Micro match Macro?, Sharpfokus81
Match 9th, 2019
⏰ 2 minute read & 1 minute take ACTION
⏰ 2 minute read & 1 minute take ACTION
First week
Here at Sharpfokus, our macro theories are simple, Indonesia’s growth of government the last 10 years has caused a dramatic economic slowdown. That has caused stock returns to fall close to zero by late last year... But as a result, our stock market is very very cheap. We just did our first week of Sharpfokus Saham, so does the micro we now see, match our macro?
Government
Effect
The answer is yes, perfectly: We’ve looked at 7 companies so far & written research for 4. There are common themes. First big government has gotten in the way. Several of the companies have seen government interference. Whole industries like oil have been virtually taken over, while protectionist regulations for example on local content have increased costs.
Budget
If we look at the latest macro data, the picture is still not great. January budget deficit was -Rp46tn, more than 2018. January 2015 was just -Rp2tn! The 12 month deficit is now -Rp268tn which is a bit better than lowest -Rp340tn Feb last year. As this comes from tax & spend, not tax cuts, it has simply caused GDP growth to collapse.
Oil
There is some sign this trend is over, the 12m deficit is lower, but we need more pressure. A change of government would be great, but we also see a rising oil price will put pressure on government to cut spending. The weak economy should also cause them to cut tax. Oil has risen since mid Feb & is trying to break out above $57. This is good.
Here at Sharpfokus, our macro theories are simple, Indonesia’s growth of government the last 10 years has caused a dramatic economic slowdown. That has caused stock returns to fall close to zero by late last year... But as a result, our stock market is very very cheap. We just did our first week of Sharpfokus Saham, so does the micro we now see, match our macro?
Government
Effect
The answer is yes, perfectly: We’ve looked at 7 companies so far & written research for 4. There are common themes. First big government has gotten in the way. Several of the companies have seen government interference. Whole industries like oil have been virtually taken over, while protectionist regulations for example on local content have increased costs.
Budget
If we look at the latest macro data, the picture is still not great. January budget deficit was -Rp46tn, more than 2018. January 2015 was just -Rp2tn! The 12 month deficit is now -Rp268tn which is a bit better than lowest -Rp340tn Feb last year. As this comes from tax & spend, not tax cuts, it has simply caused GDP growth to collapse.
Oil
There is some sign this trend is over, the 12m deficit is lower, but we need more pressure. A change of government would be great, but we also see a rising oil price will put pressure on government to cut spending. The weak economy should also cause them to cut tax. Oil has risen since mid Feb & is trying to break out above $57. This is good.
Growth
Slow sales
The second thing we could see was the slowdown in growth. Most of the companies, saw quarterly sales flat or declining in the last 4-5 quarters. This matches with the slowdown in GDP growth which we have seen. Interestingly the most positive trend in sales or the least negative is in commodity related companies.
Investment
We can also see a slowdown in investment. Cash flow for investment has shrunk to almost nothing & in some cases has even turned positive as assets were sold. Companies which had plans for big investments last year & raised cash, didn’t end up spending it. No company has investment spending higher than 2015.
Debt
Because of the low investment spending, many companies have paid down debt or are paying down debt. Several have become net cash as a result. Even if companies have high debt, it hasn’t been increasing any more. This is also a sign of slow growth & disincentives to growth. Bad news for banks which have such a huge weighting in the JCI.
Great value
PE
The third thing we notice, which matches perfectly with our macro view, is how cheap the stocks we have looked at so far, are. Several of them trade on low single digit PE multiples. As we are using quarterly forecasts in our research & only projecting 2-3 quarters ahead, these values are very current. For the future they should be even cheaper.
Payouts
Most of the stocks also pay money out to investors. The holy grail of investing, is when companies pay equity investors back; their valuations tend to becine very high. Amazon which has paid a tremendous amount to equity investors trades at 45X book equity. But our Indonesian stocks paying out cash are only 1-2X. Super cheap.
