Refer to Important disclosures in the last page of this report

  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 A p r- 1 8 A p r- 1 8 M a y -1 8 J u n -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 N o v -1 8} ADHI-Rebase JCI Index-Rebase

  0.9

  30.1

  37.2

  21.9 Net Gearing (%)

  16.7

  73.6 90.7 108.6 105.7 PER (x)

  17.4

  10.6

  8.1

  5.9

  4.9 PBV (x)

  1.0

  0.9

  0.8

  14.3 Net Profit (RpBn) 313 515 671 920 1,122 EPS (Rp) 88 145 188 258 315 EPS Growth (%) (32.5)

  0.7 Dividend Yield (%)

  1.7

  1.7

  2.8

  3.7

  5.1 EV/EBITDA (x)

  7.5 0.8 (0.2) (1.4) (1.6)

  Source: ADHI, IndoPremier Share Price Closing as of : 29-November-2018 E q u it y | I n d o n e s ia | C o n s tr u c ti o n

  50

  60

  70

  80

  90 100 110 120 130

  64.4

  8.7

  Stock Data

  Estimate Change; Vs. Consensus 2018 2019

  Target price (Rp) Rp1,750

  Prior TP (Rp) Rp1,600

  Shareprice (Rp) Rp1,530

  Upside/downside (%) +14.4

  Sharesoutstanding (m) 3,561 Marketcap. (US$ m) 379 Free float (%)

  49.0 Avg. 6m dailyT/O (US$ m)

  0.8 Price Performance

  3M

  6M

  12M

  Absolute (%) 2.7 -20.3 -11.8 Relative to JCI (%) 1.2 -21.8 -13.0 52w high/low (Rp) 2,480 - 1,105

  Major Shareholders

  Government of Indonesia 51.0% Public 49.0%

  Latest EPS (Rp) 188.3 258.4 Vs. Prior EPS (%) (13.6) (6.8) Vs. Consensus (%) (14.3) (12.3)

  9.3

  Source: Bloomberg Joey Faustian

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

  Slight delay in LRT development Maintain FY18F new contract guidance amid weak 10M18 realization. Expecting LRT’s 2 nd payment in mid December of Rp2.84tn. Cut our earnings forecast by 14/7% for FY18F/FY19F. Capex plan of Rp12tn to develop TODs in the next 10 years. Maintain Buy amid higher TP of Rp1750 (from Rp1,600).

  We keep our new contract assumption unchaged. Despite weak new contract of Rp12.3tn in 10M18 (+3% yoy), forming only 54% of company’s FY18Y new contract guidance of Rp23.4tn (Ours: Rp21tn), we still believe that ADHI will fulfill its FY18F target given several project tenders in their pipeline worth Rp23tn. Some of the notable projects were Sigli-Banda Aceh toll road, Jakarta inner toll road and renovation of Soekarno-Hatta airport which worth total of Rp12.7tn.

  To received LRT’s 2 nd payment in mid December. ADHI is expected to receive

  LRT 2 nd payment (Construction work: Sept 2017-Juni 2018) in the 2 nd week of December worth of Rp2.84tn (After PPN) as the payment’s document has already signed by Ministry of Transportation. As of mid 10M18, the construction progress of LRT Jabodebek has reached 49%, thus we forecast FY19F revenue to grow by 15% yoy supported by the remaining of LRT contract which will be monetized in FY19F.

  Cut our earnings forecast given LRT project delay. Due to land acquisition problem for LRT depot in West Bekasi (5.2ha) and Cikunir, ADHI has experienced some delays in LRT’s construction, which prompt them to revise down their revenue guidance for FY18F to Rp16.6tn (from Rp18.5tn). Thus, we cut our FY18F/FY19F earnings by 14%/7%, given the delays on LRT construction progress.

  TOD as a long-term growth strategy. ADHI currently has 20ha of landbank to develop more than 15,000 apartments. ADHI is currently discussing a partnership possibility with Bakrie Group as a land owner to develop TODs in Pasar Festival and Setiabudi. In the long term, ADHI plans to acquire additional 50ha landbank and prepares Capex of Rp12tn to develop more TODs in the next 10 years. The TOD division would be developed under Adhi Commuter Properti (ACP) which is expected launch into IPO in mid 2019.

