Results
Review:
Arwana Citra Mulia (ARNA IJ, BUY, TP: IDR635),
Strong Earnings Recovery To Sustain
Arwana Citra Mulia (ARNA IJ, BUY, TP: IDR635),
Strong Earnings Recovery To Sustain
We see Arwana’s September sales, which hit a
new record high – as an early indicator of earningsrecovery. Sales contribution
fromUNO ceramictiles– which carry a wider EBIT margin – also increased.
Maintain BUY,with DCF-based TP of IDR635 (10% upside). A catalyst for the stock
is a reduction in industrial gas prices, expected to take effect over the next
two months. Its lower-than-expected 3Q16 earnings were due to higher operating
expenses per unit, as it was impacted by a decline in salesvolume in July,on
fewer working days during Lebaran.
¨
Sales
recovery. Arwana
Citra Mulia’s (Arwana) sales are likely to improve, driven by:
i. Accelerated Government infrastructure
projects, which should indirectly boost income of low-end consumers. Hence,
more people would have excess cash to renovate/upgrade their houses;
ii. Higher property sales, driven by lower
mortgage rates and the relaxation of loan-to-value thresholds;
iii. Ramping up of the Government’s low-cost
housing programme.
¨
Sales
hit a new record high last month, reaching 4.6m sqm (August: 4.2m sqm, July:
2.4m sqm).Sales contribution fromUNO ceramictilesrose to 31% in 3Q16
(2Q16: 27%) thanks to full operations at its new Mojokerto plant, which only
produces UNOtiles. These tiles carry a wider EBIT margin compared to
Arwana’s regular ceramictiles.
¨
A
near-term catalystis
the reduction inindustrial gas tariff, as the Government targets to lower
industrial gas prices over the next two months.
¨
3Q16 earnings: below our expectations
¨ Lower-than-expected 3Q16 earnings, which were affected by higher operating expenses per unit, as a result of lower sales volume in July on fewer working days during the Lebaran season. Going forward, sales are likely to increase, which should reduce operating costs per unit.
¨ Lower-than-expected 3Q16 earnings, which were affected by higher operating expenses per unit, as a result of lower sales volume in July on fewer working days during the Lebaran season. Going forward, sales are likely to increase, which should reduce operating costs per unit.
Kindly click the following link for the full report: Arwana Citra Mulia : Strong Earnings Recovery To Sustain
Best regards,
Andrey Wijaya
Senior Vice President
Research Analyst – Auto,
Consumer, Cement
PT. RHB Securities
Indonesia
