In today’s briefing:
Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.
In this Insight:
and more…
Before it’s here, it’s on Smartkarma
In today’s briefing:
Another Year, Another Excise Tax Adjustment
Before it’s here, it’s on Smartkarma
In this series under Smartkarma Originals, CrossASEAN insight providers AngusMackintosh and Jessica Irene seek to determine whether or not we are close to the end of the rainbow and to a period of outperformance for the property sector. Our end conclusions will be based on a series of company visits to the major listed property companies in Indonesia, conversations with local banks, property agents, and other relevant channel checks.
The fourth company that we explore is township developer Alam Sutera Realty (ASRI IJ), which provides an interesting exposure to a mix of landed housing, high-rise and low-rise condominiums through its Alam Sutera Township near Serpong and its Pasir Kemis township 15 km further out on the toll road.
Given the diminishing area of high-value land bank in Alam Sutera, the company has shifted emphasis towards selling low-rise condominiums and commercial lots for shop houses, which has been a success story.
Alam Sutera Realty (ASRI IJ) also has a contract with a Chinese developer, China Fortune Land Development (CFLD), to develop a total of 500 ha over a five year period in its Pasir Kamis Township. This has provided a fillip for the company during a quiet period of marketing sales and will continue to underpin earnings for the next 2 years.
The company stands to benefit from the completion of two new toll-roads, one soon to be completed to the south connecting directly to BSD City and longer term a new toll to Soekarno Hatta Airport to the north.
It will start to utilise new land bank in North Serpong in 2021, which will extend the development potential in the area significantly longer-term.
Management is optimistic about marketing sales for 2019 and expects growth of +16% versus last year’s number, which already exceeded expectations.
Alam Sutera Realty (ASRI IJ) has less recurrent income than peers at around 10% of total revenue but has the potential to see better contributions from the Garuda Wisnu Kencana Cultural Centre (GWK) in Bali.
The new regulations on the booking of sales financed by mortgages introduced in August 2018 will benefit Alam Sutera Realty (ASRI IJ) from a cash flow perspective. Given that the company is consistently producing free cash flow, this is also a strong deleveraging story.
One of the biggest risks for the company is its US$ debt, which totals US$480m and is made up of two bonds expiring in 2020 and 2022.
From a valuation perspective, Alam Sutera Realty (ASRI IJ) looks very interesting, trading on 4.9x FY19E PER, at 0.67x PBV, and at a 71% discount to NAV. On all three measures, at 1 STD below its historical mean. Our target price of IDR600 takes a blended approach, based on the company trading at historical mean on all three measures implies upside of 91% from current levels. Catalysts include better marketing sales from its low-rise developments at its Alam Sutera township and further cluster sales there, a pick-up in sales and pricing at its Pasir Kemis township, a sale of its office inventory at The Tower, a pick up in recurrent income driven by improving tenant mix at GWK. Given that the company has high levels of US$ debt, a stable currency will also benefit the company. A more dovish outlook on interest rates will also be a positive, given a large and rising portion of buyers use a mortgage to buy its properties.
The last three years have been characterized by significant M&A activity in the upstream oil and gas industry. As the oil cycle recovered from the price bottom in January 2016, lower asset prices and corporate valuations created opportunities for the companies with a stronger balance sheet to grow inorganically while their weaker competitors were forced to downsize their portfolios. 2018, in particular, has seen a surge of corporate M&A which has been driving consolidation in the industry. This insight examines the trends that have shaped the M&A markets since 2016 with a closer view of 2018 and the outlook for 2019.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Indofood Agri Resources (IFAR SP) has announced PT Indofood Sukses Makmur Tbk, its controlling shareholder with 74.52%, has made a voluntary conditional cash offer of $0.28/share for all IFAR shares it does not own. The offer price, which is a 7.7% premium to last close, is not final. Any dividend declared will reduce the consideration under the proposal.
The Offer is conditional on PT Indofood holding 90% of shares out at the close of the offer. There is no other condition.
There is no requirement for a downstream offer for Salim Ivomas Pratama (SIMP IJ), 73.46% held by IFAR.
IFAR’s share price has increased 27% this month – evidently, there was some news leakage ahead of the announcement – positioning its discount to NAV at ~50%, around its narrowest inside a year, but on a look-through basis, the Offer price backs out just 0.4x P/B.