  Maintain Buy with higher TP of Rp1,750. Despite lower earnings estimate, our new target price (DCF-based, WACC: 10.4%, TG: 2%) was raised to Rp1,750 (from Rp1,600) as we roll over base valuation year to 2019 and lower risk free rate assumption to 8% (from 8.5%). We maintain our Buy rating for ADHI with 14% upside to our new target price which implies FY18-FY19F P/E of 6.8x and 5.6x, respectively. Key risk to our call might come from LRT project delays.

  Adhi Karya (ADHI IJ)

  30 November 2018 Company Update BUY (Unchanged)

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

  Revenue (RpBn) 11,064 15,156 16,599 19,098 22,507 EBITDA (RpBn) 602 1,358 1,484 1,613 1,844 EBITDA Growth (%) 9.7 125.7

• 62 21 5793 1168

  Fig. 1: Revenue by segment Fig. 2: Earnings trend

  Net profit growth

  Investment in infrastructure Real estates EPC Construction _{(Rp bn)} (Rp bn)

  1,000 37% 80% 64%

  25,000

  900 60%

  800 44% 30%

  20,000

  700 40%

  600

  15,000

  500 20%

  400

  10,000

  0% 300

• 21%
• 33% 200

  5,000

• 20% 100
• 40% -

  2014A 2015A 2016A 2017A 2018F 2019F

  2014A 2015A 2016A 2017A 2018F 2019F

  Source: Company, IndoPremier Source: Company, IndoPremier Fig. 3: New contract trend Fig. 4: 10M18 new contract achievements _{(Rp bn)}

  New Contract LRT _{(Rp bn)}

  10M18 New contract % of FY target (Non LRT)

  45,000 12,400

  80%

  40,000

  75% 70%

  12,200 35,000

  70% 63%

  30,000

  65%

  12,000

  59%

  25,000

  60%

  11,800 20,000

  55%

  15,000 11,600

  50%

  10,000

  45%

  11,400 5,000

  40%

  11,200

  35%

• 9M16

  9M17

  9M18 2014A 2015A 2016A 2017A 2018F 2019F 2020F

  Source: Company, IndoPremier Source: Company, IndoPremier Fig. 5: LRT Jabodebek phase I progress Fig. 6: Margin improved due to EPC and Property segment

  Gross margin Operating margin Net margin LRT Progress as of Mid 11M18

  16.0% 80%

  71% 14.0%

  70% 12.0%

  60% 50%

  10.0% 42%

  37% 40%

  8.0% 30%

  6.0% 20%

  4.0% 10%

  2.0% 0%

  0.0% Cawang-Cibubur Cawang-Dukuh Atas Cawang-East Bekasi

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

  Source: Company, IndoPremier Source: Company, IndoPremier

  Fig. 8: Earnings change (Old) (New) (%) change (Rp bn) 2018F 2019F 2018F 2019F 2018F 2019F

  Revenue 18,225.5 19,793.1 16,598.7 19,097.5 -8.9% -3.5% Gross profit 2,684.9 2,892.7 2,457.2 2,747.1 -8.5% -5.0% Operating profit 2,039.2 2,307.1 1,863.1 2,178.4 -8.6% -5.6% Net income 776.0 987.1 670.5 920.1 -13.6% -6.8%

   Margins

  Gross margin 14.7% 14.6% 14.8% 14.4% Operating margin 11.2% 11.7% 11.2% 11.4% Net margin 4.3% 5.0% 4.0% 4.8%

   Source: Company, Indo Premier

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

  Net Revenue 11,064 15,156 16,599 19,098 22,507 Cost of Sales (9,949) (13,098) (14,142) (16,350) (19,290) Gross Profit 1,115 2,058 2,457 2,747 3,216 SG&A Expenses (456) (581) (727) (756) (899) Operating Profit 659 1,477 1,730 1,991 2,317 Net Interest (95) (341) (422) (402) (481) Forex Gain (Loss)

