JAKARTA (TheInsiderStories) – Indonesian majority corporates that it rates will demonstrate stable credit trends over the next 12-18 months, although the commodity-related sectors will face some pressure, Moody’s Investors Service said in the recent report.
In the coal mining sector, Moody’s sees expectations of regulatory and economic developments in Indonesia and China will weigh on thermal coal prices during 2019-2020, and for lower revenues to weaken leverage and interest coverage for six rated coal company.
While in the oil and gas sector, large capital expenditure will limit the credit quality of the rated producers, although it is reduced by an increase in average daily production, while in the palm oil sector the income will increase even when the price of crude palm oil remains weak.
“But we hope that the increase in average daily production will reduce the decline in producer credit quality,” said Senior Vice President and Senior Credit Officer Jacintha Poh.
Palm oil, said Poh, has not sustained a decline in the price of palm oil, aggregate income and credit metrics from the two palm oil producers ranked should increase slightly in 2019-2020 on increasing productivity in plantations and higher revenue contributions from downstream operations.
However, economists are wary, so that the credit trend must remain stable in the property and telecommunications sectors.
In the property sector, increasing homebuyer sentiment and supporting industry fundamentals should support stronger marketing sales for six ranked developers, although leverage will remain high due to debt-funded growth.
“Interest coverage will weaken because maturing US dollar debt is refinanced with higher interest costs in 2018,” she stated.
While in the telecommunications sector, increased smartphone penetration and increased data usage will support revenue growth of 5 percent-6 percent, in line with the predicted real GDP growth.
“This reflects the growth of smartphone penetration and increased data usage even though competition continues to increase,” she explained.
Furthermore, the most positive prospect occurred in the two ranked textile companies, driven by capacity expansion and high utilization rates. Leverage and interest coverage will increase in 201-2020, even when companies continue to reinvest and expand their production facilities.
“However, the generation of cash flows will be hampered by higher working capital needs because the company increases new facilities added,” she concluded.
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