Refer to Important disclosures in the last page of this report

  N ^{o v -1 7 N o v -1 7 D e c -1 7 J a n -1 8 J a n -1 8 F e b -1 8 M a r- 1 8 M a r- 1 8 A p r- 1 8 M a y -1 8 M a y -1 8 J u n -1 8 J u l- 1 8 A u g -1 8 A u g -1 8 S e p -1 8 O c t- 1 8 O c t- 1 8} SSIA-Rebase JCI Index-Rebase

  2.4

  27.9

  25.1

  11.9

  13.9

  9.9 PER (x)

  34.8 1.8 n/m

  59.7

  28.5 PBV (x)

  0.6

  0.5

  0.5

  0.5

  0.5 Dividend Yield (%)

  2.1

  8.1

  8

  0.0

  0.3 EV/EBITDA (x)

  6.2

  9.1

  8.9

  8.7

  7.3 Source: SSIA, IndoPremier Share Price Closing as of : 01-November-2018

  E q u it y | I n d o n e s ia | P ro p e rt y

  70

  75

  80

  85

  90

  95 100 105 110 115

  16 EPS Growth (%) (79.3) 1,786.4 (100.5) (768.8) 109.9 Net Gearing (%)

  76 EPS (Rp) 13 250 (1)

  Stock Data

  Latest EPS (Rp) (1.2)

  Target price (Rp) Rp630

  Prior TP (Rp) Rp700

  Shareprice (Rp) Rp462

  Upside/downside (%) +36.4

  Sharesoutstanding (m) 4,705 Marketcap. (US$ m) 144 Free float (%)

  60.5 Avg. 6m dailyT/O (US$ m)

  0.9 Price Performance

  3M

  6M

  12M

  Absolute (%) -21.0 -7.2 -21.0 Relative to JCI (%) -18.2 -6.4 -17.5 52w high/low (Rp) 610 - 440

  Major Shareholders

  PT Arman Investment Utama 9.9% PT Persada Capital Investama 7.9% PT Union Sampoerna 5.5%

  Estimate Change; Vs. Consensus 2018 2019

  7.7 Vs. Prior EPS (%) (111.1) (63.2) Vs. Consensus (%) 5.8 (32.8)

  36

  Source: Bloomberg Joey Faustian

  PT Indo Premier Sekuritas joey.faustian@ipc.co.id

  Widening losses, but expect better 4Q Poor 9M18 result, below expectation. Industrial land sales of 8ha in 9M18. To open another two Batiqa hotels owned by investor. Maintain Buy albeit lower TP of Rp630 (from Rp700).

  Another loss in 3Q18, but expect positive 4Q18. SSIA booked loss of Rp67bn in 9M18, which came below market expectation vs. 9M17 earnings of Rp1.2tn solely from Cipali toll road divestment. Operating profit was down to Rp100bn (- 57% yoy), which came below market expectation forming 37%/43% of our/consensus FY18F estimate. In 3Q18, SSIA booked loss of Rp10bn, which is much stronger than Rp47bn loss in 2Q18. Furthermore, we expect SSIA to book a better 4Q18 given seasonality in its hospitality business and its construction business unit which has better occupancy rate and recognition in 4Q.

  Contribution from industrial estate segment. As of 9M18, SSIA booked industrial land sales of 8ha (9M17: 2.1ha) with ASP of US$120 (-18% yoy). With this sales, SSIA has fulfilled 80% of our FY18 sales assumption of 10ha. Despite lower than expected ASP (Ours: US$150), we are positive toward the sales as industrial land sales is SSIA’s only high margin business (FY17 GPM: 76%). In the other hand, as of 9M18, SSIA has acquired additional land of 174ha in Subang, cumulating total land bank of 1,034ha in Subang. SSIA plans to start the ground breaking for Subang City of Industry in July 2019 after at least acquiring 1,200ha.

  Continuous BATIQA expansion. In August 2018, SSIA has opened a new Batiqa hotel in Surabaya, making it their 7 th

  Batiqa hotel chain. Given early operation of new hotels, Batiqa chain is still booking negative earnings in 9M18. However, the occupancy rate (OR) in Batiqa hotels has shown an improvement to 61.7 in 9M18 with average room rate (ARR) of Rp332k (9M17: 57% with ARR of Rp296k). Thus, SSIA is planning to open another two Batiqa which will owned by investor that will be operated the two Batiqa hotels.

