Disclaimer: Tiger Thesis uses information from sources believed to be reliable; however, its accuracy cannot be guaranteed. The content in this publication is for informational purposes only and does not constitute personalized investment advice or consider your specific financial circumstances. The opinions expressed are those of the publisher and may change without prior notice. You are encouraged to consult with a qualified financial advisor to evaluate your investment options and determine their suitability for your individual needs. From time to time, I may hold positions in the securities discussed on this website. Disclosure: At the time of publication, I hold a position in Selamat Sempurna(SMSM IJ). To reiterate, this article and the accompanying presentation are intended solely for informational and educational purposes and should not be construed as a recommendation to buy or sell any securities.

Artificial intelligence, semiconductors, electric vehicles, and the energy transition have become some of the market’s favorite investment themes, and for good reason. The long-term demand outlook for each remains compelling.

However, In this article, Instead of talking about the obvious winners, I would like to take you a few layers deeper into the supply chain.

Because the thing is, these technologies that are expected to power the next decade require enormous quantities of critical minerals, including lithium, copper, graphite, gallium, cobalt, and rare earth elements and meeting that demand will require more mining activity, more processing capacity, and ultimately more heavy equipment operating in the field.

And since heavy equipments are notorious for consuming streams of replacement parts throughout its life, like oil filters for example, as mining activity expands, so does the demand for these replacement parts.

At the same time, Southeast Asia continues to urbanize and industrialize at a remarkable pace. New factories, new warehouses, new hospitals, new highways, new office buildings, and new data centers are being built across the region to support rising incomes and the economic growth.

And with such a pace of development, it naturally creates another source of demand for filtration products, because industrial facilities and commercial buildings require air filtration systems, while construction activity itself drives demand for a wide range of maintenance and replacement components.

So to sum it all up:

• Construction, tech related mining → Oil Filters

• Southeast Asian industrialization → Air Filters

Both lead to the same thing: growing demand for filtration products.

That’s where i think Selamat Sempurna (SMSM IJ) comes in.

Think about it, every internal combustion engine vehicle, whether it is a passenger car, hybrid vehicle, truck, tractor, excavator, mining vehicle, or marine vessel, requires oil and fuel filters that wear out over time and must be replaced regularly throughout the life of the equipment. Unlike the vehicle itself, these components are consumables.

The same principle applies on the industrial side. As Southeast Asia continues to urbanize and industrialize, new factories, hospitals, data centers, warehouses, and commercial buildings will require air filtration systems to operate efficiently and safely.

This is where Selamat Sempurna stands out. The company manufactures both automotive and industrial filtration products and offers one of the broadest product portfolios in the market, with more than 7,000 part numbers.

Importantly, the business is not heavily reliant on passenger vehicles, which is the part where people missunderstood Selamat Sempurna the most. Roughly two-thirds of filter sales are actually generated from heavy-duty and industrial applications, including trucks, mining equipment, construction machinery, agricultural equipment, and other commercial uses.

That exposure matters because heavy-duty and industrial equipments typically operates for longer hours, in harsher environments, and consumes replacement filters far more frequently than the average passenger vehicle.

Another factor that can increase oil filter usage: the implementation of B50 diesel.

Another notable tailwind for Selamat Sempurna is the Indonesian government’s plan to implement the B50 diesel blend starting in July this year. This is beneficial for Selamat Sempurna because the new diesel blend will contain 50% biodiesel.

The new blend is highly likely to increase the frequency of oil filter replacements in vehicles, which could lead to higher revenue for Selamat Sempurna in Indonesia.

Filters = Recurring Revenue

One of the things I find most attractive about the filtration business is its recurring nature. Unlike a vehicle or a piece of equipment that may only be purchased once every several years, filters are consumables that must be replaced repeatedly throughout their operating lives.

As the chart above illustrates, Selamat Sempurna has quietly compounded alongside Asia’s and Indonesia’s economic development for decades. Over the last 32 years, revenue has grown at approximately 19% annually, an extraordinary result for what many would consider an unremarkable business.

The explanation is actually quite simple. Filters are used almost everywhere: in passenger vehicles, trucks, mining equipment, factories, commercial buildings, and industrial facilities. As economic activity expands, so does the installed base of equipment that requires filtration products.

In many ways, Selamat Sempurna is not really betting on a single industry. It is betting on continued industrialization, urbanization, and economic growth across Asia.

I do not believe that story is over, as previously mentioned in the begining of this article, large parts of Asia are still developing, infrastructure investment remains substantial, and new growth drivers such as AI, data centers, and advanced manufacturing will require even more industrial activity in the years ahead.

If those trends continue, Im am confident that demand for filtration products should continue to grow alongside them.

Signs of Competitive Advantages

Early in my research, I sort of naturally viewed Selamat Sempurna as a commodity business. After all, the company sells filters, a product that does not appear particularly differentiated at first glance.

But the deeper I dug into the financials, the less that explanation made sense.

What stood out was the company’s consistently strong profitability. and it has generated attractive margins and high returns on equity for many years, with a track record that extends all the way back to the early 2000s.

Naturally, the “analyst brain” in me started to wonder about the changes in accounting policies or revenue recognition practices, there could be manipulation there, but after reviewing the company’s disclosures over the past decade with the help of Notebooklm, I found very little evidence of that and the cash flow figues also says so, which means the accounting treatment has remained remarkably consistent over time.

That led me to a simple question: if filters are truly interchangeable, why have competitors not competed those returns away?

In efficient markets, businesses without some form of competitive advantage rarely earn exceptional returns for long. Yet here we have Selamat Sempurna, and it has done exactly that over an extended period of time.

So I decided to get my hands dirty.

I drove the oldest car in my family’s garage, a 1997 Toyota, to a local repair shop and asked the mechanic to give it a thorough inspection. (yes i actually did this!)

As expected, the car needed an oil filter replacement.

When the mechanic was about to place the order, he asked whether I wanted a Toyota filter or a Sakura filter.

Curious, I asked him what the difference was.

His answer surprised me.

“Honestly, not much,” he replied. “Nowadays, Sakura makes filters for Toyota anyway. and besides, trying annother brand is a hassle”

That simple comment immediately caught my attention.

Standing there in that hot and humid repair shop, I suddenly realized something I had previously overlooked: Selamat Sempurna is not merely selling aftermarket filters. The company is also a major OEM supplier to a number of well-known automotive and heavy equipment manufacturers.

The mechanic also explained to me that OEM relationships are typically difficult to win and even harder to lose. Before a component can be installed on a vehicle or piece of equipment leaving the factory, it must go through extensive testing, certification, and qualification processes, Which is something Selamat Sempurna had been doing for a long time now with its partners.

And the beauty of it all is, once a supplier has been approved, manufacturers are generally reluctant to switch because doing so introduces cost, complexity, and operational risk.

As a result, supplier relationships in the automotive and heavy equipment industries are often measured in years, if not decades. In that sense, OEM relationships not only provide a stable source of revenue but also reinforce Selamat Sempurna’s competitive position across its broader filtration business.

But thats not all, because besides OEM’s

Selamat Sempurna also operates a joint venture with Donaldson Company, one of the world’s leading filtration manufacturers serving industrial and heavy-equipment markets. The partnership has played an important role in the company’s expansion into the United States and other export markets.

I think a Global industry leader like Donaldson isnt the type to casually choose long-term manufacturing partners. The relationship serves as another indication that Selamat Sempurna possesses the product quality, manufacturing capabilities, and operational standards required to compete on an international stage.

Intact Long-Term Trend Despite Recent Sluggishness

At first glance, Selamat Sempurna’s first-quarter 2026 results appear somewhat disappointing. Revenue declined by approximately 2% year-over-year, while net income fell by around 4.5%. To make matters worse, selling expenses increased at the same time, creating pressure on profitability from both sides.

However, a closer look at the segment disclosures tells a more nuanced story.

One of the data points I pay close attention to is revenue by geography. Over the years, the company’s growth has not been evenly distributed across all regions. While Asia, the Americas, and Africa have generally trended upward, Indonesia and Australia have experienced periods of slower growth. Europe, meanwhile, has been the most volatile region in the portfolio.

The first quarter of 2026 largely followed the same pattern. Asia and the Americas continued to post growth, while Indonesia, Australia, and Africa experienced modest declines. The most significant weakness came from Europe, where revenue fell sharply.

That distinction matters because the company’s end markets are closely tied to industrial activity, construction, transportation, and mining. These sectors drive demand for heavy equipment and replacement filtration products. Unfortunately, Europe has faced a challenging economic backdrop in recent years, with industrial activity and construction demand remaining under pressure.

However, I believe focusing solely on that will cause you to lose the bigger picture.

Because, if you look at the geographic revenue breakdown, you will notice that the underlying story remains broadly consistent with the thesis in the beginning of this article, which are:

• Construction, tech related mining → Oil Filters

• Southeast Asian industrialization → Air Filters

And while its true that Europe has been under pressure, revenue from Asia, the Americas, and Africa has generally shown far healthier trends over time, and is very likely to continue to do so.

Because these are precisely the regions benefiting from some of the most powerful industrial trends in the world today.

Asia, the Americas, and Africa, governments and corporations are investing heavily in securing supplies of critical minerals such as lithium, copper, cobalt, graphite, and rare earth elements. These materials are essential for electric vehicles, renewable energy infrastructure, energy storage systems, semiconductors, and increasingly, the buildout of AI-related infrastructure.

None of this happens without mining activity. New mines, processing facilities, transportation networks, and supporting infrastructure require large fleets of trucks, excavators, loaders, and other heavy equipment. Those machines operate in harsh environments and consume replacement filters on a continuous basis throughout their operating lives.

At the same time, Asia continues to urbanize and industrialize at a remarkable pace. New factories, warehouses, hospitals, data centers, highways, ports, and commercial buildings are being constructed across the region. This creates demand for industrial and air filtration products.

Viewed through this lens, I believe the recent slowdown and the recent weakness in revenues from Europe appears less significant than the broader trends unfolding across Asia, the Americas, and Africa. These regions remain the primary beneficiaries of the global push toward industrialization, infrastructure development, resource security, and technological advancement.

The same logic applies to Indonesia. While recent results have been somewhat softer, the long-term drivers remain compelling. Mining activity, infrastructure development, industrial investment, and initiatives such as the expansion of biodiesel programs should continue to support economic activity and equipment utilization over time.

For that reason, I view the recent slowdown as a short-term headwind rather than evidence that the long term growth story has changed.

Skin in the Game and Rational Capital Allocation

My philosophy on management and rational capital allocation is quite simple. I generally prefer that:

• Boards of directors are relatively small.

• There is a controlling shareholder who is not overly involved in day-to-day management.

Selamat Sempurna actually has both characteristics. First, it has a relatively small board of directors. Second, the controlling shareholder, PT Adrindo Intiperkasa, is associated with the Hartono family, one of Indonesia’s most successful business families and long-term capital allocators.

To top it all off, Mr. Ang, the company’s top executive, owns a meaningful stake in Selamat Sempurna. While insider ownership alone does not guarantee sound decision-making, it does mean that management shares many of the same outcomes as outside shareholders. When a significant portion of personal wealth is tied to the company’s performance, incentives tend to be more closely aligned.

