PWON Recurring Income Cushions Flat Marketing Sales 20180806 NHKS Company Report (English)

• 11.4%
• 62 21 797 6202, ext:114 michael@nhsec.co.id

  34.5% 32.8% 32.4% 33.0%

  35

  39

  42

  42 EPS growth 32.4% 12.1% 8.7% 10.0% BVPS (IDR) 229 266 306 349 EBITDA margin

  53.0% 55.5% 55.3% 54.9%

  Net Profit Margin

  ROE

  Net Revenues growth 4.7% 18.1% 9.8% 8.1%

  16.3% 15.7% 14.8% 14.2%

  ROA

  8.5% 8.5% 8.4% 8.6%

  ROIC 15.0% 15.8% 15.6% 15.2% P/E 16.3x 17.6x 12.7x 12.7x P/BV 2.5x 2.6x 1.7x 1.5x EV/EBITDA 12.6x 11.8x 8.4x 7.5x DPS (IDR)

  4.5

  6.0

  6.0

  EBITDA 2,567 3,175 3,473 3,728 Net profit 1,671 1,873 2,036 2,240 EPS (IDR)

  Net Revenues 4,841 5,718 6,281 6,787

  Please consider the rating criteria & important disclaimer Company Report | Aug 06, 2018 Pakuwon Jati Tbk (PWON) Recurring Income Cushions Flat Marketing Sales Buy Dec 2018 TP (IDR) 625 Consensus Price (IDR) 705 TP to Consensus Price

  Share Price Performance YTD

  vs. Last Price +16.8% Shares data

  Last Price (IDR) 535 Price date as of Aug 03, 2018 52 wk range (Hi/Lo) 715 / 496 Free float 30.2% Outstanding sh.(mn) 48,160 Market Cap (IDR bn) 23,765 Market Cap (USD mn) 1,775 Avg. Trd Vol - 3M (mn)

  54.93 Avg. Trd Val - 3M (bn)

  30.09 Foreign Ownership 13.1%

  Property Real Estate Owner & Developer Bloomberg PWON.IJ Reuters PWON.JK Michael Tjahjadi

  Pakuwon Jati Tbk | Summary (IDR bn) Source: Company Data, Bloomberg, NHKS Research

  1M

  2016/12A 2017/12A 2018/12E 2019/12E

  3M

  12M

  Abs. Ret. -21.9% 0.9% -7.0% -22.5% Rel. Ret. -16.4% -5.7% -9.5% -26.4%

  Surabaya-Based Projects: Drivers for 2Q18 Outperformance PWON thrived further to mark 2Q18’s outperformance. Its net revenue snapped higher by 10.0% y-y to IDR1.73 trillion backed by the soaring sales of 155.5% y-y to IDR312 billion posted by the land and building segment.

  Surabaya-based projects, particularly Grand Pakuwon and Tunjungan City projects, contributed 61.2% to PWON’s revenues. Such contribution was higher than the 1Q18’s contribution of 59.6% On the other side, the 2Q18’s gross profit margin was buoyant to 58.9% annually surging from 56.2% and quarterly edging up from 57.0%. However, rupiah’s exchange rate depreciated further was attributable to the loss of foreign currencies to hit IDR172.9 billion and whittling away the 2Q18’s net profit margin to 32.7%.

  Cushioned by Recurring Income In 2018, it still relies on the ongoing projects and has no plan to launch new projects. It certainly impacts on the 1H18’s marketing sales reaching 41.5% from the 2018’s target of IDR1.09 trillion (-9.64% y-y). We project that the lack of new projects likely suppresses the marketing sales to only amount to IDR2.5 trillion until 2019.

  Nevertheless, the robust recurring income was capable of maintaining its performance. In 2019, it will construct mixed-used project worth IDR.18 and situated in Bekasi. It additionally will construct 4 apartment towers, hotels, and shopping malls whose locations are near to the light rail transit (LRT) stations and West Bekasi toll road gate.

