Moody's: Stable Outlook for Rated Indonesian Companies in 2016
New York-based credit rating firm Moody’s Investors Service expects global economic factors to have less of a negative impact on Indonesian companies in 2016. In its latest report titled "Non-Financial Corporates - Indonesia: 2016 Outlook - Corporate Profits under Pressure but Likely to Stabilize" it states that amid stabilizing economic growth and the recently unveiled government stimulus packages, companies should manage to improve their corporate performances in 2016.
Moody's sees Indonesia's economy expanding by 4.7 percent (y/y) next year (flat from estimated growth in 2015). However, the credit rating agency is not positive about those Indonesian companies dependent on coal mining and other (non-oil & gas) commodities due to persistent weak demand from China, the world's second-largest economy (thermal coal exports from Indonesia to Asian nations are projected to fall by 8-10 percent in 2015 and grow modestly in 2016).
Moody's outlook for the oil & gas sector in Indonesia is stable. However, it emphasizes that there are several uncertainties in this sector due to low prices and the potential nationalization of expiring production sharing contracts.
Indonesia's telecommunications sector is projected to see steady EBITDA growth despite increased competition in the sector. Rising data penetration and smartphone proliferation will cause an estimated 5-6 percent revenue growth over the next 12-18 months.
Indonesia's property sector is expected to be hit by some cyclical softness, including weaker purchasing power and consumer confidence as well as a challenging operating environment for new project launches in early 2016. The total revenue of Moody's five rated developers is estimated to grow by between 5 and 10 percent 2016.
Currently, 74 percent of the 31 non-financial companies in Indonesia that are rated by Moody's have a stable outlook (the remaining 26 percent have a negative outlook). Those rated companies engaged in the oil & gas, telecommunications, and property sectors all have the stable outlook status.
Despite Indonesian corporate credit quality being under pressure - and liquidity weakening - the refinancing risk is estimated to be manageable for most rated companies in 2016 as existing cash level are sufficient, they have solid cash generation and proven access to the capital markets, says Brian Grieser (Moody's Vice President and Senior Credit Officer).
Meanwhile, Moody's expects bond maturities in 2016 to be minimal, mainly due to the significant issuance of five-year bonds in 2013, meaning that refinancing risks are to increase in 2017 as a significant amount of bond maturities approach in 2018.