RHB Indonesia - Bekasi Fajar - Expect To Maintain Its Performance In 2H17 (Bekasi Fajar, United Tractors) Unknown Kamis, 24 Agustus 2017




Good morning,

Bekasi Fajar – Expect To Maintain Its Performance In 2H17

Bekasi Fajar’s 1H17 results were mixed. Its revenue was above estimates, accounting for 43% and 46% of our and consensus’ projections respectively. However, its earnings fell below our expectations, at 42% of our FY17F estimate. Currently the stock is trading at 5.7x FY17F P/E and at an 81% discount to NAV. Maintain BUY with TP of IDR490 reflecting a 65% discount to NAV.

¨ Topline was better than expected. Bekasi Fajar’s 1H17 revenue grew by 17% YoY mostly driven by higher land of 15.7 ha (+33% YoY), though the average selling price (ASP) was down by 6% to IDR2.63m per sqm (Figure 4). In 2Q17, revenue was IDR240bn (+29% QoQ, +33% YoY) as a result of higher land sales of 8.7 ha (+24% QoQ, +61% YoY) with an ASP of IDR2.66m per sqm (+4% QoQ, -5% YoY).
¨ Bottom line was below expectation. 1H17 net profit margin was 42%, ie lower than its 6-year average of 47% in the first semester. 2Q17 net profit came in at IDR89bn (+7% QoQ, -5% YoY). 2Q17 net margin dropped to 37% as a result of a higher cost of revenue due to an increasing land cost as well as higher non-operating expenses; going forward we believe the net margin could be brought back to the 40% level with a higher ASP.
¨ Marketing sales achieved as expected. During 2Q17, Bekasi Fajar booked 15.3ha (+119% QoQ, +128% YoY) of marketing sales resulting in a total YTD marketing land sales of 22.3ha. This accounted for 66% and 56% of our and company’s full-year presales target and was higher than its 6-year average of a 42% achievement in the first semester (Figure 5). This happened as the company managed to close the land sale with a Japanese electronics firm for c.10ha before the end of 2Q17 after securing a 5ha sale from a Japanese auto company in May. As of August, Bekasi Fajar received inquiries for industrial land totaling 62 ha. Based on our channel checks, we learned that a large inquiry of c.20ha was received from a single buyer. Backed by these inquiries, management is confident the company could achieve this year’s land presales target of 30-40 ha.
¨ We reiterate our BUY call with a TP of IDR490 based on a 17% CAGR for earnings in FY16-19F, from the expectation of an improved economic outlook that could lead to higher industrial land demand, the company’s competitive advantage being in the proximity of Jakarta, Tanjung Priok seaport, and Soekarno-Hatta airport. We make no change to our assumptions. We believe the company would be able to maintain its performance in 2H17F. (Yualdo Tirtakencana)

Link to daily report: Indonesia Morning Cuppa 240817

Company Update:

United Tractors (UNTR IJ, BUY, TP: IDR32,900), Increasing Growth Of Mining Contracting Volume
Although there was heavy rain throughout July, United Tractors experienced a strong growth of its mining contracting volume. This should be positive for its revenue and earnings, as the mining contracting business is the biggest contributor to revenue. It also booked 310 units of Komatsu sales in July (+ 77% YoY, +18% MoM), mostly consisting of mining heavy equipment (48% of total). The replacement cycle of heavy equipment only started this year, and we think it should continue until 2019. We reiterate BUY, with a DCF-derived TP of IDR32,900 (12% upside).

¨ Mining contracting volume has begun to pick up. Revenue from the mining contracting business is the biggest contributor to United Tractors’ consolidated revenue (1H17: 45% of total). Although heavy rainfall took place in July, the company was still able to deliver a good performance. The overburden removal increased by 26% YoY (+18% MoM), while coal production grew by 13% YoY (+21% MoM).
The accumulated volume growth YTD increased for both overburden removal (7M17: +9% YoY, 1H17: +6% YoY) and coal production (7M17: +5% YoY, 1H17: +4% YoY). We estimate the mining contracting volume to continue to grow during the remaining of the year, which should be positive for its consolidated revenue and earnings.
¨ The heavy mining equipment sold at the beginning of the decade has started to enter its replacement cycle. Users of heavy mining equipment usually replace their equipment after c.30,000 machine hours. 2017 should be the starting year of the replacement cycle for heavy mining equipment sold in 2010-2012. This is also supported by a recovery in coal prices and coal domestic production.
¨ Strong heavy equipment sales to continue. United Tractors booked strong sales of Komatsu equipment in July (310 units), a 77% YoY rise (+18% MoM). Of these, sales to the mining sector dominated with 48% of the total Komatsu units. We think that strong heavy equipment sales to the coal mining sector may continue, as the company has a sizable backlog order for its heavy mining equipment until 2018.
Management’s revised FY17 guidance on Komatsu sales is 3,250 units (our assumption: 3,520 units). As at July, 2,061 units were already sold. We expect management to revise up its FY17 Komatsu sales guidance post the 3Q17 earnings, which should be a positive catalyst for the share price.
¨ Reiterate BUY with an IDR32,900 TP. We maintain our assumptions as we think United Tractors’ operational performance after seven months are still within our expectations. We reiterate our BUY recommendation as we think an increase in monthly heavy mining equipment unit sales and monthly mining contracting volumes are near-term catalysts. Key risks to our call include a significant drop in coal prices, weaker-than-expected coal demand, and a strengthening of the IDR. (Hariyanto Wijaya. CFA, CPA, CMT)
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Best regards,

Helmy Kristanto
Director
Head of Indonesia Research
PT RHB Sekuritas Indonesia

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