68,023 60,418
Total liabilities 121,949 108,874 91,108
Shareholders' equity 111,951 118,282 128,635
Minority interests 27,955 29,822 32,824
Total liabilities & equity 261,855 256,979 252,567
Cash Flow (Rp bn) 12/16A 12/17E 12/18E
EBIT 17,534 22,089 23,801
Net interest 0 0 0
Tax paid 0 0 0
Working capital 589 (7,708) 2,671
Other cash & non-cash items 1,284 7,128 3,716 Our Blue Sky Scenario (Rp) 10,400
Operating cash flow 19,407 21,509 30,188 Our blue sky scenario TP of 10,400/share implies 12% volume
Capex (11,630) (12,957) (10,966) growth for 4W, which resulted in the auto division P/E rerating to
Free cash flow to the firm 7,777 8,551 19,223 23x.
Investing cash flow (10,798) (1,554) (19,040)
Equity raised 0 0 0 Our Grey Sky Scenario (Rp) 8,700
Dividends paid (8,140) (9,094) (12,311) Our grey sky scenario TP of 7,600/share implies 12% volume
Financing cash flow (3,592) (19,383) (16,576) growth for 4W, but with a worse market share for Astra International
Total cash flow 5,017 572 (5,427) which resulted in the auto division P/E derating to 12x.
Adjustments (437) 0 0
Net change in cash 4,580 572 (5,427) Share price performance
Per share 12/16A 12/17E 12/18E
Shares (wtd avg.) (mn) 40,484 40,484 40,484
EPS (Credit Suisse) (Rp) 374 532 581
DPS (Rp) 201 225 304
Operating CFPS (Rp) 479 531 746
Earnings 12/16A 12/17E 12/18E
Growth (%)
Sales revenue (1.7) 11.7 11.6
EBIT 1.9 26.0 7.8
EPS 4.8 42.1 9.3
Margins (%)
EBITDA 13.8 14.9 14.6
EBIT 9.7 10.9 10.5
Valuation (x) 12/16A 12/17E 12/18E
P/E 22.8 16.0 14.7 The price relative chart measures performance against the JSX COMPOSITE
P/B 3.08 2.92 2.68 INDEX which closed at 5,567.13 on 24-Mar-2017
Dividend yield (%) 2.4 2.6 3.6 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1
EV/sales 2.1 1.9 1.7
EV/EBITDA 15.4 12.7 11.4
EV/EBIT 22.1 17.3 15.8
ROE analysis (%) 12/16A 12/17E 12/18E
ROE 14.2 18.7 19.1
ROIC 8.2 10.0 10.5
Credit ratios 12/16A 12/17E 12/18E
Net debt/equity (%) 29.7 25.0 18.7
Net debt/EBITDA (x) 1.66 1.23 0.92

27 March 2017
Packaged Foods
Indofood CBP (ICBP.JK / ICBP IJ)

Rating NEUTRAL
Price (24-Mar-17, Rp) 8,600 COMPANY UPDATE
Upside/downside (%)
Mkt cap (Rp/US$ bn)
10.5
100,292 / 7.52
Noodle pricing power
Number of shares (mn) 11,662 ■ Good results in 9M16. PT Indofood CBP Sukses Makmur (ICBP), a subsidiary
Free float (%) 19.4 of PT Indofood Sukses Makmur (INDF) delivered another good round of
earnings—9M16 net profit slightly higher than our initial estimates. Revenue
Target price is for 12 months. rose 10% YoY to Rp26.5 tn, with net profit soaring 16% YoY to Rp2.8 tn.
Research Analysts ■ Noodles accounted for 64% of ICBP's revenue and 75% of operating
Ella Nusantoro profit in 9M16. We are estimating a 2% higher volume and a 5% ASP
62 21 2553 7917 increase this year for noodles. However, with the surprise price increase on
ella.nusantoro@credit-suisse.com
noodles despite the still low wheat prices, margins for the segment may get
pressured. Nevertheless, this might be underpinned from the rise in other
input cost such as palm oil (at its highest since July 2012) and chilli prices. An
approximate 4% price increase took place in early January. The last price
increase by around the same amount was in January of last year.
■ Dairy business accounts for 20% of revenue and 25% of operating profit
with its operating margin at its highest of 18.5%. With the rise in sugar
prices and skim milk powder, we are concerned that the high margin might
not be sustainable.
■ Expanding the ice-cream business. ICBP is looking to expand its ice-
cream business this year. It recently relaunched its brand Espessia and
launched the Nusantara flavours. It will start to invest in freezers as well as
expanding the distribution network. Based on Euromonitor data, the ice-
cream industry in Indonesia is reported to have 2016E sales of Rp5.7 tn
(US$435 mn), witnessing an 18% CAGR for 2011-16E. The industry is also
projected to rise at a 16% CAGR in 2016E-21E, reaching Rp11.8 tn (US$905
mn).

Year 12/15A 12/16E 12/17E 12/18E
Revenue (Rp bn) 31,741.1 34,912.1 38,669.2 42,649.7
EBITDA (Rp bn) 4,690.9 5,878.0 6,231.9 6,842.1
EBIT (Rp bn) 3,992.1 4,985.3 5,129.2 5,531.9
Net profit (Rp bn) 3,000.7 3,642.0 3,776.3 4,103.0
EPS (CS adj.) (Rp) 257.31 312.30 323.82 351.83
Change from previous EPS (%) n.a. 0.0 0.0 0.0
Consensus EPS (Rp) n.a. 315.17 343.76 379.96
EPS growth (%) 13.5 21.4 3.7 8.7
The price relative chart measures performance against the P/E (x) 33.4 27.5 26.6 24.4
JSX COMPOSITE INDEX which closed at 5,567.13 on Dividend yield (%) 1.2 1.5 1.8 1.9
24/03/17. On 24/03/17 the spot exchange rate was EV/EBITDA (x) 20.3 16.0 14.9 13.3
Rp13,328/US$1 P/B (x) 6.49 5.70 5.13 4.61
Performance 1M 3M 12M ROE (%) 20.6 22.0 20.3 19.9
Absolute (%) 4.2 13.9 13.0 Net debt/equity (%) Net cash Net cash Net cash Net cash
Relative (%) 0.4 3.2 -2.4 Source: Company data, Thomson Reuters, Credit Suisse estimates

27 March 2017
Indofood CBP (ICBP.JK / ICBP IJ)

Price (24 Mar 2017): Rp8,600; Rating: NEUTRAL; Target Price: Rp9,500; Analyst: Ella Nusantoro
Income Statement (Rp bn) 12/15A 12/16E 12/17E 12/18E Company Background
Sales revenue 31,741 34,912 38,669 42,650 Indofood CBP, a subsidiary of Indofood Sukses Makmur (INDF.JK),
Cost of goods sold 22,122 23,953 26,926 29,612 is an established market-leading producer of packaged food
EBITDA 4,691 5,878 6,232 6,842 products. It has a diverse range of products providing everyday food
EBIT 3,992 4,985 5,129 5,532 solutions. Its five business units include noodles, dairy, snack and
Net interest expense/(inc.) (112) (170) (202) (219) foods, food seasoning and beverages,
Recurring PBT 4,010 5,066 5,268 5,727
Profit after tax 2,923 3,799 3,951 4,295 Blue/Grey Sky Scenario
Reported net profit 3,001 3,642 3,776 4,103
Net profit (Credit Suisse) 3,001 3,642 3,776 4,103
Balance Sheet (Rp bn) 12/15A 12/16E 12/17E 12/18E
Cash & cash equivalents 7,658 9,310 10,429 11,914
Current receivables 3,364 3,352 3,683 4,125
Inventories 2,547 2,710 3,076 3,404
Other current assets 393 429 457 492
Current assets 13,962 15,800 17,645 19,935
Property, plant & equip. 6,556 7,555 8,452 9,142
Investments 1,119 1,119 1,119 1,119
Intangibles 4,052 3,919 3,786 3,653
Other non-current assets 872 998 1,059 1,157
Total assets 26,561 29,391 32,061 35,006
Current liabilities 6,002 6,608 7,186 7,796
Total liabilities 10,174 11,020 11,909 12,831
Shareholders' equity 15,455 17,597 19,552 21,767
Minority interests 932 775 600 408
Total liabilities & equity 26,561 29,391 32,061 35,006
Cash Flow (Rp bn) 12/15A 12/16E 12/17E 12/18E
EBIT 3,992 4,985 5,129 5,532
Net interest 112 170 202 219
Tax paid (1,086) (1,266) (1,317) (1,432)
Working capital 188 380 (131) (206)
Other cash & non-cash items 268 266 996 1,300
Operating cash flow 3,473 4,535 4,879 5,413 Our Blue Sky Scenario (Rp) 11,500
Capex (1,219) (1,892) (2,000) (2,000) Our Blue sky scenario TP of Rp11,500 implies P/E of 35.5x on the
Free cash flow to the firm 2,255 2,643 2,879 3,413 back of softer commodity prices and stronger volume growth
Investing cash flow (1,477) (1,504) (2,059) (2,170)
Equity raised 0 0 0 0 Our Grey Sky Scenario (Rp) 8,500
Dividends paid (1,203) (1,500) (1,821) (1,888) Our Grey sky scenario TP of Rp8,500 implies P/E of 26.3x on the
Financing cash flow (1,643) (1,500) (1,821) (1,757) back of higher commodity prices and weaker volume growth
Total cash flow 354 1,530 999 1,485
Adjustments 0 0 0 0 Share price performance
Net change in cash 354 1,530 999 1,485
Per share 12/15A 12/16E 12/17E 12/18E
Shares (wtd avg.) (mn) 11,662 11,662 11,662 11,662
EPS (Credit Suisse) (Rp) 257 312 324 352
DPS (Rp) 103 129 156 162
Operating CFPS (Rp) 298 389 418 464
Earnings 12/15A 12/16E 12/17E 12/18E
Growth (%)
Sales revenue 5.7 10.0 10.8 10.3
EBIT 25.3 24.9 2.9 7.9
EPS 13.5 21.4 3.7 8.7
Margins (%)
EBITDA 14.8 16.8 16.1 16.0
EBIT 12.6 14.3 13.3 13.0
Valuation (x) 12/15A 12/16E 12/17E 12/18E The price relative chart measures performance against the JSX COMPOSITE
P/E 33.4 27.5 26.6 24.4 INDEX which closed at 5,567.13 on 24-Mar-2017
P/B 6.49 5.70 5.13 4.61 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1
Dividend yield (%) 1.2 1.5 1.8 1.9
EV/sales 3.0 2.7 2.4 2.1
EV/EBITDA 20.3 16.0 14.9 13.3
EV/EBIT 23.9 18.8 18.1 16.5
ROE analysis (%) 12/15A 12/16E 12/17E 12/18E
ROE 20.6 22.0 20.3 19.9
ROIC 26.4 32.0 31.6 32.4
Credit ratios 12/15A 12/16E 12/17E 12/18E
Net debt/equity (%) (29.8) (35.4) (37.9) (41.1)
Net debt/EBITDA (x) (1.04) (1.11) (1.22) (1.33)

27 March 2017
Tobacco
Hanjaya Mandala Sampoerna

(HMSP.JK / HMSP IJ)
Rating NEUTRAL
Upside/downside (%)
Mkt cap (Rp/US$ bn)
8.5
465,272 / 34.91
Indonesia’s largest cigarette maker
Number of shares (mn) 116,318 ■ PT Hanjaya Mandala Sampoerna Tbk (“HMSP”) is the largest tobacco
Free float (%) 7.5 company in Indonesia, with volume of 105.6 bn sticks in FY16. HMSP
reported a better-than-expected FY16 with net profit soaring 23% YoY to
Target price is for 12 months. Rp12.8 tn, on 7% higher sales YoY at Rp95.5 tn. FY16 sales account for
97% of our estimates, while the net profit was 7% higher than our estimates.
Research Analysts
Ella Nusantoro ■ Higher net profit was mainly due to a better-than-expected interest income
62 21 2553 7917 of Rp854 bn, driven by its cash of Rp5 tn and other short-term financial assets of
Rp1.6 tn. The company is in a net cash position. Lower opex (+2% YoY) also
helped profitability. On average, the company increased its selling price by
about 12% YoY, slightly higher than our estimates.
■ HMSP’s market share stood at 28.9% for Sigaret Kretek Mesin (SKM),
37.3% for Sigaret Kretek Tangan (SKT) and 79.5% Sigaret Putih Mesin
(SPM), as compared to 29.7%, 37.7%, and 80.3% in FY15, respectively, a
general decline across three segments for FY16.
■ HMSP remains most preferred by our respondents in the survey, with
39% market share, with a notable preference from people in the urban area.
■ The GoI is targeting Rp157.16 tn of excise tax in 2017. It has raised excise
duty by an average of 9%, which became effective on 1 January 2017
(weighted average at 10.2%). We can then assume that flat volume growth is
expected this year. Our volume growth forecast for HMSP is 2% for 2017.

Year 12/15A 12/16E 12/17E 12/18E
Revenue (Rp bn) 89,069.3 95,899.8 101,835.0 108,447.5
EBITDA (Rp bn) 14,467.4 15,928.8 16,810.2 18,018.2
EBIT (Rp bn) 14,048.1 15,449.5 16,270.9 17,418.9
Net profit (Rp bn) 10,425.1 12,323.3 12,794.0 13,526.7
EPS (CS adj.) (Rp) 89.63 105.94 109.99 116.29
EPS growth (%) (4.6) 18.2 3.8 5.7
Rp13,328/US$1 P/B (x) 14.53 14.53 14.53 14.53
Relative (%) 0.0 -0.8 -15.1 Source: Company data, Thomson Reuters, Credit Suisse estimates

27 March 2017
Hanjaya Mandala Sampoerna (HMSP.JK / HMSP IJ)

Sales revenue 89,069 95,900 101,835 108,448 PT HM Sampoerna Tbk is the largest tobacco company in
Cost of goods sold 67,305 72,510 77,187 81,987 Indonesia, with 109.7 bn cigarettes sold and overall market share of
EBITDA 14,467 15,929 16,810 18,018 34.9% in 2014. In 2005, it was acquired by Phillip Morris
EBIT 14,048 15,450 16,271 17,419 International (PMI).
Net interest expense/(inc.) 69 (748) (586) (457)
Recurring PBT 13,994 16,197 16,857 17,876 Blue/Grey Sky Scenario
Profit after tax 10,425 12,323 12,794 13,527
Inventories 19,072 19,682 21,347 23,055
Other current assets 4,290 4,281 3,069 3,244
Current assets 29,807 29,254 29,183 29,201
Investments 781 780 779 778
Intangibles 60 60 60 60
Other non-current assets 1,081 1,198 1,299 1,399
Total assets 38,011 38,294 38,984 39,701
EBIT 14,048 15,450 16,271 17,419
Net interest (69) 748 586 457
Tax paid (3,569) (3,874) (4,063) (4,350)
Working capital (13,602) 388 191 434
Other cash & non-cash items 373 545 539 599 Our Blue Sky Scenario (Rp) 6,000
Operating cash flow (2,820) 13,256 13,525 14,560 Our Blue sky scenario TP Rp6,000 implies P/E of 54.5x on the back
Capex (781) (1,200) (1,200) (1,200) of higher volume of cigarette sticks sold
Free cash flow to the firm (3,601) 12,056 12,325 13,360
Investing cash flow (1,020) (1,316) (1,300) (1,299) Our Grey Sky Scenario (Rp) 3,000
Equity raised 20,413 0 0 0 Our Grey sky scenario TP Rp3,000 implies P/E of 27.3x on the back
Dividends paid (12,259) (12,389) (12,794) (13,527) of weaker volume of cigarette sticks sold
Financing cash flow 5,493 (12,196) (12,571) (13,268)
Total cash flow 1,654 (256) (346) (7) Share price performance
Adjustments 0 0 0 0
Net change in cash 1,654 (256) (346) (7)
Per share 12/15A 12/16E 12/17E 12/18E
Shares (wtd avg.) (mn) 116,318 116,318 116,318 116,318
DPS (Rp) 105 107 110 116
Operating CFPS (Rp) -24 114 116 125
Earnings 12/15A 12/16E 12/17E 12/18E
Growth (%)
Sales revenue 10.4 7.7 6.2 6.5
EBIT 1.8 10.0 5.3 7.1
EPS (4.6) 18.2 3.8 5.7
Margins (%)
EBITDA 16.2 16.6 16.5 16.6
EBIT 15.8 16.1 16.0 16.1 The price relative chart measures performance against the JSX COMPOSITE
Valuation (x) 12/15A 12/16E 12/17E 12/18E INDEX which closed at 5,567.13 on 24-Mar-2017
P/E 44.6 37.8 36.4 34.4 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1
P/B 14.53 14.53 14.53 14.53
Dividend yield (%) 2.6 2.7 2.7 2.9
EV/sales 5.2 4.8 4.6 4.3
EV/EBITDA 32.1 29.1 27.6 25.8
EV/EBIT 33.0 30.1 28.6 26.7
ROE 45.8 38.5 40.0 42.2
ROIC 38.5 38.0 39.5 41.9
Net debt/equity (%) (3.9) (3.0) (1.8) (1.7)
Net debt/EBITDA (x) (0.09) (0.06) (0.03) (0.03)

27 March 2017
Tobacco
Gudang Garam (GGRM.JK / GGRM IJ)

Rating NEUTRAL
Upside/downside (%)
Mkt cap (Rp/US$ bn)
14.1
124,921 / 9.37
Getting more popular, according to our survey
Number of shares (mn) 1,924 ■ PT Gudang Garam Tbk (GGRM) is Indonesia’s second largest tobacco
Free float (%) 23.6 producer. GGRM produces kretek cigarettes with brands such as GG Surya,
52-wk price range (Rp) 77,500-59,300
GG FIM, GG Merah, GG Pro Mild, and GG Mild.
■ According to our consumer survey, GGRM has increased overall
Target price is for 12 months.
Research Analysts popularity among our respondents, from 25% last year to 30% this year.
Ella Nusantoro GGRM’s product has been especially strong in rural areas and amongst the
62 21 2553 7917 lower segment of the income bracket.
■ Year to date March 2017, we have seen another price increase from GGRM
in the middle of February. The increase is expected given the higher excise
duty (around 9% increase YoY) and higher VAT costs (9.1% of banderole
prices vs 8.7% last year). The new excise duty and VAT tariffs became
effective on 1 January 2017.
■ There is no price increase for GG Surya 16 and GG Mild 16, which we
believe is due to weaker volumes. The price increase for GG Merah is around
2% and that for GG FIM is 1.4%, while the price for GG Pro Mild increased by
2.5%. At the same time, the company is also adjusting its banderole prices.
■ As for FY16, GG reported around 3% lower volume, whereas the
industry’s estimated decline was by 0.8%.
■ We have a NEUTRAL rating on the stock, as we believe that in light of the
government's need to collect more tax revenue, the cigarette sector may not
see much benefit. Also, with the weak volumes, GG might continue to be
sensitive on increasing its products.

