Its strategic property projects strengthen its development revenue amid

• 4.6%

  Net Profit Margin

  Revenue growth 4.7% 18.1% 13.9% 12.9%

  EBITDA 2,567 3,175 3,748 4,242 Net profit 1,671 1,873 2,347 2,723 EPS (IDR)

  35 39 49 49

  EPS growth 32.4% 12.1% 25.3% 16.0%

  BVPS (IDR) 229 266 313 366 EBITDA margin

  53.0% 55.5% 57.5% 57.7%

  34.5% 32.8% 36.0% 37.0%

  2016/12A 2017/12A 2018/12E 2019/12E

  ROE

  16.3% 15.7% 16.9% 16.7%

  ROA

  8.5% 8.5% 9.5% 10.1%

  ROIC 15.0% 15.8% 17.2% 18.0% P/E 16.3x 15.6x 12.4x 12.4x P/BV 2.5x 2.3x 1.9x 1.7x EV/EBITDA 12.6x 10.6x 8.6x 7.3x DPS (IDR)

  4.5 4.5 4.5 4.5

  Revenue 4,841 5,718 6,515 7,356

  Target Price of IDR700 We use an estimate of the discount to RNAV of 56.0% (1 SD lower than the last 3-year average) as the basis of our valuation method. This target price implies a 2018E P/E of 16.3x (vs 12.4x at the present time).

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

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

  Please consider the rating criteria & important disclaimer Company Report | Mar 28, 2018 Pakuwon Jati Tbk (PWON) Overall Outstanding Performance Buy Dec 2018 TP (IDR) 700 Consensus Price (IDR) 734 TP to Consensus Price

  vs. Last Price +15.7% Shares data

  Last Price (IDR) 605 Price date as of Mar 23, 2018 52 wk range (Hi/Lo) 715 / 540 Free float 30.2% Outstanding sh.(mn) 48,160 Market Cap (IDR bn) 29,137 Market Cap (USD mn) 2,123 Avg. Trd Vol - 3M (mn)

  19.36 Avg. Trd Val - 3M (bn)

  13.06 Foreign Ownership 14.1%

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

  Share Price Performance YTD

  Strengthening Recurring Income Another to boost the condominium and office sales, PWON beefs up its shopping mall portfolios: Pakuwon Mall phase II & III, and Tunjungan Plaza phase IV with a view to strengthening its recurring income. Furthermore, it is committed to maintaining its shopping malls occupation level topping 90%; indeed, the current average rent tariffs on its hotels and offices are higher than 2016’s average rent tariffs.

  1M

  3M

  12M

  Abs. Ret. -11.7% -9.0% -10.4% 0.8%

  Rel. Ret. -9.4% -3.2% -10.2% -10.8%

  Ahead of Balance Revenue Ratio PWON posted the growth of 18.1% y-y in FY2017’s revenue into IDR5.7 trillion topping the estimate. It also succeeded in beefing up the development revenue; accordingly, the ratio between the development revenue and recurring income respectively reached 48% : 52% near to the target of 50% : 50% Continuously Robust Growth in Marketing Sales Its strategic property projects strengthen its development revenue amid the low purchasing power of middle to high income classes. The sales also underpinned by the picking up average selling price of condominium particularly situated in CBD areas in Jakarta and Surabaya. Although the posted marketing sales of IDR2.5 trillion failed to hit the marketing sales target of IDR2.7 trillion set in the early 2017, the marketing sales remained to grow by 10% y-y.

  Dividend yield 0.8% 0.7% 0.7% 0.7%

  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 48.4% and 51.6%. 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’s Real Estate Development Industry in ASEAN

Indonesia is a country with the largest area of land and the biggest population in ASEAN.

  Such qualities recognize Indonesia as the preferred location for the real estate development business. Indonesia’s real estate developers have a larger number of landbank than its ASEAN’s peers do; for instance, BKSL and BSDE respectively have the landbank of 14,666 hectares and 3,966 hectares.

  Indonesia and the Philippines’ real estate sector are the most competitive 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 2,468 3,382 56.71% 73.4% 48.9% 173.9% 21.4% 6.9x 0.3% PWON 2,213 1,719 18.10% 58.8% 48.9% 12.1% 15.7% 15.6x 0.7% CTRA 1,535 2,147 10.31% 49% 27.5% 0.6% 8.7% 21.1x 0.4%

• SMRA 951 1,537 4.01% 48% 26.1% 254.0% 6.1% 34.9x 0.6%
• Singapore

  Capitaland Ltd 11,596 45,972 12.23% 40% 47% 30.3% 8.6% 9.8x 2.8%

• Malaysia
• SP Setia Bhd 2,972 6,826 8.82% 33% 22% 5.2% 8.7% 13.2x 5.0%

  IOI Properties Group Bhd 2,278 7,823 38.36% 44% 32% 27.7% 4.7% 10.8x 3.7%

• Thailand

  Land & Houses PUB Co Ltd 4,070 3,362 16.76% 34% 30% 21.4% 21.6% 12.1x 6.6% WHA Corp Ltd 1,823 2,260 46.72% 47% 39% 12.7% 14.0% 17.9x 5.1%

