Trading Idea:
Cikarang Listrindo (POWR IJ; NR)
Captive Market With Promising Earning Growth
Listrindo is a major
beneficiary of rising development trends at industrial parks surrounding
Cikarang and Bekasi. In 2018, it is set to build transmission lines to supply
electricity to Meikarta – a potential market for half of its current capacity.
Based on consensus estimates, Listrindo is trading at P/Es of 9.1x (FY18F) and
10.1x (FY19F), ie slightly lower than its average peers’ 10.6-10.5x for the
same period, but does offer higher equity returns. We like this NOT RATED
counter as a long-term investment play, given its promising earning growth, and
healthy cash flow and balance sheet.
Integrated power
plant in strategic areas. Cikarang Listrindo (Listrindo) owns three power plants
(total capacity: 1,144MW) – Jababeka (gas-fired: 755MW), MM2100 (gas-fired:
109MW) and Babelan (North Bekasi) (coal-fired: 280MW). The Babelan plant just
commenced full operations in Sep 2017. Around 75% of its energy source comes
from gas, while the remainder is coal-fired. In addition, Listrindo owns a 33km
transmission network and 1,400km of underground cables for distribution
purposes. Captive market. Around 75% of
Listrindo’s revenue comes from industrial customers, while the remaining 25% is
from Perusahaan Listrik Negara (PLN). Its industrial customers include 2,300
clients in Cikarang (from Jababeka and MM2100). This area has good growth
potential thanks to infrastructure developments in the area, eg the
Jakarta-Cikampek Elevated Toll Road and light rail transit (LRT) projects.
Given the firm’s good portfolio of customers, its receivables collection days
is healthy, ie <30 days. This is the main reason behind its robust net
operating cash flow. Promising earning
growth. Listrindo
has guided for FY18 revenue to grow 4.5% YoY, while EBITDA margins are likely
to improve to 40% (FY17F: 36%). This is thanks to the commencement of a new
coal-fired power plant that has lower costs. FY17F core earnings are likely to
grow 20% YoY, while reported net profit may be flat in the absence of one-time
gains.
Note that Listrindo is likely to start
selling electricity to Meikarta in July. The company has allocated USD25m in
capex to build transmission lines to this area. According to management,
potential demand from this integrated township project is huge, ie 500MW, or
~45% of Listrindo’s current capacity.
However, consumption may be low in the early
years, in our view.
Strong balance sheet.
As
at end-Sep 2017, Listrindo was in a cash position of USD204m, while total debts
stood at USD537m. According to our calculations, its net debt to equity ratio
was 0.5x, which is quite healthy for a company that had just disbursed a huge
amount of capex for the Babelan power plant project.
In the near term, management said that there
may be no huge capex disbursements planned, as its current capacity was likely
sufficient to supply additional capacity over the next three years.
Furthermore, Listrindo’s 9M17 net cash flow from operating activities stood at
USD27m, which was much higherthan its USD20m capex disbursement.
Kindly click the following link for the full
report: Cikarang Listrindo : Captive Market With Promising Earning
Growth
Best regards,
Andrey Wijaya
Senior Vice President
Research Analyst – Auto,
Consumer, Cement
PT RHB Sekuritas
Indonesia
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