  6.0 Dividend yield 0.8% 0.9% 1.1% 1.1%

  Target Price of IDR625 We use an estimate of discount to RNAV of 61.5% (the last 3-year average) as the basis of valuation method. Now, its stocks are traded at a 2018/F discount to RNAV of 65.6%.

  A Glance at PWON PWON is one of real estate developers focusing on shopping malls, condominiums, offices, and superblocks. Its projects are in two biggest metropolitan cities in Indonesia: Jakarta and Surabaya, each of which has respective revenue ratio of 38.8% and 61.2%. Those projects are situated in strategic locations and target middle to high–class incomes.

  Having a number of superblocks portfolios: Kota Kasablanka and Gandaria City in Jakarta; Tunjungan City and Pakuwon Mall in Surabaya, PWON succeeds to balance the ratio between recurring income and development revenue. Another to develop a number of new projects, PWON penetrates a self–contained city segment through Pakuwon City and Grand Pakuwon in Surabaya.

  Indonesia–Based Real Estate Development Industry in ASEAN Indonesia is a country with the largest area of land and the most populous country in ASEAN. These qualities recognize Indonesia as the preferred location for the real estate development business. Indonesia–based real estate developers have a larger number of landbank than their ASEAN’s peers do; for instance, BKSL and BSDE have the landbank of 14,666 hectares and 3,966 hectares, respectively.

  Indonesia and the Philippines–based real estate sectors are the most competitive developers amongst their peers in ASEAN. The property developers in those two countries post better gross margins yet lower total asset than their peers do.

  ASEAN Real Estate Developer Market Cap Total Asset Sales Gross Operating Net Profit Dividend Company ROE P/E (USD mn) (USD mn) Growth Margin Margin Growth Yield

  BSDE 1,777 3,382 56.71% 73.4% 48.9% 11.2% 13.8% 7.7x N/A CTRA 1,247 2,333 -4.40% 47% 25.2% 30.5% 5.6% 24.8x 1.5%

• PWON 1,775 1,719 18.10% 59% 48.9% 25.4% 20.5% 12.3x 1.1% SMRA 761 1,594 4.50% 46% 23.8% -6.5% 5.2% 33.1x 0.7%

  Singapore

  Capitaland Ltd 9,524 45,972 12.23% 40% 47% 8.7% 8.1% 8.9x 3.8%

• Malaysia
• SP Setia Bhd 2,838 6,826 20.86% 33% 22% 13.6% 7.5% 13.8x 5.2%

  IOI Properties Group Bhd 2,428 7,823 38.36% 44% 32% 12.2% 4.8% 11.8x 3.3%

• Thailand

  Land & Houses PUB Co Ltd 4,387 3,362 16.76% 34% 30% 32.9% 21.6% 13.1x 6.1% WHA Corp Ltd 1,725 2,260 46.72% 47% 39% 38.7% 16.7% 14.8x 3.5%

• Philippines

  Megaworld Corp 2,880 6,212 8.65% 62% 41% 12.6% 9.4% 11.6x 1.3% Source: Bloomberg, NHKS research

  Operational Performance Quarterly Net Revenues (IDR bn) | 1Q15 - 2Q18 Quarterly Marketing Sales (IDR bn) | 1Q15 - 2Q18

  Source: Company, Bloomberg, NHKS research Source: Company, NHKS research

  Margin Ratios | 1Q17 - 2Q18 Revenue Breakdown | 2Q18

  Source: Company, Bloomberg, NHKS research Source: Company, Bloomberg, NHKS research

  Land Bank Portofolio | 2Q18 Land Bank Location Area (ha)

  Kota Kasablanka South Jakarta

  6.5 Gandaria City South Jakarta

  1.9 Simatupang South Jakarta

  4.5 Daan Mogot West Jakarta

  11.0 Bekasi Greater Jakarta

  3.6 Tunjungan City Central Surabaya

  3.2 Pakuwon City Township East Surabaya 212.2 Outside Pakuwon City East Surabaya

  21.5 Grand Pakuwon Towship West Surabaya 161.5 Pakuwon Mall West Surabaya

  3.9 Royal Plaza West Surabaya

  1.8 Outside Grand Pakuwon West Surabaya

  6.9 Total Area 437.5 Source: Company

  Multiple Valuation Forward P/E band | Last 3 years Discount to NAV band | Last 3 years