In many ways, Mr Ang is the public face of the company.

If I had to describe my impression of him in a single word, it would be: stoic.

Perhaps it is the influence of the company’s long-standing Japanese partnerships, or perhaps it is simply his personality, but he consistently comes across as analytical, measured, and highly disciplined in the way he communicates.

Having watched a number of public exposures and investor presentations over the years, what stands out to me is his straightforwardness. He tends to answer questions directly, avoids unnecessary promotion, and appears comfortable discussing both the strengths and weaknesses of the business.

Of course, judging management solely from public appearances is always imperfect. But the impression I have come away with is that of an executive focused more on execution and long-term value creation than on telling a compelling story.

The ownership structure provides another interesting piece of the puzzle.

Taken together, this creates a governance structure that I generally find attractive. Management has meaningful skin in the game, while the presence of a committed long-term controlling shareholder helps encourage decisions that prioritize long term value creation over short-term results.

Of course, ownership alone does not create a great business. However, when evaluating management teams, I generally prefer situations where the people making capital allocation decisions are also economically exposed to the consequences of those decisions.

Why I Think Selamat Sempurna Is a Steal at Its Current Stock Price Given Its Growth Prospects and Competitive Advantages.

To me personally, the current PE ratio of 8 times earnings says it all. I personally think that a PE of just 8 times earnings to be simply absurd, and far too low for Selamat Sempurna’s fundamentals.

Why do i think so?

First of all, Selamat Sempurna is still growing, and its growth thesis remains valid, with clear room for short term and long term growth as we have mentioned before. Compared with many stocks in Indonesia, I would argue that it ranks above average in terms of competitive advantages, again, as we have discussed previously.

And second of all, I find it difficult to justify the company’s current valuation given its strong growth prospects. To me, the current valuation is based on neither logic nor common sense, and I believe the market’s pessimism has been overdone.

Historical data also suggests that, at current valuations, we are likely to achieve high double-digit annual returns.

Simple Valuation

To make things easier, i will refer to this ilustration i made :

This illustration is important because it reflects the mental model behind my valuation. My core idea is as follows:

• For the explicit forecast period, I believe there is still ample room for growth in the sale of filters for heavy-duty equipment. My thesis is that Asia will continue to grow significantly over the next decade, which is not a particularly difficult scenario to envision. In addition, the expansion of AI-related and tech infrastructure will likely increase demand for mining and other industrial activities, further supporting demand for heavy-duty equipment and replacement filters.

• For the terminal value, I believe Selamat Sempurna is likely to shift more of its business toward air filtration over the medium to long term. As air quality standards become more stringent and filtration requirements become increasingly important across a range of industries, air filters could represent a growing share of the company’s business and provide an additional avenue for long-term growth.

please just ignore the CAPM calculation that i made, I only use the required rate of return from CAPM only if it were higher then my treshold of 10%. anything below 10% and i will just use 10% as the required rate of return.

Closing Statement :

My goal with this substack is simple: to contribute thoughtful stock ideas and research that help can investors, investing writers, and buy side analysts get “idea flows” and discover new opportunities.

Please give me feedbacks and comments, so i can become a better writer and build and improve this newsletter

Cheers!

Disclaimer: Tiger Thesis uses information from sources believed to be reliable; however, its accuracy cannot be guaranteed. The content in this publication is for informational purposes only and does not constitute personalized investment advice or consider your specific financial circumstances. The opinions expressed are those of the publisher and may change without prior notice. You are encouraged to consult with a qualified financial advisor to evaluate your investment options and determine their suitability for your individual needs. From time to time, I may hold positions in the securities discussed on this website. Disclosure: At the time of publication, I hold a position in Bank Central Asia(BBCA). To reiterate, this article and the accompanying presentation are intended solely for informational and educational purposes and should not be construed as a recommendation to buy or sell any securities.

PT Bank Central Asia Tbk (BBCA IJ) is Indonesia’s largest private bank by market value, and in a banking world like today, that is increasingly driven by trading books, investment banking mandates, and financial engineering, Bank Central Asia offers something almost anachronistic: a business model so structurally simple that its competitive advantage/moat is nearly self-evident.

With around $97 billion USD in total assests, BCA established itself as a dominant transaction infrastructure of the world’s fourth-most-populous country, processing over 110 million transactions a day. And today, tens of millions of Indonesians and hundreds of thousands of businesses are deeply embedded in its ecosystem, creating a customer base that is exceptionally difficult to displace. The result is an 84% CASA ratio, a cost-to-income ratio below 31%, a 23% return on equity, and a 3.9% return on assets all while maintaining a conservative balance sheet and operating without a meaningful investment banking franchise.

What makes it even more mindblowing is that the quality of this franchise is matched by the scale of its consistent historical growth and future opportunities for growth. Indonesia’s credit-to-GDP ratio remains at roughly 40%, less than one-third of Malaysia’s. BCA also maintains a loan-to-deposit ratio deliberately below the industry average, preserving significant lending capacity. Meanwhile, roughly 64 million micro and small enterprises have yet to meaningfully enter the formal credit system.

This explains why for most of the past decade, BBCA traded at a premium to its fundamental worth, its 10-year average PE sits at 24.35x, peaking at 31x in June 2020 during the COVID liquidity wave, when global capital flooded into high-quality emerging market names and BCA became the default vehicle for Indonesia exposure. That premium was partly deserved, BCA is a genuinely exceptional business, but we gotta to admit that a portion of that uptrend was momentum-driven, as consensus institutional positioning pushed the multiple well above what the earnings growth alone could justify.

But then several things hit simultaneously, and the worst part is none of them are really BCA-specific. The MSCI governance warning in January 2026, rupiah weakness breaching historic lows, Prabowo policy uncertainty, and broad emerging market outflows combined into a perfect storm of forced selling, its like a perfect breakup scene in a movie, and with BCA being the most liquid stock on the IDX, it became the default exit door for every fund reducing Indonesia exposure, sold not because anything was seriously wrong with the bank, but because it was the easiest thing to sell. The current PE has compressed to roughly 13-14x nearly 40% below the 10-year historical average while the underlying business kept compounding: CASA at 84%, NPL at 1.8%, ROE at 23%, cost-to-income below 31%.

The multiple collapsed, the fundamentals didn’t.

While many believe that this decline is the end of BCA as we know it, In this article i will argue that is not the case. I will also elaborate on why i think the markets pessimism has been overdone…

How Did BCA Build Its Moat, and What Is It Like Today?

It’s no exaggeration to say that BCA’s moat is the most critical factor in this investment thesis, which is why it deserves emphasis early in the article. In essence, BCA’s moat is a combination of:

• having a strong network effect

• high switching costs

• Lowest cost of funds among peers

Let’s start with the network effect, the first layer of the moat. It was established in From the early 2000s through the 2010s, BCA aggressively expanded and strengthened what became Indonesia’s most trusted ATM and transaction banking network, well ahead of many competitors. Indonesians and businesses gravitated toward BCA not because it consistently offered the highest deposit rates, but because its payment infrastructure was widely accepted, reliable, and deeply integrated into everyday commerce.

Over time, this became self-reinforcing: more merchants accepted BCA because their customers used it, and more customers used BCA because merchants widely accepted it… a two-sided network effect. This network is extremely difficult to replicate, and it is unlikely that any competitor could rebuild it from scratch.

But BCA didn’t stop there. After establishing a powerful transaction and payment network, the bank doubled down on digital banking initiatives, successfully carrying much of its dominance into Indonesia’s early mobile banking era during the 2010s.

So the main point of this first moat is that many Indonesians keep their everyday balances, salary float and working capital in BCA current and savings accounts, not because BCA offers the highest returns, but because moving elsewhere creates friction.

This leads to the second layer of the moat: switching costs. Consider a typical Indonesian office worker or business owner. Your salary is deposited into BCA. Your standing orders run through BCA. Your employer’s payroll system is integrated with BCA. Your business receivables land in BCA. Switching your “primary account” isn’t simply changing banks it means reorganizing your entire financial life. Most people don’t bother.

These switching costs extend even to consumer behavior via BCA’s mobile banking apps. BCA’s attention to detail when it comes to customer experience is exceptional, they even offered two types of mobile apps: one with a simpler interface for older users, and another tailored to younger generations with a more modern design.

and if we combined the the two previously mentioned moats, they serve as a foundation for BCA’s third moat, which is BCA’s low cost of funds, which is a direct byproduct of the network effect moat and the swithcing cost moat.

With 82% of its deposits in low-cost current and savings accounts (CASA), the bank effectively borrows from the public at near-zero cost and lends at a net interest margin of 5.9%.

If we were to combine all three layers together, it makes a lot of sense why BCA’s CASA base is structurally locked in, and with that, BCA’s cost of funds is significantly lower than that of its peers, this advantage translates directly into superior net interest margins (NIM) and return on equity (ROE), without the need for excessive risk-taking.

Inverting the question: what would need to happen for BCA’s moat to erode?

Look, Im a big fan of Charlie Munger, and he’s a big fan of inverting things, and so am I. so in a situation like this, where the answer to the question seems so obvious, we need to step back, and look at things in an inverse manner. so the question then becomes, what would technically need to happen for BCA to fail misrably?

One trend that could potentially challenge BCA’s dominance is the rise of QR payments, because QRIS(Indonesia’s QR payment gateway) essentially commoditize the payment rails layer, But even with the QR system dominating the payments in Indonesia, someone still needs a bank account behind the QR code, and today that account is overwhelmingly BCA, with its mobile apps.

And to strip BCA’s of its dominance, you would need to eliminate BCA’s “CASA” dominance, but as i ponder, i quickly realized that a competitor trying to do this would face a chicken-and-egg problem. Because to steal BCA’s CASA, you need to be the primary transaction account of the masses, but to be the primary transaction account of the masses, you need that “payment network ubiquity” that BCA has. and to build that network ubiquity, you need years and billions in investment during which BCA continues compound alongside you.

Even well-capitalized digital challengers face this: they can offer 5% on savings and attract deposits, but those tend to be investment money, not transaction money. The daily salary-in, bills-out behavior is what anchors CASA, and that behavior is anchored in BCA’s payment rails.

BCA’s Growth Potential: A Long Runway Ahead, Here’s Why

Here’s the case for optimism: roughly 80% of Indonesia’s 275 million people remain unbanked or underbanked. Indonesia’s banking industry is projected to grow at a CAGR near 7.8%, heading toward a $1 trillion market by 2027. BCA currently holds about 25% of Indonesia’s total third-party funds, meaning there’s still a large portion of the population and economy it hasn’t fully captured.

Even within existing customers, growth vectors are real and multiple. Mortgage penetration in Indonesia is still very low relative to GDP. SME lending is under-served. Wealth management and bancassurance are still early innings for a country whose middle class is expanding. BCA’s non-interest income, fees from digital payments, wealth products, credit cards, grew 10.2% in 2024 alone, and digital sub-brand blu by BCA surpassed 2.4 million users. BCA Digital’s operational income jumped 70% in 2024.