Year 12/15A 12/16E 12/17E 12/18E
Revenue (Rp bn) 70,365.6 76,363.2 84,248.5 91,612.0
EBITDA (Rp bn) 11,712.7 12,323.9 13,289.0 14,626.6
EBIT (Rp bn) 9,997.6 10,475.5 11,307.2 12,511.5
Net profit (Rp bn) 6,368.4 6,937.0 7,650.3 8,719.5
EPS (CS adj.) (Rp) 3,310 3,605 3,976 4,532
Consensus EPS (Rp) n.a. 3,489 3,899 4,404
EPS growth (%) 17.8 8.9 10.3 14.0
Rp13,328/US$1 P/B (x) 3.30 3.14 2.79 2.47
Absolute (%) 4.4 7.7 7.1 Net debt/equity (%) 46.9 45.1 32.8 20.7

27 March 2017
Gudang Garam (GGRM.JK / GGRM IJ)

Sales revenue 70,366 76,363 84,248 91,612 Gudang Garam is Indonesia’s second largest tobacco producer, with
Cost of goods sold 54,880 59,941 66,384 71,860 an estimated market share of 21.5% in FY15. It produces kretek
EBITDA 11,713 12,324 13,289 14,627 cigarettes with brands such as GG Surya, GG FIM, GG Merah, GG
EBIT 9,998 10,475 11,307 12,512 Pro Mild, and GG Mild.
Net interest expense/(inc.) 1,430 1,202 1,080 855
Recurring PBT 8,568 9,274 10,227 11,657 Blue/Grey Sky Scenario
Profit after tax 6,386 6,955 7,670 8,742
Inventories 37,256 38,644 40,791 42,518
Other current assets 1,019 618 682 742
Current assets 42,568 42,753 45,477 47,114
Investments 0 0 0 0
Intangibles 0 0 0 0
Other non-current assets 830 897 989 1,088
Total assets 63,505 63,908 66,743 68,363
EBIT 9,998 10,475 11,307 12,512
Net interest (1,430) (1,202) (1,080) (855)
Tax paid (2,182) (2,318) (2,557) (2,914)
Working capital (5,050) (2,011) (1,875) (1,720)
Other cash & non-cash items 268 628 882 1,237 Our Blue Sky Scenario (Rp) 77,670
Operating cash flow 1,604 5,572 6,677 8,260 Our blue sky scenario target price of Rp77,670 equates to 21.7x
Capex (2,848) (2,000) (2,000) (2,000) 2016E P/E.
Free cash flow to the firm (1,244) 3,572 4,677 6,260
Investing cash flow (2,950) (2,066) (2,093) (2,098) Our Grey Sky Scenario (Rp) 70,445
Equity raised 0 0 0 0 Our grey sky scenario target price of Rp70,445 equates to 19.7x
Dividends paid (1,534) (5,003) (2,694) (2,886) 2016E P/E.
Financing cash flow 990 (5,931) (5,534) (7,196)
Total cash flow (357) (2,425) (949) (1,034) Share price performance
Adjustments 0 0 0 0
Net change in cash (357) (2,425) (949) (1,034)
Per share 12/15A 12/16E 12/17E 12/18E
Shares (wtd avg.) (mn) 1,924 1,924 1,924 1,924
EPS (Credit Suisse) (Rp) 3,310 3,605 3,976 4,532
DPS (Rp) 800 2,600 1,400 1,500
Operating CFPS (Rp) 834 2,896 3,470 4,293
Earnings 12/15A 12/16E 12/17E 12/18E
Growth (%)
Sales revenue 7.9 8.5 10.3 8.7
EBIT 15.9 4.8 7.9 10.7
EPS 17.8 8.9 10.3 14.0
Margins (%)
EBITDA 16.6 16.1 15.8 16.0
P/B 3.30 3.14 2.79 2.47
Dividend yield (%) 1.2 4.0 2.2 2.3
EV/sales 2.0 1.9 1.7 1.5
EV/EBITDA 12.2 11.6 10.5 9.3
EV/EBIT 14.3 13.6 12.4 10.8
ROE 18.0 17.8 18.1 18.3
ROIC 14.1 13.8 14.4 15.5
Net debt/equity (%) 46.9 45.1 32.8 20.7
Net debt/EBITDA (x) 1.52 1.46 1.11 0.72

27 March 2017
Department Stores
Matahari Department Store (LPPF.JK / LPPF IJ)

Rating OUTPERFORM
Upside/downside (%)
Mkt cap (Rp/US$ bn)
15.8
40,559 / 3.04
Riding the improving consumer trend
Number of shares (mn) 2,918 ■ Largest department store operator in town. Matahari Department store is
Free float (%) 65.3 one of the largest department stores in Indonesia with 43% market share (as
52-wk price range (Rp) 21,500-11,725
of 2015), according to Euromonitor. Matahari operates 151 stores pan-
Target price is for 12 months. Indonesia, with a high exposure to ex-Java (61 stores). The company
recently recorded 5.5% same-store sales growth in 2016, down from 6.8% in
Research Analysts
2015 on the back of slower economic growth and tighter competition.
Ella Nusantoro
62 21 2553 7917 ■ Sweet spot of the market. Matahari caters to the best segment in Indonesia,
the rising middle class segment. This is the sweet spot in the Indonesian
Benny Kurniawan
consumer space. The people in this segment tend to be young individuals
who are brand sensitive and would want to upgrade themselves.
■ Strong private label brand. Private labels made up 38% of Matahari
Department stores’ gross sales, and it continued to perform well on the back
of strong brand recognition (especially Nevada) and continuous innovation.
Matahari recently launched its private label initiative, ‘gap brands’. Gap
brands aim to cater to the widening price gap between consignment and
private label merchandise. Our consumer survey this year showed that the
consumer’s preference towards Nevada remained high, at 7%.
■ OUTPERFORM. Although competition is expected to remain tough,
especially from specialty stores, we believe the improvement in commodity
prices will eventually trickle down and aid consumption. With 38% of its gross
sales originating from the ex-Java region, we believe Matahari started to book
improvements in 2H16. Its current valuation at 18x 2017E P/E also looks
reasonably attractive given that the company is debt-free and is the best
department store operator in town.

Year 12/16A 12/17E 12/18E 12/19E
Revenue (Rp bn) 9,897.0 11,251.7 12,567.7 13,868.2
EBITDA (Rp bn) 2,784.4 3,026.3 3,284.7 3,513.6
EBIT (Rp bn) 2,528.1 2,754.8 2,995.9 3,205.3
Net profit (Rp bn) 2,019.7 2,242.6 2,447.8 2,646.0
EPS (CS adj.) (Rp) 692.17 768.58 838.89 906.82
EPS growth (%) 13.4 11.0 9.1 8.1
Rp13,328/US$1 P/B (x) 7.47 6.48 5.69 5.03
Absolute (%) -5.8 -2.6 -22.8 Net debt/equity (%) Net cash Net cash Net cash Net cash
Relative (%) -9.7 -13.4 -38.1 Source: Company data, Thomson Reuters, Credit Suisse estimates

27 March 2017
Matahari Department Store (LPPF.JK / LPPF IJ)

Price (24 Mar 2017): Rp13,900; Rating: OUTPERFORM; Target Price: Rp16,100; Analyst: Ella Nusantoro
Sales revenue 9,897 11,252 12,568 13,868 Matahari Department Store operates department stores across
Cost of goods sold 3,685 4,357 4,933 5,444 Indonesia. It offers various fashion items for men, women and kids,
EBITDA 2,784 3,026 3,285 3,514 including clothing, bags, shoes and accessories.
EBIT 2,528 2,755 2,996 3,205
Net interest expense/(inc.) 1 (48) (64) (102) Blue/Grey Sky Scenario
Recurring PBT 2,533 2,803 3,060 3,308
Profit after tax 2,020 2,243 2,448 2,646
Current receivables 95 98 112 122
Inventories 995 1,197 1,319 1,414
Current assets 2,974 3,291 4,277 5,328
Investments 0 0 0 0
Intangibles 0 0 0 1
Other non-current assets 825 1,524 1,612 1,699
Total assets 4,859 5,983 7,200 8,520
EBIT 2,528 2,755 2,996 3,205
Net interest (93) (1) 48 64
Tax paid 0 0 0 0
Working capital 214 7 133 205 Our Blue Sky Scenario (Rp) 19,000
Other cash & non-cash items (118) (239) (308) (315) Our blue sky target price of Rp19,000 implies 8% SSSG on the back
Operating cash flow 2,531 2,521 2,869 3,160 of better-than-expected macroeconomic conditions.
Capex (360) (380) (431) (490)
Free cash flow to the firm 2,172 2,141 2,438 2,670 Our Grey Sky Scenario (Rp) 12,500
Investing cash flow (507) (1,079) (519) (577) Our grey sky scenario target price of Rp12,500 implies the valuation
Equity raised 0 0 0 0 derates as a result of weaker-than-expected SSSG on the back of
Dividends paid (1,247) (1,414) (1,570) (1,714) political overhang.
Financing cash flow (1,259) (1,373) (1,524) (1,664)
Total cash flow 766 69 825 920 Share price performance
Adjustments 0 0 0 0
Net change in cash 766 69 825 920
Per share 12/16A 12/17E 12/18E 12/19E
Shares (wtd avg.) (mn) 2,918 2,918 2,918 2,918
DPS (Rp) 427 485 538 587
Operating CFPS (Rp) 868 864 983 1,083
Earnings 12/16A 12/17E 12/18E 12/19E
Growth (%)
Sales revenue 9.9 13.7 11.7 10.3
EBIT 8.5 9.0 8.8 7.0
EPS 13.4 11.0 9.1 8.1
Margins (%)
EBITDA 28.1 26.9 26.1 25.3
P/B 7.47 6.48 5.69 5.03
Dividend yield (%) 3.1 3.5 3.9 4.2
EV/sales 3.9 3.4 3.0 2.7
EV/EBITDA 14.0 12.8 11.6 10.5
EV/EBIT 15.4 14.1 12.7 11.6
ROE 40.0 38.4 36.6 34.8
ROIC 1335.5 422.1 258.3 266.8
Net debt/equity (%) (92.3) (66.4) (73.2) (78.5)
Net debt/EBITDA (x) (0.62) (0.59) (0.79) (1.00)

27 March 2017
Retailing Conglomerates
Mitra Adiperkasa (MAPI.JK / MAPI IJ)

Rating OUTPERFORM
Upside/downside (%)
Mkt cap (Rp/US$ bn)
8.0
9,836 / 0.74
Diverse brand portfolio but well-liked by consumers
Number of shares (mn) 1,660 ■ Mitra Adiperkasa (“MAPI”) operates three lines of businesses, (1)
Free float (%) 44.0 specialty stores, (2) department stores and (3) food and beverage. MAPI’s
target market is geared towards the higher-end of the population and more
Target price is for 12 months. than 60% of its space is in Jakarta. Our consumer survey this year indicates
that the high income bracket is the only segment seeing a recovery this year
Research Analysts
and this should be positive for MAPI.
Ella Nusantoro
62 21 2553 7917 ■ MAPI’s specialty stores cater to all age groups and segments, boasting
over 150 brands with top contributions from inditex group brands namely Zara,
Benny Kurniawan
Stradivarius, Pull & Bear and Bershka. MAPI also has its “active wear” division,
which includes brands such as Adidas, Nike, New Balance and many more. Our
consumer survey this year indicates that the respondents’ preference for Zara
amongst other branded fashion goods remains high at 5.4%, while Adidas and
Nike are the top preference for sports shoes for our respondents.
■ MAPI also operates the Starbucks chain in Indonesia, which has seen its
store count growing rapidly over the past ten years. Starbucks is seen as the
pioneer of the coffee culture in Indonesia and with the latest restructuring with
General Atlantic, we expect its store count growth to expand even faster.
■ We expect MAPI to be more prudent in brand acquisition going forward,
given that it closed a few non-performing brands last year. Nevertheless, the
growth trajectory for the company should remain high given the rising need of
Indonesian consumers for branded fashion and sports goods. Risk on the
company includes significant depreciation of the IDR as the company imports
most of its content.

Year 12/15A 12/16E 12/17E 12/18E
Revenue (Rp bn) 12,832.8 14,133.2 16,325.6 18,844.2
EBITDA (Rp bn) 1,133.1 1,324.8 1,596.3 1,805.5
EBIT (Rp bn) 536.1 706.7 958.0 1,147.0
Net profit (Rp bn) 37.3 202.7 350.4 555.6
EPS (CS adj.) (Rp) 22.49 122.08 211.11 334.72
EPS growth (%) (49.1) 442.8 72.9 58.6
Rp13,328/US$1 P/B (x) 3.90 3.62 3.24 2.78

27 March 2017
Mitra Adiperkasa (MAPI.JK / MAPI IJ)

Price (24 Mar 2017): Rp5,925; Rating: OUTPERFORM; Target Price: Rp6,400; Analyst: Ella Nusantoro
Sales revenue 12,833 14,133 16,326 18,844 MAPI operates department stores (SEIBU, SOGO, Galleries
Cost of goods sold 7,050 7,671 8,833 10,164 Lafayette), Specialy stores (mainly fashion, which includes: ZARA,
EBITDA 1,133 1,325 1,596 1,806 Lacoste, etc) and F&B division (Starbucks, Genki Sushi, Godiva).
EBIT 536 707 958 1,147
Net interest expense/(inc.) 388 369 374 292 Blue/Grey Sky Scenario
Recurring PBT 148 338 584 855
Profit after tax 30 203 350 556
Reported net profit 37 203 350 556
Net profit (Credit Suisse) 37 203 350 556
Cash & cash equivalents 504 1,990 1,787 1,699
Inventories 3,356 3,531 3,993 4,455
Current assets 5,696 7,348 7,814 8,364
Investments 497 497 497 497
Other non-current assets 567 619 705 804
Total assets 9,483 10,970 11,264 11,631
EBIT 536 707 958 1,147
Net interest (388) (369) (374) (292)
Tax paid 0 0 0 0
Working capital (464) 58 (126) (204) Our Blue Sky Scenario (Rp) 8,600
Other cash & non-cash items 571 483 510 517 Our blue sky scenario’s TP of Rp8,600/share implies improvement
Operating cash flow 255 878 968 1,168 in gross margins level to 48% in 2017-21E.
Capex (590) (420) (404) (404)
Free cash flow to the firm (335) 458 564 764 Our Grey Sky Scenario (Rp) 4,600
Investing cash flow (651) (453) (466) (477) Our grey sky scenario’s target price of Rp4,600/share implies
Equity raised (51) 48 0 0 weaker gross margins as a result of discounting.
Dividends paid 0 (4) (30) (53)
Financing cash flow 539 1,061 (705) (779) Share price performance
Total cash flow 143 1,486 (204) (88)
Adjustments 0 0 0 0
Net change in cash 143 1,486 (204) (88)
Per share 12/15A 12/16E 12/17E 12/18E
Shares (wtd avg.) (mn) 1,660 1,660 1,660 1,660
DPS (Rp) 0 2 18 32
Earnings 12/15A 12/16E 12/17E 12/18E
Growth (%)
Sales revenue 8.5 10.1 15.5 15.4
EBIT (2.0) 31.8 35.6 19.7
EPS (49.1) 442.8 72.9 58.6
Margins (%)
EBITDA 8.8 9.4 9.8 9.6 The price relative chart measures performance against the JSX COMPOSITE
EBIT 4.2 5.0 5.9 6.1 INDEX which closed at 5,567.13 on 24-Mar-2017
Valuation (x) 12/15A 12/16E 12/17E 12/18E On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1
P/E 263.4 48.5 28.1 17.7
P/B 3.90 3.62 3.24 2.78
Dividend yield (%) 0.0 0.0 0.3 0.5
EV/sales 1.0 0.9 0.7 0.6
EV/EBITDA 11.5 9.4 7.6 6.4
EV/EBIT 24.2 17.7 12.6 10.1
ROE 1.5 7.7 12.2 16.9
ROIC 1.9 7.1 9.8 12.8
Net debt/equity (%) 106.0 82.6 64.1 43.7
Net debt/EBITDA (x) 2.78 2.01 1.42 0.98

27 March 2017
Integrated Telecommunication Services
PT Telkom (Telekomunikasi Indo.) (TLKM.JK

/ TLKM IJ)
Rating OUTPERFORM
Upside/downside (%)
Mkt cap (Rp/US$ bn)
16.4
411,264 / 30.86
Re-accelerating growth in TLKM and improving
Enterprise value (Rp bn)
Number of shares (mn)
410,929
100,800
profitability in fixed line
Free float (%) 48.8
52-wk price range (Rp) 4,550-3,285 ■ Telkomsel's revenue grew by 13.0% YoY into 4Q16, in a re-acceleration
ADTO-6M (US$ mn) 24.6 from the 11.4% YoY growth delivered in 3Q16, as Telkomsel successfully
pushed through further tariff increases. The result also shows that
Research Analysts Telkomsel's 4G 'combo' packages—launched in mid-2016 in a competitive
Colin McCallum, CA response to Indosat and XL's packages—were skillfully constructed to
852 2101 6514 prevent revenue erosion and create an ARPU uplift.
colin.mccallum@credit-suisse.com
■ Across FY16 as a whole Telkomsel's revenue grew by 14.0%, in line with
our forecast. Telkomsel was able to increase voice revenue by 10.1% YoY, in
spite of cannibalisation from OTT services such as Whatsapp, while declines
in SMS revenue were limited to 3.3% YoY. Of course, this small decline was
more than offset by 36.6% YoY growth in data revenues and 38.8% YoY
growth in digital revenues. Importantly, there is still some room for this to
continue; Telkomsel's 3G/4G smartphone subscriber base increased 33.9%
YoY to 82.6 mn, representing just 47.4% of the total subscriber base.
■ The visibility of quarterly results of the fixed line business is not as
good, particularly on a quarterly basis. But the fixed line YoY revenue figure
looked fairly strong, with revenue growing by 11.8% YoY into 4Q16. We
believe that the primary driver is the growth of the fibre broadband IndiHome
business. The total subscriber base (both fibre and xDSL) reached 1.624 mn
as at 31 December, up 52.1% YoY, while ARPU was stated as Rp341,000,
up 8.9% QoQ from Rp313,000 in 3Q16.
■ With another very strong Telkomsel contribution, and with Telkom fixed
line contributing less of a drag on profitability, consolidated EBITDA and
consolidated net profit grew by 15.7% YoY and 24.9% YoY across FY16,
respectively. PT Telkom remains the only liquid (large cap) way to invest in
the successful monetisation of Indonesia's data boom.

