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Good morning,
Alam
Sutera - A Better Tomorrow After a Weak 1Q17
Alam Sutera posted
weak 1Q17 results, where its topline accounted for 22%/21% of our and
consensus estimates respectively. Earnings made up 20%/20% of our/consensus
projections respectively as well. Nonetheless, management remains confident
that its 2017 target can be achieved. It expects to book around IDR1trn in
accounting revenue from last year’s IDR1.47trn marketing sales to CFLD. We
maintain our assumptions, BUY recommendation and IDR540 TP, which implies a
50% discount to NAV.
¨ Weak 1Q17. Alam Sutera’s 1Q17
revenue dropped 17% YoY on lower overall sales of its products (Figure 2).
Revenue from real estate fell by 18% YoY, hospitality revenue dropped 2% YoY,
and revenue from tourism also declined by 13% YoY.
In
unit terms, it only sold four land lots in 1Q17 (vs 201 lots in 1Q16) while
there were 271 units of houses sold (-0.4% YoY) and 293 apartment units.
Total revenue only accounted for 22% of our full-year estimates, below its
average seasonal proportion of 29% (Figure 3).
The
lower topline, combined with higher COGS (+20% YoY) and non-operating
expenses, caused net profit to tumble 67% YoY to IDR176bn.
Although
its performance improved from a net loss in 4Q16, the company’s margins took
a considerable hit. Its gross margin narrowed by 1,543bps YoY to 49.5% which
eventually caused its net margin to fall 3,747bps YoY to 25.1%.
¨ Confidence still
intact. Management
acknowledged that its 1Q17 results are weak. Nonetheless, it remains
confident that this year’s target can be achieved. It expects to book around
IDR1trn of revenue in 2H17, based on 2016’s IDR1.47trn marketing sales to
China Fortune Land Development (CFLD). Since the CFLD transaction involved
selling land plots, management expects this to be reflected as revenue in its
books in less than a year. It also expects FY17 revenue to reach IDR3.5trn
(+29% YoY), ie in line with our assumptions. As such, we maintain our
assumptions, for now.
¨ New product
launches. The
company aims to launch Chiara, a new landed housing cluster, on 7 May in
Pasar Kemis, Tangerang. The launch will feature about 70 units, with prices
starting from IDR1.1bn per unit. The cluster will feature three types of
houses:
i. Camelia (four bedrooms) with a land area of 216 sqm;
ii. Calantha (three bedrooms) with a land area of 180 sqm;
iii. Clover (three bedrooms) with a land area of 128 sqm.
As
of 1Q17, its marketing sales was IDR370bn or 7% of its full-year target.
¨ Attractive
valuation. Alam
Sutera is currently trading at 7.7x FY17F P/E and at a 68% discount to RNAV,
or 1SD below its average trading mean (Figure 4). Maintain BUY, with a TP of
IDR540 implying a 50% discount to RNAV. (Yualdo
Tirtakencana)
Link
to report: Alam Sutera : A Better Tomorrow After a Weak 1Q17
Link
to Daily report: Indonesia Morning Cuppa 020517
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Results Review:
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Japfa Comfeed
Indonesia (JPFA IJ, Neutral, TP: IDR1,450), Results Disappoint – Lower
Margin Feed, Higher Opex
We lower our
earnings estimates by 16.9% with a corresponding 17% reduction of our TP to
IDR1,450 (from IDR1,750, 6% downside) while maintaining our NEUTRAL call.
Acknowledging the cyclicality of poultry sector earnings, we believe Japfa’s
current 8.1x FY17F P/E on a revised estimate is already undemanding (close to
-2SD from its 5-year historical P/E. It recorded a weak 1Q17 net profit of
-67%/-73% YoY/QoQ due to lower feed margin, a spike in quarterly opex and
higher quarterly tax rate.
¨ Feed margins pressured by lower ASP and higher COGS. 1Q17
feed operating margins saw further erosion to 9% (4Q16: 12%), partially
offset by 8.5% YoY feed sales volume growth. Management mentioned that feed
cost of goods sold (COGS) was higher since corn imports by feed millers were
banned – with feed millers arguing over insufficient domestic corn supply
which drove up prices. The company was able to increase the price and utilise
old corn stocks that were stored, as well as alternative raw materials during
FY16, but the situation has since changed. Meanwhile, 1Q17 demand from
farmers was weak due to the low seasonality and frequent rain and thus, feed
ASP also saw a decline YoY.
