ASSA The Small Hidden Jewel Trimegah CF 20170518

Attractive on various angles, initiate with a BUY

We derive our 5-years DCF-based TP of IDR350 (implied 2017F P/E of 13.3x) using 9.2% WACC and scrap value of IDR3.26trn as terminal value. Our BUY call is premised on: 1.) Beneficiary to low interest rate, 2.) Ability to purchase bulk orders of cars at an attractive price discount, 3.) Solid used-car price value (popular brands such as Avanza/Xenia), an anomaly to non-popular brands that are facing higher depreciation, 4.) Market share gain against the big players, 5.) Cheap valuation (trading at 8% below replacement value). ASSA is trading at 9.9x/7.2x 2017-18 P/E with 0.9x 2017 P/BV. Key catalyst is improving share price liquidity.

Good corporate governance and strong fundamentals

ASSA is founded by TP Rachmat, a well-respected conglomerate in

Indone-sia (IndoneIndone-sia’s 7th richest man based on latest Forbes) and one of the

prominent figures in Astra International’s history. ASSA has the 2nd largest

car rental fleet in Indonesia with ~19k fleet in possession while its main competitor, TRAC (Astra-related), has ~33k units. ~70% of its rental fleet are under Astra brands (eg; Toyota and Daihatsu). ASSA has strong busi-ness synergies across its car rental, logistic, and auction busibusi-ness units. ASSA has grown its fleet by +14.1% CAGR from 2013 to 2016 amid 4W industry decline in the same period, outpacing TRAC and MPM Rent growth.

2017 earnings to grow by 44% YoY and ROAE to improve

This is driven by 1.) Strong market value of used cars, 2.) Increase in number of fleet, 2.) Lower interest expense as ASSA is able to re-finance its debt at lower rates, 3.) Lower fleet acquisition cost due to high bargain-ing power to purchase bulk orders at discount, 4.) Higher dividend payout. We expect 2017 ROAE to increase to 9.6% from 7.1% in 2016.

Higher bargaining power on the big rental players

With fiercer competition in the auto distribution market, we expect large-scale rental players to have relatively higher bargaining power compared to back in the 2010-13 auto boom. This enables ASSA to purchase new cars at more lucrative discount compared to market. Note that ASSA has grown its fleet to 19.2k units in 2016, up +48.4% since 2013.

Beneficiary of low interest rate environment

ASSA recently refinanced its debt bringing latest financing rate at ~9.1%, lower compared to its previous ~10% rate. This is a testament of a lower interest rate environment (7 days RRR dropped from 5.5% on May ‘16 to 4.75% currently).

Adi Sarana Armada

The Small Hidden Jewel

BUY

Rp350

Reuters Code MPPA.JK

Bloomberg Code MPPA.IJ

Issued Shares (m) 5,378

Mkt Cap (Rpbn) 15,973

Average Daily Trading Value

USD 9.3mn 52-Wk range Rp3,500 / Rp1,720

Public 40.03%

PT Adi Dinamika Investindo 24.94% Drs. Prodjo Sunarjanto SP 9.47%

Others 25.56%

Company Update Stock Data Major Shareholders Stock Price Companies Data Jeffrey Jap (jeffrey@trimegah.com) Willinoy Sitorus (willinoy.sitorus@trimegah.com) 18 May, 2017

PT Adi Sarana Armada Tbk (ASSA) is one of the largest car rental company with 19,200 rental units and 44 branch & service points. It entered the car auction business back in 2014.

Share Price Rp262

Sector Commercial Services Price Target Rp350 (+34% ups)

Reuters Code ASSA.JK

Bloomberg Code ASSA.IJ

Issued Shares 3,398

Mkt Cap. (Rpbn) 890

Avg. Value Daily 6

Month (Rpbn) 0.8

52-Wk range 282 / 110

Consensus

EPS 17E 18E

Consensus (Rp) 26 36

TRIM vs. Cons. (%) 1.4 1.6

Year end Dec 2015 2016 2017F 2018F 2019F

Revenue (IDRbn) 1,393 1,570 1,756 1,881 2,061

Net profit (IDRbn) 34 62 90 124 143

EPS (IDR) 10 18 26 37 42

EPS growth (%) -20.5 81.9 44.2 38.7 15.5

P/E (x) 25.3 13.9 9.9 7.2 6.2

P/B (x) 1.0 1.0 0.9 0.8 0.8

EV/EBITDA (x) 7.3 6.5 6.4 5.4 6.1

Div. yield (%) 2.0 1.6 2.8 4.0 5.6 0.0

1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0 50 100 150 200 250 300 (Rpbn) Avg. 5 Day MA Trading Value (RHS) Price (LHS)

Valuation

BUY with DCF-based method TP of IDR350

We derive our 5-years DCF value at IDR350/share, implying 13.3x 2017F P/E and 1.2x 2017 P/BV. Our DCF uses 9.2% WACC and use scrap value by end of 2022 as terminal value amounting to IDR3.26trn. We believe using scrap value by end of 2022 as terminal value is a conservative method as it provides high clarity of the replace-ment value of its relatively liquid assets in our view.

