UOBKH sees Indonesian retailers as relatively shielded from fuel hikes

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DESPITE Indonesia's recent announcement of a 30 per cent fuel price hike, UOB Kay Hian (UOBKH) believes the impact of the hike on purchasing power is likely to be minimal, according to data from Bank Indonesia's Retail Sales Index (RSI).

Noting that the South-east Asian country has had 4 price hikes in the last 20 years, analysts on Thursday (Sep 15) noted that the RSI recovered to higher levels in 3 to 9 months after the fuel hikes, or remained high - as was the case of the 2014 fuel hike. 

This is further supported by the finding that only the 88 per cent hike on petrol prices and 105 per cent raise on diesel prices in 2005 impacted purchasing power - which analyst Stevanus Juanda believes was due to the large magnitude of the fuel hike.

Hence, given the magnitude of the latest hike, the brokerage was optimistic that retailers would continue to perform well. It selected Mitra Adiperkasa, Matahari Department Store and Erajaya Swasembada as top picks in sector over their lower cost structures - which would help net profit after tax recover at a higher level than that of pre-Covid-19.

Further, the price hikes and softening of soft commodity - such as wheat and crude palm oil - prices, could help some consumer companies, said Juanda, who noted that prices were raised by 5 to 10 per cent across the board at consumer companies in H1 this year. He was, in particular, upbeat on both pharmaceutical group Kalbe Farma, as well as food and beverage company Mayora Indah.

Oil and gas companies are an obvious winner, given the high oil prices. Of these, UOBKH prefers Medco Energi Internasional and AKR Corporindo for the higher selling prices.

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