Year 12/16A 12/17E 12/18E 12/19E
Revenue (Rp bn) 116,333.0 129,438.4 139,193.8 145,222.1
EBITDA (Rp bn) 59,498.0 65,367.2 70,179.8 73,086.6
EBIT (Rp bn) 40,966.0 45,142.2 48,661.0 50,794.6
Net profit (Rp bn) 19,352.0 23,317.7 25,599.3 27,225.8
EPS (CS adj.) (Rp) 196.19 240.14 263.63 280.39
EPS growth (%) 25.9 22.4 9.8 6.4
Rp13,328/US$1 P/B (x) 4.69 4.23 3.81 3.62
Absolute (%) 5.2 10.6 23.3 Net debt/equity (%) 0.5 Net cash Net cash Net cash
Relative (%) 1.3 -0.2 7.9 Source: Company data, Thomson Reuters, Credit Suisse estimates

27 March 2017
PT Telkom (Telekomunikasi Indo.) (TLKM.JK / TLKM IJ)

Price (24 Mar 2017): Rp4,080; Rating: OUTPERFORM; Target Price: Rp4,750; Analyst: Colin McCallum
Sales revenue 116,333 129,438 139,194 145,222 PT Telekomunikasi Indonesia, Tbk. (TELKOM) is an integrated
Cost of goods sold 56,835 64,071 69,014 72,136 telecommunication and network services provider in Indonesia.
EBITDA 59,498 65,367 70,180 73,087
EBIT 40,966 45,142 48,661 50,795 Blue/Grey Sky Scenario
Net interest expense/(inc.) 1,094 884 552 139
Recurring PBT 38,189 45,002 48,938 51,560
Profit after tax 29,172 33,952 36,904 38,870
Inventories 0 0 0 0
Current assets 47,701 53,517 64,294 72,368
Investments 1,847 2,297 2,808 3,370
Intangibles 3,089 3,089 3,089 3,089
Total assets 179,611 194,045 208,546 217,150
Minority interests 21,160 22,755 24,451 26,197
EBIT 40,966 45,142 48,661 50,795
Net interest (1,094) (884) (552) (139)
Tax paid (9,017) (11,051) (12,035) (12,690) Our Blue Sky Scenario (Rp) 5,399
Working capital (5,654) 1,736 1,228 625 Better-than-expected data monetisation and cost control drive a blue
Other cash & non-cash items 12,924 20,225 21,519 22,292 sky valuation of 8.1x EV/EBITDA.
Operating cash flow 38,125 55,169 58,822 60,883
Capex (27,885) (28,392) (24,733) (22,259) Our Grey Sky Scenario (Rp) 4,074
Free cash flow to the firm 21,502 25,041 32,861 37,999 Worse-than-expected data monetisation and cost control drive a
Investing cash flow (28,756) (28,392) (24,733) (22,259) grey sky valuation of 6.1x EV/EBITDA.
Equity raised 3,442 0 0 0
Dividends paid (18,248) (22,836) (24,750) (31,437) Share price performance
Total cash flow 303 3,940 9,339 7,187
Adjustments 0 0 0 (0)
Net change in cash 303 3,940 9,339 7,187
Per share 12/16A 12/17E 12/18E 12/19E
Shares (wtd avg.) (mn) 98,639 97,101 97,101 97,101
DPS (Rp) 128 144 158 224
Earnings 12/16A 12/17E 12/18E 12/19E
Growth (%)
Sales revenue 13.5 11.3 7.5 4.3
EBIT 24.6 10.2 7.8 4.4
EPS 25.9 22.4 9.8 6.4
Margins (%) The price relative chart measures performance against the JSX COMPOSITE
EBITDA 51.1 50.5 50.4 50.3 INDEX which closed at 5,567.13 on 24-Mar-2017
EBIT 35.2 34.9 35.0 35.0 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1
Valuation (x) 12/16A 12/17E 12/18E 12/19E
P/E 20.8 17.0 15.5 14.6
P/B 4.69 4.23 3.81 3.62
Dividend yield (%) 3.1 3.5 3.9 5.5
EV/sales 3.5 3.2 2.9 2.7
EV/EBITDA 6.9 6.2 5.7 5.4
EV/EBIT 10.1 9.0 8.2 7.7
ROE 24.3 26.2 25.9 25.5
ROIC 30.8 31.1 32.1 33.1
Net debt/equity (%) 0.5 (2.9) (9.9) (14.7)
Net debt/EBITDA (x) 0.01 (0.05) (0.18) (0.27)

27 March 2017
Wireless Telecommunication Services
XL Axiata Tbk (EXCL.JK / EXCL IJ)

Rating OUTPERFORM [V]
Upside/downside (%)
Mkt cap (Rp/US$ bn)
20.8
34,950 / 2.62
Signs of revenue recovery
Number of shares (mn) 10,688 ■ Despite net cellular revenue declining by 5.5% across FY16, XL's revenue
Free float (%) 20.1 trajectory has now bottomed and is improving. XL's net cellular revenue grew by
0.6% QoQ into 4Q16. The key revenue growth driver is the 'XL Xtra' 4G
Target price is for 12 months. packages, initially launched in June 2016. Together with the launch of U900, the
[V] = Stock Considered Volatile (see Disclosure Appendix) XL Xtra packages also contributed to 2.7% QoQ growth in the average size of
Research Analysts the subscriber base, as XL enjoyed some success in rebuilding scale.
Colin McCallum, CA ■ XL's shift in strategy in 2015, together with the relatively cost-efficient
852 2101 6514
colin.mccallum@credit-suisse.com nature of the 4G rollout (especially when compared with 3G), seems to have
successfully improved the company's cost structure. However, we noted in
2Q16 that a side-effect of XL's strategy of reducing SIM starter pack sales
was the loss of support from traditional resellers, and this prompted XL to
increase commissions in 3Q16. Costs continued to be an issue in 4Q16, with
EBITDA declining 8.0% QoQ and 21.5% YoY thanks to a sharp rise in A&P
expenses. Across FY16 as a whole, EBITDA therefore declined by 4.0%.
■ Over the last 18 months XL has made significant progress on strengthening
its balance sheet (through rights issue and a tower sale) and reducing its heavy
USD-denominated debt exposure. In FY16 as a whole, XL achieved net profit of
just Rp376 bn, despite recording Rp1.3 tn in tower gains in FY16.
■ For XL's shares to recover, revenue will need to continue to rise to cover
the heavy fixed cost base. Our view is that there is enough data volume
growth in Indonesia such that, if unlimited data plans continue to be avoided,
all of the 'big 3' operators should be able to grow revenue. On valuation, XL
does not yet look overly attractive on P/E, given the aforementioned heavy
fixed cost base. However, the expected cash flow yield in FY17 is supportive.
Indeed, XL's free cash flow yield is set to improve further in FY18. It is this
expectation, based on revenue rising and the capex-to-sales ratio easing to
23.0% as the 4G rollout is completed, that drives our target price of Rp3,950.

Year 12/16A 12/17E 12/18E 12/19E
Revenue (Rp bn) 20,574.7 22,524.4 23,976.2 25,257.2
EBITDA (Rp bn) 8,055.8 8,863.5 9,433.6 10,042.5
EBIT (Rp bn) 12.0 1,283.5 1,723.7 1,792.8
Net profit (Rp bn) 375.3 588.9 984.2 1,114.3
EPS (CS adj.) (Rp) 38.35 55.15 92.18 104.36
EPS growth (%) n.m. 43.8 67.1 13.2
Rp13,328/US$1 P/B (x) 1.51 1.61 1.60 1.59
Absolute (%) 4.5 45.3 -16.0 Net debt/equity (%) 73.7 64.5 53.7 39.4
Relative (%) 0.6 34.6 -31.3 Source: Company data, Thomson Reuters, Credit Suisse estimates

27 March 2017
XL Axiata Tbk (EXCL.JK / EXCL IJ)

Price (24 Mar 2017): Rp3,270; Rating: OUTPERFORM [V]; Target Price: Rp3,950; Analyst: Colin McCallum
Sales revenue 20,575 22,524 23,976 25,257 XL Axiata is involved in the provision of telephony services in
Cost of goods sold 12,519 13,661 14,543 15,215 Indonesia.
EBITDA 8,056 8,864 9,434 10,043
EBIT 12 1,284 It is 1,724 1,793 Blue/Grey Sky Scenario
Net interest expense/(inc.) 1,533 998
this 911 807
Recurring PBT 185 expectation,785 1,312 1,486
Profit after tax 375 based589on 984 1,114
Reported net profit 375 589
revenue 984 1,114
Net profit (Credit Suisse) 375 rising 589
and 984 1,114
Balance Sheet (Rp bn) 12/16A the capex-to-
12/17E 12/18E 12/19E
Cash & cash equivalents 1,400 sales2,084
ratio 3,316 5,393
Current receivables 0 easing to 0 0 0
Inventories 0 23.0% as the 0 0 0
Other current assets 5,407 4G rollout
5,919is 6,301 6,637
Current assets 6,807 completed,
8,004 9,617 12,030
Property, plant & equip. 33,183 that33,187
drives 32,297 30,753
Investments 0 our target 0 0 0
Intangibles 6,108 price
5,282of 4,455 3,306
Other non-current assets 8,798 Rp4,080.103
8,798 8,798 8,798
Total assets 54,896 55,270 55,168 54,888
EBIT 12 1,283 1,724 1,793
Net interest (1,135) (998) (911) (807)
Tax paid (172) (196) (328) (371) Our Blue Sky Scenario (Rp) 4,753
Working capital 3,981 950 819 772
Other cash & non-cash items 8,044 7,580 7,710 8,250
Operating cash flow 10,730 8,618 9,013 9,636 Our Grey Sky Scenario (Rp) 3,093
Capex (5,584) (6,757) (5,994) (5,557)
Free cash flow to the firm 1,129 912 2,200 3,307
Investing cash flow (3,849) (6,757) (5,994) (5,557) Share price performance
Equity raised 2,207 0 0 0
Dividends paid 0 (177) (787) (1,003)
Total cash flow (1,912) 684 1,232 2,077
Adjustments 0 0 0 0
Net change in cash (1,912) 684 1,232 2,077
Per share 12/16A 12/17E 12/18E 12/19E
Shares (wtd avg.) (mn) 9,787 10,678 10,678 10,678
DPS (Rp) 0 17 74 94
Operating CFPS (Rp) 1,096 807 844 902
Earnings 12/16A 12/17E 12/18E 12/19E
Growth (%)
Sales revenue (7.4) 9.5 6.4 5.3
EBIT (99.0) 10595.6 34.3 4.0 The price relative chart measures performance against the JSX COMPOSITE
EPS 1342.7 43.8 67.1 13.2 INDEX which closed at 5,567.13 on 24-Mar-2017
Margins (%) On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1
EBITDA 39.2 39.4 39.3 39.8
EBIT 0.1 5.7 7.2 7.1
Valuation (x) 12/16A 12/17E 12/18E 12/19E
P/E 85.3 59.3 35.5 31.3
P/B 1.51 1.61 1.60 1.59
Dividend yield (%) 0.0 0.5 2.3 2.9
EV/sales 2.5 2.2 1.9 1.7
EV/EBITDA 6.3 5.5 4.9 4.3
EV/EBIT 4215.6 38.1 27.1 24.3
ROE 2.1 2.7 4.5 5.1
ROIC 0.1 2.7 3.7 4.2
Net debt/equity (%) 73.7 64.5 53.7 39.4
Net debt/EBITDA (x) 1.94 1.57 1.24 0.86

27 March 2017
Healthcare Facilities
Siloam International Hospitals (SILO.JK / SILO

IJ)
Rating OUTPERFORM
Upside/downside (%)
Mkt cap (Rp/US$ bn)
-9.6
18,469 / 1.39
Turnaround growth story
Number of shares (mn) 1,301 ■ We continue to like SILO as room for downside surprise from the current
Free float (%) 39.5 levels is low after past disappointments, and expansion plans would fuel
additional growth. Moreover, there could be upside post CVC's involvement
Target price is for 12 months. and execution progress in light of higher-than-expected FY17 guidance.
Research Analysts ■ Switching to FY17, SILO has targeted YoY gross operating revenue (GOR)
Ari Jahja growth of 20-25%, while EBITDA as percentage of GOR could reach 15-16%
62 21 2553 7976 (FY16 was 13%). Using FY16 actual GOR and EBITDA as a base,
ariyanto.jahja@credit-suisse.com
respectively, FY17 EBITDA would have come in above Rp930 bn (which
implies mid-30% growth instead of 20%) under this scenario. Also, it is
important to note that the financial impact from acquisitions and new hospital
openings is not baked in.
■ CVC's multi-year value creation plan could provide upside through 2020: (1)
increased equipment utilisation, (2) SG&A optimisation, (3) drug procurement
efficiencies, and (4) strategic price increases. The second phase of this
strategy may include service cost reduction.
■ Also importantly, an initial look into CVC's experience underscores
encouraging turnaround outcomes. Australia-based Affinity Health delivered
~320 bp of EBITDA margin expansion in less than two years after CVC's
acquisition, prior to being sold to Ramsay Healthcare in April 2005.

Year 12/15A 12/16E 12/17E 12/18E
Revenue (Rp bn) 4,144.1 5,247.0 6,514.0 7,865.0
EBITDA (Rp bn) 568.4 717.4 894.4 1,093.3
EBIT (Rp bn) 211.2 252.6 345.4 381.6
Net profit (Rp bn) 70.4 93.9 130.5 147.2
EPS (CS adj.) (Rp) 59.92 79.93 111.09 125.31
EPS growth (%) (2.0) 33.4 39.0 12.8
Rp13,328/US$1 P/B (x) 9.56 9.11 8.53 7.98

27 March 2017
Siloam International Hospitals (SILO.JK / SILO IJ)

Price (24 Mar 2017): Rp14,200; Rating: OUTPERFORM; Target Price: Rp12,840; Analyst: Ariyanto Jahja
Sales revenue 4,144 5,247 6,514 7,865 Siloam International Hospitals is an Indonesia-based healthcare
Cost of goods sold 2,968 3,772 4,669 5,633 company that owns and operates hospitals. Its hospitals offer a
EBITDA 568 717 894 1,093 comprehensive range of specialists, and is located throughout
EBIT 211 253 345 382 Indonesia.
Net interest expense/(inc.) 52 75 113 126
Recurring PBT 106 125 167 177 Blue/Grey Sky Scenario
Cash & cash equivalents 160 230 196 210
Inventories 140 157 195 235
Current assets 956 1,089 1,263 1,498
Investments 0 0 0 0
Total assets 2,986 3,886 4,465 4,875
Current liabilities 630 656 809 974
Minority interests (4) 6 20 34
EBIT 211 253 345 382
Net interest 0 0 0 0
Tax paid (44) (41) (50) (44)
Working capital (82) (30) (53) (56)
Other cash & non-cash items 170 322 352 483 Our Blue Sky Scenario (Rp) (from 15,465) 18,525
Operating cash flow 255 503 594 764 Our blue sky scenario assumes 2017 revenue growth of 26.1% and
Capex (279) (1,198) (889) (810) EBITDA margin of 21.5%.
Free cash flow to the firm (24) (696) (294) (46)
Investing cash flow (352) (1,053) (828) (748) Our Grey Sky Scenario (Rp) (from 10,333) 12,270
Equity raised 0 0 0 0 Our grey sky scenario assumes 2017 revenue growth of 22.9% and
Dividends paid (6) (6) (8) (11) EBITDA margin of 17.9%.
Financing cash flow (23) 620 200 (2)
Total cash flow (120) 70 (34) 14 Share price performance
Adjustments 0 0 0 0
Net change in cash (120) 70 (34) 14
Per share 12/15A 12/16E 12/17E 12/18E
Shares (wtd avg.) (mn) 1,175 1,175 1,175 1,175
DPS (Rp) 5 5 7 9
Earnings 12/15A 12/16E 12/17E 12/18E
Growth (%)
Sales revenue 24.0 26.6 24.1 20.7
EBIT 17.0 19.6 36.7 10.5
EPS (2.0) 33.4 39.0 12.8
Margins (%)
EBITDA 13.7 13.7 13.7 13.9
P/B 9.56 9.11 8.53 7.98
Dividend yield (%) 0.0 0.0 0.0 0.1
EV/sales 4.5 3.7 3.0 2.5
EV/EBITDA 32.9 26.8 21.8 17.8
EV/EBIT 88.5 76.2 56.4 51.0
ROE 4.1 5.3 6.9 7.3
ROIC 6.5 7.4 8.7 9.4
Net debt/equity (%) 13.1 42.1 50.7 46.2
Net debt/EBITDA (x) 0.40 1.08 1.12 0.90

27 March 2017
Healthcare Facilities
PT Mitra Keluarga Karyasehat Tbk (MIKA.JK

/ MIKA IJ)
Rating OUTPERFORM
Upside/downside (%)
Mkt cap (Rp/US$ bn)
19.6
37,832 / 2.84
Attractive long-term holding
Number of shares (mn) 14,551 ■ We continue to view PT Mitra Keluarga Karyasehat Tbk (“MIKA”) as an
Free float (%) 22.9 attractive long-term holding due to mid-teens growth profile, margin
expansion opportunity, and balance sheet optionality (Rp2.4 tn in cash). After
Target price is for 12 months. the recent weakness, the stock looks interesting at 33x 2017 EBITDA, below
the historical average. Its premium valuation is supported by best-in-class
Research Analysts
margins and ROIC profile.
Ari Jahja
62 21 2553 7976 ■ Pertaining to 2017, management has reiterated its mid-teens revenue and
ariyanto.jahja@credit-suisse.com
high-teens EBITDA growth, despite the expected ramp-up in pre-op costs
prior to the new Tangerang hospital launch in December.
■ At least ~15% top-line growth for FY17 would be driven by patient
volume (7-8%), followed by price increases (3-4%) and revenue intensity
(2-3%). Importantly, EBITDA growth could be faster than revenue, fuelled by
1-2% gross margin expansion.
■ Pertaining to capital deployment, management is still in the process of
assessing several possible targets. While investor sentiment appears mixed
due to potential margin impact, we think it could be a positive growth catalyst.

