Bahana (DX) 25 May 2018
ERAA Upgrade To BUY TP 4000 (from HOLD)
On track to be >IDR10tn company: upgrading
Key summary:
Compelling valuation; street-high TP of IDR4,000 Following stellar 1Q results, we are upgrading ERAA from HOLD to BUY as we see numerous re-rating catalysts ahead.
These positive catalysts include:
1) market-share gains, as we expect handset protection to eventually contribute nearly 10% to NPAT, which coupled with additional income from the multifinance division should provide room for more competitive distribution margins;
2) likely strong 2Q18E results on Lebaran festivities;
3) robust earnings growth momentum to continue through 2018E; and
4) handset premiumization and a faster smartphone churn rate (ie, new devices launched more often).
ERAA is now one of our TOP small-cap picks with a TP of IDR4,000, which implies a PER which is at a 25% discount to its Indo retailing peers.
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