  Maintain Buy with lower TP of Rp630. We expect most of the industrial land sales in 2018 would only be able to be recognized in 2019. In addition, given Subang project development delay to 2H19, we reduce our industrial land sales for FY19F to 12ha (from: 20ha). Thus we forecast SSIA to book a loss of Rp5bn in FY18F, while reduce our FY19F earnings by 63%. Given lower earnings outlook, our RNAV calculation has decreased to Rp630/share as we roll over our base calculation to 2019. SSIA currently trades at 63% to our estimate RNAV estimate or FY18F P/B of 0.5x, providing cheap valuation for the counter. Upside potential to our call might come from faster industrial sales recognition and Subang development.

  Surya Semesta

(SSIA IJ)

  02 November 2018 Results Note BUY (Unchanged)

  Year To 31 Dec 2016A 2017A 2018F 2019F 2020F

  Revenue (RpBn) 3,797 3,274 3,609 3,817 4,095 EBITDA (RpBn) 567 367 290 303 332 EBITDA Growth (%) (16.1) (35.2) (21.2)

  4.6

  9.6 Net Profit (RpBn) 62 1,178 (5)

• 62 21 5793 1168

  Fig. 1: Revenue by segments Fig. 2: 9M18 revenue by segment 30% 5,000

  0.2%

  20%

  8%

  4,000 10%

  Construction Services

  n 3,000 b

  0% p R

  22% Hotel

  2,000

• 10%

  Industrial Estate Land

  1,000

• 20%
• 30%

  Rental, Parking, Maintenance

  70%

  Service and Utilities

  2014 2015 2016 2017 2018F 2019F 2020F Construction Hospitality Industrial Estate Property growth %

  Source: Company, IndoPremier Source: Company, IndoPremier Fig. 3: Marketing sales & ASP trend Fig. 4: Improving BATIQA’ occupancy rate

  45

  2.50 Grand Melia Jakarta Grand Melia Bali

  40 Banyan Tree BATIQA

  2.00

  35 90%

  30 80%

  s

  1.50

  n re

  25

  a

  70%

   m ct p e

  20 R 60%

  1.00 H

  15 50%

  10 40%

  0.50 30%

  5 20%

  0.00 10%

  2014A 2015A 2016A 2017A 2018F 2019F 2020F 0%

  Marketing Sales (LHS) ASP (RHS) 2013A 2014A 2015A 2016A 2017A

  9M18

  Source: Company, IndoPremier Source: Company, IndoPremier Fig. 5: SSIA’s total landbank Fig. 6: Margin trend

  40%

  One off due to

  35%

  Cipali divestment 150

  30% 25% 20% 15% 10%

  5% 1034

  0% 2014A 2015A 2016A 2017A 2018F 2019F 2020F

• 5%

  Gross Margin Operating Margin Net Margin Surya Cipta III Subang

  Source: Company, IndoPremier Source: Company, IndoPremier

  Fig. 7: 9M18 result summary (Rp Bn)

  9M18

  9M17 % yoy

  

4Q17

  3Q17 % qoq % of Ours % of Consensus

  Sales 2,658.5 3,274.2 -18.8% 1,138.4 610.7 86.4% 74% 73.7% Gross Profit 625.6 863.9 -27.6% 264.3 176.4 49.9% 72% 72.3% Operating Profit 100.2 234.4 -57.2%

  55.4 6.3 774.5% 42% 41.2% Net Income (65.6) 1,178.4 nm (9.6) (47.2) -79.7% nm nm GPM (%) 24% 26% 23% 29% OPM (%) 4% 7% 5% 1% NPM (%) -2% 36% -1% -8% Source: Company, IndoPremier

  Fig. 8: Earnings Revisions FY18F FY19F Rp Bn old new (%) change old new (%) change

  Revenues (Rp Bn) 3,884 3,609 -7.1% 4,246 3,817 -10.1% Gross profit 958 879 -8.2% 1,066 954 -10.5% Operating profit 340 267 -21.4% 388 289 -25.6% Net profit 47 (5) -111.6%

  99 36 -63.2%

  Margins (%)

  GPM 24.6% 24.3% 25.1% 25.0% OPM 8.8% 7.4% 9.1% 7.6% NPM 1.2% -0.2% 2.3% 1.0%

  Source: Company, IndoPremier

  Year To 31 Dec (RpBn) 2016A 2017A 2018F 2019F 2020F Income Statement

  Net Revenue 3,797 3,274 3,609 3,817 4,095 Cost of Sales (2,728) (2,410) (2,731) (2,862) (3,043) Gross Profit 1,069 864 879 954 1,051 SG&A Expenses (636) (629) (623) (683) (750) Operating Profit 433 234 256 271 301 Net Interest (181) (243) (157) (121) (110) Forex Gain (Loss) (5)