So the more interesting question isn't "how big is BCA today?" but "how big could BCA become as Indonesia's economy doubles over the next 15–20 years?" If Indonesia's credit-to-GDP ratio converges even halfway toward Malaysia or Thailand's levels, BCA's balance sheet could realistically be 3–4x its current size organically, without acquisitions, without taking on new business lines. That's the growth story embedded in the current asset base.

BCA In Theory Could Easily Piggyback the Rise in Asset Management in Indonesia

Per capita GDP in Indonesia is projected to grow to $23,000+ by 2040, roughly tripling from today. When that happens, something qualitatively shifts: a middle class that was previously focused on accumulating basic savings starts thinking about what to do with savings. Mutual funds, bonds, insurance, retirement planning, eventually equities.

BCA already has 41 million accounts. As those account holders get wealthier, BCA doesn’t need to acquire new customers to build a massive wealth management business it just needs to sell upward into a customer base that is getting richer by default. The myBCA app already has Welma for investments. The distribution is already built. Most banks trying to build wealth management have to solve three hard problems simultaneously: trust, distribution, and customer data. BCA has already solved all three without even trying. The trust is already earned.

In the long long term, i think its plausible that BCA’s wealth management business could be bigger than its lending business is today, especially for passive investing, not because BCA did anything transformational, but because Indonesia’s savers graduated into investors and BCA was already in their pocket.

Why I Think This Is So Compelling

Indonesia’s total mutual fund net asset value grew from IDR 145 trillion in 2010 to IDR 497 trillion by April 2023. That sounds impressive until you put it against the economy. The World Bank’s own assessment shows Indonesia’s mutual funds as a percentage of GDP sits dramatically below its peer countries, countries like India, Brazil, Chile, and the Philippines. Indonesia, despite being the fourth largest country in the world, has one of the most underpenetrated investment markets among comparable economies.

Now look at what India, the most instructive comparison has done. India’s mutual fund AUM as a proportion of bank deposits has risen from 19.7% in March 2020 to an estimated 30% by March 2025. India’s mutual fund industry has nearly tripled in five years, posting a CAGR of nearly 22%, crossing Rs 81 trillion in late 2025. And India is still considered early stage in its wealth management journey. OJKAsian Development Bank

Indonesia is where India was roughly a decade ago. That gap could be BCA’s opportunity…

The Transaction Bank Business Model: How BCA is Simultaneously Conservative and Profitable.

Here’s the thing that makes BCA genuinely unusual globally: it is simultaneously conservative and profitable.

Normally those two things trade off against each other. Being conservative means you turn down marginal loans, hold excess capital, over-provision, all of which reduce returns. But BCA manages to have a 23.3% ROE, 31% CIR, and 3.9% ROA despite running a very conservative balance sheet for its category. That’s only possible because the CASA moat generates such a powerful funding cost advantage that BCA doesn’t need to take credit risk to generate exceptional returns. It earns its way to excellence from the liability side, not just the asset side.

BCA boasts the highest capital adequacy ratio among Indonesia’s big four banks. At 29.8%, it’s running at roughly 3x its regulatory minimum of 9%. Most well-run global banks hold 1.3–1.5x their minimum. BCA is sitting on almost twice that buffer.

This isn’t capital inefficiency, It’s a deliberate signal. It says: we will never be forced sellers of assets, we will never need emergency dilutive capital raises, and we can absorb a shock that would wipe out most of our competitors and still be standing. It’s also what makes the increasing dividend payout credible, there’s genuine excess capital to return.

However, don’t get the wrong impression, BCA is not being blindly conservative. The bank’s liquidity ratios help explain why.

As shown in the chart below, BCA’s Liquidity Coverage Ratio (LCR) declined from roughly 396% in 2021 to 311% in 2025, while its Net Stable Funding Ratio (NSFR) fell from 181% to 160%. At first glance, these figures may appear concerning, but this is not deteriorating liquidity. the regulatory minimum for both ratios is only 100%. BCA still operates at approximately 3x the required LCR threshold and 1.6x the NSFR minimum.

The more appropriate way to frame this, in my view, is that BCA is gradually deploying the “fortress” balance sheet it built during the COVID period. As loan demand collapsed and deposits surged, BCA accumulated a shit ton of excess liquidity. What we are seeing today is not deterioration, but normalization, a measured redeployment of surplus liquidity back into productive assets, its patient opertunism at work.

LDR and CASA are both climbing and that combination is the key

LDR rising from 62% to 77% means BCA is actually lending more of its deposit base deploying capital that was previously sitting idle. Crucially, this is happening at the same time CASA is rising from 78.6% to 83.7%. That’s the important part. Normally when banks lend more aggressively, they have to compete harder for deposits which means paying up for term deposits, which erodes CASA. BCA is doing both simultaneously: lending more AND… attracting stickier, cheaper funding. That’s the moat we have been discussing previously working in real time.

The liabilities ratios: remarkably stable

The liabilities-to-assets ratio barely moved 83.5% to 82.2% over five years. That’s not the profile of a bank taking on more structural leverage. The balance sheet composition is extremely stable even as the lending activity picks up.

The one thing i would watch tho…

LDR moved from 62% in 2021 to 78.4% at peak in 2024, before easing to 76.8% in 2025. If it continues climbing toward the 85-88% industry average, that’s worth monitoring not as a danger signal, but as confirmation that BCA’s famous underlending conservatism is gradually normalizing. Still the most conservative of the big four, but converging slowly.

Quick Walktrough of BCA’s Credit Portfolio

“Banking is a good business if you don’t do dumb things on the asset side” Warren Buffett

Our analysis would not be complete without examining BCA’s credit portfolio. As Warren Buffett often says, a bank is a great busines as long as management does not mess up the asset side of the balance sheet.

Let’s begin our quick walktrough by first looking at BCA’s loan portfolio by economic sector.

By economic sectors, personally i think portfolio is well spread, No single sector commands more than ~22% of the book. The top four, Manufacturing (21.8%), Trading/restaurants/hotels (19.8%), Business services (18.0%), and Household activities (16.5%), together account for about 76%, with the remaining 24% spread across seven other sectors including agriculture, mining, utilities, and construction. This is a reasonably diversified picture.

Although there is some concentration in the top three commercial sectors, economic data shows that these are relatively stable industries: manufacturing, trading, and business services.

And when we map the loan growth against actual sector performance, we can see that actually, most of BCA’s big bets align with Indonesia’s economic reality. Business services and transportation & warehousing are the clearest examples, sitting in the top-right of the chart where strong loan growth meets strong GDP growth. These are sectors where the fundamentals justify BCA’s expanding credit appetite.

The most striking outlier however is mining. BCA grew its mining loans faster than any other sector up 30% in a single year yet mining was the only sector in Indonesia’s economy that actually contracted in 2025, shrinking 0.66% in GDP terms. Electricity, gas & water tells a similar story, with double-digit loan growth against one of the weakest sector performances. On the flip side, social & public services grew nearly 10% economically but received very little incremental lending from BCA.

Luckily mining is just 3.6% of the total portfolio, the absolute exposure is contained. So while the trend is worth watching, it doesn’t represent a systemic risk to BCA’s book today.

The bigger picture is that from 2024 and 2025 data, it seems like BCA’s sector diversification strategy is working: no single sector dominates dangerously, asset quality remains strong with a gross NPL of just 1.71%, and with most lending is tilted toward business lending and into sectors that are growing and are stable.

In terms of loan composition, BCA’s portfolio appears reasonably balanced too. Working capital loans (44.7%) and investment loans (36.8%) account for the majority of the portfolio, which is typical for a large commercial bank. Meanwhile, consumer lending, at 16.2%, provides a meaningful retail cushion and adds diversification to the overall loan book.

What becomes particularly interesting, however, is when we connect the loan-type data with the geographic breakdown. A significant portion of these working capital and investment loans are concentrated in Java, reinforcing the island’s role as Indonesia’s primary economic and commercial center.

At first glance, some investors may view BCA’s exposure to Java as overly concentrated and therefore risky. However, that interpretation lacks important context, because…

• First, many Indonesian businesses maintain their headquarters on the island of Java. As a result, a company may appear on BCA’s books as a “Java-based” exposure while its actual operations and revenue streams are spread across the broader Indonesian economy.

• Second, approximately 56.1% of Indonesia’s population resides on Java. Despite accounting for only around 7% of the country’s total land area, the island remains the nation’s primary population center. Naturally, this makes Java the dominant market for banking activity and credit demand.

• Third, Java is the economic engine of Indonesia, consistently contributing more than 56% of national GDP as of early 2025. From a banking perspective, it is therefore unsurprising that lending activity is heavily concentrated there that is where the country’s economic activity is centered.

Furthermore, unlike state-owned peers such as BRI, Mandiri, and BNI, BCA has greater flexibility in determining how it structures and allocates its business. State-owned banks often operate with broader policy considerations and strategic mandates, which can limit their operational flexibility relative to privately controlled institutions like BCA.

Buybacks and the Clearing MSCI Overhang, A Catalyst in the Making

As we discussed early in thir article, BCA’s stock price had already declined by about 40% from its peak, and in this dire situation, the management has two choices: issue reassuring statements, or put real money on the table. BCA’s management chose the latter and did so not once, but three times in thirteen months.

Management’s response was to treat the selloff as an opportunity rather than a verdict. The first buyback in March 2025 allocated IDR 1 trillion, with a ceiling price of IDR 9,200 per share. When that program wasn’t fully utilized, management returned in October 2025 with a far larger IDR 5 trillion program which analysts explicitly noted reflected increasing management conviction rather than routine capital management. Then in April 2026, BCA launched a third program of up to IDR 5 trillion, approved at the March AGM and running for 12 months through March 2027. Three programs, IDR 11 trillion in authorized capacity, all executed while the stock was trading 40% below its own 10-year average PE.

To me the message was clear: they really do care about rational capital alocation

BCA’s excess capital position a CAR of 29.8% against a 9% regulatory minimum gave management the luxury of returning capital without compromising balance sheet strength. Rather than chasing loan growth or expanding into riskier segments to prop up earnings, they used the downturn to permanently retire shares at prices they considered materially below intrinsic value. Every share bought back is a share that a forced foreign seller exits into and that supply is gone permanently. When foreign flows eventually normalize, fewer shares will be chasing the same underlying earnings, mechanically amplifying the per-share recovery.

And on the MSCI front, the situation is now materially clearer than it was a few months ago. A frontier market downgrade is already out of the table as we speak.

For the Indonesian market, the remaining risk is centered on partial index weight reductions and the deletion of specific stocks with highly concentrated ownership namely BREN and DSSA, neither of which has anything to do with BCA.

The definitive verdict on Indonesia’s emerging market status however comes at MSCI’s Market Accessibility Review in June 2026, where OJK’s reform package expanded ownership disclosure, minimum free float requirements, and improved governance standards will be assessed in full.

BCA’s own governance position throughout this episode has been impeccable. The MSCI concerns centered on stocks where insiders controlled 95-97% of shares.

