AKR Corporindo Tbk (AKRA)

  (AKRA) AKR Corporindo Tbk

  3Q18’s Expectancy of Solid Core Business Performance Company Report | Oct 4, 2018 Asset Divestment, Strengthening Bottom Line

  We estimate AKRA to post the net profit of IDR905 billion (+446% q-q) and the net profit margin of 14.6% in 3Q18 (vs. the net profit margin of 4.4% in 2Q18). Its

Buy

  buoyant net profit was underpinned by the proceeds from the remaining payment

Dec 2019 TP (IDR) 4,650

  of its subsidiary’ assets sold for IDR787 billion on August 31st, 2018. The Consensus Price (IDR) 5,403

  divestment in its underperforming subsidiary is a positive strategy for business

  TP to Consensus Price

• 13.0% efficiencies and development of Java Integrated Industrial and Port Estate

  vs. Last Price

• 17.1% (JIIPE).

  Shares data Petroleum, AKRA’s Backbone in 3Q18 Last Price (IDR)

  3,970 We are optimistic that AKRA was capable of posting the growth of 15% q-q and

  Price date as of

  Oct 1, 2018 47% y-y to IDR6,19 trillion in 3Q18. The growth was driven by factors as follows :

  52 wk range (Hi/Lo)

  8,025/3,220 1) The increment of 12% y-y in petroleum sales volumes, stemming from the

  Free float (%)

  41.1

  increment in demands by mining and coal shipping companies; 2) The Outstanding sh.(mn)

  4014.7 surge of 44% y-y to IDR8,800 in ASP, underlined by the trend of higher WTI

  Market Cap (IDR bn)

  15,898 crude price of USD73.25 per barrel; 3) The government policy on the hike of

  Market Cap (USD mn)

  1,056 IDR400-IDR600 per liter in AKRA’s refined petroleum products prices.

  Avg. Trd Vol - 3M (mn)

  13.01 Avg. Trd Val - 3M (bn)

  50.40 Expecting JIIPE’s to Advance

  Foreign Ownership

  26.5% We estimate JIIPE’s performance to remain flat until 9M18 and its sales to advance to reach 50 hectares in 2019F (vs. 18 hectares in 2018F). Freeport’s

  Trade smelter project as the occupant of JIIPE is expected to allure other

  Petroleum & Chemical companies to invest in JIIPE.

  Bloomberg AKRA IJ Reuters AKRA.JK Buy Recommendation, Target Price of

  IDR4,650 An estimate forward P/E of 13.1x (1.5 SD higher than the last one year average). Share Price Performance

  The target price implies a 2018E P/E of 15.2x. Now, AKRA is traded at a 2018E P/E of 12.9x. Investment’s risks: 1) JIIPE’s below estimate sales ; 2) Unaccomplished target of launching new petrol stations (SPBU).

  AKR Corporindo Tbk | Summary (IDR bn) 2017 2018E 2019E 2020E

  Sales 18,288 23,494 25,845 27,913

  Sales growth 20.2% 28.5% 10.0% 8.0%

  EBITDA 1,409 1,579 1,560 1,928 Net Profit 1,079 2,335 1,231 1,421 EPS (IDR) 269 582 307 354

  EPS growth 116.4% 15.4%

• -0.3% -47.3%

  YTD

  1M

  3M

  12M

  BVPS (IDR) 2,249 2,684 2,853 3,042

  Abs. Ret. -31.8% -6.1%

• 3.2% -44.7%

  EBITDA margin 7.7% 6.7% 6.0% 6.9%

  Rel. Ret. -43.4% -4.1% -5.8% -43.5%

  NPM 5.9% 9.9% 4.8% 5.1% ROE 12.0% 21.7% 10.7% 11.6% ROA 6.6% 12.5% 5.8% 6.3% ROIC 7.5% 7.0% 7.8% 8.3% P/E 23.6x 6.8x 12.9x 11.2x P/BV 2.8x 1.5x 1.4x 1.3x

Firman Hidayat

  EV/EBITDA 19.3x 11.3x 11.7x 10.1x

• 62 21 797 6202, ext:170

  DPS (IDR) 149 205 177 191

  firman@nhsec.co.id Dividend yield 2.4% 5.2% 4.5% 4.8%

  Source: Company Data, Bloomberg, NHKS Research Please consider the rating criteria & important disclaimer

  Source: Company Data, NHKS Research Dividend per Share & Payout Ratio | 2008 - 6M18

  Source: Company Data, NHKS Research Net Profit & NPM | 2012- 2020F

  Regional Distribusi Bahan Bakar Minyak | 2Q18 Source: Company Data, NHKS Research

  Java Integrated Industrial and Port Estate (JIIPE) | 2018 Source: Company Data, NHKS Research

  Performance Highlights Harga Batu Bara & Minyak Mentah Dunia | 2013 - 2018

  Source: Company Data, NHKS Research Pelanggan Berdasarkan Segmen | 2Q18

  Source: Company Data, NHKS Research

  2Q18 review (IDR bn)