The Offer price represents a premium of approximately 21.5%, 26.3%, 29.0% and 23.1% over the VWAP for 1M, 3M, 6M and 12M. IFAR traded above the Offer price as recent as May last year. One wonders if the consideration is sufficient to achieve the 90% condition.
We have held a bullish/long position in Indonesia from 6,080 after the breakout above 6,000 resistance and continue to see the macro cycle in a positive light to challenge and clear the 2018 highs.
Bull energy is brewing once again for a bull breakout of the noted wedge that will open the way for the macro bull cycle to resume. Lower wedge support is our preferred buy zone to add to our long position with clear wedge breakout resistance and bull inflection point.
For those not long this offers an excellent risk to reward entry with a controlled stop.
Buy volumes remain healthy and supportive of the macro bull cycle.
Indonesia is our top pick within SE Asia.
In our latest Asian Tower Trends report, Chris Hoare looks at the listed telecom tower industry across the region. During 4Q18, we became more optimistic on the Asian tower space.
With the 5G investment cycle a key theme for coming years, we are now more constructive on the telecom tower space in general.
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
This second part of the series explains how China chose commodity semiconductors (DRAM and NAND flash memory chips) as the best technology to pursue.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
In this series under Smartkarma Originals, CrossASEAN insight providers AngusMackintosh and Jessica Irene seek to determine whether or not we are close to the end of the rainbow and to a period of outperformance for the property sector. Our end conclusions will be based on a series of company visits to the major listed property companies in Indonesia, conversations with local banks, property agents, and other relevant channel checks.
The fourth company that we explore is township developer Alam Sutera Realty (ASRI IJ), which provides an interesting exposure to a mix of landed housing, high-rise and low-rise condominiums through its Alam Sutera Township near Serpong and its Pasir Kemis township 15 km further out on the toll road.
Given the diminishing area of high-value land bank in Alam Sutera, the company has shifted emphasis towards selling low-rise condominiums and commercial lots for shop houses, which has been a success story.
Alam Sutera Realty (ASRI IJ) also has a contract with a Chinese developer, China Fortune Land Development (CFLD), to develop a total of 500 ha over a five year period in its Pasir Kamis Township. This has provided a fillip for the company during a quiet period of marketing sales and will continue to underpin earnings for the next 2 years.
The company stands to benefit from the completion of two new toll-roads, one soon to be completed to the south connecting directly to BSD City and longer term a new toll to Soekarno Hatta Airport to the north.
It will start to utilise new land bank in North Serpong in 2021, which will extend the development potential in the area significantly longer-term.
Management is optimistic about marketing sales for 2019 and expects growth of +16% versus last year’s number, which already exceeded expectations.
Alam Sutera Realty (ASRI IJ) has less recurrent income than peers at around 10% of total revenue but has the potential to see better contributions from the Garuda Wisnu Kencana Cultural Centre (GWK) in Bali.
The new regulations on the booking of sales financed by mortgages introduced in August 2018 will benefit Alam Sutera Realty (ASRI IJ) from a cash flow perspective. Given that the company is consistently producing free cash flow, this is also a strong deleveraging story.
One of the biggest risks for the company is its US$ debt, which totals US$480m and is made up of two bonds expiring in 2020 and 2022.
From a valuation perspective, Alam Sutera Realty (ASRI IJ) looks very interesting, trading on 4.9x FY19E PER, at 0.67x PBV, and at a 71% discount to NAV. On all three measures, at 1 STD below its historical mean. Our target price of IDR600 takes a blended approach, based on the company trading at historical mean on all three measures implies upside of 91% from current levels. Catalysts include better marketing sales from its low-rise developments at its Alam Sutera township and further cluster sales there, a pick-up in sales and pricing at its Pasir Kemis township, a sale of its office inventory at The Tower, a pick up in recurrent income driven by improving tenant mix at GWK. Given that the company has high levels of US$ debt, a stable currency will also benefit the company. A more dovish outlook on interest rates will also be a positive, given a large and rising portion of buyers use a mortgage to buy its properties.
The last three years have been characterized by significant M&A activity in the upstream oil and gas industry. As the oil cycle recovered from the price bottom in January 2016, lower asset prices and corporate valuations created opportunities for the companies with a stronger balance sheet to grow inorganically while their weaker competitors were forced to downsize their portfolios. 2018, in particular, has seen a surge of corporate M&A which has been driving consolidation in the industry. This insight examines the trends that have shaped the M&A markets since 2016 with a closer view of 2018 and the outlook for 2019.