BCA on the other hand, sits at the opposite end of that spectrum, being transparent, well-governed, with genuine institutional free float.

In conclusion, to me personally, managements buying aggressively at depressed prices, and the country-level overhang gradually resolving sets up an asymmetric situation heading into the second half of 2026. If June’s accessibility review goes well and and the FIF freeze is lifted, passive funds that have been mechanically underweight Indonesia will need to rebalance back in, and BCA as the largest, most liquid, best-governed private bank on the IDX will be the primary beneficiary of those inflows. The buybacks will have permanently reduced the share count that those inflows chase. And the business itself will continue compounding quietly through all of it.

A simple Dividend Discount Model

Scenario 1 Base Case (60% probability)

• EPS growth of 8% for years 1-5, slowing to 5% for years 6-10.

• Terminal multiple of 13x.

• Discount rate of 7.66% (CAPM).

The 8% growth assumption is actually slightly below BCA’s own historical 10-12% EPS CAGR which makes it deliberately conservative. The logic is that the next 5 years carry real headwinds: the MSCI overhang hasn’t fully cleared, the rupiah is under pressure, Indonesia’s GDP growth is running closer to 4.8% than the 5.2%+ of the boom years, and BCA itself is guiding loan growth at only 9-10%. NIM holds steady around 5.5-5.7%, cost of credit stays at 0.5%, and operating leverage continues to keep the CIR below 33%. Nothing breaks, nothing re-rates dramatically. The 13x terminal multiple is essentially saying: BCA exits this decade at the same depressed valuation it trades at today no re-rating assumed whatsoever. That’s a very hard assumption to argue with, and it’s why the base case is the anchor. Intrinsic value comes out around IDR 7,200-7,300, implying roughly 24-25% upside from IDR 5,850.

Scenario 2 Bull Case (20% probability)

• EPS growth of 12% for years 1-5, slowing to 7% for years 6-10.

• Terminal multiple of 16x.

• 7.66% discount rate.

The 12% near-term growth reflects what BCA is capable of when the macro environment cooperates it’s essentially in-line with its historical average, not a heroic assumption. The triggers that make this scenario real: MSCI’s June 2026 accessibility review goes well, the FIF freeze is lifted, passive inflows return to Indonesian equities, and the rupiah stabilizes. Beyond that, BCA’s wealth management business starts contributing meaningfully as Indonesia’s middle class grows into investable assets, and the buyback programs reduce share count, mechanically lifting EPS. The 7% growth in years 6-10 reflects a maturing business in a deepening economy still well above most developed market banks. The 16x terminal multiple is the critical assumption here… it sounds generous until you remember BCA’s 10-year historical average PE is 24x. Even 16x implies a sustained country discount. Intrinsic value in this scenario comes out around IDR 10,400-10,500, implying roughly 78-80% upside which is what a full MSCI re-rating plus business re-rating would look like.

Scenario 3 Bear Case (20% probability)

• EPS growth of 5% for years 1-5, dropping to just 3% for years 6-10.

• Terminal multiple of 10x.

• 7.66% discount rate.

The 5% near-term growth assumes real damage not a catastrophic collapse, but a sustained period of pressure. MSCI reduces Indonesia’s index weight meaningfully, forcing continued foreign outflows. The rupiah breaks past 18,000 per dollar, forcing Bank Indonesia to hike rates, which compresses NIM as BCA’s variable-rate liabilities reprice faster than assets. Credit costs tick up from 0.5% toward 0.8-1.0% as corporate borrowers feel the macro squeeze. The 3% growth in years 6-10 is the real bear signal, it implies BCA is essentially a slow-growth utility in a market that the world has partially written off, growing roughly in line with nominal GDP but without the operating leverage or CASA tailwind that normally supercharges EPS. The 10x terminal multiple reflects a market that is pricing BCA as a permanently discounted emerging market bank with no re-rating catalyst in sight. Intrinsic value in this scenario comes out around IDR 5,700-5,800 which is actually roughly in line with the current price. The bear case is essentially saying: the market has already priced in this scenario. That itself is an interesting signal.

The synthesis across all three:

What’s striking when you look at the three scenarios together is the asymmetry. The bear case lands near current market price meaning the downside is already largely priced in. The base case implies 25% upside with deliberately conservative assumptions and zero re-rating. The bull case implies 78-80% upside if the MSCI situation resolves and BCA performs in line with its own history. A 60/20/20 probability weighting across those three scenarios produces a weighted intrinsic value of around IDR 7,500-7,600 roughly 28-30% above current prices. For a bank of this quality, that margin of safety even in the conservative base case, even with no re-rating assumed is the core of the investment thesis.

Market Maker Analysis :

Okay, I know this chart looks a little strange, but that’s mainly because this type of data visualization is mostly unique to Indonesia. Long story short, it is essentially a visualization of what we call broker summary data.

Since Indonesia does not have a large number of brokerage firms, investors often group brokers into two broad categories: retail-oriented brokers and institutional-oriented brokers. In the chart above, the orange line overlaid on the price chart represents the net buying activity of retail investors.

At the moment, retail investors appear to be dominating the buying activity. Ideally, however, we would want to see the orange line begin to decline, as that would suggest institutional investors are becoming the primary buyers of the stock.

The encouraging sign is that the orange line has started to flatten, while the foreign outflow bar chart in the top-right corner is also stabilizing. Taken together, these are constructive signals that selling pressure may be easing and institutional participation could gradually be improving.

Before You Leave, One Last Note :

Because this is not an indepth analysis, There is no additional PPT for this analysis. Im planning on doing more analyses like this, however not all needed to be covered in deep depths.

So if you are like me and you like analyses like these, definitely keep reading my substack, and also consider subscribing, cheers!

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If you enjoy the research i made and want to support future deep dives, feel free to buy me a coffee 😋. My goal with this substack is simple: to contribute thoughtful stock ideas and research that help can investors, investing writers, and buy side analysts get “idea flows” and discover new opportunities.

Disclaimer: Tiger Thesis uses information from sources believed to be reliable; however, its accuracy cannot be guaranteed. The content in this publication is for informational purposes only and does not constitute personalized investment advice or consider your specific financial circumstances. The opinions expressed are those of me as the writer and may change without prior notice. You are encouraged to consult with a qualified financial advisor to evaluate your investment options and determine their suitability for your individual needs. From time to time, I may hold positions in the securities discussed on this website. Disclosure: At the time of publication, I hold a position in MAP Aktif Adiperkasa Tbk (MAPA IJ).

MAP Aktif Adiperkasa Tbk (MAPA IJ) is Indonesia’s leading sports and lifestyle retailer, serving as the exclusive local partner for global brands, handling everything from distribution and store operations to marketing and merchandising.

At first glance, retail might not seem like an obvious place to look for opportunities in the age of e-commerce. Many investors, understandably, tend to avoid the space altogether. But in Southeast Asia, the playbook is different, and MAP Aktif Adiperkasa is a good example of why.

Lets start with geography for example. In much of the region, heat and humidity aren’t just background conditions, they actively shape consumer behavior. Air-conditioned environments aren’t a luxury; they’re a draw. As a result, malls attract consistent foot traffic in a way that is difficult to replicate in Western markets.

But the difference runs deeper. Malls in Southeast Asia don’t simply function as retail destinations, they are social infrastructures. Families don’t just shop; they spend entire afternoons there. Dining, entertainment, and leisure are embedded into the experience in a way that makes malls far more resilient than their Western counterparts.

This is also reflected in their design. Rather than declining, like in Indonesia for example, malls are expanding in scale and ambition, some integrated into “megablock” developments that combine retail, residential, and lifestyle spaces into a single ecosystem.

The success of malls across Southeast Asia, particularly in Indonesia, has, in turn, elevated players like MAP Aktif Adiperkasa Tbk. Today, it stands as one of the most important partners to major mall developers in the region.

The reason is straightforward: brand density. MAP Aktif controls a wide portfolio of globally recognized sports and lifestyle brands, allowing it to fill premium retail space with concepts that reliably drive foot traffic.

What’s often overlooked, however, is that this is only part of the picture. Map Aktif’s parent company, Mitra Adiperkasa Tbk, expands that portfolio even further across fashion, F&B, and lifestyle categories, and this means, for mall operators, the presence of MAP Active and Mitra Adiperkasa is not optional it is foundational. In many cases, their brands act as key traffic anchors for malls, giving the group meaningful bargaining power in lease negotiations and site selection.

However, bargaining power does not stop with mall operators. It extends upstream to global brand owners as well.

The group is not merely a distributor, it is a local expert in retail execution across Indonesia. From site selection and merchandising to pricing and consumer positioning, MAP Aktif brings capabilities that foreign brands would struggle to replicate on their own.

As a result, many international brands choose to enter the region through partnerships with MAP Aktif rather than going direct. By doing so, they effectively outsource the complexity of market entry, navigating real estate, local consumer behavior, and operational challenges, to a proven operator.

This dynamic further reinforces MAP Aktif’s position within the ecosystem, allowing it to act as a critical bridge between global brands and Southeast Asian consumers, particularly Indonesia. and with this comes a question, then, is: if MAP Aktif Adiperkasa Tbk is such an attractive business, why not simply invest in its parent, Mitra Adiperkasa Tbk? And more specifically, why focus on the sports segment?

In my view, the answer comes down to growth. Among the group’s various segments, sports and sportswear has a high probability to offer the clearest growth runway in Indonesia and the broader ASEAN region. Rising health awareness, increasing participation in sports, and the growing influence of global athletic brands all point to a category that is still in the early stages of penetration.

From Demographics to Social Media Influence: A Growing Wellness Trend Gives a significant growth runway for Map Active.

Indonesia’s demographic profile provides a critical foundation for understanding the growth prospects of MAP Aktif Adiperkasa Tbk. The population pyramid is heavily skewed toward younger cohorts, meaning a large and growing base of consumers is entering their peak consumption years.

This matters because, for this generation, fitness and an active lifestyle are no longer niche, they are increasingly part of mainstream identity. What was once a purely functional activity has evolved into something social, aspirational, and, importantly, “cool.”

The data reflects this shift. CNN Indonesia reports that these young men and women in Indonesia are the most active, with weight training emerging as one of the fastest-growing categories. Gym penetration is also rising, with around 32% of individuals aged 25–34 holding memberships, according to Rakuten Insight.

Beyond the data, the cultural shift is equally important. Fitness is increasingly embedded in everyday content, from K-pop and anime to short-form platforms like Instagram and TikTok, where workouts are not just performed but shared and amplified. Even platforms like Bumble now incorporate fitness-related signals, reflecting how deeply these behaviors are integrated into identity and social signaling.

Taken together, this represents a meaningful shift from past decades, when fitness was more niche and function-driven. Today, it is visible, social, and aspirational. One of the clearest expressions of this shift is the rise of gym influencers in Indonesia.

These influencers span a wide range of profiles, but many share a common trait: they are young, relatable, and increasingly aspirational to their audiences. With follower bases often reaching tens of thousands, they play a meaningful role in shaping preferences, particularly among younger consumers, by normalizing and promoting fitness as part of everyday identity.