Trading at –4.4% discount to replacement value

We conducted an analysis of calculating ASSA’s replacement value assuming: 1.) 8 years of car depreciation

using straight-line method, 2.) Average fleet age at 2.89 year (our estimate of its 2016’s fleet), and 3.) Vehicles are sold at book value (after deducting depreciation expenses), 4.) Adding net debt/cash. We derive replacement

value of Rp932bn. ASSA’s current market capitalization is at an –4.4% discount to replacement value. Figure 1. ASSA valuation

Source: Trimegah Research

WACC assumption

Risk Free Rate 7.5%

Equity beta 1.1

Equity RP 5%

Cost of Equity 13.0%

Cost of Debt 9.20%

Statutory Tax Rate 20.0% Target DE

Debt 67%

Equity 33%

Target DE (x) 2.0

WACC 9.2%

Valuation summary (IDR bn)

Scrap value (terminal value) 3,256 Discounted FCF (17F-22F) 967 Discounted terminal value 2,096

- Minority interest 0

- Debt 1,906

+ Cash 20

DCF Value 1,176

shares outstanding (m) 3397.5

TP (IDR/share) 350

DCF

(IDR bn) 2017F 2018F 2019F 2020F 2021F 2022F

1 2 3 4 5

EBIT (1-tax) 237 271 293 314 341 366

Depreciation 139 146 57 54 25 37

Capex + Inv. in assoc (337) (87) (105) (52) (182) (189)

Increase (Dec.) in WC 23 -10 -13 -13 -16 -13

Free cash flow 62 320 231 303 168 201

Figure 2. Scrap value at terminal date assumption

Source: Trimegah Research

Fleet Age (year)

Fleet Size (units) Scrap

Value (%)

Scrap Value (IDR bn)

2016 2017F 2018F 2019F 2020F 2021F 2022F

1 3,369 4,500 3,250 4,250 4,000 5,000 5,000 80% 937

2 5,167 3,369 4,500 3,250 4,250 4,000 5,000 75% 845

3 4,288 5,167 3,369 4,500 3,250 4,250 4,000 65% 563

4 3,680 4,288 5,167 3,369 4,500 3,250 4,250 60% 531

5 2,142 3,302 4,288 5,167 3,369 4,500 3,250 50% 325

6 480 302 590 1,757 626 626 45% 54

Total 19,126 20,626 20,876 21,126 21,126 21,626 22,126 3,256

Figure 3. Replacement value analysis

Source: Trimegah Research

Average ASP assumption

ASP* (IDRm/unit)

Contribution Weighted ASP

Brand

to total fleet** (IDRm/unit)

Avanza 195 35.0% 68

Xenia 185 20.0% 37

Innova 300 15.0% 45

Honda 260 6.6% 17

Nissan 260 0.7% 2

Isuzu 180 1.6% 3

Other pass. Cars 250 4.8% 12

Motorcycle 16 5.3% 1

Trucks 300 11.0% 33

Total 218

Fixed asset (FA) book value simulation - vehicle

(IDRm/unit) Y1 Y2 Y3

Beginning book value 218 191 163

Depreciation*** 27 27 27

Ending book value (NBV) 191 163 136

Replacement value summary

Avg. vehicle age (year)**** 2.89 NBV 2.89 year (IDRm/unit)***** 142

Number of fleet (units) 19,200

Vehicle BV (IDR bn) 2720

Net debt (IDR bn) 1788

Replacement value (IDR bn) 932

Current market cap (IDRbn)****** 890

* Based on median of low and high base model price in Jakarta per Apr’17.

** Based on company presentation FY16. *** Depreciation—8 years, straight-line method.

**** Our calculation based on company presentation FY16 (Fig.16, p.12). ***** NBV end of year 3 is IDR136m/unit.

Figure 5. Auto industry comparables

Ticker Price Market

cap TP Ups. Call

EPS growth

(%) P/E (x)

EV/EBITDA

(x) P/BV (x) ROAE (%)

(IDR) (IDR bn) (ID) (%) 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 ASII 8,350 338,038 9,600 15% BUY 45.3 10.0 15.4 14.0 14.3 13.0 2.7 2.4 18.5 18.2 MPMX 820 3,660 950 16% BUY 20.8 22.2 9.8 8.0 6.7 5.9 0.6 0.6 7.4 8.4 NIPS 422 690 570 35% BUY 58.7 25.3 7.2 5.7 5.7 4.8 0.8 0.7 11.2 12.5 ASSA 262 890 350 34% BUY 44.2 38.7 9.9 7.2 6.4 5.4 0.9 0.8 9.6 12.3 Source: Bloomberg, Trimegah Research

Difference compared to banks and multi-finance—our justification for a premium

We draw a comparison of banks and multi-finance and car rental businesses. The reason why we draw this com-parison is that all of these industries require leverage to propel its business. We would like to point out that banks have a deposit franchise strength but lacks specialty in liquidating repossessed assets (should there be NPL) as its not their key expertize. For the multi-finance industry, the business model is quite weak as they do not possess a deposit franchise, do not have the expertize to sell repossessed assets (especially for 2W) and tend to have higher NPL compared to banks given that most of the customers are non-bankable customers.

Why the rental business have a strong business model?

Big car rental players such ASSA has the platform to sell their assets at a good price as they have its auction

company to sell their fleets at a good price in a timely manner. Also, ASSA’s customers are large corporates tied

with long-term contracts. Hence, it is unlikely that its customers would break contracts. With all of the aforemen-tioned strengths, we believe risk of non-performing assets is minimum for ASSA.

Figure 4. Banks, Multifinance, and Car Rental Business

Source: Bloomberg, Trimegah Research

Banks Multi-finance Car Rental

Leveraged High High High

Asset in possession No No Yes

Deposit franchise Yes No No

Risk of non performing assets Medium High Low

NIM (%) 7.1 / 6.4* 9.15** 11.9***

* 7.1% for big banks and 6.4% for small banks

** Average of ASDF and TAFS

Business Analysis

Company background

ASSA is part of Triputra Group, a large conglomerate group owned by T.P Rachmat. He was Astra International’s

(ASII) CEO for 16 years and commissioner for 6 years with 30 years of total experience in Astra Group. ASSA was previously named ADIRA Rent and started with ~800 fleet in 2003. In 2010, ADIRA Rent changes its name

to ASSA Rent. The company did an IPO back in Nov ‘12 and since then have been aggressively expanding. In

2014, ASSA established BidWin, an automotive auction business unit established to partially provide a strong platform for ASSA to scrap its fleets at a descent market value (through auction process). ASSA was awarded as

top brand in car rental category in 2015 and 2016. By 2016, ASSA’s fleet reached ~19,200 units, rank 2 in Indo-nesia’s car rental industry based on fleet size.