  Source: NHKS research Source: NHKS research

  Rating and target price Date Rating Target Price Last Price Consensus vs Last Price vs Consensus

  03/28/2018 Buy 700 605 734 +15.7% 4.6%

• 05/23/2018 Buy 625 496 725 +26.0% 13.8%
• 08/03/2018 Hold 625 535 705 +16.8% 11.4%
• Source: Bloomberg, NHKS research

  Closing and Target Price Analyst Coverage Rating

  Source: Bloomberg Source: NHKS research

  NH Korindo Sekuritas Indonesia (NHKS) stock ratings

  1. Period: End of year target price

  2. Rating system based on a stock’s absolute return from the date of publication : Greater than +15%

   Buy : -15% to +15%  Hold : Less than -15%  Sell

  Summary of Financials

DISCLAIMER

INCOME STATEMENT BALANCE SHEET

  

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errors, omissions, misstatements, negligence, inaccuracy arising herefrom. All rights reserved by PT NH Korindo Sekuritas Indonesia ^{PWON Summary Last Price (IDR) 535}

^{Target Price (IDR) 625 2016/12A 2017/12A 2018/12E 2019/12E}

^{Rating: Buy ROE 16.3% 15.7% 14.8% 14.2% ROA 8.5% 8.5% 8.4% 8.6% ROIC 15.0% 15.8% 15.6% 15.2% EBITDA/Equi ty 25.1% 26.7% 25.2% 23.6%}

^{In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E EBITDA/As s ets 13.0% 14.4% 14.3% 14.4%}

^{Net Revenues 4,841 5,718 6,281 6,787 Ca s h Di vi dend (IDR bn) 217 289 289 289}

^{Growth (% y/y) 4.7% 18.1% 9.8% 8.1% Di vi dend Yi el d (%) 0.8% 0.9% 1.1% 1.1%}

^{Cos t of Revenues (2,088) (2,353) (2,664) (2,881) Pa yout Ra ti o (%) 13% 15% 14% 13%}

^{Gross Profit 2,754 3,364 3,617 3,906 DER 48% 42% 38% 31%}

^{Gross Margin 56.9% 58.8% 57.6% 57.6% Net Gea ri ng 63% 54% 48% 38%}

^{Opera ti ng Expens es (525) (569) (577) (624) LT Debt to Equi ty 41% 39% 33% 26%}

^{EBIT 2,228 2,795 3,040 3,282 Ca pi ta l i za ti on Ra ti o 32% 30% 27% 24%}

^{EBIT Margin 46.0% 48.9% 48.4% 48.4% Equi ty Ra ti o 53% 55% 58% 63%}

^{Depreci a ti on 339 380 434 445 Debt Ra ti o 25% 23% 22% 20%}

^{EBITDA 2,567 3,175 3,473 3,728 Fi na nci a l Levera ge 193% 185% 177% 164%}

^{EBITDA Margin 53.0% 55.5% 55.3% 54.9% Current Ra ti o 133% 172% 201% 237%}

^{Interes t Expens es (202) (294) (244) (251) Qui ck Ra ti o 57% 78% 107% 132%}

^{EBT 1,732 2,072 2,315 2,512 Ca s h Ra ti o 53% 69% 99% 123%}

^{Income Ta x 48 (47) (29) (44) Ca s h Convers i on Cycl e 428.3 487.5 492.7 467.6 Mi nori ty Interes t (109) (152) (250) (227) Pa r Va l ue (IDR) 25 25 25}

^{Growth (% y/y) 32.4% 12.1% 8.7% 10.0% Sha re Pri ce (IDR) 565 685 535 535}

^{25 Net Profit 1,671 1,873 2,036 2,240 Tota l Sha res (mn) 48,160 48,160 48,160 48,160 Net Profit Margin 34.5% 32.8% 32.4% 33.0% Ma rket Ca p (IDR tn) 27.2 33.0 25.8 25.8 In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E}

