Company update:
Hexindo Adiperkasa (HEXA IJ, BUY, TP: IDR3,500),
A Substantial Dividend Yield Of 56%
Hexindo Adiperkasa (HEXA IJ, BUY, TP: IDR3,500),
A Substantial Dividend Yield Of 56%
Hexindo will distribute an extraordinary
dividend, with total DPS of USD0.1262, implying a dividend yield of 56%.
Post-extraordinary dividend, its unappropriated retained earnings will decline
by half. This will improve its FY18F ROAE to 11.3%. Management expects FY17F
earnings to surge sizably. We fine-tune our forecasts and reiterate our BUY
call. Our revised TP of IDR3,500 (from IDR3,300, 21% upside) implies FY18F P/E
of 13.9x(-0.2SD from its 5-year mean P/E).
¨
Extraordinary
dividend yield of 56%, cum date is 4 Oct. At Hexindo Adiperkasa’s (Hexindo) AGM
yesterday, it announced an extraordinary dividend totalling USD106m. This
translates to DPS of USD0.1262, anda substantial dividend yield of 56%.
¨
To
resume payout of 35% going forward. The total dividend comprises USD5.9m from
FY16 (Mar) earnings and USD100m from unappropriated retained earnings. As of
June, its balance sheet contained unappropriated retained earnings of
USD196.2m. Based on our discussion with management, Hexindo will resume its
dividend payout ratio of 35% moving forward.
¨
FY18F
ROAEto rise to 11.3%.
Post-extraordinary dividend of USD100m, Hexindo’s unappropriated retained
earnings will shrink by 50%. This will lift its FY18F ROAE to 11.3% from 6.6%
(prior to extraordinary dividend).
¨
FY17F
earnings to surge 60%YoY.Management has guided for earnings to grow to USD12m in
FY17. It expects earnings growth to be driven largely from positive gross
margins recorded at the heavy equipment sales division (vs a gross loss margin
of 2.8% in FY16, due to clearance sales on long outstanding heavy equipment
inventory).
¨
Heavy
equipment demand from mining is recovering. Based on our discussion with
Hexindo’s marketing director, Mr Djonggi Gultom, the key driver of heavy
equipment demand this year is mostly still the construction sector. However,
heavy equipment demand from the mining sector is improving – although this is
for medium-sized units and not giant-sized equipment.
¨
Still
a BUY.
We fine-tune our forecasts to reflect the higher-than-expected dividend payout,
and pare down our FY17F-19F earnings by 1.6-2.6%. We reiterate our BUY call,
while our revised TP of IDR3,500 (WACC: 11.9%, long-term growth rate: 2.0%)
implies FY18F P/E of 13.9x, or -0.2 SD from its 5-year mean P/E.
¨
Key
risks to our call
include weaker-than-expected demand for coal and a significant decrease in coal
prices.
Kindly click the following link for the full report: Hexindo Adiperkasa : A Substantial Dividend Yield Of 56%
Best regards,
Hariyanto Wijaya,
CFA, CFP, CA, CPA
Vice President
Research Analyst – Heavy
Equipment, Plantation
PT. RHB Securities
Indonesia