In this series under Smartkarma Originals, CrossASEAN insight providers AngusMackintosh and Jessica Irene seek to determine whether or not we are close to the end of the rainbow and to a period of outperformance for the property sector. Our end conclusions will be based on a series of company visits to the major listed property companies in Indonesia, conversations with local banks, property agents, and other relevant channel checks.
The third company that we explore is Pakuwon Jati (PWON IJ), the biggest retail mall operator, and mixed-use high rise and township developer since 1986. PWON has five major projects in the two biggest cities: Jakarta and Surabaya.
Its recurring income base is the highest in the Indonesian property universe, playing a big role in the company’s solid earnings performance in the past few years of property downturn. However, currency depreciation, stricter mortgage regulations, and falling rental yields curb investors’ appetite for property investments, leading to weak presales in the past three years. Property development revenues are expected to be trending down going forward on lower presales in 2016-2018. Contrary to peers, cashflow generation remains very strong, led by the large recurring income base and thick margin. There is however no plan to increase dividends, but rather reserving the excess cash for future landbank acquisition.
The weaker presales in 1H19 is widely anticipated, but we fear that there may be some selling pressure on each weak presales announcements, given PWON’s premium valuations and stock outperformance YTD. Nonetheless, potential portfolio inflow to high beta stocks and rising risk appetite for smaller-capped stocks should be beneficial for PWON. Our blended target price of IDR773 per share offers 21% upside.
Summary of this insight:
Cons: For the first time since 2010, PWON’s advances-to-inventory ratio, which is an indicative figure for the property developers’ working capital, fell below 100%. We are expecting a slow recovery for PWON as its inventory account should continue to grow higher in the short term as the company plans to launch few new condominium towers in Surabaya and a new superblock in Bekasi.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
We have held a bullish/long position in Indonesia from 6,080 after the breakout above 6,000 resistance and continue to see the macro cycle in a positive light to challenge and clear the 2018 highs.
Bull energy is brewing once again for a bull breakout of the noted wedge that will open the way for the macro bull cycle to resume. Lower wedge support is our preferred buy zone to add to our long position with clear wedge breakout resistance and bull inflection point.
For those not long this offers an excellent risk to reward entry with a controlled stop.
Buy volumes remain healthy and supportive of the macro bull cycle.
Indonesia is our top pick within SE Asia.
In our latest Asian Tower Trends report, Chris Hoare looks at the listed telecom tower industry across the region. During 4Q18, we became more optimistic on the Asian tower space.
With the 5G investment cycle a key theme for coming years, we are now more constructive on the telecom tower space in general.
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
This second part of the series explains how China chose commodity semiconductors (DRAM and NAND flash memory chips) as the best technology to pursue.
Global Emerging Market funds made a strong start to 2019, with just over two-thirds of funds outperforming the benchmark, generating an average alpha above the IShares MSCI Emerging Markets Indx (ETF) (EEM US) of 1.3%.
In this report, we look at the performance of 180 global emerging market strategies over the first quarter of 2019 and analyse the countries, sectors and stocks that helped generate that outperformance. We also take a look at the longer-dated outperformance of active GEM funds.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
The last three years have been characterized by significant M&A activity in the upstream oil and gas industry. As the oil cycle recovered from the price bottom in January 2016, lower asset prices and corporate valuations created opportunities for the companies with a stronger balance sheet to grow inorganically while their weaker competitors were forced to downsize their portfolios. 2018, in particular, has seen a surge of corporate M&A which has been driving consolidation in the industry. This insight examines the trends that have shaped the M&A markets since 2016 with a closer view of 2018 and the outlook for 2019.
In this series under Smartkarma Originals, CrossASEAN insight providers AngusMackintosh and Jessica Irene seek to determine whether or not we are close to the end of the rainbow and to a period of outperformance for the property sector. Our end conclusions will be based on a series of company visits to the major listed property companies in Indonesia, conversations with local banks, property agents, and other relevant channel checks.
The third company that we explore is Pakuwon Jati (PWON IJ), the biggest retail mall operator, and mixed-use high rise and township developer since 1986. PWON has five major projects in the two biggest cities: Jakarta and Surabaya.
Its recurring income base is the highest in the Indonesian property universe, playing a big role in the company’s solid earnings performance in the past few years of property downturn. However, currency depreciation, stricter mortgage regulations, and falling rental yields curb investors’ appetite for property investments, leading to weak presales in the past three years. Property development revenues are expected to be trending down going forward on lower presales in 2016-2018. Contrary to peers, cashflow generation remains very strong, led by the large recurring income base and thick margin. There is however no plan to increase dividends, but rather reserving the excess cash for future landbank acquisition.