As more young Indonesians adopt active lifestyles, one might expect demand to shift primarily toward e-commerce rather than physical retail. In practice, however, this is not always the case.

Despite the rapid growth of online channels, physical retail continues to dominate footwear sales in Indonesia, particularly for performance and fit-sensitive categories like athletic shoes, which is MAP Aktif Adiperkasa Tbk’s core revenue driver.

The data shows that fit is a key consideration, with around 66% of consumers citing sizing as a primary concern, second only to price at 75%.

As a result, offline channels still account for roughly 65% of the market, with consumers favoring physical stores for hands-on fit assessment, comfort testing, and immediate availability. A 2023 survey further reinforces this behavior, with 64.7% of sneaker buyers preferring to purchase through mall-based retailers.

However this does not mean that Map Aktif does not have an online presence, infact they have a big one, particularly in Indonesia. they have both official online stores with their own website and also are quite dominant in Indonesia’s big 3rd party market places such as Tokopedia and Tiktok.

and while e-commerce is growing rapidly, led by platforms like Shopee and supported by improvements such as AI-based sizing tools and easier returns, its adoption remains more pronounced in lower-risk purchases which explain why only 9.9% of sales comes from online stores, because for premium or performance-oriented footwear, many consumers continue to rely on physical stores.

As an Indonesian living in Indonesia, I believe this dynamic will continue to persist because, as i mentioned earlier in this article, Indonesians have the tendency to go to malls on a regular basis because it almost like a part of the culture here to dine and go out together with friends and family, we even have a term for it and its called “nge-mall”.

Taken together, the strength of mall culture, rising sports participation, and a young demographic profile form a powerful combination, i believe this is a solid runway for growth.

Capturing Growth Through Competitive Advantage

Growth potential is only as valuable as a company’s ability to capture it.

And for MAP Active, that ability is closely tied to scale. This applys to increasing sales in current products and the ability to expand to new products that will later on give sales. and this scale have the tendency to compound because for global brands, partnering with them is a no-brainer:

1. Their understanding of Indonesian consumers is exceptionally deep, supported by vast amounts of data. This scale gives them a unique advantage in generating meaningful insights. As a result, global brands entering the market can rely on MAP Active to guide their strategy.

2. They have significant bargaining power with major malls across Indonesia, enabling them to secure favorable pricing and prime retail locations, both of which are critical to success.

3. For new brands entering Indonesia, executing on points 1 and 2 without a partner like MAP Active is exceptionally difficult.

How Map Active’s Scale Gives it a Unique Advantage in Gaining Unique Customer Insights, particularly in Indonesia.

As Peter Lynch suggests, the most attractive opportunities often lie in companies that effectively utilize technology rather than build it. In this context, Map Active stands to benefit from advances in AI and machine learning, not because it develops these technologies, but because it can apply them to a uniquely rich dataset.

With transactional data spanning thousands of SKUs across multiple global brands, Map Active can enhance demand forecasting, inventory allocation, and pricing decisions at a granular level. This creates a data-driven feedback loop where scale improves decision-making, which in turn drives higher sell-through and strengthens brand relationships.

Crucially, this advantage is rooted in proprietary first-party data generated through its distribution network, making it difficult for smaller competitors to replicate, and translating into improved inventory turnover and margin efficiency over time.

so in essence, this system plus their expertise and bargaining power it flexibility to alocate or realocate capital to brands in that gives the most return.

An example of this “Flexibility” in action. colaborative branding in action.

Foot Locker is the best example of this advantage, particularly in Indonesia.

The Foot Locker case is practically a textbook confirmation of this thing. Foot Locker's Asia Pacific CEO explicitly stated that "partnering with MAPA will help us deliver on that commitment in an incredibly important market with long-term growth potential", meaning even a global giant with 2,900 stores worldwide felt it needed MAP Active as its entry vehicle into Indonesia. MAP Active subsequently acquired Foot Locker stores in Singapore and Malaysia, and launched Foot Locker debuts in Thailand and Vietnam, showing the relationship deepened into a full regional partnership not just a local convenience.

Trancending retail: how Map Active can be “more then just a retailer” in ASEAN. New Balance as a case study

Through exclusive brand licenses spanning Indonesia, the Philippines, Thailand, Vietnam, Singapore, Malaysia, and Cambodia, MAP Active is quietly building the infrastructure to serve as the de facto “retail operating system” for global sports and lifestyle brands entering Southeast Asia. With over 1,800 stores, 40+ exclusive brand partnerships, deep mall relationships, and proprietary consumer data across the region, any global brand seeking meaningful ASEAN market presence faces a simple reality: going through MAP Active is dramatically easier, cheaper, and more effective than building that presence independently.

What makes this particularly powerful is when you layer in the manufacturing dimension…

Indonesia is rapidly becoming a preferred production base for global brands New Balance alone has six factories, 300+ local suppliers, and over $500 million in annual footwear exports from the country.

When a brand manufactures in Indonesia and distributes through MAP Active across Indonesia and ASEAN, MAP stops being just a retailer and becomes something far more strategic: a regional brand commerce platform that controls both ends of the value chain. The brand produces in Indonesia, and MAP Active takes it to market across 680 million consumers. This is the model New Balance has already validated, and it could potentially set the template for how MAP Active could evolve from Southeast Asia's top sports retailer into something thats rather unique. here’s how i see it:

Layer 1 : Production (Indonesia as the factory floor)

New Balance already proved the template. New Balance has made IDR 2 trillion in direct investment, operates across six factories with 300+ local supplier partnerships, and exports over $500 million worth of footwear annually to China, Japan, the US, and Europe. Jakarta Globe Indonesia isn’t just where the shoes are sold, it’s where they’re made. For global brands watching geopolitical risk in China and Vietnam, Indonesia is a democracy and is increasingly attractive as a production base.

Layer 2 : Retail & Distribution (MAP as the gateway to 680 million ASEAN consumers)

Once a brand manufactures in Indonesia, the logical next move is to also sell in the region through the entity that already controls the premium mall locations, the consumer data, and the exclusive licenses. MAP becomes the path of least resistance for market entry across all of ASEAN.

A good example of this is in Thailand. New Balance’s previous Thai distributor was CRC Sports, but in April 2023 all New Balance stores in Thailand closed after CRC Sports lost its import/export contract. Then just months later, New Balance opened its first flagship store in Thailand in partnership with MAP Active Adiperkasa as its new distributor. New Balance didn’t just pick any replacement, they went straight to MAP. MAP Active Adiperkasa was named the new official importer and distributor, with a target of 8 standalone stores in Thailand by end of 2023 and 30-35 standalone stores plus 100+ shop-in-shops by 2025.

Other then Thailand, MAP Active has established legal entities in Singapore, Malaysia, Vietnam, including multiple subsidiaries in Singapore (MAA Sports Singapore, Map Active Singapore, Noble Footwear Holdings) and entities in Malaysia and Vietnam MAP Indonesia, and New Balance appears in MAP Group’s brand portfolio across these markets.

So in this bullish scenatio. if global brands continue choosing Indonesia as a manufacturing base and continue choosing MAP as their retail partner for ASEAN, MAP evolves from a retailer into something more like a regional brand operating system, holding the production relationships, the distribution licenses, and the consumer touchpoints simultaneously. That's a fundamentally different and far more defensible business than a chain of shoe stores.

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In this article we havent really covered much the valuation, margins, and risks are still missing hahaha, consider subscribing to my substack!, its still free!

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Disclaimer: Tiger Thesis uses information from sources believed to be reliable; however, its accuracy cannot be guaranteed. The content in this publication is for informational purposes only and does not constitute personalized investment advice or consider your specific financial circumstances. The opinions expressed are those of the publisher and may change without prior notice. You are encouraged to consult with a qualified financial advisor to evaluate your investment options and determine their suitability for your individual needs. From time to time, I may hold positions in the securities discussed on this website. Disclosure: At the time of publication, I hold a position in PT Astra International Tbk (ASII). To reiterate, this article and the accompanying presentation are intended solely for informational and educational purposes and should not be construed as a recommendation to buy or sell any securities.

If you’re searching for an undervalued Asian company that resembles early Berkshire Hathaway, one that is transitioning from a traditional owner-operator model into a more disciplined, capital-allocating investment vehicle, then PT Astra International Tbk (IJ: ASII) may be exactly what you’re looking for. As a value investor focused on Southeast Asia, I find Astra particularly compelling not just because of this strategic evolution, but because it is built on an extraordinary foundation: a gargantuan moat within Indonesia.

Astra sits at the heart of multiple critical industries it is the country’s largest automotive and motorcycle player, the dominant mining contractor, and a diversified conglomerate with interests spanning gold mining and numerous other businesses. Despite this scale, resilience, and embedded optionality, the company trades at just around 7.5 times earnings, a valuation that appears disconnected from both its current dominance and its long-term potential as a compounding capital allocator.

What’s particularly interesting is that Astra’s low valuation seems to coincide with several global and regional events that have little, if any, direct impact on Astra’s long term fundamentals. For instance, the MSCI temporary freeze triggered a wave of foreign outflows from emerging markets like Indonesia, and Astra was no exception, despite long term fundamentals being largely unaffected by the underlying issues.

And with much of the investing world’s attention focused on the Iran–U.S. conflict over the Strait of Hormuz, capital markets have become increasingly distracted from underlying, post-crisis fundamentals. As a result, companies like Astra are often labeled as “boring,” leading to elevated risk premiums that may not fully reflect their intrinsic value.

To top it all off, prior to all of this, Astra’s shares was critically hit with poor communication from the Indonesian government. One of its subsidiaries, Angincourt Resources, a gold mining company based in Sumatra had its mining permit suspended. Although the issue was eventually resolved, with the miscommunication addressed and the permit reinstated, the damage to the market had already been done.

And with the market already driven by sentiment and external noise, issues like these amplify perceptions of uncertainty, reinforcing bearish sentiment and encouraging short-term thinking among investors.

So, what do investors misunderstand about Astra? The writer argues, as the title of this article suggests, that Astra right now is not merely just a car company or even just a conglomerate. That perception is a disguise it has maintained over the years. In reality, Astra is strating to operate more like a large investment fund, a capital allocator at its core. And with a new star in its board, Its automotive and other business segments primarily serve as liquidity generators, supporting its central function of allocating capital.

Therefore, to truly understand Astra, the key question is whether its core businesses automotive, mining, and finance will continue to generate strong cash flows to support its capital allocation strategy.

Beyond the Noise: What Do Buybacks and Astra’s Core Businesses Tell Us About Its Capital Allocation Strategy and Future as a Capital Allocator?

Before discussing Astra’s businesses, it is important to note one thing: Astra is consistently doing share buybacks. On March 16, 2026, Astra announced a buyback program of approximately 2 trillion rupiah. This is not an isolated move; the company has conducted buybacks in the past, even prior to 2026.

I want to highlight this early in the article to illustrate that we are seeing signs the company is accelerating its evolotion to and that Astra’s behavior is beginning to resemble that of an investment manager. This shift is partly evidenced by the initiation of the share buyback program; with a current P/E of just 7.5×, repurchases are create value for investors.