¨ Quarterly net profit underperformed largely due to a spike in
opex and higher tax. Quarterly net profit of IDR91bn was only 5%
of our estimate. It was mainly due a 23% QoQ jump in opex and higher
effective tax rate of 49% (some non-tax deductible expenses but management
did not specify; the normal tax rate was around 25-30%). Management also
attributed the opex jump to higher bonus payments due to the good performance
in FY16.
¨ DOC and broiler segments chalked up a stable performance. In spite
of:
i. The announcement to cap day-old
chick (DOC) prices at IDR4,800/bird (implemented in West Java so far, which
attributed to 50% of total feed and DOC sales volume); and
ii. Nationwide broiler prices at
IDR18,000/kg; Japfa Comfeed Indonesia’s (Japfa) DOC segment recorded an
improvement on higher YoY ASP (about IDR5,100-5,200/bird in 1Q17 vs
IDR4,800-4,900/bird in 1Q16) while the broiler segment recorded operating
losses, similar to 1Q16.
 Maintain NEUTRAL on a weak outlook but undemanding valuation. We
lower our 2017F-2018F core profit estimates by 16.9-17.3% on a further
reduction on feed margins estimate and higher opex assumption. This
translates to a lower DCF-derived TP of IDR1,450, which implies 8.5x 2017F
P/E, -2SD from its 5-year historical mean. Our current EBITDA estimate of
IDR2.87trn is slightly lower than management’s targeted IDR3trn. Upside risks
include an improvement in chicken demand and the absence of a price cap
regulation while downside risks are IDR depreciation and feed margin
compression. (Norman Choong, CFA)
Unilever Indonesia (UNVR IJ, Neutral, TP:
IDR48,500), 1Q17 earning rose 20% QoQ, above expectation
Unilever’s 1Q17 earning rose to IDR2trn
(+20% QoQ, +25% YoY), above our and consensus expectation which was driven by
better than expected Home Personal Care (HPC) EBIT margin. 1Q17 earning
achieved 27% of our and consensus estimates.
HPC’s 1Q17 EBIT (before un-allocated
expenses margin widened to 33.7% (4Q16: 30.7%, 1Q16: 32.7%). While, Food and
Refreshment’s 1Q17 EBIT margin came in at 20.8% (4Q16: 23.1%, 1Q16: 12.4%).
Our DCF-based
IDR48,500 TP (9% upside), implying 52x FY17F P/E. (Andrey Wijaya)
Adhi Karya (ADHI IJ,
Neutral, TP: IDR2,100), Not a Surprise
While Adhi Karya’s
1Q17’s earnings are relatively in line with our expectations, revenue was
above our estimate. This is on IDR643bn in contributions from the Greater
Jakarta LRT project. Moreover, new contracts in 1Q17 grew 21.1% YoY and were above
last year’s seasonality. We reiterate our NEUTRAL call and IDR2,100 TP (7%
downside), which implies 15.1x FY17F P/E. Our call is based on uncertainties
over the LRT project’s payment scheme, a potential EPC loss of up to
IDR250bn, and the fact that it is the second most expensive state-owned
contractor.
¨ 1Q17
results in line.
Adhi Karya Persero’s (Adhi Karya) 1Q17 revenue rose 69.3% YoY to IDR2.25trn.
This accounted for 15.6% and 13.5% of our/consensus estimates respectively.
It was also above Adhi Karya’s 1Q16 revenue seasonality of only 12%. This was
mainly spurred by the construction segment, which soared 85.6% YoY to nearly
IDR2trn.
The firm’s 1Q17 net profit grew 79.2% YoY
to IDR19bn, which was 3.9% and 3.3% of our and street’s FY17 estimates respectively.
This was relatively in line with the average historical 4-year seasonality of
3.4%. This growth was mainly supported by higher-than-expected profits from
joint operations (JO), which grew 577.5% YoY, and strong revenue growth.