Assets
Companies with assets are also at very cheap levels compared to the value of those assets. 2 of the stocks we’ve looked at are trading far below their net asset value or equity value. In both cases only about 33%! Imagine if business & growth now picks up & the value rises to reflect just the current level, that’s a quick 3X return for you.
Set up
Micrro marches macro! We are seeing signs of government spending moderating (a bit) & talk of tax cuts. Oil has been rising & will put pressure on government to shrink. Out of the 3 stocks we have so far mentioned on Sharpfokus, both WEGE & TINS have soared & almost doubled. This shows there is tremendous value in our market & we are on a mission to find it.
Be a great investor!
Sebastian
Slow sales
The second thing we could see was the slowdown in growth. Most of the companies, saw quarterly sales flat or declining in the last 4-5 quarters. This matches with the slowdown in GDP growth which we have seen. Interestingly the most positive trend in sales or the least negative is in commodity related companies.
Investment
We can also see a slowdown in investment. Cash flow for investment has shrunk to almost nothing & in some cases has even turned positive as assets were sold. Companies which had plans for big investments last year & raised cash, didn’t end up spending it. No company has investment spending higher than 2015.
Debt
Because of the low investment spending, many companies have paid down debt or are paying down debt. Several have become net cash as a result. Even if companies have high debt, it hasn’t been increasing any more. This is also a sign of slow growth & disincentives to growth. Bad news for banks which have such a huge weighting in the JCI.
Great value
PE
The third thing we notice, which matches perfectly with our macro view, is how cheap the stocks we have looked at so far, are. Several of them trade on low single digit PE multiples. As we are using quarterly forecasts in our research & only projecting 2-3 quarters ahead, these values are very current. For the future they should be even cheaper.
Payouts
Most of the stocks also pay money out to investors. The holy grail of investing, is when companies pay equity investors back; their valuations tend to becine very high. Amazon which has paid a tremendous amount to equity investors trades at 45X book equity. But our Indonesian stocks paying out cash are only 1-2X. Super cheap.
Assets
Companies with assets are also at very cheap levels compared to the value of those assets. 2 of the stocks we’ve looked at are trading far below their net asset value or equity value. In both cases only about 33%! Imagine if business & growth now picks up & the value rises to reflect just the current level, that’s a quick 3X return for you.
Set up
Micrro marches macro! We are seeing signs of government spending moderating (a bit) & talk of tax cuts. Oil has been rising & will put pressure on government to shrink. Out of the 3 stocks we have so far mentioned on Sharpfokus, both WEGE & TINS have soared & almost doubled. This shows there is tremendous value in our market & we are on a mission to find it.
Be a great investor!
Sebastian
100 stocks in your pocket?
The mission
Would you like to have access to interactive equity research on 100 Indonesian listed companies on your smartphone, which you can quickly accesss anytime?
We are now on a new mission at Sharpfokus to research 100 listed companies by end August.
We’re confident we will find great stories & Investnent opportunities which you can take advantage of.
We are now on a new mission at Sharpfokus to research 100 listed companies by end August.
We’re confident we will find great stories & Investnent opportunities which you can take advantage of.
To sign up for SHARPFOKUS SAHAM go to the menu bar at the top of the page & register with email & password.
The research
The research is easily accessible online. Each company has its own page plus a special macro research page. Each page includes
The aim is to give you our research & also allow you to do your own.
We will update each page every month & email then to you daily.
- Stock target price
- 1-minute-read report
- Graphics to illustrate
- Quarterly financial forecasts
- Data file & financial model to download
- Target price calculator
- Quality rating
The aim is to give you our research & also allow you to do your own.
We will update each page every month & email then to you daily.
The price
Sharpfokus Saham,equity research for < a small bottle of Aqua per day.
Sharpfokus Saham is
- Rp100k a month
- Rp500k for 6 months (Rp83k a month)
- Rp900k for 12 moths (Rp75k a month)
To sign up for SHARPFOKUS SAHAM go to the menu bar at the top of the page & register with email & password.
