PTPP Moment to Carry on Effective Strategy 20180412 NHKS Company Report (English)

• 3.1% vs. Last Price +39.0%
• 62 21 797 6202, ext:214

  Share Price Performance YTD

  4.0% 4.0% 4.0% 4.5%

  ROIC

  14.6% 11.3% 11.2% 12.3%

  P/E 23.2x 11.3x 9.7x 7.6x P/BV 2.2x 1.1x 1.1x 1.0x EV/EBITDA 10.9x 7.1x 5.3x 4.9x DPS (IDR)

  50 71 86 110

  Dividend yield 1.3% 2.7% 3.1% 4.0% Source: Company Data, Bloomberg, NHKS Research

  1M

  12.8% 11.6% 11.7% 13.5%

  3M

  12M

  Abs. Ret. 4.9% -5.8% -7.7%

  5.4% -4.1% -7.0% -21.0%

  4Q17 Performance Review PTPP secured 4Q17 revenue of IDR7.7 trillion (+37.9% y-y) settling at highest revenue figures as of 1Q14. 2Q17 and 3Q17 soaring new contracts of IDR13.5 trillion and IDR11.7 trillion were the potent drivers for 4Q17. In contrast to the soaring figures of 4Q17 revenue, 4Q17 net profit moved little by IDR463 billion (+2.2%) attributable to escalating interest expense of IDR415 billion.

  Secured Growth of New Contracts PTPP enjoyed 2017 new contracts accomplishment worth IDR40.9 trillion (+25.5%) higher than the growth of 20.4% in 2016 new contracts accomplishment. It sets the target of 2018 new contracts worth IDR49 trillion (+19.8%). We oversee that its determined growth of around 20% is realistic in light of its success in securing 1Q18 new contracts worth IDR9.5 trillion surging 42.4% y-y. Setting A Way More Effective Strategy PTPP sets strategies to receive no turnkey projects and eye only at contracts worth higher than IDR300 billion. We analyze that the strategies are effectively solves the cash flow issue: common project headwind looming stated-owned constructors. In fact, these strategies are key takeaways for taking hold higher rhythm of margin growth.

  ROA

  ROE

  Target Price IDR3,850 We use an estimated forward P/E of 10.5x (the last one year average) as the basis for our valuation method of obtaining the target price of December 2018. The target price implies a 2018E P/E of 13.5x. Now, PTPP is traded at 2018E P/E of 9.7x.

  Property Construction Bloomberg PTPP IJ Reuters PTPP.JK Raphon Prima

  Please consider the rating criteria & important disclaimer NH Korindo Sekuritas Indonesia Company Report | Apr 12, 2018 Pembangunan Perumahan Tbk (PTPP) Moment to Carry on Effective Strategy Buy Dec 2018 TP (IDR) 3,850 Consensus Price (IDR) 3,971 TP to Consensus Price

  Shares data

  Last Price (IDR) 2,770 Price date as of Apr 10, 2018 52 wk range (Hi/Lo) 3,510 / 2,250 Free float (%)

  48.9 Outstanding sh.(mn) 6,200 Market Cap (IDR bn) 17,422 Market Cap (USD mn) 1,265 Avg. Trd Vol - 3M (mn)

  15.12 Avg. Trd Val - 3M (bn)

  45.44 Foreign Ownership 26.3%

  raphon@nhsec.co.id Pembangunan Perumahan Tbk | Summary (IDR bn)

  6.2% 6.8% 6.9% 7.4%

  2016/12A 2017/12E 2018/12E 2019/12E

  Revenue 16,459 21,502 25,526 30,785

  Revenue growth 15.8% 30.6% 18.7% 20.6%

  EBITDA 1,983 2,587 3,701 4,289 Net profit 1,020 1,453 1,762 2,264 EPS (IDR) 165 234 284 365

  EPS growth 37.8% 42.5% 21.2% 28.5%

  BVPS (IDR) 1,738 2,297 2,550 2,871 EBITDA margin 12.0% 12.0% 14.5% 13.9% NPM

• 8.9% Rel. Ret.