Later in the article i will explain more about this in the section on management and its relationship with Astra’s parent company, Jardine Matheson. This discussion will follow an analysis of Astra’s core businesses, which serve as key sources of liquidity for such capital allocation decisions and for the company’s broader investment activities.

Astra’s bright 2026 outlook for its main businesses: Auto, HEMCE, Financials

As discussed earlier, the most appropriate way to view Astra is as an investment company, with the majority of its investment capital sourced from three primary business segments. These mature businesses serve as key cash flow generators that support Astra’s capital allocation strategy. Therefore, it is important to first understand the outlook for these three core segments.

Automotive & Mobility: they got cars which are the perfect fit for the Indonesian geography and demography.

Contributing roughly 30% of total net income, Astra’s automotive division dominates Indonesia’s automotive sector through a vertically integrated ecosystem spanning manufacturing, distribution, financing, insurance, and after-sales services. The company holds exclusive rights to brands such as Toyota, Daihatsu, Isuzu, Peugeot, Lexus, and BMW. As of July 2025, Astra controls 52% of the domestic car market and 79% of the low-cost green car (LCGC) segment, aligning with national goals for affordable, fuel-efficient, and environmentally friendly transportation.

The primary emerging risk often cited is competition from Chinese EV manufacturers such as BYD and Wuling. However, despite this, Astra remains well positioned to maintain its leadership in Indonesia.

While new entrants like BYD focus solely on EVs, Astra offers a broader and more locally adapted approach. In addition to EVs, it produces hybrids tailored to Indonesia’s geography and demographics through its partnership with Toyota, including models such as the hybrid Veloz. Beyond the Veloz, Astra offers a wide range of vehicles designed specifically for Indonesian consumers, including locally produced models like the Toyota Avanza and Innova.

This localization is a key reason Chinese automakers may struggle to compete, as they often rely on standardized global models that are less suited to local needs. Moreover, Astra’s decades-long presence has enabled it to build an extensive after-sales service network, an important competitive moat over its Chinese rivals.

With the government officially ending incentives for fully electric vehicles in 2026, and Chinese EV automakers struggling to compete, Astra is further strengthened, as its diversified product mix positions it particularly well in this evolving landscape.

Heavy Equipment, Mining, Construction & Energy: How Astra’s heavy duty division will benefit from the latest thermal coal production quota cut from the Indonesian government.

With a contribution of around around 45% of the total net income, Astra’s HEMCE division is a major player in Indonesia’s Heavy Equipment, Mining, Construction & Energy sector through PT United Tractors, the largest distributor and sole agent for Komatsu in Indonesia. The business has two main revenue streams: equipment sales and mining contracting.

Because United Tractors is so large, most of its revenue does not come from smaller, average coal miners. Instead, it follows a Pareto-like distribution, where the majority of revenue is generated by large, established operators such as:

• PT Bukit Asam Tbk

• PT Indominco Mandiri

• PT Kideco Jaya Agung

• PT Kaltim Prima Coal

• PT Jembayan Muarabara.

These tend to be companies with long-life reserves, strong compliance, and strategic importance to Indonesia’s energy system. Many fall under PKP2B or IUPK licenses, which historically receive more favorable treatment under RKAB approvals. In practice, this means a meaningful portion of UNTR’s customer base is less likely to face severe production cuts compared to smaller, less critical miners.

If that holds true, then UNTR avoids the biggest risk from RKAB: a drop in mining activity. Its core businesses, contracting (PAMA) and equipment utilization depend on how much its clients actually produce. So if these large clients maintain their output, UNTR’s volumes remain stable, even if national coal production declines.

At the same time, RKAB still tightens overall coal supply at the industry level. That creates the second leg of the story: higher coal prices. With supply constrained but demand relatively intact, pricing tends to firm up. This benefits UNTR’s own coal operations and can support margins across the value chain.

Put together, this creates a favorable asymmetry:

• Volumes hold up because key clients aren’t cut

• Prices rise because the overall market is tightened

In that scenario, RKAB shifts from being a broad headwind to a more selective filterone that removes weaker players while leaving stronger operators (and their contractors like UNTR) relatively intact. The result is a setup where UNTR can maintain activity levels while still benefiting from improved pricing, which is quietly supportive for earnings rather than harmful.

Financial services or insurance: biggest heavy equipment insurance company in Indonesia.

With a contribution of around around 20% of the total net income, Astra’s financial services segment stands out for its consistent and stable growth and it strong synergy with the company’s automotive and heavy equipment businesses, yet it operates independently of their performance. Covering heavy equipment financing, car and motorcycle financing, car and life insurance, and banking, this segment has remained stable and continued to grow even when the other two major contributors, automotive and heavy equipment, were in decline as of Q2 2025.

Reinvesting proceeds generated from automotive, mining, and insurance segments.

To fully assess Astra’s investment capabilities, we should examine its other business segments beyond automotive, HEMCE, and financial services. The table below illustrates this point.

Notably, while Astra’s core businesses performed relatively poorly in 2025, its investments in agribusiness, infrastructure, IT, and property were highly successful, with all segments growing by more than 20%. This performance reflects Astra’s strong commitment to capital allocation.

Astra’s managements: a new era for Astra and Jardine Matheson, Astra’s parrent company.

After Henry Keswick stepped down as chairman in 2018, his nephew, Ben Keswick, assumed leadership of the group.

And with Ben Keswick incharge, we are now beginning to see tangible signs of change. More significantly, a broader transformation is underway. Ben Keswick has committed to repositioning Jardine Matheson from an owner-operator into a portfolio manager. In his own words:

“We have been on an ongoing transition away from our historical owner-operator model, towards becoming an engaged investor with a sharpened focus on generating superior, long-term returns for shareholders”

And with the “engaged investor with a focus for long-term returns for shareholders” way of thinking, comes buybacks, which is no wonder why Jardine Matheson (JM) is actively buying back shares, executing a US$250 million share buyback program initiated in November 2025, with roughly 80% completed as of late March 2026. And they continued to buy back shares even up until March and April 2026 to reduce share count, increase shareholder value, and tighten control.

We are also seeing progress at the highest levels of executive leadership. Former private equity executive Lincoln Pan has taken over as CEO. He brings a strong reputation and was largely responsible for building out private equity group PAG’s non-China business.

With both Keswick and Pan on Astra’s board and with Astra being Jardine’s largest subsidiary, we can begin to see how these influences are taking hold. Astra has also started initiating share buybacks of its own.

All of this is good news for Astra because it suggests that management is increasingly aligned with shareholder interests and incentivized to allocate capital rationally. In the current context where Astra is trading at a discounted valuation, share repurchases can be value-accretive, the management’s decision to pursue them reflects this discipline.

Warren Buffett has long emphasized the importance of rational capital allocation when evaluating management teams. In that sense, the actions taken by Astra and Jardine indicate a similar focus on disciplined, shareholder-oriented decision-making.

While Not Without Challenges, I Believe Astra Doesn’t Deserve a PE Ratio as low as 8x Earnings

While Astra’s situation isn’t perfect, I believe its current valuation is far too low for a company of this quality. To test that view, I ran a deliberately conservative valuation. I applied a 10% discount rate, roughly twice the Indonesian government bond yield, because I believe a risk-bearing investment should deliver at least that return. For growth, I assumed just 5%, in line with GDP projections and with no outperformance built in. Finally, I used a terminal multiple of 8x earnings, well below Astra’s historical average of 13x, as I prefer a more pessimistic figure to ensure the margin of safety figure is meaningful and unbiased.

To keep the valuation realistic, I use a short earnings projection horizon and avoid forecasting too far into the future. The result is a margin of safety of about 36%, not exceptionally high, but still respectable given the deliberately conservative assumptions.

Conclusion: What to Expect Over the Next 18–24 Months and Potential Risks

Over the past five years, Indonesia has seen an IPO boom and bust, the recent US war with Iran, MSCI meltdown, events that, in my view, have distracted investors from Astra’s fundamentals. With so much noise, it is easy to dismiss Astra as just another slow-growing large-cap and chase flashier alternatives.

Most generalize Astra as being a car company heading towards a gradual decline, and i believe they are mistaken for seeing things that way because Astra, at its core isnt just a car company or even the many companies it owns, instead, it is an alocator or capital.

Its core businesses such as the automotive, heavy equipment, and financial services, still hold strong competitive advantages, especially its wide moat in autos, earnings from these businesses will be reinvested into more exciting investments such as agribusiness, infrastructure, and IT which are expanding rapidly with double-digit growth, this shows Astra’s resilience as an alocator of capital.

In summary, I believe Astra’s stock is poised to rise over the next 18–24 months, once the economy and the political climate improves and the current noise clears, it is hard to see the market continuing to undervalue a company of this quality.

“im a long term investor”

have you ever heard of that statement?

It’s a common phrase in investing, and many people use it to describe their approach. The problem is that it’s so often misunderstood that its original meaning has become blurred.

the idea that being a long term investor is all about holding stocks for forever and ever is just bogus. infact, not only is it wrong, it also leads to some of the dumbest investing mistakes you could ever make as an investor.

So what does it really mean to be a “long-term” investor?

Who better than the GOAT himself to answer that question, Warren Buffett?

In this video, Buffett says something important: “If you make a good investment, it shouldn’t bother you if the stock market shuts down for five years.” What does he mean by that?

Clearly, the literal “five-year” period isn’t the point. He has also said that if you aren’t willing to own a stock for “ten years”, you shouldn’t even think about owning it for ten minutes.

Instead, what Buffett is proposing is If the market closed for 5 years:

• You can’t rely on price movement

• You can’t react to news

You’re stuck with:

• The business quality

• Its earnings power

• Its compeitive advantages

So the question then becomes:

“Would I still feel good owning this business if I couldn’t sell it?”

If the answer is no → it’s probably speculation, not investing.

Therefore you should only buy something if you'd be comfortable holding it long-term even if you don’t end up doing so.

Which means long term investing isnt about:

“Holding stocks for a long time”

Instead, it is to:

“Think in long term business terms, regardkess of how long you end up holding”

So by shifting your attention to how a business can thrive over the long term, you naturally move away from short-term thinking and instead focus on whether the business can truly endure.

Disclaimer: Tiger Thesis uses information from sources believed to be reliable; however, its accuracy cannot be guaranteed. The content in this publication is for informational purposes only and does not constitute personalized investment advice or consider your specific financial circumstances. The opinions expressed are those of the publisher and may change without prior notice. You are encouraged to consult with a qualified financial advisor to evaluate your investment options and determine their suitability for your individual needs. From time to time, I may hold positions in the securities discussed on this website. Disclosure: At the time of publication, I hold a position in PT Mark Dynamics Tbk (MARK). To reiterate, this article and the accompanying presentation are intended solely for informational and educational purposes and should not be construed as a recommendation to buy or sell any securities.

PT Mark Dynamics Tbk (MARK) is the worlds biggest producer of “hand mould formers”. troughout the years it has achieved significant economies of scale and is a low cost producer compared to its competitors. hand mould formers are specialized tools used by glove manufacturers in the production of latex gloves. As of 2026, the company is the global market leader in this product segment, holding a 45% global market share.