Adhi Karya’s gross margin stood at 10.6%,
ie >100bps higher than the same period last year. This was mainly driven
by a smaller loss from the EPC segment in 1Q17. However, Adhi Karya recorded
only 0.9% in net margins due to higher interest expenses.
¨ Update
on the Greater Jakarta Light Rail Transit (LRT) project. Although Adhi
Karya signed the Greater Jakarta LRT Phase I early this year, its payment
scheme has not been finalised till now. Moreover, revenue from the Ministry
of Transportation contributed IDR643bn in 1Q17, mainly from the Greater
Jakarta LRT project. According to the company, it booked ~15% gross margins
from this project in that quarter. This was the same as the gross margins it
proposed to the Government for the project. However, we think Adhi Karya’s gross
margins from this project would be lower than that, given the Government’s
tight budget to finance its infrastructure projects.
¨ New
contracts.
The firm obtained IDR3.7trn (+59.6% YoY) in new contracts in 1Q17, accounting
for 21.1% of our FY17 estimate of IDR17.5trn (excluding the LRT project).
This was above the 13.9% seasonality to FY16 new contracts. Projects from
fellow state-owned enterprises (SOEs) dominated at 41.6%, while contracts
from the private sector contributed 33.2% of total contracts. Meanwhile,
based on the type of work, 1Q17’s new contracts mainly comprise buildings
(71.7%) and road & bridges (16.8%) projects.
¨ Maintain
NEUTRAL.
We reiterate our NEUTRAL call and IDR2,100 TP based on uncertainties over the
Greater Jakarta LRT’s payment scheme and potential loss from the EPC segment
of up to IDR250bn this year. Our TP is derived from 15.1x FY17F P/E, ie its
5-year historical forward P/E mean. It is now trading at 16.2x FY17F P/E, ie
the second most expensive state-owned contractor. (Dony Gunawan)
Link to report: Adhi Karya Persero : Not a Surprise
Semen Indonesia
(SMGR IJ, Neutral, TP: IDR9,800), 1Q17 earnings declined 28% YoY, below
expectation
Semen Indonesia’s 1Q17 earning declined to
IDR747bn (-53% QoQ, -28% YoY), below expectation which achieved merely 20%
and 19% of our and consensus full-year estimates, respectively.
QoQ basis, 1Q17 ASP increased to
IDR909,000/tonne, driven by higher international (export and Than Long
Cement) sales’ ASP which increased 49% QoQ. However, higher production costs
per tonne which rose to IDR633,000/tonne (+6% QoQ) caused EBIT margin slipped
to 14% in 1Q17 (4Q16: 15.6%).
Our DCF-based TP of
IDR9,800 (11% upside), implies FY17F P/E of 12x. (Andrey Wijaya)
Indocement Tunggal Prakarsa (INTP IJ,
Neutral, TP: IDR15,700), 1Q17 earning fell 49% YoY, below expectation
Indocement’s 1Q17 earning fell to IDR492bn
(-32% QoQ, -49% YoY), lower than expectation which achieved merely 14% and
13% of our and consensus full-year estimates. Lower sales volume and higher
than expected production costs were the main drivers of lower than expected
1Q17 earning.
In our calculation, COGS per tonne
increased to IDR584,000/tonne (+8.5% QoQ, +4.5% YoY) while ASP came lower at
IDR891,000/tonne (-0.6% QoQ, -9.4% YoY) in 1Q17. These were the main reasons
of EBIT margin narrowed to 14.8% in 1Q17 (4Q16: 20.7%, 1Q17: 27.4%).
Our DCF-based TP of IDR15,700 (8%
downside), premised on 15x FY17F P/E. (Andrey
Wijaya)
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Company Update:
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Metrodata is one of the major suppliers for
several well-known electronics brands such as Asus, HP and Lenovo.
Its business is also supported by other segments such as the solutions and
consultation divisions. The company expects higher gross margins this year
(+50bps) as the solutions segment, which generates higher margins, would have
a bigger contribution in 2017. Management is guiding for conservative
earnings growth of only 8%, although its 1Q17 earnings growth would likely
hit double-digits. Assuming 8% EPS growth, the stock is trading at FY17F P/E
of 4.7x, below its historical mean P/E of 7.5x.