Strong synergy across business units

ASSA’s management has 4 business segments; rental business, sale of used cars, logistics and auction event

(BidWin) contributing 66%, 15%, 17%, and 1% of revenue respectively. Here is how the synergy works:

ASSA Rent provides car rental service to corporates while ASSA Logistic provides logistic services to corporates

using ASSA Rent’s big fleets. These 2 businesses use ASSA Driver for the supply of car drivers. After 4-5 years

(or 7 years for commercial cars), its cars will be disposed partially through BidWin’s auction events. We view that

strong synergies across business units provide 1.) A cost efficient and timely value chain process, 2.) Strong cross-selling strategies, 3.) Strong market intelligence.

Business model—How it works?

A car rental business requires large capital spending initially as to acquire fleets. After acquiring the fleets, ASSA rents out the cars to corporate customers and sells the rental vehicles after 4-5 years for passenger cars and after 7 years for commercial cars. After that, management will do an internal review and decide wisely whether to expand, maintain, or reduce its fleet size. In the car rental business, the disposal value highly determines the internal rate of return (IRR) for a particular cycle of a car investment.

Why do corporates prefer to rent?

Several reasons are: 1.) Light asset investment, 2.) corporates can focus on its core business, 3.) risk transfer for insurance, vehicle maintenance, human resources, and depreciation. With these justifications, we believe

corporates’ preference to rent cars will increase even further in the long-run.

Strong competitive edge

ASSA has a strong competitive advantage compared to individual car rental businesses in terms of 1.) larger discounts in new fleet purchases, 2.) higher ability to obtain low cost of fund (interest rate) to purchase fleet, 3.) Ability to efficiently scrap old fleet at attractive market value supported by its auction business unit. Note that small rental players account ~70% of the industry according to marketeers.

New ca ac uisiio

Stage

Re t ca a d dep eciate assets

- yea s fo passe ge ca s a d ~7 yea s fo co e cial ca s

Stage

Sell used ca s

Stage

Figure 6. Car rental business cash flow model

Source: Company, Trimegah Research

Figure 7. Rental car IRR simulation

Factors that determines IRR level

IRR level significantly increase when leverage

Assuming a car purchased at IDR152m with 100% cash and sells the vehicle at 60% of acquisition cost at the 4th year, we derive an IRR of 14.5%. However, if we leverage using 67% debt, the IRR would be 36.1%.

Use acquisition price of Toyota G 1.3 M/T at the end of 2012, disposed 2016 (4 years) at 40% acquisition Initial Vehicle Value 152.3 Rp mm

Rental* 38.9% per annum *as % of initial cost

Revenue 59.29 per annum

COGS Y1 Y2 Y3 Y4

Maintenance 1.60% 2.60% 4.25% 5.25%

Insurance 1.60% 1.60% 1.60% 1.60%

License 1.00% 1.00% 1.00% 1.00%

Opex + Margin 8.00%

Resale Value at year 4 60.0% Depreciation 8.0 years

Leverage 67.0%

Interest Costs 9.3%

Corporate Tax 20.0% of PBT

Unlevered Cash Flow in Rp mn

Y0 Y1 Y2 Y3 Y4

Initial Cost (152.3)

Revenue 59.3 59.3 59.3 59.3 Costs

Maintenance (2.4) (4.0) (6.5) (8.0) Insurance (2.4) (2.4) (2.4) (2.4) License & Tax (1.5) (1.5) (1.5) (1.5) Opex + Margin (12.2) (12.2) (12.2) (12.2) Corporate Tax (4.3) (4.0) (3.5) (3.2)

Disposal 91.4

Total (152.3) 36.4 35.2 33.1 123.3

average EBITDA margin 68.7% 66.1% 61.9% 59.3% 64.0%

ROIC -15.0% 24.2% 21.2% 19.0% 12.4%

IRR: 14.5%

1 2 3 4

Levered Cash Flow in Rp mn

Y0 Y1 Y2 Y3 Y4

Initial Cost (50.2)

Revenue 59.3 59.3 59.3 59.3 Costs

Maintenance (2.4) (4.0) (6.5) (8.0) Insurance (2.4) (2.4) (2.4) (2.4) License & Tax (1.5) (1.5) (1.5) (1.5) Opex + Margin (12.2) (12.2) (12.2) (12.2) Interest Payments (9.4) (9.4) (9.4) (9.4) Corporate Tax (2.4) (2.1) (1.6) (1.3)

Principal Payments (102.0)

Disposal 91.4

Total (50.2) 28.8 27.6 25.6 13.7

average EBITDA margin 68.7% 66.1% 61.9% 59.3% 64.0%

ROIC 31.2% 24.8% 17.8% 12.8% 21.6%

IRR level is highly impacted by the scrap value of the fleet

Our sensitivity analysis suggests that a +/- 5% change in scrap value from 60% of acquisition cost to 55% and 65% would change unlevered IRR to 13.4%/15.7%. Our thesis holds that popular brands such as Avanza (contributes 30%-35% of ASSA’s fleet) have been upgrading its class segment. This is shown by significant price increase over the past 5 years (In 2012, a brand new Avanza was only ~IDR150m/unit and now is ~IDR200m/ unit without any new model revamps, only facelifts) so that the lower class LCGC segment (e.g. Toyota Calya / Daihatsu Sigra) could replace its class position. This ensures relative stability of second-hand Avanza prices over the past 5 years.

Source: Trimegah Research

Figure 8. Sensitivity analysis of changes in scrap value to IRR levels

Source: Company, Trimegah Research * Data collection from ASSA

Figure 9. Toyota Avanza second hand price is relatively stable over the past 3 years*

Scrap value

50% 55% 60% 65% 70%

Unlevered IRR

Car fleet size has been increasing consistently for 9 years...