The stock has declined approximately 32% from its last peak, primarily due to industry-wide challenges. During the COVID-19 surge in 2022, demand for latex gloves, and consequently hand former moulds spiked to extraordinary levels. This led to aggressive capacity expansion across the industry, resulting in a significant oversupply once demand normalized. As a result, MARK experienced a decline in earnings in 2023. and although demand somewhat recovered in 2024, the effect of the oversupply still lingers up until 2025, leading to earnings being flat.

However, this oversupply phase is unlikely to persist indefinitely. 2026 Q1 results show an improvement and overtime, industry imbalances tend to correct over time as excess capacity is absorbed or rationalized.

Why a World With More Gloves and Hand Formers Is the Most Likely Scenario in the Next Few Years

To keep things concise, here is the reality we are experiencing today:

• The world is becoming increasingly aware of health and sanitation issues. The recent attention surrounding Hantavirus is one example of this growing concern.

• Gloves are widely recognized as essential sanitation products, and as global awareness of health-related risks continues to rise, demand for gloves is likely to grow as well.

• Although MARK manufactures the hand formers used in glove production rather than the gloves themselves, glove manufacturers are unlikely to produce their own hand formers because doing so is not economically efficient.

• MARK possesses a strong competitive moat for several reasons.

  • First, the company collaborates closely with glove manufacturers on research and development. This creates meaningful switching costs, as changing suppliers would be costly and operationally disruptive for glove manufacturers.

  • Second, MARK is the largest manufacturer of hand formers, giving it significant economies of scale. This scale advantage enables the company to offer competitive pricing to glove manufacturers while maintaining its market position.

  • Third, MARK’s proximity to Malaysia, the global hub for glove manufacturing provides an additional strategic advantage. Later, I will explain why close proximity to hand former suppliers is important for glove manufacturers.

• Given the competitive advantages discussed above, MARK is well positioned to ride the recovery in the glove industry while maintaining its margins. As the market gradually transitions from oversupply toward a more balanced supply-demand environment, and as demand continues to rise due to increasing health and sanitation awareness, MARK is likely to benefit significantly.

I don’t want to waste your time, the points above are basically the backbone of this stock thesis/article. so if somehow the dots connect in your head while you read the points above, definitely keep reading.

Before we Even Start, lets First Discuss About the Price of The Stock.

To properly assess whether current valuation multiples are high, we need to examine a period when business conditions were more normalized. The period from 2016 to early 2019 provides a clearer picture of MARK’s performance under typical industry conditions. During this time, demand for disposable latex and nitrile gloves did not surge dramatically. Instead, global market growth remained steady at approximately 4 to 6% CAGR, driven by “usual” healthcare expansion and rising hygiene awareness. there is one development though, and that is that nitrile gloves gradually gained market share from latex due to their superior puncture resistance and hypoallergenic properties, but then again, this is does not translate to multi-digit growth for the industry.

and MARK’s performance reflected this industry backdrop. From 2016 to 2019, earnings per share (EPS) increased steadily, broadly aligning with the underlying growth in glove demand. Notably, earnings nearly doubled between 2017 and early 2019. However, despite this strong earnings growth, the stock price remained largely flat during the same period.

The explanation lies in valuation. As shown in the chart above, from 2018 to early 2019, MARK consistently traded at more than 20 times earnings, a relatively rich multiple, especially considering that 2016 to 2019 was a fairly ordinary operating period for the company.

This raises an important question: if the business was valued at over 20x earnings during a mundane growth phase, does it not seem compelling that today the stock trades at a significantly lower multiple of just 11 times earnings?

Assuming a return its typical healthcare-driven growth trajectory is quite likely as i previously mentioned, coupled with a recovery of the glove industry oversupply from increasing health and sanitation awareness, then its rather ridiculous if this company is selling at a cheaper price now. Using a simple analogy, from 2016 to 2019 investors were paying a premium price for the “cake” alone steady, predictable growth. Today, investors appear to be paying less for both the “cake” and the “icing”: core growth plus the previously mentioned tailwinds.

Simply put, we now have a rough idea of MARK’s valuation and the potential room for growth, based on the previously discussed tailwinds and expansion opportunities in the sanitary gloves market. What remains is to understand MARK’s business model so we can determine how these tailwinds and growth prospects will translate into higher profits for the company.

Business Fundamentals, Competitive Advantages & Profitability Outlook. Capturing Sales and Maintaining Margins.

Being the dominant or low-cost producer certainly has its advantages. The financials make this clear: it typically translates into strong profit margins and high returns on equity (ROE). However, past high margins and ROE do not guarantee that such performance will continue. Future margins and returns depend on two key factors:

• The potential for increased sales volume and overall room for growth.

• Sustainable competitive advantages and effective cost controls that protect margins and enable the company to capture growth opportunities.

The first factor “room for growth” has already been discussed. What remains is assessing the company’s competitive advantages, cost controls, and their impact on future profitability.

But before examining margins and competitive positioning in detail, i will explain the balance sheet and solvency ratios first. Because these are the first indicators of whether a company can survive or not. and without financial stability, MARK cannot capitalize on growth opportunities in the first place.

How Strong Is MARK’s Balance Sheet and Financial Position?

When we examine the balance sheet, one point is clear: leverage is low. MARK’s capital structure is heavily weighted toward equity, and total liabilities remain modest. As shown in the chart below, the share of liabilities in the capital structure increased from 2017 to 2020. However, since 2020, that share has steadily declined, indicating that the period from 2020 to 2025 represents a phase of deleveraging.

Breaking down MARK’s asset base, property, plant, and equipment (PP&E), inventory, and receivables account for the majority of its total assets. A review of prior balance sheets also does not reveal any unusual or concerning items on either the asset or liability side. Overall, MARK’s accounts appear straightforward and transparent.

The solvency ratios above also indicate that MARK’s leverage has been trending downward. and overall, so in conclusion MARK’s balance sheet is pretty straightforward and easy to understand. Most importantly, leverage remains low.

Earnings Quality and Margin Trends Throughout MARK’s History

A strong alignment between net income and cash flow from operations indicates that MARK’s earnings quality is high. Additionally, MARK has consistently generated positive free cash flow, which further supports the company’s financial strength.

MARK’s margins reflect its strong competitive position, as they are consistently high across all metrics. Gross profit margins are close to 50%, and the company operates with relatively low operating costs, which supports robust net profit margins. Over the past eight years, these margins have remained relatively stable.

This condensed income statement provides a more detailed view of the company’s margins. As shown, MARK’s operating expenses, including Selling, General, and Administrative (SG&A) expenses, are significantly lower than its gross profit margins.

While MARK’s figures are strong, the key question is whether they can be sustained in the future. To assess this, we must evaluate MARK’s competitive advantages.

Competitive Advantages That Enable MARK to Sustain High Margins While Expanding Its Equity Base

this is probably the most important part of this whole article because this is the reason why i believe MARK is worth analyzing. so there are 3 competitive advantages that i was able to recognize from my study, and they are:

Competitive advantage 1: Geography factors like close proximity with Malaysia is structurally beneficial long term and short term.

As previously mentioned, Malaysia dominates global glove production, accounting for approximately 40% of global supply. Its share of the U.S. glove market, for example, increased to around 60% in early 2025 from about 46% in 2024, according to a late-April report from Citigroup.

and MARK, which operates on the island of Sumatra, benefits from its close geographic proximity to Malaysia’s glove manufacturers, as Indonesia and Malaysia are neighboring countries. In addition, MARK is the only company in Indonesia that manufactures hand formers and holds the largest production capacity globally. As a result, Malaysian glove manufacturers have limited alternative suppliers

Another reason Malaysian glove manufacturers rely on MARK is the nature of the product itself.

Because you see, ceramic hand formers are:

• Brittle → They can crack or chip under impact.

• Heavy → Increases breakage risk if dropped or poorly stacked.

• Rigid → They don’t flex under stress like metal or polymer.

So in theory, longer transport distance increases:

• Handling frequency

• Vibration exposure

• Shock events

• Loading/unloading cycles

All of which increase breakage probability, and MARK being the closest supplier with the biggest production capacity is practically a total no brainer for these glove companies, which means MARK has bargaining powers.

Competitive advantage 2: RnD with the worlds biggest glove manufacturers creates switching costs.

MARK’s key strength lies in its close relationships with glove manufacturers. The company collaborates with customers on research and development to produce customized hand formers tailored to their specific needs. This level of integration and customization is difficult for competitors to replicate.

Ridwan Goh, CEO of MARK, CNCB Interview

MARK’s top customers, including Top Glove, Hartalega, and other leading global glove manufacturers, continue to rely on MARK because its hand formers are tailored specifically to their operational requirements. This is largely due to MARK’s close relationships with each customer, built through joint research and development efforts. By collaborating directly with these manufacturers, MARK has been able to design and produce hand formers customized to their exact specifications.

This relationship-driven model is similar to how TSMC works closely with Apple or Samsung to develop chips optimized for their devices, only in this case, the collaboration occurs within the glove manufacturing industry.

Competitive advantage 3: Economies of scale, “fortunate” to become the low cost producer due to close ties with Malaysia, as a result “able” to offer competitive prices to the entire ecosystem, its a self reinforcing cycle.

As we previously mentioned before, MARK is the biggest producer of hand former moulds and holds a 45% global market share. which means it produces at very high volume in a business that is heavily fixed-cost driven.

MARK benefited significantly from its close geographic proximity to Malaysia. As Malaysia rose to become the world’s largest glove producer, its growth pulled MARK along with it. This dynamic enabled MARK to emerge as the dominant manufacturer of ceramic hand mould formers.

Ceramic former manufacturing is capital-intensive, requiring substantial investment in industrial kilns, casting systems, precision finishing equipment, and skilled engineering teams. These fixed costs do not increase proportionally with output. As production volume rises, fixed costs are spread across more units, reducing the cost per former. Higher volumes also improve kiln utilization, enhance energy efficiency, and strengthen bargaining power when sourcing raw materials such as clay and glazing compounds. Together, these scale advantages help explain MARK’s strong profit margins.

Having already achieved economies of scale, MARK benefits from a cost advantage that supports competitive pricing. This allows the company to offer attractive prices not only to Malaysian glove manufacturers but also to customers in other markets.

Extras: why its economically impractical for glove manufacturers to produce their own hand formers.

It is economically impractical for glove manufacturers like Top Glove or Hartalega to produce their own ceramic hand former moulds because it is an entirely different business requiring separate expertise, capital, and operational focus. Former manufacturing involves ceramic formulation, kiln firing, precision calibration, and surface engineering capabilities that differ significantly from high-speed glove dipping, chemical compounding, and regulatory compliance. Building this capability would require meaningful capital expenditure on kilns, casting systems, and technical teams, diverting funds away from higher-return investments such as expanding glove production lines or automation. From a capital allocation standpoint, the return on investing in core glove capacity typically exceeds the return from integrating into former production.

