October 18, 2016 / 8:11 AM / 9 months ago

Fitch: Expected Positive Shift in Indonesian Corporate Credit Optimistic

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(The following statement was released by the rating agency) Link to Fitch Ratings' Report: 100 Indonesian Listed Corporates: Credit Change Zones 2016 here JAKARTA/SYDNEY, October 18 (Fitch) Fitch Ratings is less optimistic in its projections for 19 Indonesian corporates that it publicly rates compared with Bloomberg consensus estimates (BEst), which expect 75 of the top-100 listed non-financial corporates by market capitalisation (Indonesia100) to be in the credit-positive change zones of cash flow growth exceeding net debt growth over 2015 to 2017. BEst expectations are a dramatic shift from actual 2013-2015 outcomes, where 67 corporates were in the credit-negative change zones of net debt growth exceeding cash flow grow. The agency projects 11 of the 19 Fitch-rated top-100 corporates to be in credit-negative change zones, where leverage is forecast to rise, whereas BEst forecasts 13 to be in the credit-positive change zones. In addition, five corporates are in opposite credit change zones. Specifically, Fitch forecasts PT Garuda Indonesia (Persero) Tbk (BBB+(ind)/Stable, PT Astra Otoparts Tbk (AA-(ind)/Stable), PT Bumi Serpong Damai Tbk (BB-/Stable), PT Telekomunikasi Indonesia Tbk (BBB-/Stable) and PT Perusahaan Gas Negara Tbk (BBB-/Stable) to be in the credit-negative change zones (leverage to rise), whereas BEst forecasts these five corporates to be in the credit-positive change zones (leverage to fall). We ranked the top-100 corporates based on EBITDA changes as a proxy for cash flow and net debt changes over 2015-2017 using BEst projections to gauge credit trends, then compared this with the historical period over 2013-2015. We then grouped each company into one of four credit change zones: 1) the credit-positive Blue "Joy" Zone of higher cash flow and falling net debt; 2) the credit-positive Purple Zone of cash flow growth exceeding net debt growth; 3) the credit-negative Orange Zone of debt growth exceeding cash flow growth; and 4) the credit-negative Red "Pain" Zone of cash flow decline and rising net debt. The report contains scatter charts illustrating the credit zone of each company in both projected and historical periods. We believe market expectations of improving corporate credit profiles is driven more by projected higher EBITDA generation as opposed to lower debt and capex. BEst forecasts aggregate net debt/EBITDA leverage for the Indonesia100 portfolio to fall to 0.9x by 2017, from 1.2x in 2015, with leverage falling in six out of 10 major sectors. Specifically, leverage is forecast to fall most for corporates in the natural resources sector, followed by technology, media and telecommunications, retail, leisure and consumer products, utilities, energy and autos. BEst projects aggregate leverage to rise for construction and engineering, transport, health and pharmaceuticals and real estate sectors. The report includes Venn diagrams illustrating overlapping areas of our Top-10 lists based on BEst projections, particularly the Blue "Joy" Zone of strong cash-flow increases and debt pay-down and the Red "Pain" Zone of cash flow decline and rising net debt. The report also contains explanatory notes and rating sensitivities for the 19 Fitch-rated listed Indonesian corporates. The report is available at www.fitchratings.com or by clicking on the link above. Contact: Matt Jamieson Head of APAC Research Corporate Ratings Group +61 2 8256 0366 Fitch Ratings Pty Ltd Level 15, 77 King Street, Sydney NSW 2000 Australia Olly Prayudi Associate Director +62 21 2988 6812 Media Relations: Leslie Tan, Singapore, Tel: +65 67 96 7234, Email: leslie.tan@fitchratings.com. Additional information is available at www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE, AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE CODE OF CONDUCT SECTION OF THIS SITE. 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