IJM CORP BHD 2,583 4,721 24.4% 10.8% 55.2% 6.2% 17.4x 1.1x SUNWAY CONSTRUCTION 750 464 11.6% 6.6% 24.3% 26.3% 21.1x 5.3x

  GAMUDA BHD 3,268 3,683 8.6% 18.7% 66.8% 9.3% 18.3x 1.7x

  PTPP 1,265 3,075 42% 6.8% 62% 11.6% 9.7x 1.1x WSKT 2,465 7,205 127% 8.6% 188% 31.0% 6.0x 2.4x WIKA 1,111 3,362 14% 4.6% 62% 8.2% 12.8x 1.0x ADHI 553 2,085 64% 3.4% 142% 9.1% 14.8x 1.3x

  Malaysia

  COTECCONS CONSTR. 543 699 16.2% 6.1% 0.0% 23.2% 7.7x 1.7x HOA BINH CONSTRUCTION 270 616 51.5% 5.4% 187.0% 44.5% 7.1x 2.7x

  Vietnam

  MEGAWIDE CONSTRUCTION 884 1,030 12.7% 8.8% 158.9% 8.7% 40.0x 3.1x HOUSE OF INVESTMENTS 81 679

  Philippine

  UNIQUE ENGINEERING 444 846 0.8% 7.1% 107.8% 12.7% 15.5x 1.9x

  CH. KARNCHANG PUBLIC 1,309 2,434

  Thailand

  Company Market Cap (USD mn) Total Asset (USD mn) Net Profit Growth Net Profit Margin Debt to Equity ROE P/E P/BV

• 18.9% 1.6% 49.7% 6.2% 6.9x 0.4x

  Source: Bloomberg, NHKS research

  ASEAN Constructor

  Indonesia–based construction companies are notable for having larger a vast amount of asset than its ASEAN’s peers have. Of note, Indonesia and Vietnam–based construction companies averagely are higher-profit growth makers than are its peers.

  Indonesia–based Construction Sector in ASEAN Paradoxical backdrop of vast economic development yet lack of infrastructure progress in ASEAN is logical takeaway for the flourishing growth of construction sector in ASEAN.

  PTPP is well-acknowledged for its expertise in building and residential constructions. Along with the massive infrastructure construction in Indonesia, it furthers to diversifies its construction contracts into toll roads, power plants, airports, and other infrastructures. It categorizes its revenues segments as follows: construction, EPC (engineering, procurement-construction), property & realty, energy, precast, and equipment rental.

  A Glance at PTPP PTPP is one of state-owned enterprises (BUMN) whose expertise is in a construction service sector. Based on contracts value it receives, PTPP is the second-biggest stated- owned constructor after WSKT. Virtually 55.5% contracts it handles are projects owned by BUMN, the remaining 37.5% are private projects, and 7.0% is the Indonesian’s government projects.

  Apr 12, 2018

  Company Report

• 9.6% 5.0% 164.6% 8.1% 22.6x 1.7x

  Company Report

  Apr 12, 2018

  New Contracts (IDR bn)

  Source: Company, NHKS Research

  Revenue (IDR bn)

  Source: Company, NHKS Research

  Revenue Breakdown

  Source: Company, NHKS Research

  Net Profit (IDR bn)

  Source: Company, NHKS Research

  Margin Ratios

  Source: Company, NHKS Research

  Total Debt (IDR bn)

  Source: Company, NHKS Research

  Performance Highlights

  Company Report

  Apr 12, 2018

  Multiple Valuation Forward P/E band | Last 1 year Dynamic Forward P/E band | Last 1 year

  Source: NHKS research Source: NHKS research

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

  04/13/2017 Buy 4,960 (Dec 2017) 3,380 4,846 +46.7% +2.4% 09/01/2017 Buy 4,060 (Dec 2018) 2,770 4,374 +46.6% 7.2%

