1H20 wrap and latest recovery trends. We see a nice recovery in July-August 2020

where private patient volume is currently at 70-80% of pre-COVID-19 levels (from 50-

60% in April-May), while BPJS is doing even better at 90% of normal levels. Coupled with

increasing COVID-19 treatments in Jakarta, we expect these two factors to drive hospital

top line into flattish-positive growth territory in 2H20 and lift margins closer to 1Q20 levels.

HEAL should do relatively better given its higher BPJS patient composition.

COVID-19 vaccine implications. The Indonesian government aims to secure 290 mn

doses of vaccine from international partnerships as well as private manufacturers by the

end of 2021 (roughly half fulfilled by 1H21). Assuming that the execution is smooth, we

would likely see a sharper recovery of activities across all sectors next year, including

hospital traffic. As a result, we are forecasting bed occupancy ratio to be slightly below

2019 levels, outpatient visits to grow by low-mid single digit and EBITDA to grow by 13-

18% YoY. Traffic recovery aside, we do not expect significant monetary benefits for

vaccine manufacturers (KLBF) and administers (MIKA, HEAL, SILO) at the moment,

Selective on hospitals and neutral pharma. We retain HEAL as the top pick in the

hospital sector as we see (1) room for valuation to rerate and (2) resilience of BPJS patient

volume amidst the pandemic, meanwhile we believe MIKA is fairly valued (even taking into

account double-digit growth next year) and SILO left with several key overhangs. We also

assume coverage on KLBF with no changes to earnings/TP/recommendation.

Recommendation summary: HEAL – Maintain OUTPERFORM and Rp3,800 TP (from

Rp3,700 previously). MIKA – Downgrade to NEUTRAL (from Outperform previously) and

maintain Rp2,400 TP (no change). SILO – Maintain NEUTRAL and Rp4,800 TP (no

change). KLBF – Maintain NEUTRAL and Rp1,660 TP (no change).