ASSA fleet size has grown by 25.6% CAGR since 2007 to 2016 coupled with strong utilization rate at a high

~95% level. ASSA plans to increase its fleet size by 7.8% to 20,700 units by end of this year. ASSA’s total fleet

accounts to 0.14% of total registered cars in Indonesia, a very small proportion as it is only segmented to corpo-rate customers.

…and its car auction business is growing as well

Its new car auction business, BidWin, has increased the number of cars it auctioned from only 1,096 units in 2014 to 18,122 units. We expect units offered to grow by 15% this year. There are several competitors; Ibid (owned by Astra), JBA (consortium of Japanese companies), and Astria. It is difficult for players with small capi-tal to enter the auction business as the auction business requires a huge land plot. Indonesia still uses conven-tional method of auto auction where land possession matters, whereas advanced countries such as Japan already uses digital computer platforms for auction events

.

We visited one of BidWin’s auction events in Cakung, East Jakarta, a regular weekly event. One of the main purpose of this weekly event is for leasing companies to 1.) Have a platform in selling their massive number of second-hand 4W units (majority are showroom dealers), 2.) Get a fair-deal as price agreement by consensus (group of bidders). The auction coordinator usually holds a days open event before the auction starts. The 3-days period is the time where potential bidders get to see the physical condition and the details of the numerous cars displayed. At the auction event, an appointed legal is in the middle of all bidders to ensure that the highest bidder must become legally binding with the purchase.

Figure 10. Number of fleet, 2007-2016

Source: Company

Fleet size has grown

by

+25.6%

CAGR

Figure 11. BidWin’s units offered vs. units sold, 2014-2017F

Source: Company

Units sold has grown

by

+197.2%

CAGR

since 2014. We

ex-pect it to grow by

~30% in 2017F.

Figure 12. Our visit to BidWin auction event

Figure 13. BI Rate, 7DRRR and lending rate vs. ASSA’s cost of fund, 1Q12-1Q17

Source: Bloomberg, Company, Trimegah Research

Low interest rate environment, lower cost of fund

Since beginning of 2016, BI rate and 7DRRR have been decreasing, followed by lower working capital and

invest-ment lending rate. This low interest rate environinvest-ment is reflected in ASSA’s lower cost of fund which consistently

stays below 10% since 3Q16 reaching 9.26% in 1Q17, lowest cost of fund since IPO.

Lending rate trend

fol-lows BI rate and

7DRRR. Hence, cost of fund decreased from

10.75% in 1Q13 to

9.26% in 1Q17

High bargaining power to car distributors

Things will never be the same in the 4W distribution industry. Competition remains tight and distributors find competitive edge to gain market share by filling segment gaps and providing generous price discounts. We had a channel-check to several car dealers. They said that they are able to provide even more generous discounts should we purchase more than 3 cars for corporate use. With ASSA purchasing ~4000 cars/year, ASSA could obtain a relatively higher discount compared to small rental players.

Source: Company, Trimegah Research

ASSA 1Q17 results

 1Q17 revenue reached IDR411bn (+12% YoY, -6%QoQ) while net profit grew to IDR23bn (+109% YoY, +9%QoQ), in-line with consensus’ estimate at 23% and 26%. Increased in net profit margin is a result of lower 1Q17 interest rate compared to 4Q16 and 1Q16, which were 9.3%, 9.9% and 10.6% respectively.  Net gearing also went down from 204% in 1Q16, to 198% in 4Q16 and reached 192% on 1Q17.

Figure 15. ASSA 1Q17 result

Figure 14. Toyota Avanza price vs. ASSA’s acquisition

Source: Company, Trimegah Research

Company plans to re-place 3,000 units and increase its fleet size by 1,500 units to 20,700 units in 2017. It

ena-bles ASSA to get

~Rp3mn-Rp5mn

dis-count higher than

mar-ket’s.

(in IDRbn) 1Q16 4Q16 1Q17 % QoQ % YoY 3M16 3M17 %YoY

%of FY17 TRIM

% of FY17 Cons

Revenue 365 437 411 -6% 12% 365 411 12% 24% 23%

Gross Profit 100 139 121 -13% 21% 100 121 21% 24%

EBITDA 90 105 105 0% 17% 90 105 17% 24% 14%

Operating Profit 60 81 72 -12% 20% 60 72 20% 24% 24%

Net Profit 11 21 23 9% 109% 11 23 109% 26% 26%

Gross Margin 27.5% 31.9% 29.5% 27.5% 29.5% EBITDA margin 24.6% 24.0% 25.5% 24.6% 25.5% Operating Margin 16.5% 18.6% 17.5% 16.5% 17.5%

Net Margin 3.0% 4.8% 5.6% 3.0% 5.6%

Cash 30 40 72 30 72

Debt 1,799 1,828 1,852 1,799 1,852

Equity 865 904 926 865 926

Source: Company

Figure 16. Fleet breakdown based on age, 2016

Figure 17. Fleet breakdown based on brands, 2016

Source: Company

Figure 18: Fleet breakdown based on 4W classification, 2016

Figure 19. Fleet breakdown based on loca-tion Age 1, 17.5% Age 2 26.9% Age 3 22.3% Age 4 19.2% Age 5 11.2% Age 6 2.5% Age 7 0.4% Daihatsu 30.8% Honda 6.6% Isuzu 1.6% Mitsubishi 11.3% Nissan 0.7% Suzuki 6.2% Toyota 41.5% Others 1.3% 4x4 1.7% Motorcycle 5.3% Passenger car 81.7% Truck 11.3% Jakarta 23.8% Surabaya 12.1% Medan 12.0% Makassar 6.9% Bandung 6.7% Palembang 6.5% Others (< 5%) 32.0%

Figure 20. Contribution from top customers by fleet size

Source: Company

Top 5 customers

ac-counts 37% of

AS-SA’s fleet

37% 47% 59% 71% 79%

Top 5 Top 10 Top 20 Top 50 Top 100 Source: Company

Figure 22. Porter’s five forces analysis

Threat of new entrants MEDIUM

 High capital require-ment.