The weaker presales in 1H19 is widely anticipated, but we fear that there may be some selling pressure on each weak presales announcements, given PWON’s premium valuations and stock outperformance YTD. Nonetheless, potential portfolio inflow to high beta stocks and rising risk appetite for smaller-capped stocks should be beneficial for PWON. Our blended target price of IDR773 per share offers 21% upside.
Summary of this insight:
Cons: For the first time since 2010, PWON’s advances-to-inventory ratio, which is an indicative figure for the property developers’ working capital, fell below 100%. We are expecting a slow recovery for PWON as its inventory account should continue to grow higher in the short term as the company plans to launch few new condominium towers in Surabaya and a new superblock in Bekasi.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
We have held a bullish/long position in Indonesia from 6,080 after the breakout above 6,000 resistance and continue to see the macro cycle in a positive light to challenge and clear the 2018 highs.
Bull energy is brewing once again for a bull breakout of the noted wedge that will open the way for the macro bull cycle to resume. Lower wedge support is our preferred buy zone to add to our long position with clear wedge breakout resistance and bull inflection point.
For those not long this offers an excellent risk to reward entry with a controlled stop.
Buy volumes remain healthy and supportive of the macro bull cycle.
Indonesia is our top pick within SE Asia.
In our latest Asian Tower Trends report, Chris Hoare looks at the listed telecom tower industry across the region. During 4Q18, we became more optimistic on the Asian tower space.
With the 5G investment cycle a key theme for coming years, we are now more constructive on the telecom tower space in general.
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
This second part of the series explains how China chose commodity semiconductors (DRAM and NAND flash memory chips) as the best technology to pursue.
Global Emerging Market funds made a strong start to 2019, with just over two-thirds of funds outperforming the benchmark, generating an average alpha above the IShares MSCI Emerging Markets Indx (ETF) (EEM US) of 1.3%.
In this report, we look at the performance of 180 global emerging market strategies over the first quarter of 2019 and analyse the countries, sectors and stocks that helped generate that outperformance. We also take a look at the longer-dated outperformance of active GEM funds.
This week’s offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
This week’s highlights include value-added comment from Kevin O’Rourke on the ongoing Indonesian Presidential Election campaign, some differentiated comment on the upcoming follow-on offering from Map Aktif Adiperkasa PT (MAPA IJ), as well as the 6th and 7th Insights fromJessica Irene andAngus Mackintosh from the ongoing series of Indonesian Property onIntiland Development (DILD IJ) and Kawasan Industri Jababeka(KIJA IJ). I also include in the detailed section some on-the-ground snapshots from a recent trip to Jakarta, with brief highlights from company visits toNippon Indosari Corpindo (ROTI IJ), Sarimelati Kencana PT (PZZA IJ), andAce Hardware Indonesia (ACES IJ), as well as the first take on Jakarta’s brand new MRT.
In Widodo Withstands Prabowo’s Debate Pressure / BI Hints at Lower 1Q CAD / Gerindra Prepares Dispute, CrossASEAN Insight Provider Kevin O’Rourke comments on the most important political and economic developments in Indonesia over the past week.
In his global Insight, What Next in the Inflation / Deflation Debate and What Does It Mean for Asset Prices? Stewart Paterson takes a look at this very current subject of debate globally.
In the sixth company visit Insight in an ongoing series, Indonesia Property – In Search of the End of the Rainbow – Part 6 – Intiland Development (DILD IJ), CrossASEAN Insight Provider Jessica Irene takes a deep dive into this high-rise and office focused developer. The company is a property developer that focuses on landed residential, industrial estates, high-end condominiums, and offices in Jakarta and Surabaya. DILD has a good track record in building and operating high-end condominiums and offices.
In Indonesia Property-In Search of the End of the Rainbow- Part 7 – Kawasan Industri Jababeka (KIJA IJ) CrossASEAN Insight Provider Angus Mackintosh takes a close look at Indonesia’s oldest Industrial Estate Developer.
In Map Aktif Follow-On Offering – Lace up for a Potential Long Run, Zhen Zhou, Toh runs through the latest details on the proposed follow-on offering for this Indonesian sports retailer.
In the first part in a series of Insights, Quiddity Singapore M&A Guide 2019, Travis Lundy kicks off by taking a look at Singapore from an M&A perspective.