Year 12/15A 12/16E 12/17E 12/18E
Revenue (Rp bn) 2,140.7 2,479.2 2,918.0 3,413.6
EBITDA (Rp bn) 743.6 901.8 1,069.1 1,249.4
EBIT (Rp bn) 600.0 742.3 877.3 1,021.3
Net profit (Rp bn) 566.8 695.2 802.0 903.0
EPS (CS adj.) (Rp) 39.28 47.78 55.12 62.06
EPS growth (%) 4.7 21.6 15.4 12.6
Rp13,328/US$1 P/B (x) 11.84 10.73 9.74 8.86

27 March 2017
PT Mitra Keluarga Karyasehat Tbk (MIKA.JK / MIKA IJ)

Price (24 Mar 2017): Rp2,600; Rating: OUTPERFORM; Target Price: Rp3,110; Analyst: Ariyanto Jahja
Sales revenue 2,141 2,479 2,918 3,414 Mitra Keluarga Karyasehat is an Indonesia-based healthcare
Cost of goods sold 1,168 1,312 1,529 1,781 company that engages in hospital management and business
EBITDA 744 902 1,069 1,249 services. Its hospitals offer a range of specialist medical services,
EBIT 600 742 877 1,021 and are located in the Greater Jakarta Area, Surabaya, and Tegal.
Net interest expense/(inc.) (135) (155) (171) (161)
Recurring PBT 740 902 1,054 1,187 Blue/Grey Sky Scenario
Inventories 38 69 80 93
Current assets 2,621 2,934 3,012 3,242
Property, plant & equip. 884 1,084 1,365 1,528
Investments 0 0 0 0
Intangibles 2 2 2 2
Total assets 3,720 4,255 4,656 5,096
Current liabilities 206 436 512 598
Total liabilities 441 671 747 833
Minority interests 83 57 26 (8)
EBIT 600 742 877 1,021
Net interest 161 133 146 131
Tax paid (151) (180) (221) (249)
Working capital (14) 182 26 30
Other cash & non-cash items 91 99 117 137 Our Blue Sky Scenario (Rp) 3,383
Operating cash flow 688 976 945 1,070 Our blue sky scenario assumes 2017 revenue growth of 22.5% and
Capex (205) (299) (398) (299) EBITDA margin of 36.5%.
Free cash flow to the firm 483 677 547 771
Investing cash flow (171) (321) (439) (346) Our Grey Sky Scenario (Rp) 2,458
Equity raised 1,208 0 0 0 Our grey sky scenario assumes 2017 revenue growth of 17.3% and
Dividends paid (291) (364) (446) (515) EBITDA margin of 33.6%.
Financing cash flow 1,063 (390) (477) (549)
Total cash flow 1,579 265 29 174 Share price performance
Adjustments 3 0 0 0
Net change in cash 1,582 265 29 174
Per share 12/15A 12/16E 12/17E 12/18E
Shares (wtd avg.) (mn) 14,429 14,551 14,551 14,551
DPS (Rp) 20 25 31 35
Earnings 12/15A 12/16E 12/17E 12/18E
Growth (%)
Sales revenue 10.0 15.8 17.7 17.0
EBIT 9.5 23.7 18.2 16.4
EPS 4.7 21.6 15.4 12.6
Margins (%)
EBITDA 34.7 36.4 36.6 36.6
P/B 11.84 10.73 9.74 8.86
Dividend yield (%) 0.8 1.0 1.2 1.4
EV/sales 16.6 14.2 12.0 10.2
EV/EBITDA 47.7 39.0 32.9 28.0
EV/EBIT 59.1 47.4 40.1 34.2
ROE 23.1 20.7 21.6 22.1
ROIC 56.5 65.1 64.2 61.2
Net debt/equity (%) (72.8) (74.0) (68.6) (67.0)
Net debt/EBITDA (x) (3.21) (2.94) (2.51) (2.28)

27 March 2017
Major Pharmaceuticals
Kalbe Farma (KLBF.JK / KLBF IJ)

Rating UNDERPERFORM
Upside/downside (%)
Mkt cap (Rp/US$ bn)
-10.3
70,547 / 5.29
Challenging pharma division
Number of shares (mn) 46,875 ■ PT Kalbe Farma Tbk (KLBF) is an Indonesia-based pharmaceutical
Free float (%) 43.4 company. The company is engaged in the development, production and
distribution of pharmaceutical products for humans and animals. KLBF
Target price is for 12 months. reported 14% higher net profit YoY to Rp1.7 tn, on 10% higher revenue YoY
to Rp14.4 tn, slightly below our estimates, accounting for 66% and 70% of
Research Analysts
FY16E, respectively.
Ella Nusantoro
62 21 2553 7917 ■ Gross profit increased 10% YoY to Rp7 tn, on the back of a stable
IDR/USD exchange rate, and gross margin improved 10 bp to 48.9%. Opex
was only increased 7% YoY, and hence operating profit rose 15% YoY to
Rp2.3 tn and operating margin improved 70 bp to 15.8%.
■ Within the four divisions that Kalbe has, nutritionals and consumer health
divisions each reported 11% revenue growth YoY in 9M16 to Rp4.1 tn and
Rp2.6 tn. They accounted for 28% and 18% of the total revenue. Distribution
& logistics reported 10% higher revenue YoY to Rp4.3 tn, accounting for 30%
of the total. Prescription pharma that accounts for 24% of the total, reported
only 6% revenue growth to Rp3.4 tn, as consumers shift to utilise the BPJS
Kesehatan (National Health Care Insurance). Nutritionals is the highest
contributor to gross profit, making up 33% of total, and grew 16% YoY to
Rp2.3 tn.
■ The prescription drugs division will continue to have major challenges with
the continuous increase of participants of the national healthcare insurance
scheme. The scheme resulted in a shift from branded generic, which the
company focused on, to the unbranded generic.
Year 12/14A 12/15E 12/16E 12/17E
Revenue (Rp bn) 17,368.5 18,335.1 20,486.9 22,970.3
EBITDA (Rp bn) 3,006.6 3,235.0 3,745.8 4,300.9
EBIT (Rp bn) 2,761.0 2,922.8 3,373.6 3,895.4
Net profit (Rp bn) 2,067.3 2,223.8 2,584.7 3,005.3
EPS (CS adj.) (Rp) 44.10 47.44 55.14 64.11
EPS growth (%) 7.7 7.6 16.2 16.3
Rp13,328/US$1 P/B (x) 7.52 6.56 5.68 4.92
Relative (%) -3.2 -6.2 0.9 Source: Company data, Thomson Reuters, Credit Suisse estimates

27 March 2017
Kalbe Farma (KLBF.JK / KLBF IJ)

Price (24 Mar 2017): Rp1,505; Rating: UNDERPERFORM; Target Price: Rp1,350; Analyst: Ella Nusantoro
Earnings Drivers 12/14A 12/15E 12/16E 12/17E Per share 12/14A 12/15E 12/16E 12/17E
GDP growth 0.05 0.05 0.05 0.05 Shares (wtd avg.) (mn) 46,875 46,875 46,875 46,875
GDP per capita 0.05 0.05 0.05 0.05 EPS (Credit Suisse) (Rp) 44.10 47.44 55.14 64.11
Population growth 0.01 0.00 0.00 0.00 DPS (Rp) 17.00 19.00 19.70 22.89
- - - - BVPS (Rp) 200.15 229.30 264.74 305.96
- - - - Operating CFPS (Rp) 48.45 54.20 55.45 60.29
Income Statement (Rp bn) 12/14A 12/15E 12/16E 12/17E Valuation (x) 12/14A 12/15E 12/16E 12/17E
Sales revenue 17,369 18,335 20,487 22,970 P/E 34.1 31.7 27.3 23.5
Cost of goods sold 8,893 9,238 10,132 11,345 P/B 7.52 6.56 5.68 4.92
SG & A 5,572 6,021 6,811 7,539 Dividend yield (%) 1.1 1.3 1.3 1.5
Other operating exp./(inc.) (102) (159) (202) (214) P/CF 31.1 27.8 27.1 25.0
EBITDA 3,007 3,235 3,746 4,301 EV/sales 4.0 3.7 3.3 2.9
Depreciation & amortisation 246 312 372 406 EV/EBITDA 22.9 21.0 17.9 15.2
EBIT 2,761 2,923 3,374 3,895 EV/EBIT 25.0 23.2 19.9 16.8
Net interest expense/(inc.) (11) (54) (86) (127) Earnings 12/14A 12/15E 12/16E 12/17E
Non-operating inc./(exp.) (6) 0 0 0 Growth (%)
Associates/JV 0 0 0 0 Sales revenue 8.5 5.6 11.7 12.1
Recurring PBT 2,766 2,977 3,460 4,023 EBIT 8.3 5.9 15.4 15.5
Exceptionals/extraordinaries 0 0 0 0 Net profit 7.7 7.6 16.2 16.3
Taxes 643 692 804 935 EPS 7.7 7.6 16.2 16.3
Profit after tax 2,124 2,285 2,655 3,087 Margins (%)
Other after tax income 0 0 0 0 EBITDA 17.3 17.6 18.3 18.7
Minority interests 56 61 71 82 EBIT 15.9 15.9 16.5 17.0
Preferred dividends 0 0 0 0 Pre-tax profit 15.9 16.2 16.9 17.5
Reported net profit 2,067 2,224 2,585 3,005 Net profit 11.9 12.1 12.6 13.1
Analyst adjustments 0 0 0 0
ROE 23.6 22.1 22.3 22.5
Balance Sheet (Rp bn) 12/14A 12/15E 12/16E 12/17E ROIC 26.7 26.6 28.5 30.5
Cash & cash equivalents 1,895 2,863 3,789 5,216 Asset turnover (x) 1.4 1.3 1.3 1.3
Current receivables 2,347 2,291 2,578 2,910 Interest burden (x) 1.0 1.0 1.0 1.0
Inventories 3,091 3,104 3,334 3,714 Tax burden (x) 0.8 0.8 0.8 0.8
Other current assets 789 643 714 797 Financial leverage (x) 1.3 1.2 1.2 1.2
Current assets 8,121 8,901 10,415 12,637
Investments 0 0 0 0 Net debt/equity (%) (16.3) (23.2) (27.1) (32.9)
Intangibles 422 396 370 345 Net debt/EBITDA (x) (0.53) (0.81) (0.94) (1.15)
Interest cover (x) n.a. n.a. n.a. n.a.
Total assets 12,425 13,894 15,970 18,330
Accounts payable 1,133 1,163 1,323 1,470 12MF P/E multiple
Short-term debt 252 252 252 252
Current provisions 0 0 0 0
Other current liabilities 1,001 1,013 1,143 1,275
Long-term debt 44 0 0 0
Non-current provisions 0 0 0 0
Other non-current liabilities 177 195 215 238
EBIT 2,761 2,923 3,374 3,895
Net interest 11 54 86 127
Tax paid (643) (692) (804) (935) 12MF P/B multiple
Working capital (66) 31 (298) (515)
Other cash & non-cash items 208 225 242 254
Operating cash flow 2,271 2,540 2,599 2,826
Capex (724) (1,000) (900) (500)
Free cash flow to the firm 1,547 1,540 1,699 2,326
Disposals of fixed assets 0 0 0 0
Acquisitions 0 0 0 0
Divestments 0 0 0 0
Associate investments 0 0 0 0
Other investment/(outflows) (36) 26 26 26
Investing cash flow (761) (974) (874) (474)
Equity raised 44 87 105 125
Dividends paid (797) (857) (923) (1,073)
Net borrowings (285) (44) 0 0
Other financing cash flow 6 17 20 23
Financing cash flow (1,032) (797) (798) (925) Source: Credit Suisse, Thomson Reuters
Total cash flow 478 769 926 1,427
Adjustments 0 0 0 0
Net change in cash 478 769 926 1,427

27 March 2017
Real Estate Management & Development
PT Summarecon Agung Tbk (SMRA.JK / SMRA IJ)

Rating OUTPERFORM
Upside/downside (%)
Mkt cap (Rp/US$ bn)
19.4
19,332 / 1.45
Getting back to the ground floor.
Number of shares (mn) 14,427 ■ Setting 23% pre-sales CAGR for 2016-18E. Pre-sales growth has been in
Free float (%) 67.7 the negative zone for the past couple of years. While the macro and
regulatory environment had a lot to do with this, product mix is equally
Target price is for 12 months. important. For instance, in the last year, the company managed to fully meet
its landed houses and shophouses sales target, but merely 30% of its
Research Analysts
apartments' target. For 2017, it is guiding Rp4.5 tn, but this time, landed
Laurensius Teiseran
products accounted for more with 76% of the total (vs 41%/38% in 2016/15),
62 21 255 37931
laurensius.teiseran@credit-suisse.com a more promising product mix, in our view.
■ We expect 66% 2016-18E EPS CAGR vs 40% Bloomberg consensus. We
know that sales recognition comes with a lag of 1-2 years for landed and 2-4
years for high-rise depending on the progress of construction—a reason to
avoid P/E multiple for seeking fair value. During 2014-16, SMRA had sold
>8,200 units of apartments worth Rp5.8 tn, roughly half of which had been
recognised as revenue in 2015/16E, i.e., apartments account for about 40%
of total revenue vs 7% historical average. It was a disadvantage for earnings
as revenue got stretched, leverage went up and margin contracted. The
reverse should play out as we account for lower revenue from apartments.
■ Risks and catalysts. We find evidence of demand picking up in the month of
October post the first amnesty window, but that was dented by the November
Ahok rallies. In this regard, we expect pre-sales to kick in only in 2Q due to
the Jakarta election and related uncertainties. On a more positive note,
catalysts include stronger mortgage growth and better apartment sales.
■ Valuation. The stock is now trading at a 60% discount to NAV, just 9% above
2015-low and >2 s.d. below its 2015-high. Adjusting for political risks and
possible higher interest rates, our DCF-based target price is Rp1,600,
implying 18% upside, 50% discount to 2017E NAV and 21% potential upside.

Year 12/15A 12/16E 12/17E 12/18E
Revenue (Rp bn) 5,623.6 4,815.6 5,444.8 6,749.2
EBITDA (Rp bn) 2,032.4 1,378.2 1,718.9 2,184.6
EBIT (Rp bn) 1,791.4 1,154.0 1,475.4 1,914.4
Net attributable profit (Rp bn) 855.2 281.3 482.7 778.4
EPS (CS adj.) (Rp) 59.28 19.50 33.46 53.96
EPS growth (%) (38.3) (67.1) 71.6 61.3
Rp13,328/US$1 ROE (%) 14.9 4.6 7.6 11.3
Performance 1M 3M 12M Net debt/equity (%) 62.3 61.1 55.1 46.7
Absolute (%) -6.0 6.8 -22.5 NAV per share (Rp) - - - -
Relative (%) -9.9 -4.0 -37.9 Disc./(prem.) to NAV (%) - - - -

27 March 2017
PT Summarecon Agung Tbk (SMRA.JK / SMRA IJ)

Price (24 Mar 2017): Rp1,340; Rating: OUTPERFORM; Target Price: Rp1,600; Analyst: Laurensius Teiseran
Earnings Drivers 12/15A 12/16E 12/17E 12/18E Company Background
Real GDP growth (%) 4.61 5.23 5.23 5.23 SMRA Was founded in 1961. It has three main locations which are
Inflation rate (%) 6.47 4.69 4.69 4.69 Summarecon Kelapa Gading which has a land area of 500 hectares,
Interest rate (%) 7.50 6.75 6.75 6.75 Summarecon Serpong which has an area of 1500 hectares and
Marketing sales (Rp bn) 4,351 3,005 3,734 4,555 Summarecon Bekasi which has an area of 240 hectares.
Income Statement (Rp bn) 12/15A 12/16E 12/17E 12/18E
Sales revenue 5,624 4,816 5,445 6,749 Blue/Grey Sky Scenario
Cost of goods sold 2,717 2,615 2,827 3,425
EBITDA 2,032 1,378 1,719 2,185
EBIT 1,791 1,154 1,475 1,914
Net interest expense/(inc.) 409 531 535 539
Recurring PBT 1,382 623 941 1,375
Profit after tax 1,064 393 690 1,054
Revaluations 0 0 0 0
Inventories 4,925 5,229 5,422 6,099
Current Assets 7,290 8,375 9,111 10,360
Property, plant & equip. 420 421 481 563
Investment Properties 4,312 4,516 4,744 5,028
Investment in Associates/JV 0 0 0 0
Intangibles 8 9 9 9
Total assets 18,758 20,108 21,763 23,694
Our Blue Sky Scenario (Rp) 2,190
Minority interests 1,517 1,664 1,811 1,960
Total liabilities & equity 18,758 20,108 21,763 23,694 Our blue sky scenario is based on 33% discount to the company's
2017E NAV. This is largely driven by stronger mortgage growth,
Cash Flow (Rp bn) 12/15A 12/16E 12/17E 12/18E better apartment sales, higher plot ratio in Kelapa Gading, better-
EBIT 1,791 1,154 1,475 1,914 than-expected infrastructure realisation and positive changes in tax
Net interest 0 0 0 0 structure.
Tax paid 0 0 0 0
Working capital 0 0 0 0
Other cash and non-cash items (2,107) (628) (573) (686) Our Grey Sky Scenario (Rp) 1,140
Operating cash flow (316) 526 902 1,228 Our grey sky scenario is based on 65% discount to the company's
Capex (586) (429) (532) (636) 2017E NAV. We highlight political uncertainty in Indonesia as risk for
Free cashflow to the firm (902) 97 370 592 pre-sales growth. Additionally, the possibility of a higher interest
Investing cash flow (2,001) (565) (840) (963) rates environment in Indonesia may affect housing affordability and
Equity raised 0 0 0 0 the cost of borrowings for the company.
Dividends paid 0 0 0 0
Financing cash flow 2,050 713 599 78 Share price performance
Total cash flow (267) 673 661 344
Adjustments 0 0 0 (0)
Net change in cash (267) 673 661 344
Per share 12/15A 12/16E 12/17E 12/18E
Shares (wtd avg.) (mn) 14,427 14,427 14,427 14,427
DPS (Rp) 20 12 4 7
BVPS (Rp) 417 424 453 500
NAV per share (Rp) n.a. n.a. n.a. n.a.
Earnings 12/15A 12/16E 12/17E 12/18E
Growth (%)
Sales reveue (2.3) (14.4) 13.1 24.0
EBIT (14.5) (35.6) 27.8 29.8
EPS (38.3) (67.1) 71.6 61.3
Margins (%) The price relative chart measures performance against the JSX COMPOSITE
EBITDA 36.1 28.6 31.6 32.4 INDEX which closed at 5,567.13 on 24-Mar-2017
On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1
EBIT 31.9 24.0 27.1 28.4
Valuation (x) 12/15A 12/16E 12/17E 12/18E
P/E 22.6 68.7 40.0 24.8
P/B 3.22 3.16 2.96 2.68
Dividend yield (%) 1.5 0.9 0.3 0.5
EV/Sales 4.3 5.0 4.4 3.5
EV/EBITDA 11.8 17.5 13.9 10.8
EV/EBIT 13.4 20.9 16.2 12.3
ROE 14.9 4.6 7.6 11.3
ROIC 13.0 5.9 8.5 11.1
Net debt/equity (%) 62.3 61.1 55.1 46.7
Net Debt/EBITDA (x) 2.31 3.45 2.68 1.96

27 March 2017
Regional Banks
PT Bank Pembangunan Daerah Jawa

Timur Tbk (BJTM.JK / BJTM IJ)
Rating OUTPERFORM
Price (24-Mar-17, Rp) 640.00 COMPANY UPDATE
Target price (Rp) 690.00
Upside/downside (%)
Mkt cap (Rp/US$ bn)
7.8
9,470/ 0.71
Number of shares (mn) 14,797
Free float (%) 23.2 ■ Third-highest profitability among Indo banks. Bank Jatim is the regional
52-wk price range 695.00-438.00 development bank for East Java and the smallest bank by assets among the
nine banks in our coverage. It is focused on the consumer (67% of loan, 87%
of which is payroll loan) and commercial/SME (33%) segments. Jatim's ROA
Research Analysts was the third highest last year at 2.4%, behind that of BCA and BRI. Superior
Laurensius Teiseran profitability can be attributed to the higher proportion of cheaper current/
62 21 255 37931
laurensius.teiseran@credit-suisse.com
saving deposits (81%), fee income and cost efficiency.
Sanjay Jain ■ Falling credit cost likely to persist; we expect 12.9% 2017-18E profit
65 6306 0668
sanjay.jain@credit-suisse.com
CAGR. Since 2012, Jatim's earnings have been hit severely on elevated loan
losses as commercial/SME loan quality deteriorated, with gross NPL ratio
reaching 4.92% in 3Q16 (4.77% in 4Q16). Under a new CEO, Jatim shrank
the commercial/SME loans last year by 3.4% (after having doubled them in
the previous five years) and has also reported a far larger portion of problem
loans as NPLs (78% of total loans-at-risk being reported as NPLs vs 29%
aggregate for our sample). Therefore, we expect credit costs to fall from 175
bp of loans in 2016 (219 bp in 2015) to 111 bp/66 bp in 2017/18—more than
offsetting the margin compression and cautious loan growth.
■ Catalysts and key risks. Jatim is guiding its NPL ratio to be 3.10% for
2017—upside to our 4.5% NPL forecast. Second, execution on loan growth
guidance of 8.2% for the year could be a catalyst vs our 6.6% forecast. Key
risks would be higher-than-expected loan losses and margin compression.
■ Cheap on fundamentals; maintain OUTPERFORM. On valuation, Jatim is
trading at a 7.5x 12M forward P/E, 38% discount to average Indo banks, 24% to
the small banks, while its P/B is 1.1x. This is attractive given the superior
profitability. Assuming a 15.9% ROE (average 2017-18E), 13.5% cost of equity
and 7.2% growth in Gordon growth model gives us a target price of Rp690/sh
implying 8% upside potential for the stock.

