Number I | September 2016
2017 will be Steady Year for Indonesian Firms : Moody ' s
Moody ' s Investors Services projects steady earnings growth for Indonesian corporations next year on the back of accelerating economic expansion , validating the debt rating agency ' s stable outlook on most of the companies ' bonds .
Moody ' s expects the Indonesian economy to expand 5.2 percent from an estimated 5 percent growth rate this year , which would support corporate earnings growth of between 2 percent and 6 percent , it wrote in a report published on 14 th December 2016 .
" Higher commodity prices will benefit the oil and gas , palm oil and coal sectors , while state-owned entities will help the government fund and execute large infrastructure projects ," Moody ' s said in the report .
Of the 41 Indonesian companies Moody ' s covered , 22 , mostly banks and financial institutions , are rated as investment grade while the remainder remains at junk levels . In comparison , Moody ' s placed Indonesia ' s sovereign bonds at Baa3 – the lowest investment grade notch given by the agency – with a stable outlook .
Among the companies , 32 have a stable outlook on their debt ratings . A stable outlook meaning the company bonds rating may stay at the current level in the
medium term . Three companies have a positive outlook and only five have negative outlook with one company ' s rating being under review .
State energy company Pertamina ' s bond is rated at Baa3 with a stable outlook . Smaller rival Energi Mega Persada , a company controlled by the family of tycoon and politician Aburizal Bakrie , is rated with a highly speculative rating of B2 , also with a stable outlook .
" Stronger than expected upstream earnings from oil-price gains will encourage oil and gas capital investments and acquisitions within the sector ," the agency said .
" Priority infrastructure projects and the 35,000-megawatt power plant program will drive demand for the construction , building materials , and heavy equipment sectors ," Moody ' s said .
State-controlled cement maker “ Semen Indonesia ”, state-owned gas distributor “ Perusahaan Gas Negara ” and heavy equipment distributors “ United Tractors ” are among companies placed at investment grade of Baa3 , all with stable outlooks .
In the property sector , Moody ' s says oneoff transactions would likely become the main drive for revenue , but core " marketing sales are likely to remain weak ."
The agency rates “ Lippo Karawaci ”, Indonesia ' s largest property company , at Ba3 or three notches below investment grade with a negative outlook . Rival “ Alam Sutra Realty ” is at the even lower speculative level of B2 with a stable outlook . Risk-averse investors may be better off investing in “ Lippo Malls Indonesia Retail Trust ”, a real estate investment trust that has an investment grade and a stable outlook .
Moody ' s expects consumer spending to rebound next year , supporting sales of property , automobiles , motorcycles , white goods and consumer electronics companies . " Upside potential is dependent on the stability of the rupiah and level of tax amnesty repatriation ,"
Number IV / January 2017 | Trade & Investment Bulletin 5