 Need economies of scale and synergies across the value chain to be competitive.

Bargaining power of suppliers MEDIUM

 Mostly use ASII’s brand

 Corporate sales account for 30% of total 4W sales which can provide some bargaining power for car rental company (bulk discount)

Threat of substitutes MEDIUM

 Customer can switch to competitor with no significant switching cost.

 ~78% market is owned by small busi-nesses. However, the big players can be price competitive.

Bargaining power of buyers MEDIUM

 Customer can switch to com-petitor with no significant switching cost.

 High market utilization rate (>90% on average)

Industry Rivalry MEDIUM

 Companies are targeting same cus-tomers, which are corporate clients.  Different level of service and pricing.

Source: Trimegah Research

Figure 21. Top customers

Financial Analysis

Revenue and gross profit contribution

Vehicle leasing and sale of its used leasing vehicle is ASSA’s core business contributing to 81%/87% of 2016’s

revenue and gross profit respectively. Its other businesses such as logistics and auction partially act as a back-bone to support the core business.

Source: Company, Trimegah Research

Revenue to grow ...

+11.8%/+7.1% revenue growth in 2017-18 would be supported by 1.) Increase in rental fleet, 2.) High disposal value, 3.) Growth in units offered and units sold in auction segment.

… and net profit to grow even further

We expect 2017F net profit to grow by +44% YoY, a significant increase mainly driven by lower interest expense as ASSA has refinanced most of its debt in 4Q16. 2017 net margin increased to 5.1% from 4.0% in 2016. The interest expense is a sensitive component that can impact net profit. Our sensitivity analysis suggests +/- 0.4% change in financing rate will impact 2017 and 2018 net profit by +/- 8.5% and +/- 5.7% respectively.

Figure 23. Revenue breakdown Figure 24. Gross profit breakdown

2015 2016 2017F 2018F 2019F

Revenue (IDRbn) 1,393 1,570 1,756 1,881 2,061

Revenue growth (%) 22 13 12 9 9

EBITDA (IDRbn) 358 409 435 484 423

EBITDA margin (%) 26 26 25 26 21

Net profit (IDRbn) 34 62 90 124 143

Net profit growth (%) -20 82 45 39 16

Figure 25. Revenue, EBITDA and net profit, 2015—2019F

Figure 26. Sensitivity analysis — Impact of change in CoF to net profit

Source: Trimegah Research

Net profit (IDR bn) Change

Rate change rate 2017F 2018F 2017F 2018F

10.00% 74 110 -17.0% -11.3%

9.60% 82 117 -8.5% -5.7%

Base case 9.20% 90 124 0.0% 0.0%

8.80% 97 131 8.5% 5.7%

8.40% 105 138 17.0% 11.3%

Source: Company, Trimegah research

Figure 27. Highly leveraged business in nature Figure 28. Increasing ROIC

Source: Company, Trimegah research

Source: Company, Trimegah research

Figure 29. Increasing ROAA and ROAE Figure 30. Prudent capex level

Source: Company, Trimegah research

Figure 31. EBITDA to cover debt in ~4 years Figure 32. Minimum cash flow risk

Source: Company, Trimegah research

Figure 33. Auto industry net gearing, 2016

Source: Companies, Trimegah Research

Company Net Debt

(IDR bn)

Equity (IDR bn)

Net Gearing (x)

BIRD 1,252 4,589 0.27

MPMX 5,704 5,647 1.01

ASSA 1,788 904 1.98

TAXI 1,501 736 2.04

ASSA’s net gearing is

high compared to peers due to the nature of the business

5% corporate tax savings

Under Gov. Reg. No. 56/2015, companies who met certain criteria will be granted 5% lower income tax rate. The criteria are 40% or more of its shares must be owned by public, and such shares are owned by at least 300 par-ties, each parties owning less than 5% of the total paid-up shares and must be met at least 183 calendar days

within a tax year. By meeting such condition, ASSA’s income tax rate is only 20%, lower vs normal corporate tax

Industry Analysis

Auto sector to grow +5/+6% in 2017-18 respectively

Gaikindo targets to sell 1.1m units 4W in 2017, up +3.5% growth. Meanwhile, we expect domestic 4W industry

sales to grow by +5% in 2017 and +6% in 2018 respectively. The 2017’s +5% growth is quite reasonable

know-ing that 3M17 4W sales have increased by +6% YoY while ASII’s 3M17 4W sales grew by +27% YoY. ...and we expect ASII’s market share to further increase driven by LCGCs

ASII’s LCGC market share experienced a jump from 57% in 2015 to 69% in 2016 and further increased to 81%

in 1Q17. This is mainly driven by strong sales of Toyota Calya which was launched back in 2H16. Note that LCGC

industry sales accounts ~23% of total domestic 4W sales. By this we expect ASII’s total market share to increase

to 57% in 2017 and 61% in 2018. Based on our proprietary data, Toyota products have been giving away gener-ous discounts over the past several years. We believe that this would be a key tool to incentivize demand going forward.

Figure 34. 4W industry sales volume, 2014—2018F

Source: ASII, Trimegah Research

Figure 35. 4W vs. 2W industry growth, 1Q14-1Q17

Source: ASII, Gaikindo, AISI, Trimegah Research

4W sales has experi-enced positive growth

since Apr ‘16 while 2W

sales growth is still un-der negative growth territory.