Additionally, MARK achieved economies of scale by serving multiple glove producers, spreading fixed costs across larger volumes and lowering unit costs. If a glove maker produces only for internal use, utilization risk increases and cost efficiency declines. Formers also represent a relatively small portion of total glove production cost, meaning vertical integration would not materially improve margins but would add complexity and operational risk. As seen with other major industry players other then MARK like Kossan Rubber Industries and Supermax Corporation, the industry has largely favored specialization over integration suggesting that outsourcing former production remains the more economically rational structure.

These Competitive Advantages Combined Makes it Extremely Hard for New Commers to Compete.

If we combine all the competitive advantages discussed above, it becomes clear that it would be extremely difficult for a new entrant to challenge MARK. Even Chinese competitors would face significant hurdles, as they lack the geographic proximity to Malaysia that MARK benefits from. Moreover, capital alone cannot replicate the long-standing R&D partnerships MARK has built with major glove manufacturers.

Management Quality, Shareholder Alignment, and Capital Allocation

Consider the chart below. It shows that management has been disciplined and rational in its capital allocation decisions. Notably, MARK’s managements did not overinvest when expected returns on equity (ROE) fell below acceptable levels. This is reflected in the growth of equity and retained earnings, which stalled as ROE declined.

During this same period, management distributed the majority of earnings as dividends rather than reinvesting them at lower returns.

I believe this rational capital allocation stems from MARK’s ownership structure, where management’s incentives are closely aligned with those of shareholders. As of the end of 2025, the company has a clear majority shareholder, which establishes strong control and accountability at the top.

As shown in the chart above, the Hong Kong–based company Tecable HK Co. Ltd. is a substantial shareholder of MARK. Its significant ownership stake increases the likelihood of rational capital allocation and fair treatment of minority shareholders, as the majority owner’s economic interests are aligned with ours.

Valuation: DCF with 3 different scenarios.

Previously, I mentioned that by looking at the past, we can reasonably infer that Mark Dynamics Indonesia Tbk or MARK is currently trading at a cheap valuation. Historically, the company was valued at over 20× earnings during what appeared to be a fairly mundane growth phase. Today, however, the business arguably has stronger prospects than it did back then, yet the stock trades at a significantly lower multiple of just 11× earnings. That disconnect between improved prospects and compressed valuation is what makes the current situation particularly interesting.

Now that we have gone through MARK’s hand former business in detail, understanding its competitive positioning, customer relationships, and industry dynamics, we can revisit this valuation gap with greater clarity.

In my valuation of MARK, there are 3 different secnarios that I use, there is a best, normal and worst case, and each scenario has different projections and different weights which will later on be summed to get the expected value. but before we do that, we need to calculate the required rate of return.

Upon determining the required rate of return, i will first do the CAPM calculation and if it were below my threshold of 10% then i will dismiss it and use 10% instead, which is the case with MARK here, where the required rate of return is only 7.17% from the CAPM calculation, so i will dismiss it and use 10% instead.

Best Case Scenario:

• Trump tarrif actually does happen

• latex gloves demand accelerated from virus fears and increase in health awareness

• Likelihood : Low

In this scenario, I believe a 20% CAGR is achievable. Stronger-than-expected global glove demand, combined the Trump tarrifs actually happening, Malaysian manufacturers would likely need to expand production capacity.

As the dominant supplier of hand formers to Malaysian glove producers, MARK would directly benefit from this increase in output. Higher production volumes would further strengthen its economies of scale, lowering unit costs and reinforcing margin expansion.

Improved scale efficiencies would also enhance MARK’s global competitiveness. With a stronger cost advantage, MARK could easily diversify its customer base beyond Malaysia by offering more attractive pricing to glove manufacturers in other regions, further increasing its asset turnovers.

So a double in net income for the next 5 years is quite possible under this scenario i believe.

Normal Case Scenario:

• Trump tarrif speculation causes the supply chain to shift to malaysian glove manufacturers even if the Trump tarrifs are canceled

• latex gloves demand accelerated from virus fears and increase in health awareness

• Likelihood : High

This scenario closely resembles the bull case, with the key difference being that the Trump tarrifs did not take place, but the uncertainty was so big for distributors that they altered their imports from China to Malaysia, but not as agressive as if the Trump tarrifs were to take place.

Even under these more moderate assumptions, I believe high double-digit growth remains achievable. Malaysia retains a structural advantage in glove manufacturing. Malaysia’s share of the U.S. glove market increased significantly from approximately 46% in 2024 to around 60% in early 2025, according to Bloomberg.

As a result, further improvements in economies of scale remain likely, albeit less dramatic than in the best-case scenario. This continued scale expansion would still support competitive pricing and create opportunities for incremental market share gains.

Worst Case Scenario:

• Trump tarrifs canceled, with no effects on the supply chains

• latex gloves demand accelerated from virus fears and increase in health awareness

• Growth is expected to come from diversifying across glove manufacturers around the world that are within reachable proximity, as highlighted by CEO Mr. Goh.

In this scenario, the Trump tariffs do not occur, and changes to global supply chains are not material. However, I still incorporate virus-related concerns and rising health awareness into the analysis, as I believe these trends are likely to persist regardless of broader global developments.

Regarding management’s growth initiatives, I believe Mr. Goh’s strategy of expanding to glove manufacturers in more regions around the world could prove beneficial. In this case, MARK would be able to leverage its position as a low-cost producer of hand formers more effectively.

Therefore, I believe revenue growth of more than 10% CAGR is still achievable under this scenario. That said, I do not want to rely too heavily on management delivering exceptional execution, so I believe using a conservative 10% growth assumption is reasonable.

Final Conclusion:

Over the long term, demand for nitrile and latex gloves is likely to increase across more regions, Rising global healthcare expenditure, stricter hygiene standards makes it likely that more regions will copy high-consumption markets such as North America.

Even over the very long run, both nitrile and latex gloves are highly likely to remain in widespread use, even with the gradual rise of substitutes such as biodegradable gloves. The healthcare and industrial ecosystems are deeply built around the performance characteristics, cost efficiency, and regulatory familiarity of nitrile and latex products. Substitutes may carve out niches, but complete displacement is unlikely given the scale, installed capacity, and global supply chains already in place.

More importantly, from the perspective of Mark Dynamics Indonesia Tbk, it ultimately does not matter which glove material “wins.” All disposable gloves whether nitrile, latex, or biodegradable variants still require hand mould formers in the production process. As long as gloves are manufactured through the dipping method, ceramic formers remain indispensable. That structural necessity means MARK’s economics are tied less to material preference and more to overall glove production volume, positioning the company to benefit regardless of which glove type dominates.

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As markets across the Asia-Pacific have tumbled amid the conflict in the Strait of Hormuz, as investors reduce exposure to risk assets. This includes the Indonesian stock market. While the potential closure of Hormuz is understandably concerning, a closer look suggests that, from a business standpoint, the impact on Indonesia has been limited despite work-from-home advisories issued by the government. In fact, the situation appears more stable than much of the Western financial media portrays.

To provide clarity, I will explain everything as concisely and simply as possible

Whats the oil situation in Indonesia right now compared to Asia Pacific neighboors?

Regarding Indonesia’s oil situation, the dynamics are as follows. Diesel production stands at approximately 39 million kiloliters per year, broadly matching domestic consumption. This balance means Indonesia does not rely significantly on diesel imports.

Gasoline, however, presents a different picture. Domestic production is around 14.4 million kiloliters annually, while consumption reaches roughly 40 million kiloliters per year. With the addition of the Balikpapan RDMP, which contributes an extra 5.5 million kiloliters annually, total gasoline production rises to approximately 20 million kiloliters.

As a result, Indonesia still imports a substantial portion of the crude oil required for gasoline production, even though refining takes place domestically. In effect, roughly half of the required input must be sourced from abroad.

With around 35.2% of Crude being imported, and around 20% of them comming from the middle east, this places Indonesia in a relatively more secure position compared to neighboring countries such as Japan, which imports about 95% of its crude oil from the Middle East, and South Korea, which imports nearly all of its oil consumption, with over 70% sourced from the same region.

With approximately 35.2% of crude oil sourced from imports and only around 20% of those imports coming from the Middle East, Indonesia is in a relatively more secure position compared to neighboring countries. For instance, Japan imports about 95% of its crude oil from the Middle East, while South Korea relies on imports for nearly all of its oil consumption, with over 70% sourced from the same region.

As shown in the table above, Malaysia and Indonesia have the lowest levels of oil import dependency. Additionally, crude oil accounts for only about 33% of total energy imports, indicating that the overall energy supply is less sensitive to crude oil disruptions compared to neighboring Asia-Pacific economies such as China, Japan, and Thailand.

Want to think like Buffett? Just one word: ROE.

That’s it.

Far too much attention is given to earnings growth, and it really blurs the picture. If you really want to think like Buffett, you shouldn’t focus on earnings growth, you should focus on ROE (Return on Equity).

Here’s why.

Earnings growth can simply come from having more equity while the ROE stays the same.

Think about it. If in Year 1 a company earns a 20% ROE, and in Year 2 the ROE is still 20%, but the equity base is bigger… then earnings will automatically grow. Nothing magical happened. The company just kept earning the same return on a larger base.

So as fellow “Buffetians,” instead of asking:

“How much will earnings or revenues grow next year?”

Maybe we should be asking:

“Can this company maintain or even increase its ROE as its equity base grows?”

And to answer that question, we need to dissect ROE into three parts.

Because a company can maintain, or even increase, a high ROE in a few different ways:

• By having high profit margins (it keeps more money from each dollar of sales)

• By having high asset turnover (it generates a lot of sales relative to its assets)

• By using more debt (financial leverage)

This breakdown is known as the DuPont Method.

So when you see a high ROE, don’t stop there.

Ask yourself:

Is it high because the business is truly efficient and profitable?
Or is it high because the company is just using more debt?

And we all know, debt is a big no-no for Buffett. He doesn’t like businesses that rely on leverage to look good on paper.

So if we take debt out of the picture, what’s left?

Only two real drivers:

• Profit margins

• Asset turnover

Asset turnover can improve if there’s room to grow. But here’s the catch, when there’s room to grow, competitors usually show up. They see the opportunity and want a piece of the pie. Growth attracts competition.

And competition usually squeezes margins.

So how do you maintain strong margins and capture growth?

Simple: competitive advantage.

That’s exactly why when you hear Buffett speak, at places like Berkshire Hathaway annual meetings, he keeps repeating the same thing:

“Buy businesses with moats.”

An economic moat just means it’s hard for others to copy what you do. Your product, your brand, your cost structure, your network, whatever it is, isn’t easy to replicate.

When people can’t easily copy you, and what you’re selling is something customers truly want, two good things happen:

• Customers keep coming.

• You can make prices higher

And that’s just how the world works.

So if a business today is hard to copy with 100 customers, and you believe that 10 years from now it will still be hard to copy, but serving 10,000 customers instead…that’s the kind of business you want to own.

That’s the general framework of how Buffett thinks:
Not “Will earnings grow next year?”
But “Can this business sustain high returns on equity without relying on debt and keep doing so as it scales?”

Find that, and you’ve found something special.. cheers