Company Update:
PP London Sumatra Indonesia (LSIP IJ; BUY
(from Neutral); TP: IDR1,675)
Positives From Sale Of Idle Landbank
Lonsum is in the
process of selling its idle landbank (125ha) in Cikupa to Indofood CBP. The
sale is expected to be completed by end-2018. We are positive on the
transaction, as there should be an additional FY18 cash inflow of IDR375bn, and
a potentially higher dividend payout ratio on the back of a stronger net cash
position, no significant capex and sizeable cash inflow from the sale. Upgrade
to BUY (from Neutral) with a TP of IDR1,675 (from IDR1,400, 23% upside) due to
a higher target P/E of 12.8x (-0.2SD from its 11-year mean P/E,
from 12x) on FY18F revised EPS.
¨
Selling
idle landbank of 125ha in Cikupa, Tangerang. London Sumatra (Lonsum) and its sister
company, Indofood CBP (ICBP IJ, BUY, TP: IDR9,700) have entered into a sale and
purchase agreement for the former’s idle landbank of 125ha, located in the
Bojong and Budimulya villages, Tangerang (around 50km from Jakarta). The agreed
price is IDR300,000 per sqm. The landbank sales is expected to be completed by
31 Dec 2018. According to its management, the landbank in the Cikupa area may
only be suitable as an industrial area – which is not Lonsum’s main business.
¨
Reasonable
selling price. We
deem the selling price as reasonable. Based on our observation on selling
prices in Cikupa, the prices of land range from IDR150,000 up to IDR4mn per
sqm. According to Licensed and Registered Public Appraisers (KJPP), the fair
value of the idle landbank is around IDR317,000 per sqm.
¨
Positives:
additional cash inflow and higher dividend payout ratio. The idle landbank has
been listed in Lonsum’s balance sheet before the Indofood group acquired it in
2007. The sale should be positive for Lonsum, as it would see an additional
cash inflow of around IDR375bn in 2018, and industrial estate companies’ EBITDA
margins range from 20% to 70%.
¨
If we
assume that it rakes in a profit margin of c.25% from the sale, this would
imply an additional gain of around IDR94bn in its FY18F earnings (our previous
FY18F earnings: IDR795bn). Also, its dividend payout ratio has the potential to
keep growing – on the back of its net cash position, no significant capex and
sizeable cash inflow from the sale of the idle landbank.
¨
Upgrade
to BUY.
We factored in the impact of the sale of the idle landbank and lift our TP to
IDR1,675 (from IDR1,400), mostly on back of a higher target P/E of 12.8x
(-0.2SD from its 11-year P/E mean). This is compared with our previous target
P/E of 12x, on FY18F revised EPS. Our TP also implies an EV/ha of USD8,350,
which is within the range of the EV/ha of Indonesian plantation companies. The
completion of this sale would be a near-term catalyst for the share price, as
it should boost its earnings, cash inflow and dividend.
¨
Key
risks to our call include
weaker-than-expected demand for palm oil, and weaker-than-expected rubber
prices.
Kindly click the following link for the full
report: PP London Sumatra Indonesia : Positives From Sale Of Idle
Landbank
Best regards,
Hariyanto Wijaya,
CFA, CFP, CA, CPA, CFTe, CMT
Vice President
Research Analyst – Cigarette,
Coal, Heavy Equipment, Mining Contracting, Plantation
PT RHB Sekuritas
Indonesia
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