Year 12/16A 12/17E 12/18E 12/19E
Pre-provision op profit (Rp bn) 1,972.2 1,970.1 2,077.7 2,224.9
Pre-tax profit (Rp bn) 1,452.1 1,619.1 1,849.8 1,894.3
Net attributable profit (Rp bn) 1,028.2 1,146.4 1,309.8 1,341.3
EPS (CS adj.) (Rp) 68.93 76.85 87.80 89.91
EPS growth (%) 16.2 11.5 14.2 2.4
P/E (x) 9.3 8.3 7.3 7.1
The price relative chart measures performance against the Dividend yield (%) 6.9 7.1 7.3 7.5
JSX COMPOSITE INDEX which closed at 5,567.13 on BVPS (CS adj.) (Rp) 448.78 480.13 520.96 562.77
24/03/17. On 24/03/17 the spot exchange rate was P/B (x) 1.43 1.33 1.23 1.14
Rp13,328/US$1 ROE (%) 16.5 16.5 17.5 16.6
Performance 1M 3M 12M ROA (%) 2.4 2.6 2.7 2.6
Absolute (%) 16.4 14.3 33.6 Tier 1 Ratio (%) 22.9 24.1 24.6 24.7

27 March 2017
PT Bank Pembangunan Daerah Jawa Timur Tbk (BJTM.JK / BJTM IJ)

Price (24 Mar 2017): Rp640.00; Rating: OUTPERFORM; Target Price: Rp690.00; Analyst: Laurensius Teiseran
Loan growth (% YoY) 4.45 6.63 7.38 8.09 Bank Jatim is a regional development bank for East Java province.
Credit cost (as bps of loans) 175.5 111.0 66.00 90.00 Bank Jatim was established in 1961 and has been managing civil
Gross NPL ratio (%) 4.77 4.53 4.38 4.33 servant payrolls for the regional government of East Java.
Net interest margins (%) 6.94 6.81 6.78 6.80
- - - - Blue/Grey Sky Scenario
Income Statement (Rp bn) 12/16A 12/17E 12/18E 12/19E
Interest income 4,823 4,970 5,301 5,736
Interest expense 1,360 1,378 1,467 1,581
Net interest income 3,463 3,593 3,834 4,155
Fee and commission income 352 364 417 450
Trading income 0 0 0 0
Total non-interest income 352 364 417 450
Total income 3,815 3,956 4,251 4,605
Personal expense 941 1,050 1,173 1,311
Other expenses 992 1,065 1,140 1,219
Total expenses 1,932 2,116 2,313 2,530
Pre-provision profit 1,972 1,970 2,078 2,225
Loan loss provisions 510 340 217 318
Operating profit 1,463 1,630 1,861 1,907
Other non-operating inc./(exp.) (10) (11) (11) (12)
Pre-tax profit 1,452 1,619 1,850 1,894
Taxes 424 473 540 553
Net profit before minorities 1,028 1,146 1,310 1,341
Gross customer loans 29,675 31,642 33,979 36,728
Risk provisions 0 0 0 0
Net customer loans 28,353 30,310 32,603 35,268
Interbank loans 7,536 8,338 9,246 10,276 Our Blue Sky Scenario (Rp) 840.00
Investment & securities 3,528 3,705 3,890 4,085
Fixed assets 837 837 837 837 Our Grey Sky Scenario (Rp) 500.00
Other assets 1,068 1,107 1,147 1,188
Total assets 43,033 46,167 49,878 54,222
Total deposits 31,305 33,296 35,571 38,284 Share price performance
Other liabilities 4,519 5,194 6,021 7,029
Asset quality & Capital 12/16A 12/17E 12/18E 12/19E
Asset Quality (%)
NPL/ gross loans 4.8 4.5 4.4 4.3
B/S loan loss coverage - - - -
Loan/ deposit ratio 90.6 91.0 91.7 92.1
Capital ratios (%)
Capital adequacy ratio 23.9 25.1 25.7 25.8
Tier 1 ratio 22.9 24.1 24.6 24.7
Equity Tier 1 ratio 22.9 24.1 24.6 24.7
Per share 12/16A 12/17E 12/18E 12/19E
Shares (wtd avg.) (mn) 14,918 14,918 14,918 14,918 The price relative chart measures performance against the JSX COMPOSITE
EPS (Credit Suisse) (Rp) 69 77 88 90 INDEX which closed at 5,567.13 on 24-Mar-2017
BVPS (Rp) 449 480 521 563 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1
Tangible BVPS (Rp) 449 480 521 563
DPS (Rp) 44 45 47 48
Earnings 12/16A 12/17E 12/18E 12/19E
Growth (%)
Revenue 9.9 4.6 7.5 8.3
Operating expense 10.7 9.5 9.3 9.4
Pre-provision profit 9.2 (0.1) 5.5 7.1
Net profit 16.2 11.5 14.2 2.4
Deposit (4.9) 6.4 6.8 7.6
Valuation 12/16A 12/17E 12/18E 12/19E
EPS growth (%) 16.2 11.5 14.2 2.4
P/E (x) 9.3 8.3 7.3 7.1
P/B (x) 1.43 1.33 1.23 1.14
P/TB (x) 1.4 1.3 1.2 1.1
Dividend yield (%) 6.9 7.1 7.3 7.5
Profitability & margins (%) 12/16A 12/17E 12/18E 12/19E
ROE stated 16.5 16.5 17.5 16.6
ROE - CS adj. 16.5 16.5 17.5 16.6
ROA - CS adj. 2.4 2.6 2.7 2.6
Gearing (x) 6.9 6.4 6.4 6.4

27 March 2017
Regional Banks
PT Bank Negara Indonesia (Persero)

Tbk (BBNI.JK / BBNI IJ)
Rating OUTPERFORM
Upside/downside (%)
Mkt cap (Rp/US$ bn)
14.7
125,543/ 9.42
Fast growth a cause for worry?
Number of shares (mn) 18,462
Free float (%) 40.0 ■ Corporate-focused state-owned bank. BNI is the fourth-largest bank in
52-wk price range 6,900-4,310 Indonesia with a decent corporate and consumer (mainly mortgage)
business. Loan book is divided among SOE-corporate (20% of loans),
private-corporate (30%), SMEs (28.5%) and consumer (17%) with the
Research Analysts remaining from subsidiaries. BNI also has a good deposit franchise with 68%
Sanjay Jain low-cost current/saving (CASA) deposits and enjoys the second-lowest cost
65 6306 0668
sanjay.jain@credit-suisse.com
of funding after BCA (Mandiri is marginally higher). With a network spanning
Laurensius Teiseran
over 1,781 branches and 14,157 ATMs, BNI has ~9% of both loan/deposit
62 21 255 37931 market share.
laurensius.teiseran@credit-suisse.com
Rikin Shah
■ With a new CEO, BNI set aside a large provisioning in 2015 and started
65 6212 3098 growing loans aggressively from 2016. This has caused concern in the
rikin.shah@credit-suisse.com market but BNI contends most of its loan growth is derived from government
infrastructure projects, and is hence safer. We have taken a view that (1) the
Indonesian government has a record of saving SOEs, and (2) new loans are
unlikely to turn bad unless the economy suffers a major downturn. We prefer
BNI to Mandiri for some time on valuation discount that gapped up.
■ Earnings drivers. For 2017, BNI is guiding for loan growth of 15-17% (20.6%
in 2016), funding growth of 19-21% (17.6% deposit growth in 2016), net
interest margin of 5.8-6.0%, operating expenses growth of 14-16%, gross
NPL ratio of 2.8-3.0%, and coverage ratio of 147-149%.
■ We project EPS growth of 15.6% in 2017 and 19.4% in 2018 along with
ROEs of 14.3% in 2017 and 15.3% in 2018. However, for target price
calculation, we use the projected ROA of 2.12% (average of 2017-19E) and
apply a normalised gearing of 7.5x (vs projected 7.2x and 2016 6.8x), which
gives us a normalised ROE of 15.6%. With a 13.3% cost of equity and "g" of
9%, the Gordon growth model leads us to a target price of Rp7,800, which
implies a 2017 P/B of 1.3x, P/E of 11.0 (9.2x 2018E) with 15% potential upside.

Year 12/16A 12/17E 12/18E 12/19E
Pre-provision op profit (Rp bn) 20,392.4 22,280.2 25,487.1 29,589.6
Pre-tax profit (Rp bn) 14,302.9 16,529.5 19,743.3 23,001.2
Net attributable profit (Rp bn) 11,338.7 13,103.9 15,651.7 18,234.4
EPS (CS adj.) (Rp) 608.84 708.37 846.10 985.72
EPS growth (%) 25.1 16.3 19.4 16.5
P/E (x) 11.2 9.6 8.0 6.9
The price relative chart measures performance against the Dividend yield (%) 2.6 3.1 0.0 0.0
JSX COMPOSITE INDEX which closed at 5,567.13 on BVPS (CS adj.) (Rp) 4,680 5,178 5,847 6,621
24/03/17. On 24/03/17 the spot exchange rate was P/B (x) 1.45 1.31 1.16 1.03
Rp13,328/US$1 ROE (%) 13.9 14.3 15.3 15.8
Performance 1M 3M 12M ROA (%) 2.0 2.0 2.1 2.2
Absolute (%) 8.4 29.5 32.0 Tier 1 ratio (%) 18.2 17.4 17.2 17.0

27 March 2017
PT Bank Negara Indonesia (Persero) Tbk (BBNI.JK / BBNI IJ)

Price (24 Mar 2017): Rp6,800; Rating: OUTPERFORM; Target Price: Rp7,800; Analyst: Sanjay Jain
Loans Growth 21.05 17.70 14.76 14.77 PT Bank Negara Indonesia (Persero) Tbk is an Indonesia-based
Net Interest Margin 5.87 5.69 5.70 5.75 financial institution. Its products & services are categorised into:
Fee Growth 39.17 6.22 9.51 11.75 individual, consisting of credit, savings, treasury & services;
Cost to Income Ratio 48.76 49.91 49.56 48.85 corporate, & financing products based on sharia principles.
P&L Provision (as % of loans) 1.85 1.50 1.30 1.30
Income Statement (Rp bn) 12/16A 12/17E 12/18E 12/19E Blue/Grey Sky Scenario
Interest income 43,768 49,957 57,550 66,073
Interest expense 13,773 15,888 18,422 20,968
Net interest income 29,995 34,070 39,128 45,104
Fee and commission income 6,473 7,446 8,563 9,795
Trading income 1,162 1,162 1,046 942
Total non-interest income 9,114 9,685 10,629 11,902
Total income 39,109 43,754 49,757 57,007
Personal expense 8,834 10,601 12,191 14,019
Other expenses 10,570 11,599 12,851 14,235
Total expenses 19,404 22,200 25,042 28,254
Pre-provision profit 20,392 22,280 25,487 29,590
Loan loss provisions 6,288 6,091 6,135 7,039
Operating profit 14,104 16,189 19,352 22,550
Other non-operating inc./(exp.) 199 341 391 451
Pre-tax profit 14,303 16,530 19,743 23,001
Taxes 2,893 3,343 3,993 4,652
Net profit before minorities 11,410 13,186 15,750 18,349
Gross customer loans 407,528 479,670 550,452 631,733
Risk provisions 16,242 19,897 23,048 26,630
Net customer loans 391,285 459,773 527,404 605,103
Interbank loans 12,538 14,419 15,860 17,446
Investment & securities 149,311 157,534 169,457 182,612 Our Blue Sky Scenario (Rp) 8,200
Fixed assets 21,972 23,426 24,953 26,556
Other assets 16,758 19,666 23,119 26,533 Our Grey Sky Scenario (Rp) 4,400
Total assets 603,032 691,763 779,256 879,370
Total deposits 435,545 511,327 583,268 665,430
Other liabilities 78,233 82,352 85,229 88,516 Share price performance
Asset quality & Capital 12/16A 12/17E 12/18E 12/19E
Asset Quality (%)
NPL/ gross loans 2.7 2.8 2.4 2.4
B/S loan loss coverage 147.1 147.5 171.2 179.1
Loan/ deposit ratio 89.8 89.9 90.4 90.9
Capital ratios (%)
Capital adequacy ratio 19.3 18.5 18.4 18.2
Tier 1 ratio 18.2 17.4 17.2 17.0
Equity Tier 1 ratio 18.2 17.4 17.2 17.0
Per share 12/16A 12/17E 12/18E 12/19E
Shares (wtd avg.) (mn) 18,624 18,499 18,499 18,499
EPS (Credit Suisse) (Rp) 609 708 846 986 The price relative chart measures performance against the JSX COMPOSITE
BVPS (Rp) 4,680 5,178 5,847 6,621 INDEX which closed at 5,567.13 on 24-Mar-2017
Tangible BVPS (Rp) 4,680 5,178 5,847 6,621 On 24-Mar-2017 the spot exchange rate was Rp13,328/US$1
DPS (Rp) 177 212 0 0
Earnings 12/16A 12/17E 12/18E 12/19E
Growth (%)
Revenue 22.1 11.8 13.6 14.5
Operating expense 23.7 14.4 12.8 12.8
Pre-provision profit 20.6 9.3 14.4 16.1
Net profit 25.1 15.6 19.4 16.5
Deposit 17.6 17.4 14.1 14.1
Valuation 12/16A 12/17E 12/18E 12/19E
EPS growth (%) 25.1 16.3 19.4 16.5
P/E (x) 11.2 9.6 8.0 6.9
P/B (x) 1.45 1.31 1.16 1.03
P/TB (x) 1.5 1.3 1.2 1.0
Dividend yield (%) 2.6 3.1 0.0 0.0
Profitability & margins (%) 12/16A 12/17E 12/18E 12/19E
ROE stated 13.9 14.3 15.3 15.8
ROE - CS adj. 13.9 14.3 15.3 15.8
ROA - CS adj. 2.0 2.0 2.1 2.2
Gearing (x) 6.8 7.1 7.2 7.2

27 March 2017
Appendix 1: Respondents' summary

Demographics
Figure 155: What is your total monthly income after
Figure 154: Could you please tell us your age? tax?
40% 38% 35%
37%
35%
30%
25%
% of respondents
30%
20%
% of respondents
25%
15%
20% 10%
16%
15% 5%
9%
0%
10%
10,000k - 15,000k
1,000k - 1,500k
1,500k - 2,000k
2,000k - 3,000k
3,000k - 5,000k
5,000k - 7,500k
< 1,000k
7,500k - 10,000k
> 15,000k
5%
0%
18 - 29 30 - 45 46 - 55 56 - 65
Respondents' age IDR
Figure 156: Urban to rural split Figure 157: Male to female split
Rural
34%
Female Male
51% 49%
Urban
66%
Figure 158: How many people live in your household?