We expect the 4W in-dustry to grow by +5% in 2017 and +6% in 2018. Also, we expect

ASII’s market share to

increase

4W sales growth turns positive

4W & 2W Sales Mar' 16 Feb' 17 Mar' 17 %Chg MoM

%Chg

YoY 3M16 3M17

%Chg

YoY 2017F

3M17/ 12M17 4W

Astra

Toyota 30,083 36,376 38,852 7% 29% 80,515 107,611 34% 386,637 28% Daihatsu 14,504 17,755 16,149 -9% 11% 42,452 49,730 17% 201,202 25%

Isuzu 1,449 1,247 1,247 0% -14% 3,908 3,594 -8% Ud Trucks 4 3 -100% -100% 244 5 -98% Peugeot & others 142 170 3 -98% -98% 147 318 116%

Total Others (Astra) 1,595 1,420 1,250 -12% -22% 4,299 3,917 -9% 23,920 16% Subtotal for Astra

(inc. LCGC) 46,182 55,551 56,251 1% 22% 127,266 161,258 27% Astra LCGC 8,326 18,167 15,094 -17% 81% 24,337 51,839 113% Total Domestic 93,990 94,791 101,484 7% 8% 267,125 282,528 6% Total LCGC 13,141 21,727 20,128 -7% 53% 41,301 64,220 55%

Astra market share 49% 59% 55% 48% 57%

Astra LCGC market 63% 84% 75% 59% 81%

LCGC market to national 14% 23% 20% 15% 23%

Figure 36. 4W 1Q17 volume sales

Source: ASII, Trimegah Research

April MPV price index stabilizing as well as...

Our MPV gross price index finally calms at steady price index of 109 in Apr’ 17 (+0% MoM, +5.4% YoY) after

increasing by +4.7% YTD. Net price index (price after discounts) was also flat.

… LCGC price index

LCGC Apr’ 17 gross price index went flat at 106 (+0% MoM, +8.3% YoY) and net price index also stayed flat at

106 (-0.3% MoM, +9.4% YoY). LCGC gross price index, net price index, and discount level have been relatively flat since beginning of year. We believe that LCGC prices will remain flat throughout this year as to gain larger market share knowing that the customer segment is relatively price sensitive.

Increase in MPV and LCGC price indexes lead to strong used car market

We compared ASSA’s used car price data for Toyota Avanza G 1.3 M/T 2011 and 2012 between 2015—2017. Toyota Avanza G 1.3 M/T 2011 highest price fluctuated between IDR109mn to IDR110mn while average price slightly increased. Furthermore, Toyota Avanza G 1.3 M/T 2012 highest price increased from IDR105mn in 2015 to IDR127mn in 2016 (+20.9% YoY) and to IDR133mn in 2017 (+4.7% YTD) in 1Q17. Even though average price dropped slightly in 1Q17, it was still higher compared to average price in 2015. It shows that used Toyota Avanza G 1.3 M/T price tends to be sticky downward, and for production of 2012 the price even tends to in-crease. It is mostly caused by increasing price of new Toyota Avanza in spite of limited change in specs and

Source: Company, Trimegah Research

Gross price index, net price index, and dis-count are stabilizing.

Figure 37. MPV gross and net price index*, Apr ‘16-Apr ‘17

LCGC Price Index*

MPV Price Index*

* base year index starts from Jan’ 16 using average price (low and high base) of

new cars such as Agya, Ayla, Calya, Sigra, and Honda Brio Satya. Gross and net

prices are obtained from dealers’ price list excluding discount.

Gross price index, net price index, and dis-count are relatively sta-ble since beginning of the year.

Figure 38. LCGC gross and net price index*, Apr ‘16-Apr ‘17 Source: Company, Trimegah Research

* base year index starts from Jan’ 16 using average price (low and high base) of

new cars such as Avanza, Xenia, Innova, Mobilio and HRV. Gross and net prices

Source: Company, Trimegah Research

Highest price were similar between 2015-2017 while average price slightly in-creased.

Figure 39. Toyota Avanza G 1.3 M/T 2011 used car price

*1Q17 only

Highest price increased 20.9% YoY in 2016 and 4.7% YoY in 2017. Aver-age price dropped slightly on 1Q17 but still higher than 2015.

Source: Company, Trimegah Research *1Q17 only

Figure 41. Top 3 companies fleet size, 2012-2016*

Source: Company, Trimegah Research *Assume TRAC 2013 fleet size unchanged.

Indonesia car rental market is dominated by informal small rental players

Based on data from Marketeers, 8 big players (eg; TRAC, ASSA, and MPM Rent) only cover ~21-22% of market while the rest (~79%) is covered by informal small rental players. TRAC is the largest player, followed by ASSA and MPM rent.

Income Statement (IDRbn) Balance Sheet (IDRbn)

Cash Flow (IDRbn)

Interim results

Year end Dec 2015 2016 2017F 2018F 2019F

Revenue 1,393 1,570 1,756 1,881 2,061

Gross profit 414 456 505 553 601

Opr. profit 228 273 297 338 366

EBITDA 358 409 435 484 423

Growth (%) 6.13 14.31 6.4 11.2 -12.7

Net int. inc/(Exp) (171) (184) (174) (161) (156)

Pre-tax profit 57 89 122 178 210

Tax (23) (27) (33) (54) (67)

Minority int. (0) (0) (0) (0) (0)

Net profit 34 62 90 124 143

Growth (%) -20.5 81.9 44.2 38.7 15.5

Year end Dec 2015 2016 2017F 2018F 2019F

Cash & equivalents 28 40 20 23 23 Other current asset 238 252 249 263 282 Net fixed asset 2,538 2,631 2,829 2,770 2,819 Other non-curr. asset 89 106 113 121 130

Total asset 2,893 3,030 3,212 3,177 3,253

ST debt 28 2 10 10 10

Other curr liab 597 595 615 619 625 LT debt 1,300 1,387 1,457 1,307 1,257 Other LT liab 114 143 162 185 211

Total liabilities 2,038 2,126 2,244 2,120 2,103

Minority interest 0 0 0 0 0

Equity 854 904 968 1,057 1,150

Total liab. & equity 2,893 3,030 3,212 3,177 3,253

Year end Dec 2015 2016 2017F 2018F 2019F

Net profit 34 62 90 124 143 Depr / Amort 130 136 139 146 57 Chg in work. cap (32) 1 23 (10) (13) Others (226) (21) 19 23 27

