Corporate News Flash:
Mega Manunggal Property (MMLP IJ, BUY, TP: IDR950),
Get The Wheels Turning
Mega Manunggal Property (MMLP IJ, BUY, TP: IDR950),
Get The Wheels Turning
Two developments:
1. On Monday, Mega Manunggal Property (Mega
Manunggal) gave us an update and mentioned that it is currently in talks to
lease 98,000 sqm of NLA to two potential tenants;
2. Also it is constructing multi-tenant
warehouses with NLA of 35,000 sqm in Block AE Cibitung.
These developments
are in line with our forecast of 120,000 sqm worth of new lease income in FY17.
Therefore we maintain BUY, with a TP of IDR950 (23% upside).
¨ To construct
built-to-suit (BTS) warehouses. Mega Manunggal is currently in talks to lease
space to two tenants – a fast-moving consumer goods (FMCG) company and a food
supply logistics player that require cold storage facilities. These potential
tenants could take about 98,000 sqm of net leaseable area (NLA). We estimate
the tenants to contribute revenue of c.IDR85.2bn pa from Jul 2017 onwards. Mega
Manunggal expects to finalise the leases by end-June, and estimates the
construction of the two facilities to complete around 2H17.
¨ Multi-tenant
warehouses.
The company is also building multi-tenant warehouses in Cibitung Block AE that
will have a total NLA of 35,000 sqm (built on 3.6ha of land). Mega Manunggal is
currently negotiating with three potential tenants that have expressed interest
in leasing the space. The company indicated the average based rental rate for
Block AE would be about IDR70,000/sqm/month. Assuming an 85% occupancy rate,
this should translate to additional revenue of about IDR25bn pa.
¨ Forecasts still
intact. After
taking in the latest development, we think the new projects may contribute
rental revenue of IDR114bn (including IDR33bn from Lazada’s Phase 1 facility)
in FY17.
¨ More to come. We see two potential
catalysts ahead:
i. The company said that it is fielding
enquiries regarding 61,000 sqm of NLA, and expects to finalise a deal by 4Q16.
If the indicative rental rate is IDR77,000/sqm/month, this would yield
additional revenue of IDR56bn pa;
ii. The land available for business parks and
warehouses near Soekarno-Hatta International Airport may be limited, given the
Government’s plan to expand the passenger capacity of the airport.
¨ Maintain BUY with an
unchanged IDR950 TP.
We are satisfied with the company’s progress in signing up new tenants, in
light of its target of achieving 500,000sqm NLA within three years. The stock
is currently trading at
FY16F-17F P/Es of 24.3-16.1x
and EV/EBITDAs of 35.8-19.7x respectively. This is admittedly expensive, but it
is justified by its:
i. Potential growth;
ii. Stable operating cash flow;
iii. Earnings quality.
Key upside risks include the company being
able to execute its projects on schedule, including obtaining suitable land and
funding
Kindly click the following link for the full report: Mega Manunggal Property : Get The Wheels Turning
Best regards,
Lydia Suwandi
Vice President
Research Analyst - Property
PT. RHB Securities
Indonesia