• Philippines

  Megaworld Corp 2,795 5,619 4.84% 59% 39% 11.1% 9.4% 11.7x 1.2% Source: Bloomberg, NHKS research

  Operational Performance Quarterly Revenue (IDR bn) | 1Q15 - 4Q17 Marketing Sales (IDR bn) | 1Q15 - 4Q17

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

  Annual Revenue | 2014 - 2017 Revenue Breakdown | 4Q17

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

  Land Bank Portofolio | 4Q17 Land Bank Location Area (ha)

  Kota Kasablanka South Jakarta

  6.4 Gandaria City South Jakarta

  1.9 Simatupang South Jakarta

  4.5 Daan Mogot West Jakarta

  11.0 Bekasi Greater Jakarta

  3.2 Tunjungan City Central Surabaya

  3.2 Pakuwon City Township East Surabaya 212.9 Outside Pakuwon City East Surabaya

  21.5 Grand Pakuwon Towship West Surabaya 157.9 Pakuwon Mall West Surabaya

  3.9 Royal Plaza West Surabaya

  1.8 Outside Grand Pakuwon West Surabaya

  6.9 Total Area 435.1 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%

• 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

  

This report and any electronic access hereto are restricted and intended only for the clients and related entity of PT NH Korindo Sekuritas Indonesia. This

report is only for information and recipient use. It is not reproduced, copied, or made available for others. Under no circumstances is it considered as a selling

offer or solicitation of securities buying. Any recommendation contained herein may not suitable for all investors. Although the information here is obtained

from reliable sources, it accuracy and completeness cannot be guaranteed. PT NH Korindo Sekuritas Indonesia, its affiliated companies, respective employees,

and agents disclaim any responsibility and liability for claims, proceedings, action, losses, expenses, damages, or costs filed against or suffered by any person

as a result of acting pursuant to the contents hereof. Neither is PT NH Korindo Sekuritas Indonesia, its affiliated companies, employees, nor agents liable for

errors, omissions, misstatements, negligence, inaccuracy arising herefrom. All rights reserved by PT NH Korindo Sekuritas Indonesia ^{PWON Summary Last Price (IDR) 605}

^{Target Price (IDR) 700 2016/12A 2017/12A 2018/12E 2019/12E}

^{Rating: Buy ROE 16.3% 15.7% 16.9% 16.7% ROA 8.5% 8.5% 9.5% 10.1% ROIC 15.0% 15.8% 17.2% 18.0% EBITDA/Equi ty 25.1% 26.7% 26.9% 26.0%}

^{In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E EBITDA/As s ets 13.0% 14.4% 15.2% 15.7%}

^{Revenue 4,841 5,718 6,515 7,356 Ca s h Di vi dend (IDR bn) 217 217 217 217}

^{Growth (% y/y) 4.7% 18.1% 13.9% 12.9% Di vi dend Yi el d (%) 0.8% 0.7% 0.7% 0.7%}

^{Cos t of Revenue (2,088) (2,353) (2,545) (2,831) Pa yout Ra ti o (%) 13% 12% 9% 8%}

  Gross Profit ^{2,754 3,364 3,970 4,525 DER 48% 42% 32% 22%}

_{Gross Margin 56.9% 58.8% 60.9% 61.5% Net Gea ri ng 63% 54% 40% 27%}

_{Opera ti ng Expens es (525) (569) (617) (713) LT Debt to Equi ty 41% 39% 31% 21%}

_{EBIT 2,228 2,795 3,353 3,813 Ca pi ta l i za ti on Ra ti o 32% 30% 24% 18%}

_{EBIT Margin 46.0% 48.9% 51.5% 51.8% Equi ty Ra ti o 53% 55% 58% 62%}

_{Depreci a ti on 339 380 395 430 Debt Ra ti o 25% 23% 19% 14%}

_{EBITDA 2,567 3,175 3,748 4,242 Fi na nci a l Levera ge 193% 185% 177% 165%}

EBITDA Margin 53.0% 55.5% 57.5% 57.7% Current Ra ti o 133% 172% 181% 182%

_{Interes t Expens es (202) (294) (304) (272) Qui ck Ra ti o 57% 78% 89% 89%}

_{EBT 1,732 2,072 2,606 3,015 Ca s h Ra ti o 53% 69% 79% 79%}

_{Income Ta x 48 (47) (59) (60) Ca s h Convers i on Cycl e 428.3 487.5 547.4 575.2}