¨ Distribution of
electronics products – the main business. Metrodata Electronics (Metrodata)
is one of the major suppliers for several well-known electronics brands such
as Asus, HP and Lenovo. These three brands contributed
more than 50% to total revenue in FY16. The company also distributes other
brands such as Dell, Microsoft, Oracle, and IBM,
which have smaller revenue contributions. It is currently approaching other
brands to distribute, including Apple, in order to capture potential
demand in Indonesia.
¨ Better product mix
to generate higher margins. The distribution business has dominated
its revenue, with around 80% contribution over the past three years, with
relatively low gross margins of 4.5-5.6%. Starting this year, the company
expects to lower contributions from its distribution business to 75%, which
would result in contributions from the solutions business improving to around
20% (vs 15.9% of total revenue in FY16). Hence, gross margins are expected to
improve by 50bps.
¨ Conservative
guidance.
Metrodata is only targeting 10% revenue growth this year with gross margins
of around 8.5%. At the earnings level, management is aiming for 8% earnings growth,
which we believe is overly conservative as it does not include lower interest
expenses due to the reduced amount of debt, and lower interest rates.
Currently, its balance sheet is still in a net cash position.
¨ Strong growth in
1Q17 earnings.
Management indicated that its earnings are likely to have grown by
double-digits in 1Q17, while its revenue may have dropped slightly compared
to 1Q16. The strong growth in 1Q17 earnings was driven by new and bigger
business contract signings, as previous contracts have expired. However,
management highlighted that this would normalise in the following quarters.
¨ Cheap valuations
with healthy balance sheet, decent growth and good corporate governance. Metrodata is
currently trading at 4.7x FY17F P/E (assuming an 8% EPS growth), below its
historical mean P/E of 7.5x. The company is owned by well-known property
developer, Ciputra Group, which has a 25.3% stake in the company. (Dony Gunawan)
Link to report: Metrodata Electronics Tbk : Riding The Technology Wave |
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Media Highlights:
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Corporate
Lippo Cikarang records declining earnings
in 1Q17
Waskita Karya plans to divests 300km of
toll roads
Adaro Energy books 69.7% YoY profit
increase
Summarecon Agung records IDR450bn marketing
sales
Bumi Resources posts 291% YoY earnings
increase
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Our
Recent Publication:
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Results Review: Delta Dunia Makmur –
Further Robust Volume Ahead
Link to report: Delta
Dunia Makmur : Further Robust Volume Ahead
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Results Review: Bank Tabungan Pensiunan
Nasional – Bright Outlook Ahead
Link to report: Bank
Tabungan Pensiunan Nasional : Bright Outlook Ahead
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Results Review: Wijaya Karya Persero
– Positive Outlook Thus Far
Link to report: Wijaya
Karya Persero : Positive Outlook Thus Far
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Corporate News Flash: Surya Semesta
Internusa – Key Takeaways From ASEAN Small Cap Book Launch
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Results Review: Perusahaan Gas Negara – Improvement
On Opex Normalisation And E&P Profit
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Economics Update: BI Continues To Hold Key
Policy Rate In April
Link to report: BI
Continues To Hold Key Policy Rate In April
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Results Review: Arwana Citramulia – Better
Sales Mix And Efficiency To Boost Earnings
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Results Review: Bank Tabungan Negara – To
Stay Housing-Centric
Link to report: Bank
Tabungan Negara : To Stay Housing-Centric
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Economics Update: Exports And Imports
Accelerate In March
Link to report: Exports
And Imports Accelerate In March
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Reinitiating Coverage: Surya Semesta
Internusa – Subang Industrial Estate As a Future Driver
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Sector Update: Retailing - Upper segments,
mid-ticket items seem to fare better
Link to report: Retailing - Upper
segments, mid-ticket items seem to fare better
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Reinitiating Coverage: Delta Dunia Makmur
–Strong Projected Earnings Growth In 2017F
Link to report: Delta
Dunia Makmur : Strong Projected Earnings Growth In 2017F
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Best regards,
Helmy Kristanto
Director
Head of Indonesia Research
PT. RHB Securities Indonesia
DID: (6221) 2970 7056
Fax: (6221) 2783 0777
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