  64

  7 Others-Net (15) (185) (150) (108) (61) Pre-Tax Income 613 957 1,158 1,481 1,776 Income Tax (298) (440) (486) (558) (651) Minorities (2) (2) (2) (3) (3) Net Income 313 515 671 920 1,122

  Balance Sheet

  3,365 4,131 5,548 4,217 4,173 Cash & Equivalent

  3,970 3,739 3,755 4,328 5,047 Receivable 131 3,683 3,236 3,588 4,021 Inventory

  9,368 13,264 13,597 16,026 18,572 Other Current Assets

  16,835 24,818 26,137 28,160 31,814 Total Current Assets

  1,814 1,876 3,677 4,850 5,434 Fixed Assets - Net Goodwill

  1,446 1,639 1,657 1,821 2,009 Non Current Assets

  20,095 28,333 31,471 34,831 39,257 Total Assets

  2,344 3,537 4,565 5,252 6,189 ST Loans

  8,373 11,611 13,017 15,404 Payable

  1,828 2,235 2,255 2,561 3,075 Other Payables 500 250 250 500 Current Portion of LT Loans

  13,044 17,633 18,376 21,329 24,669 Total Current Liab.

  1,428 4,665 6,513 6,166 6,374 Long Term Loans 180 164 195 229 261 Other LT Liab.

  14,653 22,463 25,084 27,724 31,303 Total Liabilities

  3,415 3,413 3,413 3,413 3,413 Equity

  1,997 2,446 2,947 3,666 4,511 Retained Earnings

  10

  11

  12

  13

  14 Minority Interest 5,422 5,869 6,371 7,091 7,938 Total SHE + Minority Int.

  Total Liabilities & Equity 20,075 28,332 31,456 34,816 39,241

  Source: ADHI, IndoPremier

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

  315 517 673 923 1,125 Net Income (Excl.Extraordinary&Min.Int) 66 131 208 332 421 Depr. & Amortization

  2,074 191 (8) 779 1,306 Changes in Working Capital

  (301) (3,124) (3,360) 132 (1,583) Others

  2,154 (2,285) (2,487) 2,166 1,269 Cash Flow From Operating

  (1,257) (386) (2,028) (1,669) (1,193) Capital Expenditure 163 104 145 194 148 Others

  (1,094) (283) (1,883) (1,474) (1,045) Cash Flow From Investing

  1,153 4,181 2,875 590 646 Loans

  1 Equity (94) (94) (155) (201) (276)

  Dividends (195) (447) (546) (569) (609)

  Others 866 3,640 2,175 (180) (239) Cash Flow From Financing

  1,926 1,072 (2,195) 511 (16) Changes in Cash

  Financial Ratios

  10.1

  13.6

  14.8

  14.4

  14.3 Gross Margin (%)

  6.0

  9.7

  10.4

  10.4

  10.3 Operating Margin (%)

  5.5

  6.3

  7.0

  7.8

  7.9 Pre-Tax Margin (%)

  2.8

  3.4

  4.0

  4.8

  5.0 Net Margin (%)

  1.7

  2.1

  2.2

  2.8

  3.0 ROA (%)

  5.9

  9.1

  11.0

  13.7

  14.9 ROE (%)

  5.2

  5.2

  5.1

  6.1

  6.4 ROIC (%)

  84.8

  70.2

  64.1

  59.8

  58.5 Acct. Receivables TO (days)

  35.4

  22.6

  18.3

  17.5

  17.5 Acct. Receivables - Other TO (days)

  67.8

  6.9

  4.1

  4.8

  5.1 Inventory TO (days) 272.6 278.4 295.8 271.5 268.9

  Payable TO (days)

  0.0

  0.0

  0.0

  0.0

  0.0 Acct. Payables - Other TO (days) 78.8 144.0 177.8 168.1 158.3

  Debt to Equity (%)

  0.4

  0.3

  0.3

  0.3

  0.3 Interest Coverage Ratio (x)

  16.7

  73.6 90.7 108.6 105.7 Net Gearing (%)

  Source: ADHI, 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