^{Ca s h 2,432 3,406 4,952 5,630 Pri ce /Ea rni ngs 16.3x 17.6x 12.7x 12.7x}

^{Recei va bl es 186 448 407 432 Pri ce /Book Va l ue 2.5x 2.6x 1.7x 1.5x}

^{Inventori es 2,860 3,741 3,806 3,961 Pri ce/Revenue 5.6x 5.8x 4.1x 3.8x}

^{Total Current Assets 6,127 8,428 10,064 10,874 PE/EPS Growth 0.5x 1.5x 1.4x 1.3x}

^{Net Fi xed As s ets 12,164 12,461 12,556 12,788 EV/EBITDA 12.6x 11.8x 8.4x 7.6x}

^{Other Non Current As s ets 2,383 2,470 2,722 2,848 EV/EBIT 14.5x 13.4x 9.6x 8.6x}

^{Total Assets 20,674 23,359 25,342 26,510 EV (IDR bn) 32,354 37,483 29,069 28,149}

^{Pa ya bl es 212 364 355 386 Revenue CAGR (3-Yr) 16.9% 13.9% 10.7% 11.9%}

^{ST Debt 769 402 724 850 EPS CAGR (3-Yr) 13.8% -9.4% 17.3% 10.3%}

^{Other Current Li a b. 3,637 4,147 3,920 3,357 Ba s i c EPS (IDR) 35 39 42 42 LT Debt 4,471 5,026 4,863 4,364 Di l uted EPS (IDR) 35 39 42 42 Other Non Current Li a b. 566 628 744 734 BVPS (IDR) 229 266 306 349}

^{Total Liabilities 9,654 10,567 10,606 9,691 Revenue PS (IDR) 101 119 130 141}

^{Shareholders' Equity 11,020 12,791 14,736 16,818 DPS (IDR) 5 6 6 Net Income 1,671 1,873 2,036 2,240 DCF (IDR bn) 6 In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E}

^{Deprec & Amorti za ti on 339 380 434 445 NOPAT 2,291 2,731 3,002 3,225}

^{Chg. In Worki ng Ca pi ta l - - (663) +Depr./Amor. 339 380 434 445}

^{CFO 2,010 2,252 2,470 2,022 -CAPEX (272) (146) (493) (677)}

^{Ca pex (272) (146) (493) (677) -Incr. (Decr.) i n Worki ng Ca p. - - (663)}

^{CFI (1,141) (507) (819) (813) (Unl evered) FCFF 2,358 2,965 2,942 2,330}

^{Di vi dends Pa i d (229) (216) (0) (289) WACC}

^{Net Borrowi ng (PMT) 395 2,781 (62) (373) Cos t of Debt (Ta x Adj.) 12.7% 9.9% 11.8% 11.2%}

^{CFF 165 (119) (15) (531) Cos t of Equi ty (COE) 10.5% 11.0% 10.9% 9.3%}

^{Net Changes in Cash 1,034 1,627 1,636 678 WACC (%) 10.8% 10.8% 11.1% 9.7%}

^{RIM Sprea d (FROE-COE) (%) 7.2% 6.0% 5.0% 5.9% Res i dua l Income (IDR bn) 681 665 638 865}

^{By Geography % Shareholders % Equi ty Cha rge (IDR bn) 990 1,207 1,398 1,375}

^{Indones i a 86.9 PT Pa kuwon A 69.7 EVA Uni ted Sta tes 6.8 Va ngua rd Group Inc 2.0 Inves ted Ca pi ta l (IDR bn) 14,363 16,260 18,219 20,322 Luxembourg 2.4 Bl a ckrock Inc 1.0 ROIC-WACC (%) 5.1% 6.0% 5.4% 6.2% Uni ted Ki ngdom 1.2 TT Interna ti ona l 0.8 EVA (IDR bn) 737 975 981 1,263}

  CASH FLOW STATEMENT DCF, RIM & EVA OWNERSHIP PROFITABILITY & STABILITY _{August 3, 2018 Dec 2018 Analyst: Michael Tjahjadi}