• 11/15/2017 Buy 4,770 (Dec 2018) 2,750 4,131 +73.5% +15.5%

  1/23/2018 Buy 4,770 (Dec 2018) 2,960 4,002 +61.1% +19.2% 4/12/2018 Buy 3,850 (Dec 2018) 2,770 3,971 +39.0% 3.1%

• Source: NHKS research, Bloomberg

  Analyst Coverage Rating Closing and Target Price

  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

  Company Report

  Apr 12, 2018

  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 Securities Indonesia ^{PTPP Summary Last Price (IDR) 2,770}

^{Target Price (IDR) 3,850 2016/12A 2017/12A 2018/12E 2019/12E}

^{Rating: Buy ROE 12.8% 11.6% 11.7% 13.5% ROA 4.0% 4.0% 4.0% 4.5% ROIC 14.6% 11.3% 11.2% 12.3% EBITDA/Equi ty 24.9% 20.7% 24.6% 25.5%}

^{In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E EBITDA/As s ets 7.9% 7.1% 8.5% 8.6%}

^{Revenue 16,459 21,502 25,526 30,785 Ca s h Di vi dend (IDR bn) 307 437 530 681}

^{Growth (% y/y) 15.8% 30.6% 18.7% 20.6% Di vi dend Yi el d (%) 1.3% 2.7% 3.1% 4.0%}

^{Cos t of Revenue (14,002) (18,251) (21,632) (25,934) Pa yout Ra ti o (%) 30% 30% 30% 30%}

^{Gross Profit 2,457 3,251 3,894 4,851 DER 58% 62% 61% 60%}

^{Gross Margin 14.9% 15.1% 15.3% 15.8% Net Gea ri ng 176% 188% 160% 138%}

^{Opera ti ng Expens es (571) (903) (1,072) (1,405) LT Debt to Equi ty 29% 38% 37% 37%}

^{EBIT 1,886 2,348 2,822 3,446 Ca pi ta l i za ti on Ra ti o 37% 38% 38% 37%}

^{EBIT Margin 11.5% 10.9% 11.1% 11.2% Equi ty Ra ti o 35% 34% 35% 33%}

^{Depreci a ti on 96 238 880 844 Debt Ra ti o 20% 21% 21% 20%}

^{EBITDA 1,983 2,587 3,701 4,289 Fi na nci a l Levera ge 316% 292% 290% 297%}

^{EBITDA Margin 12.0% 12.0% 14.5% 13.9% Current Ra ti o 155% 144% 146% 133%}

^{Interes t Expens es (409) (653) (829) (853) Qui ck Ra ti o 88% 78% 81% 69%}

^{EBT 1,166 1,792 2,108 2,716 Ca s h Ra ti o 59% 46% 46% 35%}

^{Income Ta x (17) (68) (80) (104) Ca s h Convers i on Cycl e (76.1) (100.3) (97.7) (100.9)}

^{Mi nori ty Interes t (128) (271) (266) (348) Pa r Va l ue (IDR) 100 100 100 100}

^{Net Profit 1,020 1,453 1,762 2,264 Tota l Sha res (mn) 6,200 6,200 6,200 6,200}

^{Growth (% y/y) 37.8% 42.5% 21.2% 28.5% Sha re Pri ce (IDR) 3,810 2,640 2,770 2,770}

^{Net Profit Margin 6.2% 6.8% 6.9% 7.4% Ma rket Ca p (IDR tn) 23.6 16.4 17.2 17.2 In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E}

^{Ca s h 9,424 9,587 10,273 10,076 Pri ce /Ea rni ngs 23.2x 11.3x 9.7x 7.6x}

^{Recei va bl es 4,598 6,510 7,825 9,549 Pri ce /Book Va l ue 2.2x 1.1x 1.1x 1.0x}

