Profits in the Emerald of the Equator?

Watch the video with Andrew Stotz or read a summary of the country profile on Indonesia.

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The date: 2017-11-21, Time: 16:00 Asia/Bangkok

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Four Pillars of GDP: Driven by private consumption

Indonesia’s GDP has been growing at a rapid pace, 5% over the past year. Private consumption and investment have been the main contributors to GDP growth, while government consumption has been slightly reduced, despite the government’s big plans for infrastructure and energy investments over the next five years.

Heightened earnings, rich valuations growth expected

Earnings saw a recovery in 2016, but analysts’ estimates for 2017-2018CE* are in the double digits. Return on equity (ROE) is the highest among Asian markets, expected at 16% for 2017, and a price-to-book of 2.8x.

Highest ROE in Asia but rich #valuation for #Indonesia

A. Stotz Four Elements: Indonesia’s rank relative to Asia

Overall, Indonesia is moderately attractive in Asia, considering all our four elements: Fundamentals, Valuation, Momentum and Risk.

Fundamentals: Indonesia has the highest ROE in Asia, hence strong profitability.

Valuation: The strong fundamentals are reflected in the second highest price-to-book in Asia, only India trades at a higher PB.

Momentum: Slow price momentum mixed with decent earnings growth.

Risk: The market’s price volatility compared to other Asian markets is relatively high.

Industrials have seen the largest stock gains in 3Q17

Top 3 largest sectors: Financials: 29% of the market; Consumer Staples: 23%; Consumer Discretionary: 11%.

Best sector & stock: Industrials: +16.9%; PT Totalindo Eka Persada Tbk: +295.7%.

Worst sector & stock: Utilities: -21.7%; PT Perusahaan Gas Negara (Persero) Tbk: -30.8%.


*CE is consensus estimates

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DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.

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Dr. Andrew Stotz, CFA is the CEO of A. Stotz Investment Research, a company providing institutional investors with ready-to- invest portfolios in Asia that aim to beat the benchmark through superior stock selection. The company also provides buy- and sell-side clients with financial models to value any company in the world and World Class Benchmarking to determine what companies are financially world class. Previously, as Head of Research at CLSA, Andrew was voted No. 1 Analyst in Thailand in the Asiamoney Brokers Polls for 2008 and 2009. He was also voted No. 1 Analyst in Thailand in the 2009 Institutional Investor magazine All-Asia Research Team Report. Andrew earned his PhD in finance at the University of Science and Technology of China in Anhui province, with a focus on answering questions raised by fund managers and analysts during his career about picking stocks and managing portfolios. In addition, Andrew has been a lecturer in finance for 22 years at various universities in Thailand. Since 2013, he has been the president of the CFA Society of Thailand. He is also the author of How to Start Building Your Wealth Investing in the Stock Market.