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Micro match Macro?, Sharpfokus81

Match 9th, 2019
​⏰ 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.
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Sharpfokus daily #Indonesia #stockmarket #ihsg #saham #investasi #investment #equity #research Budgets are there to be broken, right? You plan to stick to it, but you probably never do. This can be ok, Let’s say you decide to invest heavily in something which will increase your sales. & you spend more than you budgeted. You decide to grow faster. That’s a good thing. You will get more business & profits in future, Then you can pay back what you borrowed to exceed your budget. This works for you, your family, your company, But it doesn’t work for the government. If the government spends more than they budget. That’s a disaster. For the economy, for the currency & ultimately for you. Why? 3 reasons. 1. If the government spends more, the money can only come from one place. You. Your tax. That’s never good. 2. When the government raises taxes, much of it gets wasted on things like bureaucracy. Time gets wasted too as projects take much longer than with private companies. Time is money. 3. Because the government is trying to get elected, they try to spend money on things which will win votes, not make money for anyone. The only time when a higher government budget deficit is good... Is when it’s because they cut revenue, ie cut taxes. Meaning they took less money from you. That’s the only time. Indonesia’s budget deficit exploded from 2015. January 2015 the deficit was -Rp2tn. January 2019 the deficit was -Rp46tn!!! 23X bigger in just 4 years.... The deficit was completely out of control by early 2018 & was running at an annual rate of -Rp340tn! January 2019 that has improved a bit to an annual rate of -Rp270tn. Better, but still bad. In our case the deficit is from spending & taking more tax not less. The deficit has resulted in. A halt to business expansion. A huge slowdown in GDP growth A 40% decline in the value of the rupiah. It has to end. We have seen some improvement, -Rp340tn to -Rp270tn... But in 2019 the new government must reduce the deficit, cut spending & cut taxes. # Sebastian Please subscribe for Sharpfokus here http://www.sharpiepresents.com/sharpfokus.html

A post shared by Sharpfokus (@sharpfokusdaily) on Mar 5, 2019 at 11:28pm PST

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
Previously on Sharpfokus

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.

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
  1. Stock target price
  2. 1-minute-read report
  3. Graphics to illustrate
  4. Quarterly financial forecasts
  5. Data file & financial model to download
  6. ​Target price calculator
  7. 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.
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