Results
Review:
AKR Corporindo (AKRA IJ, BUY, TP: IDR7,500)
Petroleum And Industrial Estate Sales Boost Growth
AKR Corporindo (AKRA IJ, BUY, TP: IDR7,500)
Petroleum And Industrial Estate Sales Boost Growth
AKR’s
1Q17 results showed strong sequential growth – revenue, gross profit and net
profit rose 12.4%, 33.1% and 24.7% QoQ respectively. Its volume of petroleum
sales grew after a soft 1Q17, while revenue recognition from its industrial
estates surged. Thus, we maintain BUY, with an unchanged SOP-based TP of
IDR7,500 (16% upside), due to a pick-up in its petroleum sales volume and the
increased contribution from industrial land sales. Its outlook is also buoyed
by contributions from the utilities businesses on JIIPE industrial land from
4Q17F onwards.
¨
Petroleum
sales to mining sector grew. The main highlight of AKR Corporindo’s (AKR)
2Q17 results was a 16% QoQ hike in its petroleum sales volume to 550,000
kilolitres, driven by higher offtake from the mining sector.
In 1Q17, the volume of its sales to the
coal-mining sector was soft due to the rainy season, as well as disruption of
copper production in Freeport-McMoRan’s mine, due to export permit issues. The
mine, which accounts for c.10% of AKR’s total sales volume, resumed production
in April after the permit was extended to Jan 2018.
AKR has guided for a similar run rate per
quarter for 2H17. This would bring its projected petroleum sales volume for
FY17F to 2.2m kilolitres (+6% YoY). It also expects 1H17’s distribution margin
to be similar to that of 1Q17.
¨
Industrial
land unit doubles contribution to gross profit. Revenue from AKR’s
industrial estates also quadrupled QoQ due to the lumpy recognition of land
sales. It expects to recognise the sale of 30 ha of land for FY17F (1H17: 19
ha). The remaining 11 ha are worth approximately IDR200bn in revenue. Marketing
sales were in line with guidance, with 30 ha sold vs its 40ha target.
Its industrial land segment now accounts for
20% of gross profit (1H16: 9%) The quicker revenue recognition for this segment
is highly ROE-accretive due to its high gross margin of >50%.
¨
Recurring
income from Jakarta Integrated Industrial and Port Estate (JIIPE) to kick in
from 4Q17.
AKR’s first project, a 23MW power plant, would be commissioned on 1 Aug. Also,
the deep seaport is now fully operational. AKR expects these businesses to lift
its earnings by 5% from 4Q17 onwards.
¨
Earnings
growth to resume from 2H17F; reiterate BUY. After a soft 3Q16-1Q17 period, we
expect AKR to close the year strongly, with growth in its petroleum sales
volume and land sales. It also hinted at a potential one-off gain of USD15-20m
ahead, from divesting assets in China. It expects to close the deal for this as
soon as 4Q17.
As
per its latest guidance of FY17F earnings of IDR1.15-1.25trn, we cut our
FY17F-18F earnings by 7-6%. Our SOP-based IDR7,500 TP is unchanged after we
roll over our valuation base to FY18. Our TP also implies 21x FY18 P/E.
Kindly click the following link for the full report: AKR Corporindo : Petroleum And Industrial Estate Sales Boost
Growth
Best regards,
Best regards,
Norman Choong, CFA
Assistant Vice
President
Research Analyst – Utilities,
Oil & Gas, Telecommunications, Poultry
PT RHB Sekuritas
Indonesia
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