< 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t know
% of respondents 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer
1 2 5 3 8 5 1 - - - - -
2 8 14 24 27 20 5 - 1 - 1 -
3 9 24 71 120 81 15 5 3 3 8 5
4 7 34 77 170 125 36 8 4 3 17 12
5 or more 14 41 69 173 158 58 20 7 8 15 10
Mean 3.58 3.78 3.76 3.95 4.06 4.26 4.45 4.13 4.36 4.12 4.19

27 March 2017
Figure 159: What is the total after-tax monthly income of your household?
Total Area Region Age
% of respondents Urban Rural Java Ex Java 18-29 30-45 46-55 56-65
2016
< 1,000k 3% 2% 4% 3% 3% 3% 2% 2% 3%
1,000k - 1,500k 8% 5% 14% 9% 7% 7% 7% 9% 13%
1,500k - 2,000k 17% 14% 21% 16% 17% 19% 15% 15% 19%
2,000k - 3,000k 34% 31% 39% 35% 32% 36% 34% 31% 31%
3,000k - 5,000k 27% 31% 17% 26% 28% 23% 29% 31% 21%
5,000k - 7,500k 8% 11% 3% 8% 8% 8% 8% 8% 8%
7,500k - 10,000k 2% 3% 1% 2% 3% 2% 3% 2% 2%
10,000k - 15,000k 1% 1% 1% 1% 1% 1% 2% 1% 0%
> 15,000k 1% 1% 0% 1% 2% 1% 1% 1% 3%
2015
< 1,000k 4% 3% 7% 4% 6% 5% 4% 3% 5%
1,000k - 1,500k 7% 5% 10% 6% 9% 6% 5% 7% 13%
1,500k - 2,000k 19% 16% 24% 18% 21% 19% 18% 22% 17%
2,000k - 3,000k 30% 31% 30% 30% 32% 29% 33% 28% 26%
3,000k - 5,000k 25% 27% 20% 26% 23% 26% 24% 23% 22%
5,000k - 7,500k 9% 12% 5% 11% 5% 9% 9% 11% 7%
7,500k - 10,000k 3% 4% 2% 3% 2% 2% 3% 4% 6%
10,000k - 15,000k 1% 1% 1% 1% 1% 1% 1% 1% 2%
> 15,000k 2% 2% 2% 2% 1% 2% 2% 0% 3%
2010
< 1,000k 8% 5% 15% 8% 9% 7% 8% 8% 14%
1,000k - 1,500k 16% 11% 26% 17% 13% 17% 14% 18% 15%
1,500k - 2,000k 26% 24% 29% 26% 25% 26% 27% 21% 23%
2,000k - 3,000k 26% 29% 20% 27% 25% 28% 27% 24% 23%
3,000k - 5,000k 19% 25% 8% 19% 19% 17% 20% 23% 19%
5,000k - 7,500k 3% 4% 1% 3% 4% 3% 3% 4% 3%
7,500k - 10,000k 1% 1% 0% 0% 2% 1% 0% 1% 1%
10,000k - 15,000k 1% 1% 0% 0% 1% 0% 1% 0% 2%
> 15,000k 1% 1% 0% 0% 1% 1% 0% 0% 1%
Figure 160: Do you think the state of your own finances over the next six months will be better, worse or
about the same?
Better About the same Worse
100% 3% 2% 0% 0%
8% 4% 7%
8% 9%
90%
80%
45%
46%
70%
57% 67%
58% 64%
60% 61%
% of respondents
63%
71%
50%
40%
30%
52% 55%
20% 40%
35% 32% 33%
31% 28%
10% 21%
0%
< 1,000k 1,000k - 1,500k 1,500k - 2,000k 2,000k - 3,000k 3,000k - 5,000k 5,000k - 7,500k 7,500k - 10,000k 10,000k - 15,000k > 15,000k

27 March 2017
Figure 161: Net percentage of people who are positive regarding their finances over the next six months
60%
55%
50%
50%
40% 37%
33%
% of respondents
30% 28% 28%
22%
20% 18%
14%
10%
0%
Figure 162: In your opinion, is now a good time to make a major purchase? - Area
2016 2015 2010
Excellent time 2% 2% 1% 2% 2% 5% 6% 4% 5% 6% 6% 7% 5% 6% 7%
Good time 34% 33% 34% 35% 30% 30% 31% 28% 29% 31% 50% 48% 54% 55% 39%
A bad time 5% 5% 5% 4% 5% 7% 6% 7% 7% 5% 4% 5% 3% 4% 6%
Figure 163: In your opinion, is now a good time to make a major purchase? - Age
2016 2015 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 2% 1% 2% 2% 2% 5% 5% 5% 6% 4% 6% 6% 6% 6% 6%
Good time 34% 37% 31% 35% 30% 30% 28% 33% 27% 25% 50% 53% 49% 50% 45%
A bad time 5% 5% 5% 3% 6% 7% 7% 6% 6% 8% 4% 3% 5% 4% 4%
Figure 164: In your opinion, is now a good time to make a major purchase? - Income
2016 2015 2010
% of respondents Total Low Mid High Total Low Mid High Total Low Mid High
Excellent time 2% 1% 1% 6% 5% 3% 6% 6% 6% 5% 7% 4%
Good time 34% 29% 35% 47% 30% 32% 29% 27% 50% 46% 53% 68%
Not such a good time 60% 64% 59% 44% 59% 57% 59% 65% 40% 44% 36% 21%
A bad time 5% 6% 4% 3% 7% 8% 6% 2% 4% 5% 3% 7%

27 March 2017
Figure 165: What savings or investment channels, if any, does your household use to save money?
Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k
% of respondents 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k
Bank account 45% 21% 17% 30% 48% 54% 58% 51% 36% 25%
Cash 25% 26% 30% 29% 27% 22% 17% 19% 18% 19%
No extra money for saving 22% 52% 52% 33% 19% 14% 8% 4% 27% 16%
Property 5% 0% 1% 7% 4% 5% 7% 6% 9% 9%
Life insurance 4% 0% 0% 1% 2% 5% 9% 15% 9% 16%
Stock market 0% 0% 0% 0% 0% 0% 1% 4% 0% 6%
Mutual Fund 0% 0% 0% 0% 0% 0% 0% 2% 0% 6%
State Treasury bill-bond 0% 0% 0% 0% 0% 0% 0% 0% 0% 3%
Collectables 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Gold and Jewellery 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Figure 166: To what extent has your household income changed in the last 12 months?
< 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k
Decline more than 20% 0% 0% 0% 1% 2% 0% 0% 13% 0%
-10% to -20% 0% 3% 2% 2% 1% 3% 0% 0% 0%
-10% to flat 5% 17% 12% 7% 8% 4% 6% 7% 0%
Unchanged 63% 53% 55% 48% 36% 31% 27% 60% 43%
Flat to +10% 18% 20% 18% 30% 36% 42% 36% 13% 36%
10-20% 8% 3% 5% 7% 11% 15% 24% 0% 21%
20-30% 0% 0% 1% 1% 2% 0% 6% 0% 0%
30%+ 3% 0% 0% 0% 0% 1% 0% 7% 0%
No income 12 months ago 5% 4% 7% 5% 5% 3% 0% 0% 0%
Figure 167: In what way do you expect your household income to change in the next 12 months?
< 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k
Decline more than 20% 0% 0% 0% 0% 1% 1% 0% 0% 0%
-10% to -20% 0% 1% 4% 1% 2% 2% 3% 0% 0%
-10% to flat 8% 6% 6% 4% 3% 3% 0% 7% 0%
Unchanged 40% 53% 39% 36% 26% 30% 36% 20% 21%
Flat to +10% 35% 25% 33% 37% 36% 35% 18% 40% 57%
10-20% 13% 10% 11% 13% 20% 18% 33% 7% 21%
20-30% 0% 2% 1% 2% 5% 3% 6% 7% 0%
30%+ 3% 0% 1% 1% 3% 4% 3% 13% 0%
No income 12 months ago 3% 3% 5% 5% 4% 3% 0% 7% 0%

27 March 2017
Figure 168: Have you migrated from your hometown to where you are currently living? And did you migrate
to earn better income?
Migrated Did not migrate Moved to earn better income
100%
93% 92%
86%
90%
79%
80%
69%
66%
70%
60%
50%
40% 64%
30% 76% 74%

81% 81%
20% 85%
36%
24% 26%
10% 19% 19% 15%
0%
2015 2016 2015 2016 2015 2016
China India Indonesia
Automotive
Figure 169: Do you own a car or motorbike for personal use?
< 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k
Car 5% 1% 0% 4% 9% 17% 31% 21% 36%
Motorbike 68% 74% 86% 91% 93% 96% 88% 100% 100%
Figure 170: Will you or your family purchase or replace your car in the next 12 months?
Definitely will Probably will Not sure Probably won’t Definitely won’t
50%
45%
40%
35%
% of respondents
30%
25%
20%
15%
10%
5%
0%
Total < 1,000k 1,000k - 1,500k 1,500k - 2,000k 2,000k - 3,000k 3,000k - 5,000k 5,000k - 7,500k 7,500k - 10,000k10,000k - 15,000k > 15,000k

27 March 2017
Figure 171: Will you or your family purchase or replace your motorbike in the next 12 months?
Definitely will Probably will Not sure Probably won’t Definitely won’t
50%
45%
40%
35%
% of respondents
30%
25%
20%
15%
10%
5%
0%
Total < 1,000k 1,000k - 1,500k 1,500k - 2,000k 2,000k - 3,000k 3,000k - 5,000k 5,000k - 7,500k 7,500k - 10,000k10,000k - 15,000k > 15,000k
Figure 172: How do you plan to finance this motorbike purchase?

Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k
All Cash 29% 21% 34% 36% 26% 30% 13% 55% 0% 100%
Cash + Credit 33% 57% 31% 47% 29% 26% 30% 36% 50% 0%
All Credit 34% 21% 34% 15% 44% 36% 47% 9% 50% 0%
Don’t know 4% 0% 0% 2% 1% 9% 10% 0% 0% 0%
Food and beverages

Figure 173: Have you purchased or will you be purchasing any of the following products?
Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t
% of respondents 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer know
Purchased in the last 3 months
Bottled water 88% 84% 73% 82% 88% 90% 96% 92% 100% 100% 89% 91%
Carbonated drinks 61% 58% 47% 59% 61% 65% 72% 62% 85% 45% 52% 55%
Cigarettes 51% 45% 49% 55% 51% 53% 44% 54% 54% 45% 41% 41%
Dairy products 70% 58% 53% 67% 70% 76% 84% 77% 46% 73% 81% 86%
Instant noodles 94% 92% 94% 93% 94% 93% 97% 81% 92% 82% 100% 100%
Will purchase in the next 12 months
Bottled water 62% 61% 56% 63% 61% 64% 64% 73% 85% 82% 70% 32%
Carbonated drinks 37% 26% 28% 37% 37% 38% 40% 50% 62% 45% 44% 18%
Cigarettes 35% 39% 31% 38% 35% 36% 28% 38% 54% 18% 30% 18%
Dairy products 50% 45% 41% 51% 46% 57% 49% 58% 31% 55% 70% 50%
Instant noodles 64% 63% 66% 67% 64% 64% 62% 54% 77% 55% 81% 50%

27 March 2017
Personal care
% of respondents 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer know
Purchased in the last 3 months
Cosmetics & skin care 52% 48% 41% 47% 52% 55% 64% 44% 53% 71% 49% 58%
Feminine hygiene 84% 82% 72% 81% 82% 88% 92% 81% 100% 86% 86% 80%
Tissue 56% 35% 39% 47% 54% 62% 74% 78% 67% 93% 66% 65%
Will purchase in the next 12 months
Cosmetics & skin care 35% 40% 26% 35% 34% 37% 44% 31% 47% 36% 46% 15%
Feminine hygiene 56% 59% 52% 55% 56% 56% 69% 50% 67% 43% 82% 27%
Tissue 39% 33% 28% 37% 36% 43% 51% 50% 67% 50% 66% 15%
Luxury goods
% of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer know
Fashion
Purchased in the last 3 months 38% 43% 30% 36% 38% 40% 51% 56% 38% 55% 18% 17%
Planning to purchase in 12 months 48% 58% 41% 52% 49% 47% 57% 56% 62% 45% 9% 35%
Leather
Sport shoes
Jewelry
Perfumes
Watches

27 March 2017
Technology and internet

Figure 176: Have you purchased any of the following products in the last 12 months?
Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Prefer not Don’t know
% of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k to answer
Smartphone 21% 20% 8% 15% 20% 24% 33% 38% 11% 23% 46% 32%
TV 9% 9% 8% 8% 10% 10% 11% 8% 7% 9% 3% 4%
Mobile phone 8% 20% 14% 9% 8% 6% 4% 8% 11% 5% 8% 0%
DVD Player 5% 7% 2% 5% 5% 6% 2% 3% 7% 0% 0% 0%
Notebook PC 3% 0% 1% 1% 3% 4% 5% 5% 7% 9% 0% 0%
Tablet 2% 0% 2% 1% 2% 4% 2% 3% 4% 14% 3% 0%
Digital Camera 1% 4% 1% 2% 1% 1% 1% 0% 4% 5% 0% 0%
Desktop computer 1% 0% 0% 1% 1% 1% 0% 5% 4% 0% 0% 0%
Internet Service 0% 0% 0% 0% 0% 0% 1% 0% 4% 0% 0% 4%
Gaming facility 0% 0% 0% 1% 1% 0% 0% 0% 0% 5% 0% 0%
Figure 177: Will you be purchasing any of the following products in the next 12 months?
Smartphone 21% 33% 21% 17% 22% 22% 16% 34% 28% 33% 17% 22%
TV 8% 16% 9% 7% 8% 9% 8% 11% 6% 17% 3% 9%
Notebook PC 5% 4% 5% 4% 6% 5% 8% 9% 0% 8% 0% 4%
Tablet 3% 0% 0% 3% 3% 4% 3% 3% 6% 0% 0% 0%
Mobile phone 2% 2% 4% 3% 2% 2% 0% 0% 0% 0% 0% 0%
Digital Camera 2% 0% 1% 3% 2% 1% 3% 11% 0% 0% 0% 4%
DVD Player 2% 4% 2% 5% 1% 1% 1% 3% 0% 0% 0% 0%
Desktop computer 1% 0% 1% 2% 1% 0% 3% 3% 6% 0% 0% 0%
Gaming facility 0% 2% 0% 0% 1% 0% 0% 0% 0% 0% 0% 0%
Internet Service 0% 0% 1% 0% 0% 1% 0% 0% 6% 0% 0% 0%
Telecommunications
Figure 178: Do you currently own a mobile phone / handset for personal use?
Yes, I own and pay for my own
77% 59% 57% 76% 76% 83% 83% 90% 93% 100% 90% 73%
mobile phone/handset
Yes, I own my own mobile
phone/handset but is paid for by my 1% 0% 2% 0% 1% 1% 1% 3% 0% 0% 0% 0%
employer
Yes, I own my own mobile
phone/handset but is paid by 6% 8% 4% 4% 6% 6% 10% 0% 0% 0% 0% 12%
somebody else
No I do not own my own mobile
16% 33% 37% 20% 17% 11% 6% 6% 7% 0% 10% 15%
phone/handset

27 March 2017
Figure 179: Have you bought a mobile phone or handset in the last 12 months?
2010 2015 2016
90%
80%
70%
60%
% of respondents
50%
40%
30%
20%
10%
0%
Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k Would prefer Don’t know
1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k not to answer
Figure 180: Are you planning to upgrade to a Figure 181: Which brand of smartphone are you
smartphone in the next 12 months? going to purchase?
2010 2016
60% Apple
3%
Don't know
50% 21%
40%
% of respondents
Other
30% 3%
20%
10%
Android
0% 73%
Indonesi
Russia
China
Turkey
Brazil
South
India
Mexico
Africa
a

27 March 2017
Travel
Figure 182: Have you been or are you planning to go on a holiday?
Took holiday in the last 12 months Planning to take holiday in the next 12 months
100%
95%
90%
85%
% of respondents
80%
75%
70%
65%
60%
55%
50%
Figure 183: Where did you go or where are you planning to go for holiday?
Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k
% of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k
Holiday in the
last 12 months
At home 71% 90% 77% 79% 73% 64% 60% 54% 46% 55%
Domestic 29% 10% 23% 21% 27% 36% 40% 46% 54% 45%
International 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Holiday in the
next 12 months
At home 55% 63% 64% 60% 55% 49% 49% 50% 25% 55%
Domestic 45% 37% 36% 40% 45% 51% 51% 50% 75% 45%
International 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Figure 184: What was the main form of transport that you used to reach your holiday destination?
% of respondent Total < 1,000k 1,000k - 1,500k 1,500k - 2,000k 2,000k - 3,000k 3,000k - 5,000k 5,000k - 7,500k 7,500k - 10,000k 10,000k - 15,000k > 15,000k
Car 32% 33% 29% 21% 30% 31% 50% 36% 86% 20%
Bus 29% 33% 29% 18% 33% 32% 13% 36% 0% 20%
Train 13% 0% 6% 9% 10% 18% 22% 9% 0% 0%
Ship 0% 0% 0% 0% 0% 1% 0% 0% 0% 0%
Airplane 4% 0% 0% 3% 2% 3% 9% 9% 14% 20%
Other 22% 33% 35% 50% 25% 15% 6% 9% 0% 40%

27 March 2017
Education
Figure 185: Do you intend to spend more on education or training course in the next 12 months?
Less About the same More
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Total < 1,000k 1,000k - 1,500k 1,500k - 2,000k 2,000k - 3,000k 3,000k - 5,000k 5,000k - 7,500k 7,500k - 10,000k - > 15,000k
10,000k 15,000k
Figure 186: Do you conduct any education online?

Total < 1,000k 1,000k - 1,500k - 2,000k - 3,000k - 5,000k - 7,500k - 10,000k - > 15,000k
% of respondent 1,500k 2,000k 3,000k 5,000k 7,500k 10,000k 15,000k
Yes 0.5% 0.0% 0.0% 0.4% 0.4% 0.3% 0.9% 3.0% 6.7% 0.0%
Number of respondents 1,518 39 118 244 497 383 112 33 15 11

27 March 2017
Healthcare
Figure 187: Does your household have access to free or partially-free healthcare from the State?
Yes 52% 55% 42% 44% 52% 59% 61% 41% 67% 62% 46% 62%
Number of respondents 1,492 40 118 243 489 375 111 32 15 13 35 21
Figure 188: How do you pay for your healthcare?