^{Inventori es 3,030 2,421 3,719 3,257 Pri ce/Revenue 1.4x 0.8x 0.7x 0.6x}

^{Total Current Assets 24,526 29,908 32,606 37,775 PE/EPS Growth 0.6x 0.3x 0.5x 0.3x}

^{Net Fi xed As s ets 5,128 8,944 11,658 15,149 EV/EBITDA 10.9x 7.1x 5.3x 4.9x}

^{Other Non Current As s ets 1,562 2,931 1,236 1,321 EV/EBIT 11.4x 7.8x 6.9x 6.0x}

^{Total Assets 31,216 41,783 45,500 54,245 EV (IDR bn) 21,562 18,392 19,463 20,838}

^{Pa ya bl es 10,398 14,506 15,364 20,589 Revenue CAGR (3-Yr) 12.2% 21.7% 24.7% 26.1%}

^{ST Debt 3,155 3,403 3,716 4,114 EPS CAGR (3-Yr) 34.5% 48.9% 42.6% 36.6%}

^{Other Current Li a b. 2,312 2,790 3,269 3,748 Ba s i c EPS (IDR) 165 234 284 365}

^{LT Debt 3,083 5,419 5,917 6,550 Di l uted EPS (IDR) 206 234 284 365}

^{Other Non Current Li a b. 1,489 1,421 1,424 1,445 BVPS (IDR) 1,738 2,297 2,550 2,871}

^{Total Liabilities 20,438 27,540 29,689 36,447 Revenue PS (IDR) 2,655 3,468 4,117 4,965}

^{Shareholders' Equity 10,778 14,243 15,810 17,798 DPS (IDR) 50}

^{In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E}

^{71 86 110 Net Income 1,020 1,453 1,762 2,264 DCF (IDR bn) Deprec & Amorti za ti on 96 238 880 844 NOPAT 1,858 2,259 2,714 3,314 Chg. In Worki ng Ca pi ta l (89) 12 (676) 338 +Depr./Amor. 96 238 880 844}

^{CFO 1,027 1,703 1,965 3,445 -CAPEX (1,305) (2,749) (3,594) (4,334)}

^{Ca pex (1,305) (2,749) (3,594) (4,334) -Incr. (Decr.) i n Worki ng Ca p. (89) 12 (676) 338}

^{CFI (1,867) (4,144) (1,896) (4,399) (Unl evered) FCFF 560 (240) (676) 161}

^{Di vi dends Pa i d (177) (377) (437) (530) WACC}

^{Net Borrowi ng (PMT) 2,707 1,483 811 1,032 Cos t of Debt (Ta x Adj.) 10.1% 7.8% 8.3% 8.7%}

^{CFF 6,899 2,696 616 756 Cos t of Equi ty (COE) 9.5% 10.2% 12.4% 12.7%}

^{Net Changes in Cash 6,060 255 686 (197) WACC (%) 9.6% 9.4% 10.9% 11.2%}

^{RIM Sprea d (FROE-COE) (%) 10.3% 3.3% 0.0% 1.6% Res i dua l Income (IDR bn) 532 356 (1) 254}

^{By Geography % Shareholders % Equi ty Cha rge (IDR bn) 488 1,097 1,763 2,009}

^{Indones i a 73.7 Republ i c of Indones i a 51.0 EVA Uni ted Sta tes 5.9 Norges Ba nk 3.9 Inves ted Ca pi ta l (IDR bn) 8,388 17,017 23,065 25,443 Norwa y 5.6 TT Interna ti ona l Funds 3.2 ROIC-WACC (%) 12.5% 3.9% 0.9% 1.9% Uni ted Ki ngdom 4.8 Va ngua rd 1.3 EVA (IDR bn) 1,051 666 200 472}

  CASH FLOW STATEMENT DCF, RIM & EVA OWNERSHIP PROFITABILITY & STABILITY _{April 10, 2018 Dec 2018 Analyst: Raphon Prima}