_{Mi nori ty Interes t (109) (152) (200) (232) Pa r Va l ue (IDR) 100 100 100 100}

_{Net Profit 1,671 1,873 2,347 2,723 Tota l Sha res (mn) 48,160 48,160 48,160 48,160}

_{Growth (% y/y) 32.4% 12.1% 25.3% 16.0% Sha re Pri ce (IDR) 565 605 605 605}

Net Profit Margin 34.5% 32.8% 36.0% 37.0% Ma rket Ca p (IDR tn) ^{27.2 29.1 29.1 29.1} _{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 4,312 4,863 Pri ce /Ea rni ngs 16.3x 15.6x 12.4x 12.4x}

_{Recei va bl es 186 448 537 630 Pri ce /Book Va l ue 2.5x 2.3x 1.9x 1.7x}

  

Inventori es 2,860 3,741 4,301 4,978 Pri ce/Revenue 5.6x 5.1x 4.5x 4.0x

_{Total Current Assets 6,127 8,428 9,890 11,212 PE/EPS Growth 0.5x 1.3x 0.5x 0.8x}

_{Net Fi xed As s ets 12,164 12,461 13,369 14,410 EV/EBITDA 12.6x 10.6x 8.6x 7.3x}

_{Other Non Current As s ets 2,383 2,470 2,557 2,644 EV/EBIT 14.5x 12.0x 9.6x 8.1x}

_{Total Assets 20,674 23,359 25,816 28,267 EV (IDR bn) 32,354 33,630 32,242 30,818}

_{Pa ya bl es 212 364 326 346 Revenue CAGR (3-Yr) 16.9% 13.9% 12.1% 15.0%}

_{ST Debt 769 402 242 155 EPS CAGR (3-Yr) 13.8% -9.4% 23.0% 17.7%}

Other Current Li a b. 3,637 4,147 4,900 5,651 Ba s i c EPS (IDR) ^{35 39 49 49} _{LT Debt 4,471 5,026 4,603 3,718 Di l uted EPS (IDR) 35 39 49 49 Other Non Current Li a b. 566 628 691 754 BVPS (IDR) 229 266 313 366}

_{Total Liabilities 9,654 10,567 10,763 10,624 Revenue PS (IDR) 101 119 135 153}

_{Shareholders' Equity 11,020 12,791 15,053 17,643 DPS (IDR) 5 5 5 5} In IDR bn 2016/12A 2017/12A 2018/12E 2019/12E 2016/12A 2017/12A 2018/12E 2019/12E _{Net Income 1,671 1,873 2,347 2,723 DCF (IDR bn)}

_{Deprec & Amorti za ti on 339 380 395 430 NOPAT 2,291 2,731 3,277 3,737}

_{Chg. In Worki ng Ca pi ta l - - 158 - +Depr./Amor. 339 380 395 430}

_{CFO 2,010 2,252 2,900 3,152 -CAPEX (272) (146) (1,303) (1,471)}

_{Ca pex (272) (146) (1,303) (1,471) -Incr. (Decr.) i n Worki ng Ca p. - - 158 -}

_{CFI (1,141) (507) (1,327) (1,496) (Unl evered) FCFF 2,358 2,965 2,527 2,695}

Di vi dends Pa i d (229) (216) (217) (217) WACC

_{Net Borrowi ng (PMT) 395 2,781 (582) (973) Cos t of Debt (Ta x Adj.) 12.7% 11.0% 11.1% 11.3%}

_{CFF 165 (119) (667) (1,105) Cos t of Equi ty (COE) 10.5% 8.9% 9.3% 9.4%}

_{Net Changes in Cash 1,034 1,627 906 551 WACC (%) 10.8% 9.2% 9.5% 9.6%}

_{RIM Sprea d (FROE-COE) (%) 7.2% 8.1% 9.1% 8.7% Res i dua l Income (IDR bn) 681 894 1,162 1,308}

By Geography % Shareholders % Equi ty Cha rge (IDR bn) 990 979 1,185 1,414

_{Indones i a 85.9 PT Pa kuwon A 69.7 EVA Uni ted Sta tes 6.7 Va ngua rd Group 1.9 Inves ted Ca pi ta l (IDR bn) 14,363 16,260 18,219 19,899 Luxembourg 2.3 Bl a ckrock 1.2 ROIC-WACC (%) 5.1% 7.6% 8.5% 9.2% Uni ted Ki ngdom 1.1 TT Interna ti ona l Funds 0.8 EVA (IDR bn) 737 1,234 1,542 1,823}

  CASH FLOW STATEMENT DCF, RIM & EVA OWNERSHIP PROFITABILITY & STABILITY _{March 23, 2017 Dec 2018 Analyst: Michael Tjahjadi}