CF from op. (93) 177 271 283 213

Capex (345) (93) (337) (87) (105) Others 300 81 (7) (8) (8)

CF from investing (45) (12) (344) (95) (114)

Net change in debt 329 44 78 (150) (50) Changes in capital 0 0 0 0 0 Others (184) (196) (25) (36) (50)

CF from financing 145 (152) 53 (186) (100)

Others

Net cash flow 6 13 (20) 2 (0) Cash at BoY 22 28 40 20 23 Cash at EoY 28 41 20 23 23

Year end Dec 1Q16 2Q16 3Q16 4Q16 1Q17

Revenue 365 380 388 437 411

Gross Profit 100 108 108 139 121

Opr. Profit 60 63 69 81 72

Net profit 11 12 18 21 23

Gross Margins (%) 27.5 28.5 27.8 31.9 29.5

Opr. Margins (%) 16.5 16.6 17.7 18.6 17.5

Net Margins (%) 3.0 3.1 4.8 4.8 5.6

Year end Dec 2015 2016 2017F 2018F 2019F

Profitability

Gross margin (%) 29.8 29.0 28.8 29.4 29.2 Op. margin (%) 16.4 17.4 16.9 18.0 17.8 EBITDA margin (%) 25.7 26.1 24.8 25.8 20.5 Net margin (%) 2.5 4.0 5.1 6.6 7.0 ROAE (%) 4.0 7.1 9.6 12.3 13.0 ROAA (%) 1.3 2.1 2.9 3.9 4.5

Stability

Current ratio (x) 0.4 0.5 0.4 0.5 0.5 Net debt/equity (x) 2.1 2.0 1.9 1.6 1.5 Net debt/EBITDA (x) 4.9 4.4 4.3 3.6 4.0 Interest coverage (x) 1.3 1.5 1.7 2.1 2.3

Efficiency

A/R turnover (days) 39 42 40 40 40 Inv. turnover (days) 8 8 9 9 8 A/P turnover (days) 19 14 17 17 17

Capital History Date

IPO date—Nov 2012 IPO price @ IDR 390

PT Trimegah Sekuritas Indonesia Tbk

Gedung Artha Graha 18th _Floor

Jl. Jend. Sudirman Kav. 52-53 Jakarta 12190, Indonesia t. +62-21 2924 9088 f. +62-21 2924 9150 www.trimegah.com

DISCLAIMER

This report has been prepared by PT Trimegah Sekuritas Indonesia Tbk on behalf of itself and its affiliated companies and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solic itation of any offer to buy. This report has been produced independently and the forecasts, opinions and expectations contained herei n are entirely those of Trimegah Sekuritas Indonesia Tbk.

While all reasonable care has been taken to ensure that information contained herein is not untrue or misleading at the time of publication, Trimegah Sekuritas Indonesia Tbk makes no representation as to its accuracy or completeness and it should not be relied upon as such. This report is provided solely for the information of clients of Trimegah Sekuritas Indonesia Tbk who ar e expected to make their own investment decisions without reliance on this report. Neither Trimegah Sekuritas Indonesia Tbk nor any officer or employee of Trimegah Sekuritas Indonesia Tbk accept any liability whatsoever for any direct or consequential l oss arising from any use of this report or its contents. Trimegah Sekuritas Indonesia Tbk and/or persons connected with it may ha ve acted upon or used the information herein contained, or the research or analysis on which it is based, before publication.

4W & 2W Sales

Mar' 16

Feb' 17

Mar' 17

%Chg

MoM

%Chg

YoY

3M16

3M17

%Chg

YoY

2017F

3M17/

12M17

4W

Astra

Toyota

30,083 36,376 38,852

7%

29% 80,515 107,611

34% 386,637

28%

Daihatsu

14,504 17,755 16,149

-9%

11% 42,452 49,730

17% 201,202

25%

Isuzu

1,449 1,247 1,247

0% -14% 3,908 3,594

-8%

Ud Trucks

4 3

-100% -100% 244 5 -98%

Peugeot & others

142 170 3 -98% -98% 147 318 116%

Total Others (Astra) 1,595 1,420 1,250 -12% -22% 4,299 3,917

-9% 23,920

16%

Subtotal for Astra

(inc. LCGC)

46,182 55,551 56,251

1% 22% 127,266 161,258 27%

Astra LCGC

8,326 18,167 15,094

-17%

81% 24,337 51,839 113%

Total Domestic

93,990 94,791 101,484

7%

8% 267,125 282,528

6%

Total LCGC

13,141 21,727 20,128

-7%

53% 41,301 64,220

55%

Astra market share

49%

59%

55%

48%

57%

Astra LCGC market

63%

84%

75%

59%

81%

LCGC market to national

14%

23%

20%

15%

23%

Figure 36. 4W 1Q17 volume sales

Source: ASII, Trimegah Research

April MPV price index stabilizing as well as...

Our MPV gross price index finally calms at steady price index of 109 in Apr’ 17 (+0% MoM, +5.4% YoY) after

increasing by +4.7% YTD. Net price index (price after discounts) was also flat.

… LCGC price index

LCGC Apr’ 17 gross price index went flat at 106 (+0% MoM, +8.3% YoY) and net price index also stayed flat at

106 (-0.3% MoM, +9.4% YoY). LCGC gross price index, net price index, and discount level have been relatively

flat since beginning of year. We believe that LCGC prices will remain flat throughout this year as to gain larger

market share knowing that the customer segment is relatively price sensitive.

Increase in MPV and LCGC price indexes lead to strong used car market

We compared ASSA’s used car price data for Toyota Avanza G 1.3 M/T 2011 and 2012 between 2015—

2017.