In Company Visits: The Best of March 2019, Thai Guru Athaporn Arayasantiparb, CFA lays out his thoughts on the most interesting company visits he made in the month of March, including Singapore International School of Bangkok (SISB TB), Minor International (MINT TB), and After You Pcl (AU TB) .
In Malaysian Telcos: Look for Improvements to Continue in 2019, our friends at New Street Research revisit the Malaysian Telecoms sector post the recent results.
In Singapore Property – Luxury Segment Leads Price Decline in 1Q; Property Outlook Remains Shaky, Royston Foo revisits the Singapore Property after analysing 1Q19 numbers.
In Singapore REIT – The Draft Master Plan 2019 Boost and Q1 Scorecard, Anni Kum takes a bird’s eye view of the Singapore REIT space after 1Q19 numbers.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
In this series under Smartkarma Originals, CrossASEAN insight providers AngusMackintosh and Jessica Irene seek to determine whether or not we are close to the end of the rainbow and to a period of outperformance for the property sector. Our end conclusions will be based on a series of company visits to the major listed property companies in Indonesia, conversations with local banks, property agents, and other relevant channel checks.
The third company that we explore is Pakuwon Jati (PWON IJ), the biggest retail mall operator, and mixed-use high rise and township developer since 1986. PWON has five major projects in the two biggest cities: Jakarta and Surabaya.
Its recurring income base is the highest in the Indonesian property universe, playing a big role in the company’s solid earnings performance in the past few years of property downturn. However, currency depreciation, stricter mortgage regulations, and falling rental yields curb investors’ appetite for property investments, leading to weak presales in the past three years. Property development revenues are expected to be trending down going forward on lower presales in 2016-2018. Contrary to peers, cashflow generation remains very strong, led by the large recurring income base and thick margin. There is however no plan to increase dividends, but rather reserving the excess cash for future landbank acquisition.
The weaker presales in 1H19 is widely anticipated, but we fear that there may be some selling pressure on each weak presales announcements, given PWON’s premium valuations and stock outperformance YTD. Nonetheless, potential portfolio inflow to high beta stocks and rising risk appetite for smaller-capped stocks should be beneficial for PWON. Our blended target price of IDR773 per share offers 21% upside.
Summary of this insight:
Cons: For the first time since 2010, PWON’s advances-to-inventory ratio, which is an indicative figure for the property developers’ working capital, fell below 100%. We are expecting a slow recovery for PWON as its inventory account should continue to grow higher in the short term as the company plans to launch few new condominium towers in Surabaya and a new superblock in Bekasi.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
In our latest Asian Tower Trends report, Chris Hoare looks at the listed telecom tower industry across the region. During 4Q18, we became more optimistic on the Asian tower space.
With the 5G investment cycle a key theme for coming years, we are now more constructive on the telecom tower space in general.
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
This second part of the series explains how China chose commodity semiconductors (DRAM and NAND flash memory chips) as the best technology to pursue.
Global Emerging Market funds made a strong start to 2019, with just over two-thirds of funds outperforming the benchmark, generating an average alpha above the IShares MSCI Emerging Markets Indx (ETF) (EEM US) of 1.3%.
In this report, we look at the performance of 180 global emerging market strategies over the first quarter of 2019 and analyse the countries, sectors and stocks that helped generate that outperformance. We also take a look at the longer-dated outperformance of active GEM funds.
This week’s offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
This week’s highlights include value-added comment from Kevin O’Rourke on the ongoing Indonesian Presidential Election campaign, some differentiated comment on the upcoming follow-on offering from Map Aktif Adiperkasa PT (MAPA IJ), as well as the 6th and 7th Insights fromJessica Irene andAngus Mackintosh from the ongoing series of Indonesian Property onIntiland Development (DILD IJ) and Kawasan Industri Jababeka(KIJA IJ). I also include in the detailed section some on-the-ground snapshots from a recent trip to Jakarta, with brief highlights from company visits toNippon Indosari Corpindo (ROTI IJ), Sarimelati Kencana PT (PZZA IJ), andAce Hardware Indonesia (ACES IJ), as well as the first take on Jakarta’s brand new MRT.
In Widodo Withstands Prabowo’s Debate Pressure / BI Hints at Lower 1Q CAD / Gerindra Prepares Dispute, CrossASEAN Insight Provider Kevin O’Rourke comments on the most important political and economic developments in Indonesia over the past week.
