Initiative Coverage of Buy Rating with the Price Target of IDR2,000 over PT Erajaya Swasembada Tbk (ERAA)
Our price target is based on the valuation estimate of a 19.1x P/E forward with the potential yield of 19.0% from the current stock price. Until 3Q19, ERAA was still the market leader in Indonesia as it dominated ~35% telecommunication-device market share. We are certain that its domination is supported by the successful sales of Chinese smartphone brands to win consumers’ preference due to their affordable selling prices. It aggressively expands businesses by means of setting certain number of to be launched stores per year. Besides, IoT products to have a niche market are potential for significant growth as 4.0 digital revolution is today’s face. Acknowledging the positive sentiments, we estimate ERAA to be capable of leveraging profitability along with the implementation of IMEI to actively take into force in 2020. Risks posed by our target price are soft consumption, black-market
access, lower-than-estimate sales , lenient IME regulation.
WhatsApp Stops Supporting Some Operating Systems: A Boost for Earnings
WhatsApp, the most popular messaging application, on February 01, 2020 no longer supported smartphones operating systems of which are Windows, Android 2.3.7 Gingerbread, Apple iOS 7, and Apple iOS8. WhatsApp official withdrawal from some older mobile phones’ operating systems is strengthened by the fact noting 0.3% of 2.5 billion people worldwide still use mobile phones supported with Android Gingerbread system, according to Google Android’s mobile distribution number. WhatsApp warned its users to renew their smartphones’ operating systems or buy smartphones with the latest operating systems. The later option stands for ERAA’s benefit as ERAA can sell affordable smartphones with the latest operating systems targeting the low-end consumers.
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