Insurance 14% 6% 6% 7% 12% 19% 22% 11% 22% 0% 0% 13%
Self-Pay (Cash) 57% 71% 84% 86% 59% 48% 42% 47% 33% 75% 75% 88%
Paid by company 28% 24% 9% 7% 29% 33% 37% 42% 44% 25% 25% 0%
Figure 189: What services, if any, could you get free from the state?
Hospital 45% 43% 44% 43% 45% 45% 44% 45% 60% 44% 89% 50%
Emergency Room 18% 20% 16% 21% 16% 19% 22% 10% 7% 11% 6% 15%
Prescriptions 19% 24% 17% 14% 20% 21% 20% 17% 20% 17% 6% 31%
Vaccinations 9% 9% 12% 13% 11% 7% 6% 14% 7% 11% 0% 4%
Diagnostic tests 8% 4% 10% 9% 8% 8% 8% 14% 7% 17% 0% 0%
Outpatient service 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% 0%
Figure 190: Do you trust local domestic brands as much as foreign brands?
Yes, I trust local brands on
78% 65% 78% 83% 78% 76% 74% 78% 67% 54% 89% 76%
both efficacy and safety
I trust local brands on
10% 5% 7% 8% 11% 13% 13% 13% 13% 31% 0% 0%
efficacy but not on safety
I trust local brands on safety
4% 5% 3% 1% 3% 5% 7% 3% 7% 15% 0% 10%
but not on efficacy
No, I do not trust local
brands neither on efficacy or 2% 0% 3% 1% 2% 2% 1% 3% 0% 0% 0% 0%
on safety
Don't know 7% 25% 10% 7% 6% 4% 5% 3% 13% 0% 11% 14%

27 March 2017
Appendix 2: Indonesia macro

Figure 191: Indonesia macro
2009 2010 2011 2012 2013 2014 2015 2016 2017F 2018F
National accounts, population and unemployment
Real GDP growth (%) 4.7 7.7 6.2 6.0 5.6 5.0 4.8 5.1 5.2 5.2
Growth in real private consumption (%) 4.7 4.8 5.1 5.5 5.5 5.3 4.8 5.1 5.3 5.3
Growth in real fixed investment (%) 3.9 8.5 8.9 9.1 5.0 4.6 5.1 4.8 5.6 6.0
Fixed investment (% of GDP) 31.1 31.0 31.3 32.7 32.0 32.6 33.2 33.1 33.2 33.5
Nominal GDP (US$bn) 538.6 756.1 892.7 914.8 903.8 889.0 857.6 918.2 1,002.0 1,079.0
Population (mn) 228.5 231.4 237.6 242.0 245.4 248.8 252.2 255.5 258.8 262.1
GDP per capita (US$) 2,357.0 3,268.0 3,756.4 3,780.1 3,682.4 3,573.1 3,400.8 3,594.0 3,874.0 4,118.0
Prices, interest rates and exchange rates
CPI inflation (% year-on-year change, December over December) 2.8 7.0 3.8 3.7 8.1 8.4 3.4 3.0 4.5 4.7
CPI inflation (% change in average index for the year) 4.8 5.1 5.3 4.0 6.4 6.4 6.4 3.5 4.3 4.1
Exchange rate (IDR per USD, end-year) 9,400.0 8,991.0 9,068.0 9,670.0 12,189.0 12,440.0 13,795.0 13,500.0 13,900.0 13,900.0
Exchange rate (IDR per USD, average) 10,354.1 9,078.3 8,773.3 9,418.6 10,562.7 11,884.5 13,457.6 13,648.0 13,700.0 13,900.0
REER (% year-on-year change, December over December) (1) 15.6 6.0 (1.2) (5.4) (11.6) 10.0 (1.6) (0.5) (1.0) (1.0)
Nominal wage growth (% year-on-year change)(2) 5.3 12.2 3.4 20.4 16.1 4.0 6.5 5.0 6.0 6.5
Overnight rate (%, end-year) (3) 6.5 6.5 6.0 5.8 7.5 7.8 7.5 5.8 n.a n.a
Fiscal data (4)
General government fiscal balance (% of GDP) (1.6) (0.7) (1.1) (1.8) (2.2) (2.1) (2.5) (2.9) (2.7) (2.5)
General government primary fiscal balance (% of GDP) 0.1 0.6 0.1 (0.6) (1.1) (1.0) (1.4) (1.8) (1.6) (1.4)
General government expenditure (% of GDP) 16.7 15.2 16.5 17.3 17.3 16.8 15.6 15.3 15.2 15.2
General government revenue (% of GDP) 15.1 14.5 15.5 15.5 15.1 14.7 13.0 12.3 12.5 12.7
Gross general government debt (% of GDP, end-year) (5) 31.4 24.7 22.3 22.4 21.6 23.6 26.2 30.5 33.2 35.4
Money supply and credit
Broad money supply (M2, % of GDP) 35.6 36.0 36.7 38.4 39.1 39.5 39.4 38.5 38.8 39.8
Broad money supply (M2, % year-on-year change) 13.0 15.4 16.4 15.0 12.8 11.9 8.9 6.0 10.5 12.0
Domestic credit (% of GDP) 24.3 23.4 25.1 27.2 28.5 29.0 29.5 28.7 28.6 29.4
Domestic credit (% year on year change) 12.2 9.9 22.4 19.2 16.1 12.8 11.1 6.5 9.5 12.0
Domestic credit to the private sector (% of GDP) 23.4 24.5 27.0 30.0 32.5 33.0 33.1 32.5 32.8 33.6
Domestic credit to the private sector (% year-on-year change) 6.8 20.0 25.8 21.9 20.0 12.6 9.6 6.5 10.5 12.0
Balance of payments (6)
Exports (goods and non-factor services, % of GDP) 24.7 23.1 23.9 23.1 22.7 22.4 19.9 17.8 16.5 15.8
Imports (goods and non-factor services, % of GDP) 20.7 20.3 21.2 23.3 23.4 22.7 19.3 17.4 16.4 16.0
Exports (goods and non-factor services, % year-on-year change (14.2) 25.5 27.8 (0.9) (2.8) (3.0) (14.4) (4.0) 1.5 3.0
in $ value)
Imports (goods and non-factor services, % year-on-year change in (23.0) 30.3 29.9 12.7 (0.8) (4.5) (18.0) (3.5) 3.0 5.0
$ value)
Current account balance (US$bn) 10.6 5.1 1.7 (24.4) (29.1) (27.5) (17.8) (18.8) (21.1) (24.4)
Current account balance (% of GDP) 2.0 0.7 0.2 (2.7) (3.2) (3.1) (2.1) (2.0) (2.1) (2.3)
Net FDI inflows (US$bn) 2.6 11.1 11.5 13.7 13.7 15.9 15.9 14.0 17.0 19.0
Scheduled external debt amortisation (US$bn) 17.1 18.7 23.0 42.0 38.8 38.8 38.8 45.0 45.0 45.0
Foreign debt and reserves
Foreign debt (US$bn) 172.9 202.4 225.4 252.4 266.1 293.8 310.7 335.0 350.0 340.0
Public 99.3 118.6 118.6 126.1 123.5 129.7 143.0 158.0 170.0 160.0
Private 73.6 83.8 106.7 126.2 142.6 164.0 167.7 177.0 180.0 180.0
Foreign debt (% of GDP) 32.1 28.5 26.7 28.8 29.4 33.0 36.2 36.5 34.9 31.5
Foreign debt (% of exports of goods and services) 130.2 123.4 111.7 124.8 129.8 147.8 182.5 205.0 211.0 199.0
Central bank gross FX reserves (US$bn) 66.1 96.2 110.1 112.8 99.4 111.9 105.9 110.0 101.0 98.5
Central bank net non-gold FX reserves (US$bn) 63.6 92.9 106.5 108.8 96.4 108.8 103.3 107.0 98.0 95.5
(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: Indonesia Bureau of Statistics, Ministry of Finance, Bank Indonesia, Credit Suisse, CEIC, World Bank

27 March 2017
Companies Mentioned (Price as of 24-Mar-2017)

Ace Hardware Indonesia (ACES.JK, Rp810)
Astra International (ASII.JK, Rp8,525, OUTPERFORM, TP Rp9,800)
Gudang Garam (GGRM.JK, Rp64,925, NEUTRAL, TP Rp74,100)
Hanjaya Mandala Sampoerna (HMSP.JK, Rp4,000, NEUTRAL, TP Rp4,340)
Indofood CBP (ICBP.JK, Rp8,600, NEUTRAL, TP Rp9,500)
Indofood Sukses Makmur (INDF.JK, Rp8,050)
Kalbe Farma (KLBF.JK, Rp1,505, UNDERPERFORM, TP Rp1,350)
Matahari Department Store (LPPF.JK, Rp13,900, OUTPERFORM, TP Rp16,100)
Media Nusantara Citra (MNCN.JK, Rp1,790)
Mitra Adiperkasa (MAPI.JK, Rp5,925, OUTPERFORM, TP Rp6,400)
PT Alam Sutera Realty TBK (ASRI.JK, Rp362)
PT Bank Central Asia Tbk (BBCA.JK, Rp16,550)
PT Bank Danamon Indonesia Tbk (BDMN.JK, Rp4,700)
PT Bank Mandiri (Persero) Tbk (BMRI.JK, Rp11,900)
PT Bank Negara Indonesia (Persero) Tbk (BBNI.JK, Rp6,800, OUTPERFORM, TP Rp7,800)
PT Bank Pembangunan Daerah Jawa Barat dan Banten T (BJBR.JK, Rp2,180)
PT Bank Pembangunan Daerah Jawa Timur Tbk (BJTM.JK, Rp640, OUTPERFORM, TP Rp690)
PT Bank Rakyat Indonesia (Persero) Tbk (BBRI.JK, Rp13,150)
PT Bank Tabungan Negara Persero Tbk (BBTN.JK, Rp2,320)
PT Bank Tabungan Pensiunan Nasional Tbk (BTPN.JK, Rp2,730)
PT Bekasi Fajar Industrial Estate Tbk (BEST.JK, Rp306)
PT Bumi Serpong Damai Tbk (BSDE.JK, Rp1,865)
PT Ciputra Development TBK (CTRA.JK, Rp1,270)
PT Indosat Tbk (ISAT.JK, Rp6,975)
PT Kawasan Industri Jababeka Tbk (KIJA.JK, Rp324)
PT Kino Indonesia (KINO.JK, Rp2,550)
PT Lippo Karawaci Tbk (LPKR.JK, Rp735)
PT Mitra Keluarga Karyasehat Tbk (MIKA.JK, Rp2,600, OUTPERFORM, TP Rp3,110)
PT Pakuwon Jati Tbk (PWON.JK, Rp600)
PT Sarana Menara Nusantara (TOWR.JK, Rp4,000)
PT Summarecon Agung Tbk (SMRA.JK, Rp1,340, OUTPERFORM, TP Rp1,600)
PT Surya Semesta Internusa Tbk (SSIA.JK, Rp600)
PT Telkom (Telekomunikasi Indo.) (TLKM.JK, Rp4,080, OUTPERFORM, TP Rp4,750)
Prodia Widyahusada (PRDA.JK, Rp4,800)
Pt Link Net Tbk (LINK.JK, Rp5,300)
Ramayana Lestari Sentosa (RALS.JK, Rp1,155)
Siloam International Hospitals (SILO.JK, Rp14,200, OUTPERFORM, TP Rp12,840)
Surya Citra Media (SCMA.JK, Rp2,670)
Tower Bersama (TBIG.JK, Rp5,475)
Unilever Indonesia (UNVR.JK, Rp43,150)
XL Axiata Tbk (EXCL.JK, Rp3,270, OUTPERFORM[V], TP Rp3,950)
Disclosure Appendix
Analyst Certification
I, Ella Nusantoro, certify that (1) the views expressed in this report accurately reflect my personal views about all of the subject companies and
securities and (2) no part of my 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
28-Apr-14 7,600 8,370 O
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
27-Apr-16 6,825 6,500 N
23-Sep-16 8,600 8,600
28-Feb-17 8,200 9,800 O O U T PERFO RM
N EU T RA L
* Asterisk signifies initiation or assumption of coverage.

27 March 2017
3-Year Price and Rating History for Gudang Garam (GGRM.JK)
GGRM.JK Closing Price Target Price

06-Apr-14 48,900 46,200 U
07-Apr-14 50,200 46,200 N
31-Oct-14 57,750 53,500
22-Apr-15 53,100 66,800 O
04-Aug-15 48,850 63,700
26-Nov-15 51,600 61,500
15-Mar-16 65,600 61,500 N
06-Jun-16 70,000 74,100
U N D ERPERFO RM
N EU T RA L
O U T PERFO RM
3-Year Price and Rating History for Hanjaya Mandala Sampoerna (HMSP.JK)
HMSP.JK Closing Price Target Price

04-Jan-16 3,669 4,340 O*
15-Mar-16 4,139 4,340 N
O U T PERFO RM
N EU T RA L
3-Year Price and Rating History for Indofood CBP (ICBP.JK)
ICBP.JK Closing Price Target Price

26-Aug-14 5,138 5,900 O
15-May-15 6,800 7,550 N
01-Aug-15 6,150 7,550 O
17-Feb-16 7,762 9,150
21-Sep-16 9,600 10,200 N
20-Feb-17 8,375 9,500
O U T PERFO RM
N EU T RA L

27 March 2017
3-Year Price and Rating History for Kalbe Farma (KLBF.JK)
KLBF.JK Closing Price Target Price

14-Apr-14 1,520 1,280 N
19-May-14 1,630 1,290
11-Aug-14 1,640 1,350
01-Aug-15 1,745 1,350 U
N EU T RA L
U N D ERPERFO RM
3-Year Price and Rating History for Matahari Department Store (LPPF.JK)
LPPF.JK Closing Price Target Price

08-Apr-14 14,800 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
26-Apr-16 17,900 19,900
18-May-16 18,800 R
19-May-16 18,800 19,900 O O U T PERFO RM
REST RICT ED
27-Jun-16 20,000 *
23-Nov-16 14,575 17,600 O
01-Mar-17 11,725 16,100
3-Year Price and Rating History for Mitra Adiperkasa (MAPI.JK)
MAPI.JK Closing Price Target Price

30-Apr-14 6,375 4,900 U
19-May-14 5,350 4,500
04-Aug-14 5,125 4,100
03-Nov-14 5,175 3,400
01-Apr-15 5,900 6,500 O
18-May-15 5,350 7,050
31-Jul-15 4,650 6,550
03-Nov-15 3,505 4,500
19-Apr-16 4,200 5,400
23-Jun-16 4,180 * U N D ERPERFO RM
O U T PERFO RM
24-Nov-16 4,850 6,400 O

27 March 2017
3-Year Price and Rating History for PT Bank Negara Indonesia (Persero) Tbk (BBNI.JK)
BBNI.JK Closing Price Target Price

15-Apr-14 4,995 5,000 N
14-Oct-14 5,275 5,550
17-Nov-14 5,825 6,000
09-Apr-15 7,175 7,550
24-Jul-15 5,000 5,850
24-Sep-15 4,280 5,100 O
14-Dec-15 4,800 5,550
29-Mar-16 5,050 5,650
31-May-16 4,800 5,500
19-Aug-16 5,850 5,900 N N EU T RA L
O U T PERFO RM
02-Nov-16 5,525 5,650
09-Dec-16 5,475 6,300 O
21-Mar-17 6,575 7,800
3-Year Price and Rating History for PT Bank Pembangunan Daerah Jawa Timur Tbk (BJTM.JK)
BJTM.JK Closing Price Target Price

13-Mar-17 580 690 O*
O U T PERFO RM
3-Year Price and Rating History for PT Mitra Keluarga Karyasehat Tbk (MIKA.JK)
MIKA.JK Closing Price Target Price

03-Dec-15 2,295 2,500 N*
03-Aug-16 2,720 3,110 O
N EU T RA L
O U T PERFO RM

27 March 2017
3-Year Price and Rating History for PT Summarecon Agung Tbk (SMRA.JK)
SMRA.JK Closing Price Target Price

05-Feb-15 1,635 2,020 O*
20-Oct-15 1,395 1,960 *
19-May-16 1,530 *
17-Jun-16 1,685 1,950 O
09-Feb-17 1,320 1,600
O U T PERFO RM
3-Year Price and Rating History for PT Telkom (Telekomunikasi Indo.) (TLKM.JK)
TLKM.JK Closing Price Target Price

05-Jun-14 2,509 2,738 O
25-Aug-14 2,673 2,937
25-Nov-14 2,773 3,086
30-Sep-15 2,633 3,236
09-Dec-15 3,002 3,335
04-Mar-16 3,400 3,783
14-Apr-16 3,375 3,883
28-Apr-16 3,579 4,000
15-Jun-16 3,810 4,150
28-Jun-16 3,820 R O U T PERFO RM
REST RICT ED
29-Jun-16 3,820 4,150 O
28-Jul-16 4,340 4,750
3-Year Price and Rating History for Siloam International Hospitals (SILO.JK)
SILO.JK Closing Price Target Price

21-Apr-14 10,530 10,333 N
29-Apr-14 10,727 12,794 O
10-Nov-14 14,024 12,794 N
05-Feb-15 13,138 R
17-Feb-15 12,031 12,794 N
08-Apr-15 12,892 13,384
05-Aug-15 16,090 14,024
03-Dec-15 9,546 12,794 O
20-Apr-16 8,636 12,794 *
03-Aug-16 10,186 12,840 N EU T RA L
O U T PERFO RM
* Asterisk signifies initiation or assumption of coverage. REST RICT ED

27 March 2017
3-Year Price and Rating History for XL Axiata Tbk (EXCL.JK)
EXCL.JK Closing Price Target Price

29-May-14 5,450 4,784 U
16-Jun-14 4,932 4,932 N
25-Aug-14 5,598 5,524
29-Oct-14 5,400 5,425
15-Jan-15 4,424 5,524 O
16-Feb-15 5,105 5,672
17-Mar-15 4,340 5,376
11-Aug-15 2,510 5,150
01-Feb-16 3,689 R
26-May-16 3,410 4,700 O U N D ERPERFO RM
N EU T RA L
15-Jun-16 3,600 4,850 O U T PERFO RM
23-Aug-16 3,370 4,250 REST RIC T ED
28-Oct-16 2,290 4,080

01-Feb-17 2,850 3,950
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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 all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.
Credit Suisse's distribution of stock ratings (and banking clients) is:
Global Ratings Distribution
Rating Versus universe (%) Of which banking clients (%)
Outperform/Buy* 45% (64% banking clients)
Neutral/Hold* 39% (61% banking clients)
Underperform/Sell* 14% (53% banking clients)
Restricted 2%
*For purposes of the NYSE and FINRA ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, a nd 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.