  2Q18

  3Q18E

  2Q17

  3Q17

  4Q17

  1Q18 Actual Estimate y-y q-q surprise

  Sales 4,880 4,208 4,859 5,834 5,381 5,219 10.3% -7.8% 3.1% 6,193

• -0.1% 8.3% 498

  Gross Profit 601 365 450 416 415 384 -30.9%

  Gross Margin 12.3% 8.7% 9.3% 7.1% 7.3% -4.6% 0.4% 8.0%

  8% 0.6%

   435 104 214 239 236 230 -45.8% 2.5% 266

  EBIT

• -1.4% EBIT Margin 8.9% 2.5% 4.4% 4.1% 4.4% 0.0% 4.3%

  4% -4.5% 0.3%

  2.1% 352

  EBITDA 523 167 323 319 315 309 -39.7% -1.1%

  EBIT Margin 10.7% 4.0% 6.6% 5.5% 5.9% 5.7%

  6% -4.9% 0.4% -0.1%

  

Net Profit 459 127 200 925 166 163 -63.9% -82.1% 1.3% 905

Net Margin 9.4% 3.0% 4.1% 15.9% 3.1% 14.6%

  3% -6.3% -12.8% -0.1%

  Source: Bloomberg, NHKS research Earnings revision (IDR bn) 2018E 2019E 2020E

  23,494 25,845 27,913

• Revised Sales
>Previous 20,186 20,804 22> -Change 16.4% 24.2% 22.0%

  1,994 2,424 3,013

• Revised Gross Profit
• Previous 2,727 2,855 2,788
• Change -26.9% -15.1% 8.1%
• Revised 8.5% 9.4% 10.8% Gross Margin

  13.5% 13.7% 12.2%

• Previous EBIT -Revised 1,191 1,415 1> -Previous 1,450 1,570 1
• Change -17.9% -9.9% -6.9%

  5.1% 5.5% 5.9%

  EBIT Margin -Revised

• Previous 7.2% 7.5% 7.8% EBITDA -Revised 1,579 1,560 1> -Previous 1,780 1,820 2
• Change -11.3% -14.3% -4.1%

  6.7% 6.0% 6.9%

  EBITDA Margin -Revised

• Previous 8.8% 8.7% 8.8%
• Revised

  Net Profit 2,335 1,231 1,421

• -Previous 1,523 1,389 1,610
• -Change 53.3% -11.3% -11.7%
• Revised 9.9% 4.8% 5.1% Net Margin

  7.5% 6.7% 7.0%

• Previous

  Source: NHKS research

  A Glance at AKRA

  AKR Corporindo (AKRA) is the first private company running its business on petroleum distribution by importing its first cargo of petroleum products from Singapore on October 1st, 2005 when the Indonesian government deregulated the downstream crude sector. It expands its business networks and now has storage tanks and terminals in 15 major sea ports and river ports across Indonesia. The Downstream Oil and Gas Regulatory Agency (BPH Migas) appoints AKRA as the sole distributor of subsidized petroleum since 2018.

  AKR distributes refined petroleum products from international refineries to mining industries, state-owned electricity firm (PLN), industrial and commercial constructions, and retail sector through its SPBU. It has a long-term vision and strategy for developing infrastructures integrating major ports in Java Island.

  AKRA’s Competitiveness in Global Market

  Indonesia as an archipelago nation requires a broadened coverage of refined petroleum products distribution. We are optimistic that the Indonesia-based refined petroleum products distribution industry is capable of making an advanced development in ahead years, in light of less intense competition and high demand for refined petroleum products distributed to mining industry, power plants, industrial estates, providers of integrated one-stop sea logistics and transportation solutions, and retail sectors through its distribution networks across Java, Sumatra, and Kalimantan. AKRA as the biggest chemicals, particularly petroleum, distributor in Indonesia has a lower market cap. than its peers’ market cap. It has fewer peers in the global market, considering the nature of its business is unique. PT Brenntag AG, a German-based chemicals distributor, is the market leader with the market cap. of USD9.5 billion a steep larger than AKRA’s market cap. of USD1.0 billion. However, its net profit margin of 8.6% is more efficient than Benntag AG’s net profit margin of 3.2%. Another to a more efficient net profit margin, its ROE of 22.2% is the highest among its peers.

  Global Chemical & Fuel Distributor Market Sales Net Profit Net Profit Asset Net Profit ROE P/E Company Cap LTM LTM Growth P/BV (USD mn) Margin LTM LTM (USD mn) (USD mn) (USD mn) LTM Indonesia

  AKR Corporindo 1,056 1,238 1,491 128 71.1% 8.6% 22.2% 12.9x 1.9x

  Japan

  Nagase & Co Ltd 2,237 5,380 7,212 174 65.7% 2.4% 6.4% 13.1x 0.8x

  China

  Chengzhi Co Ltd 2,682 3,231 861 114 38.7% 13.2% 4.7% 25.0x 1.1x Shanghai Huayai Ltd 2,696 5,961 6,498 208 152.7% 3.2% 8.0% 9.7x 0.8x

  United States

  Nexeo Solution 1,086 2,254 3,999 58 510.5% 1.5% 7.3% 18.2x 1.3x

  Germany

• 2.8% Brenntag AG 9,476 8,758 14,272 457 3.2% 13.0% 21.5x 2.7x

  Source: Bloomberg

  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

  10/04/2018 Buy 4,650 (Dec 2019) 3,970 5,403 +17.1% -13%

  Source: Bloomberg, NHKS research 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

   Buy : Greater than +15%

   Hold : -15% to +15%  Sell : Less than -15% Summary of Financials

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