In his global Insight, What Next in the Inflation / Deflation Debate and What Does It Mean for Asset Prices? Stewart Paterson takes a look at this very current subject of debate globally.
In the sixth company visit Insight in an ongoing series, Indonesia Property – In Search of the End of the Rainbow – Part 6 – Intiland Development (DILD IJ), CrossASEAN Insight Provider Jessica Irene takes a deep dive into this high-rise and office focused developer. The company is a property developer that focuses on landed residential, industrial estates, high-end condominiums, and offices in Jakarta and Surabaya. DILD has a good track record in building and operating high-end condominiums and offices.
In Indonesia Property-In Search of the End of the Rainbow- Part 7 – Kawasan Industri Jababeka (KIJA IJ) CrossASEAN Insight Provider Angus Mackintosh takes a close look at Indonesia’s oldest Industrial Estate Developer.
In Map Aktif Follow-On Offering – Lace up for a Potential Long Run, Zhen Zhou, Toh runs through the latest details on the proposed follow-on offering for this Indonesian sports retailer.
In the first part in a series of Insights, Quiddity Singapore M&A Guide 2019, Travis Lundy kicks off by taking a look at Singapore from an M&A perspective.
In Company Visits: The Best of March 2019, Thai Guru Athaporn Arayasantiparb, CFA lays out his thoughts on the most interesting company visits he made in the month of March, including Singapore International School of Bangkok (SISB TB), Minor International (MINT TB), and After You Pcl (AU TB) .
In Malaysian Telcos: Look for Improvements to Continue in 2019, our friends at New Street Research revisit the Malaysian Telecoms sector post the recent results.
In Singapore Property – Luxury Segment Leads Price Decline in 1Q; Property Outlook Remains Shaky, Royston Foo revisits the Singapore Property after analysing 1Q19 numbers.
In Singapore REIT – The Draft Master Plan 2019 Boost and Q1 Scorecard, Anni Kum takes a bird’s eye view of the Singapore REIT space after 1Q19 numbers.
In this series under Smartkarma Originals, CrossASEAN insight providers AngusMackintosh and Jessica Irene seek to determine whether or not we are close to the end of the rainbow and to a period of outperformance for the property sector. Our end conclusions will be based on a series of company visits to the major listed property companies in Indonesia, conversations with local banks, property agents, and other relevant channel checks.
In the seventh company in ongoing Smartkarma Originals series on the property space in Indonesia, we now look at Indonesia’s oldest Industrial Estate developer and operator Kawasan Industri Jababeka (KIJA IJ). The company’s largest and the original estate is in Cikarang to the East of Jakarta and comprises 1,239 hectares of industrial land bank and a masterplan of 5,600 ha.
It has a blue chip customer base both local and foreign at Cikarang including Unilever Indonesia (UNVR IJ), Samsung Electronics (005930 KS), as well as a number of Japanese automakers and their related suppliers.
The company has also expanded its presence to Kendal, close to Semarang in Central Java, where it has a joint venture with Singapore listed company Sembcorp Industries (SCI SP). This estate covers a total area of 2,700 ha to be developed in three phases over a period of 25 years and is focused on manufacturing in industries.
The company also has successfully installed a 140 MW gas-fired power station at its Cikarang, providing a recurrent stream utility-type earnings, which cushion against the volatility in its industrial estate and property earnings. After some issues with one of its boilers (non-recurrent) and issues early last year with PLN, this asset now looks set to provide a stable earnings stream for the company.
KIJA has also built a dry-port at Cikarang estate which has been increasing throughput by around +25% every year, providing its customers with the facility for customs clearance at a faster pace of that at the Tanjong Priok port, as well as logistics support.
After two difficult years where the company has been hit by a combination of problems at its power plant, foreign exchange write-downs, and slower demand for industrial plots, the company now looks set to see a strong recovery in earnings in 2019 and beyond.
The company has seen coverage from equity analysts dwindle, which means there are no consensus estimates but it looks attractive from both a PBV and an NAV basis trading on 0.85x FY19E PBV and at a 73% discount to NAV. If the company were to trade back to its historical mean from a PBV and PER point of view, this would imply an upside of 33% to IDR325, using a blend of the two measures. An absence of one-off charges in 2019 and a pick up in industrial sales should mean a significant recovery in earnings, putting the company on an FY19E PER multiple of 9.7x, which is by no means expensive given its strategic positioning and given that this is a recovery story.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