27 March 2017
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Target Price and Rating

Valuation Methodology and Risks: (12 months) for Astra International (ASII.JK)
Method: Our Rp9,800/share target price for Astra International is based on our sum-of-the-parts valuation analysis. Our TP implies 19x FY17E P/E
(price-to-earnings). Our OUTPERFORM rating is on the back of improvement in commodity prices and good launches of 4W models
Risk: Potential downside risks to our Rp9,800/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.
Valuation Methodology and Risks: (12 months) for Gudang Garam (GGRM.JK)
Method: Our target price of Rp74,100/share and NEUTRAL rating for Gudang Garam implies a 21x 2016E P/E at the target price, with an 13%
estimated earnings growth over the next two years. We derive our target price using the five-year average market relative P/E of 1.25x
with JCI's target P/E of 16.6x. Our NEUTRAL rating is derived from its undemanding valuation, as well as the clarity of the excise tax
scheme this year and its ability to pass on the prices to consumers.
Risk: The following risks could impede the achievement of our Rp74,100/share target price for Gudang Garam and NEUTRAL rating. (1)
Change in government regulation: There is no specific timeline as to when the Government of Indonesia will revise excise tax regulations.
In the past two years, the tax has been revised yearly, and was favourable to SKM (machine-made cigarettes) and tier 1 companies
(large-size producers, producing more than 2 bn sticks), narrowing the gap in tax to the SKT (hand rolled cigarettes) and mid and smaller
size producers. (2) Strong demand for low tar, low nicotine: GG's brands in the low-tar, low-nicotine category include the Nusantara series
and Surya Slim series, and last year it launched Surya Slim Premium and Surya Pro Mild. However, its presence in this category is
relatively small. Low-tar, low-nicotine kretek cigarettes have been posting strong growth in the past decade, particularly for younger
smokers in urban areas. (3) Consumers down-trading to less expensive cigarettes: If the GoI increases the excise tax, cigarettes will
become more expensive, encouraging consumers to downtrade to cheaper products. (4) Weak consumer purchasing power: Although the
consumer confidence index, surveyed by Bank Indonesia, showed that the confidence of Indonesian consumers is rising, concerns about
the possibility of higher inflation (due to the recent increase in electricity tariffs) might disrupt consumer affordability. (5) Rising interest
rates: GG's debt is usually Rupiah-denominated and in the form of short-term loans. This is used for raw materials (clove) purchasing,
where typically the harvest season peaks at the end of 4Q and 1Q (depending on the weather). A rise in interest rates would increase its
interest expense, hence affecting its profitability.
Valuation Methodology and Risks: (12 months) for Hanjaya Mandala Sampoerna (HMSP.JK)
Method: Our target price of Rp4,340/share for HM Sampoerna implies 42x P/E 2016E (38x P/E 2017E) with 9% earnings growth over the next two
years. Our target price is derived based on premium P/E multiple of Sampoerna over its parent company (PM.N) as we benchmark the
premium valuation of Unilever Indonesia (UNVR.JK) and its parent company (ULVR.L) over the past one year. We believe the main risk to
the stock is the possibility of another excise tax hike as the government is short in achieving its target last year. Hence, we maintain our
rating at NEUTRAL.
Risk: The following risks could impede the achievement of our Rp4,340/share target price and NEUTRAL rating for HM Sampoerna: (1)
regulatory risk, (2) litigation risk, (3) operational risks, (4) supply of raw materials, (5) competition risk, (6) labour-intensive industry, (7)
unable to extend its arrangements with its third-party operators, (8) Indonesia macro risks. Our target price is derived based on premium
P/E multiple of Sampoerna over its parent company (PM.N) as we benchmark the premium valuation of Unilever Indonesia (UNVR.JK)
and its parent company (ULVR.L) over the past one year.
Valuation Methodology and Risks: (12 months) for Indofood CBP (ICBP.JK)

27 March 2017
Method: We derive our Rp9,500 target price on ICBP using a combination of two different methodologies: (1) SOTP (sum-of the parts), and (2)
market relative performance. The usual SOTP where we are able to see each of the business division value – we are using our target
price multiples for each of the division at 17.3x in 2017E EV/EBITDA, to be in line with the weighted average of consumer companies
within Credit Suisse coverage in NJA and we arrive at Rp9,100/share. On the market relative performance count, we would like to
determine how much the market is valuing the company. By implying 1.7 on current market P/E of 17.7x, we arrive at Rp9,882/share. With
a 50:50 combination of SOTP and market relative performance, we arrive at our target price of Rp9,500, which implies 29.3x P/E 2017E
with 6% earnings growth over the next two years. With a limited upside potential, we have a NEUTRAL rating on the stock.
Risk: Risks that could impede achievement of our Rp9,500 target price and NEUTRAL 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 macroeconomic
situation, (5) fluctuation of exchange rates, and (6) regulatory risks.
Valuation Methodology and Risks: (12 months) for Kalbe Farma (KLBF.JK)
Method: We derive our target price of Rp1,350/share for Kalbe Farma using a discounted cash flow (DCF) methodology and 11.1% WACC
(weighted average cost of capital), underpinned from the 7.5% risk-free, 0.7 beta, 5% risk premium, and 5.2% terminal growth. Our target
price equates to 28x 2015E P/E (price-to-earnings). Our UNDERPERFORM rating on the stock is on the back of the pressure that Kalbe
has on its pharmaceuticals division; it is still finding new principals for its distribution division, and its demanding valuation.
Risk: Risks to our Rp1,350/share target price and UNDERPERFORM rating for Kalbe Farma include: (1) a weakening Rupiah, (2) acquisition,
(3) selling treasury stocks, (4) retiring treasury stocks, and (5) Government of Indonesia regulations.
Valuation Methodology and Risks: (12 months) for Matahari Department Store (LPPF.JK)
Method: Our target price of Rp16,100 for Matahari Department Store is based on a multiple valuation. The target price is based on 21x FY17E
price to earnings ratio (P/E), which is 1.5 standard deviation below its historical mean as sales growth is slowing down We have an
OUTPERFORM rating on the company on the back of better position from forex pressure, manageable working capital days, a healthy
balance sheet, and resilient middle-income target market.
Risk: Key risks to our Rp16,100 target price and OUTPERFORM rating for Matahari Department Store include competition from both existing
and incoming players, risk of meeting its expansion target, regulatory risks and macro risks of Indonesia.
Valuation Methodology and Risks: (12 months) for Mitra Adiperkasa (MAPI.JK)
Method: Our target price of Rp6,400 for Mitra Adiperkasa is based on our two-stage DCF model. We are conservative enough to use 7.7% risk-free
rate and a lower tax rate than what MAPI has now to reflect normalisation going forward. Our OUTPERFORM rating is on the back of
improvement in operations
Risk: Key risks to our OUTPERFORM rating and Rp6,400 target price for Mitra Adiperkasa include principal risks, slower MAA business
turnaround, competition from both existing and new players, regulatory risks, and macro risks.
Valuation Methodology and Risks: (12 months) for PT Bank Negara Indonesia (Persero) Tbk (BBNI.JK)
Method: Our target price of Rp7,800 for BBNI is derived based on Gordon's growth model, assuming normalised return of equity (ROE) of 16%,
beta of 1.15x, risk-free rate of 8% and market risk premium of 5.0%, implying 1.6x 2017E price-to-book ratio (P/B) and 10.2x 2017E price-
to-earnings ratio (P/E). BNI already swallowed the bitter pill of NPLs and credit cost in 2015. We thus have an OUTPERFORM rating on
the stock.
Risk: Risks to our target price of Rp7,800 and OUTPERFORM rating for BBNI include: (1) BNI has been growing loans very aggressively, it
could lead to some adverse selection and loan-losses in future; (2) BNI is leveraged into the interest rate cycle due to its current/saving
deposit franchise. Its margins have suffered lately as BI cut rates through 2016; (3) BNI needs to invest in technology and branch network,
there is a risk that cost growth could be higher than revenue growth; (4) risks relating to Indonesia, including macroeconomic, political and
social risks; and (5) currency risks.
Valuation Methodology and Risks: (12 months) for PT Bank Pembangunan Daerah Jawa Timur Tbk (BJTM.JK)
Method: Our target price of Rp690/share for BJTM is derived based on Gordon's growth model, assuming: a normalised return on equity (ROE) of
15-16%, beta of 1.1x, risk-free rate of 8% and market risk premium of 5.0%, implying 8.7x 2017E price to earnings ratio (P/E) and 1.4x
2017E price to book ratio (P/B). With relatively higher profitability versus peers, we think valuation looks compelling at current level.
Therefore, we rate the stock OUTPERFORM.

27 March 2017
Risk: Risks to our target price of Rp690/share and OUTPERFORM rating for BJTM include: (1) significant changes in global sentiment; (2)
significant changes in the public's confidence in the bank; (3) risks relating to Indonesia, including macroeconomic, political and social
risks; and (4) currency risks.
Valuation Methodology and Risks: (12 months) for PT Mitra Keluarga Karyasehat Tbk (MIKA.JK)
Method: Our target price of Rp 3,110 for MIKA is derived using DCF (discounted cash flow) methodology, with assumed WACC (weighted-average
cost of capital) of 9.1% and implied terminal value EBITDA multiple of ~35x. Our OUTPERFORM rating is driven by: (1) continued double-
digit growth profile, (2) best-in class margins, and (3) optionality from its net cash position.
Risk: The main risks to our target price of Rp3,110 and OUTPERFORM rating of MIKA include: (1) lower-than-expected growth, (2) delays in
execution, (3) unfavourable regulatory changes, and (4) intensifying competition.
Valuation Methodology and Risks: (12 months) for PT Summarecon Agung Tbk (SMRA.JK)
Method: Our DCF-based target price of Rp1,600 for PT Summarecon Agung Tbk is implying 50% discount to the RNAV of the company (a
standard deviation away to its long-term average). We have an OUTPERFORM rating on the stock on a bottoming out earning projection
and improved outlook for 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 DCF-based target price of Rp1,600 (which implies 50% 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 weaker than expected pre-sales delivery.
Valuation Methodology and Risks: (12 months) for PT Telkom (Telekomunikasi Indo.) (TLKM.JK)
Method: Our target price of Rp4,750 for PT Telkom is based on discounted cash flow (DCF) analysis, based on an estimated 9.9% cost of capital
and a 4.0% terminal growth rate. We value Telkom's fixed-line business at Rp1,280 and its 65% holding in its cellular subsidiary,
Telkomsel, at Rp3,335 share. At Rp4,750, Telkom would trade at an enterprise value-to-earnings before interest, taxes, depreciation, and
amortisation (EV/EBITDA) multiple of 7.1x 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 strong smartphone data
monetization and valuation.
Risk: Telkom's key asset, Telkomsel, is primarily a cellular operator within a seven-player market. The risks that may impede achievement of
our target price of Rp4,750 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
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.
Valuation Methodology and Risks: (12 months) for Siloam International Hospitals (SILO.JK)
Method: Our target price of Rp12,840 for SILO is derived using DCF (discounted cash flow) methodology, with assumed WACC (weighted-average
cost of capital) of 9.4% and implied terminal value EBITDA multiple of ~15x. Our OUTPERFORM rating is driven by: (1) margin expansion
from ramp-up of new hospitals, (2) improving momentum of new hospital launches, and (3) the stock trades at 25% discount to historical
average.
Risk: The main risks to our target price of Rp12,840 and OUTPERFORM rating of SILO include: (1) lower-than-expected growth, (2) delays in
execution, (3) unfavourable regulatory changes, and (4) intensifying competition.
Valuation Methodology and Risks: (12 months) for XL Axiata Tbk (EXCL.JK)
Method: Our discounted cash flow (DCF) analysis, based on an estimated 10.5% weighted average cost of capital and a 2.5% terminal growth
rate, supports our Rp3,950 target price for XL Axiata. At Rp3,950, XL Axiata would trade at an FY17 enterprise value-to-earnings before
interest, taxes, depreciation, and amortisation (EV/EBITDA) multiple of 6.3x. While ahead of the regional average, XL Axiata's potential
for medium-term growth is higher given still-low penetration rates in Indonesia. We rate the stock OUTPERFORM, on valuation and as it
was previously oversold due to a weak balance sheet.
Risk: XL Axiata is the third-largest competitor within the ten-player Indonesian market. The risks that may impede achievement of our Rp3,950
target price and OUTPERFORM rating are: (1) either faster-than-expected, or slower-than-expected growth in the cellular market, from the
current penetration level; (2) the prospect that competitors take a larger or smaller proportion of the market share of net additions; (3) that
capex forecasts prove higher- or lower-than-expected due to competitive pressures or pressures from the regulator; (4) that competition

27 March 2017
leads to higher or lower attrition of revenue per user than expected, for example through a price war; and (5) faster- or slower-than-
expected speed of tower sharing.
Please refer to the firm's disclosure website at https://rave.credit-suisse.com/disclosures/view/selectArchive 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, SILO.JK, TLKM.JK, HMSP.JK, LPPF.JK, EXCL.JK, BBNI.JK, SMRA.JK, MAPI.JK, ASII.JK, BMRI.JK, BDMN.JK,
CTRA.JK, KIJA.JK, ASRI.JK, SCMA.JK, BTPN.JK, LPKR.JK, BSDE.JK, BBTN.JK, BBCA.JK, TBIG.JK, LINK.JK, KINO.JK, ISAT.JK, INDF.JK,
PRDA.JK, TOWR.JK, UNVR.JK) 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, SILO.JK, TLKM.JK, HMSP.JK, LPPF.JK, EXCL.JK, BBNI.JK,
BMRI.JK, BDMN.JK, CTRA.JK, BTPN.JK, LPKR.JK, BSDE.JK, BBTN.JK, KINO.JK, INDF.JK, PRDA.JK, TOWR.JK, UNVR.JK) within the past 12
months.
Credit Suisse has managed or co-managed a public offering of securities for the subject company (SILO.JK, TLKM.JK, HMSP.JK, LPPF.JK,
BMRI.JK, BDMN.JK, LPKR.JK, PRDA.JK) within the past 12 months.
Credit Suisse has received investment banking related compensation from the subject company (ICBP.JK, SILO.JK, TLKM.JK, HMSP.JK, LPPF.JK,
EXCL.JK, BBNI.JK, BMRI.JK, BDMN.JK, CTRA.JK, BTPN.JK, LPKR.JK, BSDE.JK, BBTN.JK, KINO.JK, INDF.JK, PRDA.JK, TOWR.JK, UNVR.JK)
within the past 12 months
Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (ICBP.JK, SILO.JK,
TLKM.JK, HMSP.JK, GGRM.JK, LPPF.JK, MIKA.JK, EXCL.JK, BBNI.JK, SMRA.JK, MAPI.JK, ASII.JK, KLBF.JK, BMRI.JK, BDMN.JK, RALS.JK,
CTRA.JK, KIJA.JK, ASRI.JK, PWON.JK, MNCN.JK, SCMA.JK, BTPN.JK, LPKR.JK, BSDE.JK, BBTN.JK, BBRI.JK, BBCA.JK, TBIG.JK, LINK.JK,
BEST.JK, ACES.JK, KINO.JK, ISAT.JK, INDF.JK, PRDA.JK, TOWR.JK, UNVR.JK) within the next 3 months.
Credit Suisse may have interest in (ICBP.JK, SILO.JK, TLKM.JK, HMSP.JK, GGRM.JK, BJTM.JK, LPPF.JK, MIKA.JK, EXCL.JK, BBNI.JK,
SMRA.JK, MAPI.JK, ASII.JK, KLBF.JK, BMRI.JK, BDMN.JK, RALS.JK, CTRA.JK, KIJA.JK, ASRI.JK, BJBR.JK, PWON.JK, MNCN.JK, SCMA.JK,
BTPN.JK, LPKR.JK, BSDE.JK, BBTN.JK, BBRI.JK, BBCA.JK, TBIG.JK, SSIA.JK, LINK.JK, BEST.JK, ACES.JK, KINO.JK, ISAT.JK, INDF.JK,
PRDA.JK, TOWR.JK, UNVR.JK)
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suisse.com/disclosures or call +1 (877) 291-2683.
For date and time of production, dissemination and history of recommendation for the subject company(ies) featured in this report, disseminated
within the past 12 months, please refer to the link: https://rave.credit-suisse.com/disclosures/view/report?i=290972&v=58r90z4pyblub1aecpjfoga9t .
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Credit Suisse has acted as lead manager or syndicate member in a public offering of securities for the subject company (SILO.JK, TLKM.JK,
HMSP.JK, LPPF.JK, BMRI.JK, BDMN.JK, LPKR.JK, LINK.JK, KINO.JK, PRDA.JK) within the past 3 years.
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This research report is authored by:
Credit Suisse (Hong Kong) Limited ........................................................................................................................................... Colin McCallum, CA
Credit Suisse AG, Singapore Branch ................................................................................................................................. Sanjay Jain ; Rikin Shah
PT Credit Suisse Securities Indonesia ........................... Ella Nusantoro ; Jahanzeb Naseer ; Benny Kurniawan ; Ari Jahja ; Laurensius Teiseran
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
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PT Credit Suisse Securities Indonesia .............................................................................................................................................. Ella Nusantoro
Important disclosures regarding companies or other issuers that are the subject of this report are available on Credit Suisse’s disclosure website at
https://rave.credit-suisse.com/disclosures or by calling +1 (877) 291-2683.

27 March 2017
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Indonesia Consumer Survey 2017

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27 March 2017

Indonesia Consumer Survey 2017

Indonesia Consumer Survey 2017 2

Key themes from Indonesia 6

Key stock preferences 7

The seventh Credit Suisse Indonesia Consumer Survey 10

Food and beverages 33

Personal care products 51

Internet and e-commerce 62

Indonesia Consumer Survey 2017 3

Astra International (ASII.JK / ASII IJ) 85

Indofood CBP (ICBP.JK / ICBP IJ) 87

Hanjaya Mandala Sampoerna (HMSP.JK / HMSP IJ) 89

Gudang Garam (GGRM.JK / GGRM IJ) 91

Matahari Department Store (LPPF.JK / LPPF IJ) 93

Mitra Adiperkasa (MAPI.JK / MAPI IJ) 95

PT Telkom (Telekomunikasi Indo.) (TLKM.JK / TLKM IJ) 97

XL Axiata Tbk (EXCL.JK / EXCL IJ) 99

Siloam International Hospitals (SILO.JK / SILO IJ) 101

PT Mitra Keluarga Karyasehat Tbk (MIKA.JK / MIKA IJ) 103

Kalbe Farma (KLBF.JK / KLBF IJ) 105

PT Summarecon Agung Tbk (SMRA.JK / SMRA IJ) 107

PT Bank Negara Indonesia (Persero) Tbk (BBNI.JK / BBNI IJ) 111

Appendix 1: Respondents' summary 113

Appendix 2: Indonesia macro 125

Indonesia Consumer Survey 2017 4

Focus charts and table

Figure 2: Indonesia—State of personal finances Figure 3: Indonesia—State of personal finances

0 4-wheelers 20 Mobile phones 2-wheelers

Indonesia Consumer Survey 2017 5

Key themes from Indonesia

Indonesia Consumer Survey 2017 6

Key stock preferences

Indonesia Consumer Survey 2017 7

Indonesia Consumer Survey 2017 8

Figure 6: Indonesia’s stock picks

Indonesia Consumer Survey 2017 9

The seventh Credit Suisse Indonesia

Figure 7: Indonesia's key economic indicators and survey profile

Indonesia Consumer Survey 2017 10

2016 was a year full of hope...

Indonesia Consumer Survey 2017 11

Figure 9: Indonesians worry over whether inflation will move higher

2011 2012 2013 2014 2015 2016

Source: Credit Suisse Indonesia Consumer Survey 2017

Indonesia Consumer Survey 2017 12

...and improving economic growth

Figure 11: Indonesia’s GDP quarterly and annual growth

5.6 5.6 5.6

Source: Bank Indonesia (BI)

90% 90% 18% 18% 18% 18% 18% 19% 22%

31% 32% 33% 32% 33% 33% 80%

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

Indonesia Consumer Survey 2017 13

Figure 14: GDP growth, by segment

Source: Bank Indonesia (BI)

Figure 15: Net export growth—2010-16

Source: Bank Indonesia

Figure 16: GDP growth, by sector

Electricity & gas

Other Services Activities

Wholesale & retail trade

Financial & insurance

Human Health and Social