  1

  1

  1

  1 Others-Net (50) 1,790

  36

  42

  50 Pre-Tax Income 197 1,782 135 193 243 Income Tax (103) (84) (100) (108) (120) Minorities (38) (63) (41) (49) (47) Net Income 62 1,178 (5)

  36

  76 Balance Sheet 1,520 1,145 1,040 753 919

  Cash & Equivalent 1,193 3,364 1,241 1,346 1,445

  Receivable 392 415 457 479 509 Inventory 276 161 160 166 177 Other Current Assets

  3,381 5,085 2,897 2,744 3,049 Total Current Assets

  2,394 3,315 4,141 4,406 4,489 Fixed Assets - Net Goodwill

  103

  37

  57

  62

  59 Non Current Assets 7,195 8,851 7,512 7,641 8,017

  Total Assets 550 250 250 250 ST Loans 538 456 527 548 Payable 606 1,408 911 1,030 1,215 Other Payables 752 226 889 Current Portion of LT Loans

  1,896 2,640 1,616 1,807 2,902 Total Current Liab. 1,704 1,494 1,305 1,115 226

  Long Term Loans 242 240 267 327 393 Other LT Liab.

  3,843 4,375 3,188 3,249 3,521 Total Liabilities 994 985 985 986 986

  Equity 1,918 3,023 2,841 2,879 2,949

  Retained Earnings 441 468 497 528 561 Minority Interest

  3,353 4,477 4,324 4,393 4,497 Total SHE + Minority Int. Total Liabilities & Equity 7,195 8,851 7,512 7,641 8,017

  Source: SSIA, IndoPremier

  Year to 31 Dec 2016A 2017A 2018F 2019F 2020F Cash Flow

  101 1,241

  35 85 123 Net Income (Excl.Extraordinary&Min.Int) 137 159 174 184 193 Depr. & Amortization 203 (2,070) 2,014 (50) (107) Changes in Working Capital 138 166 221 (2) 277 Others 571 (47) 2,445 218 486

  Cash Flow From Operating (430) (1,013) (1,021) (455) (272)

  Capital Expenditure 60 865 Others

  (370) (148) (1,021) (455) (272) Cash Flow From Investing

  1,079 (186) (716) (190) Loans

  3 Equity (45) (51) (177) 1 (5)

  Dividends (148) (251) (140) (81) (69)

  Others 889 (488) (1,032) (269) (74) Cash Flow From Financing

  1,091 (684) 392 (506) 140 Changes in Cash

  Financial Ratios

  28.2

  26.4

  24.3

  25.0

  25.7 Gross Margin (%)

  11.4

  7.2

  7.1

  7.1

  7.4 Operating Margin (%)

  5.2

  54.4

  3.7

  5.1

  5.9 Pre-Tax Margin (%)

  1.6 36.0 (0.2)

  1.0

  1.9 Net Margin (%)

  0.9 14.7 (0.1)

  0.5

  1.0 ROA (%)

  1.9 30.1 (0.1)

  0.8

  1.7 ROE (%)

  1.3 19.3 (0.1)

  0.7

  1.3 ROIC (%)

  33.9

  33.7

  34.0

  34.7

  34.5 Acct. Receivables TO (days) 78.8 220.4 198.8

  89.0

  89.9 Acct. Receivables - Other TO (days)

  6.3

  6.0

  6.3

  6.1

  6.2 Inventory TO (days)

  63.9

  75.3

  60.8

  62.6

  64.5 Payable TO (days)

  0.1

  2.9

  2.5

  0.1

  0.1 Acct. Payables - Other TO (days)

  73.3

  50.7

  36.0

  31.1

  30.4 Debt to Equity (%)

  0.4

  1.0

  0.6

  0.4

  0.4 Interest Coverage Ratio (x)

  27.9

  25.1

  11.9

  13.9

  9.9 Net Gearing (%)

  Source: SSIA, IndoPremier

  Head Office PT INDO PREMIER SEKURITAS Wisma GKBI 7/F Suite 718 Jl. Jend. Sudirman No.28 Jakarta 10210 - Indonesia p +62.21.5793.1168 f +62.21.5793.1167

INVESTMENT RATINGS

  BUY : Expected total return of 10% or more within a 12-month period HOLD : Expected total return between -10% and 10% within a 12-month period SELL : Expected total return of -10% or worse within a 12-month period ANALYSTS CERTIFICATION.

  The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

  DISCLAIMERS

  This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this