Toyota Avanza G 1.3 M/T 2011 highest price fluctuated between IDR109mn to IDR110mn while average price

slightly increased. Furthermore, Toyota Avanza G 1.3 M/T 2012 highest price increased from IDR105mn in 2015

to IDR127mn in 2016 (+20.9% YoY) and to IDR133mn in 2017 (+4.7% YTD) in 1Q17. Even though average

price dropped slightly in 1Q17, it was still higher compared to average price in 2015. It shows that used Toyota

Avanza G 1.3 M/T price tends to be sticky downward, and for production of 2012 the price even tends to

in-crease. It is mostly caused by increasing price of new Toyota Avanza in spite of limited change in specs and

Source: Company, Trimegah Research

Gross price index, net

price index, and

dis-count are stabilizing.

Figure 37. MPV gross and net price index*, Apr ‘16-Apr ‘17

LCGC Price Index*

MPV Price Index*

* base year index starts from Jan’ 16 using average price (low and high base) of

new cars such as Agya, Ayla, Calya, Sigra, and Honda Brio Satya. Gross and net

prices are obtained from dealers’ price list excluding discount.

Gross price index, net

price index, and

dis-count are relatively

sta-ble since beginning of

the year.

Figure 38. LCGC gross and net price index*, Apr ‘16-Apr ‘17

Source: Company, Trimegah Research

* base year index starts from Jan’ 16 using average price (low and high base) of

new cars such as Avanza, Xenia, Innova, Mobilio and HRV. Gross and net prices

Source: Company, Trimegah Research

Highest price were similar

between 2015-2017 while

average price slightly

in-creased.

Figure 39. Toyota Avanza G 1.3 M/T 2011 used car price

*1Q17 only

Highest

price

increased

20.9% YoY in 2016 and

4.7% YoY in 2017.

Aver-age price dropped slightly

on 1Q17 but still higher

than 2015.

Source: Company, Trimegah Research

*1Q17 only

Figure 41. Top 3 companies fleet size, 2012-2016*

Source: Company, Trimegah Research

*Assume TRAC 2013 fleet size unchanged.

Indonesia car rental market is dominated by informal small rental players

Based on data from Marketeers, 8 big players (eg; TRAC, ASSA, and MPM Rent) only cover ~21-22% of market

while the rest (~79%) is covered by informal small rental players. TRAC is the largest player, followed by ASSA

and MPM rent.

Income Statement (IDRbn)

Balance Sheet (IDRbn)

Cash Flow (IDRbn)

Interim results

Year end Dec 2015 2016 2017F 2018F 2019F

Revenue 1,393 1,570 1,756 1,881 2,061

Gross profit 414 456 505 553 601 Opr. profit 228 273 297 338 366

EBITDA 358 409 435 484 423 Growth (%) 6.13 14.31 6.4 11.2 -12.7 Net int. inc/(Exp) (171) (184) (174) (161) (156) Pre-tax profit 57 89 122 178 210 Tax (23) (27) (33) (54) (67)

Minority int. (0) (0) (0) (0) (0) Net profit 34 62 90 124 143

Growth (%) -20.5 81.9 44.2 38.7 15.5

Year end Dec 2015 2016 2017F 2018F 2019F

Cash & equivalents 28 40 20 23 23 Other current asset 238 252 249 263 282 Net fixed asset 2,538 2,631 2,829 2,770 2,819 Other non-curr. asset 89 106 113 121 130 Total asset 2,893 3,030 3,212 3,177 3,253

ST debt 28 2 10 10 10

Other curr liab 597 595 615 619 625 LT debt 1,300 1,387 1,457 1,307 1,257 Other LT liab 114 143 162 185 211 Total liabilities 2,038 2,126 2,244 2,120 2,103

Minority interest 0 0 0 0 0 Equity 854 904 968 1,057 1,150

Total liab. & equity 2,893 3,030 3,212 3,177 3,253

Year end Dec 2015 2016 2017F 2018F 2019F

Net profit 34 62 90 124 143 Depr / Amort 130 136 139 146 57 Chg in work. cap (32) 1 23 (10) (13) Others (226) (21) 19 23 27 CF from op. (93) 177 271 283 213

Capex (345) (93) (337) (87) (105)

Others 300 81 (7) (8) (8)

CF from investing (45) (12) (344) (95) (114)

Net change in debt 329 44 78 (150) (50) Changes in capital 0 0 0 0 0 Others (184) (196) (25) (36) (50) CF from financing 145 (152) 53 (186) (100)

Others

Net cash flow 6 13 (20) 2 (0) Cash at BoY 22 28 40 20 23 Cash at EoY 28 41 20 23 23

Year end Dec 1Q16 2Q16 3Q16 4Q16 1Q17

Revenue 365 380 388 437 411

Gross Profit 100 108 108 139 121

Year end Dec 2015 2016 2017F 2018F 2019F

Profitability

Gross margin (%) 29.8 29.0 28.8 29.4 29.2 Op. margin (%) 16.4 17.4 16.9 18.0 17.8 EBITDA margin (%) 25.7 26.1 24.8 25.8 20.5 Net margin (%) 2.5 4.0 5.1 6.6 7.0 ROAE (%) 4.0 7.1 9.6 12.3 13.0

ROAA (%) 1.3 2.1 2.9 3.9 4.5

Stability

Current ratio (x) 0.4 0.5 0.4 0.5 0.5 Net debt/equity (x) 2.1 2.0 1.9 1.6 1.5 Net debt/EBITDA (x) 4.9 4.4 4.3 3.6 4.0 Interest coverage (x) 1.3 1.5 1.7 2.1 2.3 Efficiency

A/R turnover (days) 39 42 40 40 40 Inv. turnover (days) 8 8 9 9 8 A/P turnover (days) 19 14 17 17 17

Capital History

Date

IPO date—Nov 2012 IPO price @ IDR 390

Key Ratio Analysis

PT Trimegah Sekuritas Indonesia Tbk Gedung Artha Graha 18th _Floor

Jl. Jend. Sudirman Kav. 52-53

DISCLAIMER