Refer to Important disclosures in the last page of this report

  O ^{c t- 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 J u l- 1 8} _A ^{u g -1 8} _S ^{e p -1 8 O c t- 1 8 O c t- 1 8} PTPP-Rebase JCI Index-Rebase

  5.1

  0.5

  0.6

  0.6

  0.8

  3.8 PBV (x)

  4.4

  5.7

  1.8

  7.1

  18.3 PER (x)

  13.4

  6.4

  15.9 Net Gearing (%) (22.0) (5.5)

  14.9

  0.5 Dividend Yield (%)

  3.7

  25.0

  E q u it y | I n d o n e s ia | C o n s tr u c ti o n

  90 100 110 120

  80

  70

  60

  50

  40

  2.8 Source: PTPP, IndoPremier Share Price Closing as of : 31-October-2018

  5.3

  2.8

  3.1

  2.6

  2.9

  6.8 EV/EBITDA (x)

  5.9

  11.9

  57.0

  Stock Data

  3M

  Estimate Change; Vs. Consensus 2018 2019

  Government of Indonesia 51.0% Public 49.0%

  Major Shareholders

  Absolute (%) -31.8 -40.1 -53.7 Relative to JCI (%) -28.9 -40.8 -49.9 52w high/low (Rp) 3,220 - 1,330

  12M

  6M

  1.8 Price Performance

  0.0

  49.0 Avg. 6m dailyT/O (US$ m)

  Sharesoutstanding (m) 6,200 Marketcap. (US$ m) 542 Free float (%)

  Upside/downside (%) +57.9

  Shareprice (Rp) Rp1,330

  Prior TP (Rp) Rp2,950

  Target price (Rp) Rp2,100

  Latest EPS (Rp) 262.2 301.2 Vs. Prior EPS (%)

  0.0 Vs. Consensus (%) (7.8) (11.7)

  7.9 Net Profit (RpBn) 1,163 1,453 1,626 1,867 2,164 EPS (Rp) 188 234 262 301 349 EPS Growth (%)

  01 November 2018 Results Note BUY (Unchanged)

  19.9

  38.5

  36.2

  23.5

  Revenue (RpBn) 16,459 21,502 27,938 33,038 36,103 EBITDA (RpBn) 2,071 2,820 3,905 4,683 5,053 EBITDA Growth (%)

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

  Pembangunan Perumahan (PTPP IJ)

  Source: Bloomberg Joey Faustian

  Maintain Buy with TP of Rp2,100 (from Rp2,950). Given in-line 9M18 earnings and new contract achievement, we maintain our positive stand on PTPP as one of our top picks in construction sector. As of 9M18, PTPP has the lowest DER of 0.8x among SOE contractor peers (Industry average: 1.4x). However, we reduced our target price for PTPP to Rp2,100, based target FY18F P/E of 8.0x as we raise our risk free rate to 8.5% (from: 7%). Key risk to our call might come from lower than expected new contract achievement due to infrastructure projects tender delays.

  Diversify to Energy and Water treatment projects. Through it’s subsisdiary, PP Energi has acquired 95% of oil and fuel storage company in Palembang, PT Odira Energy. PTPP plans to construct fuel storage in Nipa Island with total investment of US$400mn. In addition, PTPP is also planning to create a JV to develop 200MV power plant in Philippine with total investment of Rp4tn. PP Energi is currently developing another power plant in Solo which will soon reach financial closing and signing of power purchase agreement (PPA). On the other hand, PTPP has 3 water treatment projects in their pipeline which located in Bekasi, Bali, and Tangerang Selatan.

  8M18, PTPP has total orderbook of Rp80tn, which translate to 3.5x trailing 12- month sales, providing strong profitability for the next 3 years.

  The only SOE contractor with positive new contract growth. PTPP booked new contract of Rp32.5tn in 9M18 (+2% yoy), forming 66% of company’s FY18 guidance of Rp49tn. We are confident that PTPP will be able to achieve our FY18F target of Rp48tn given new contract pipeline of Rp21.3tn in 4Q18. PTPP will need 77% winning rate to achieve company’s FY18F contract target of Rp49tn. As of

  Modest 3Q18 bottom line with improved margin. PTPP reported 9M18 Earnings of Rp865bn (+53% yoy), which came in-line with ours (54%), but slightly below consensus FY18F estimate (50%). Net margin were squeezed to 5.9% in 9M18 (9M17: 7.2%) due to increase in interest expense of Rp464bn (+95% yoy) and non-controlling interest portion of 22% (9M17: 11%). However, PTPP booked modest 3Q18 earnings of Rp395bn (+22% qoq, -5% yoy), forming 24% of our FY18F forecast. In addition, 3Q18 net margin was improved to 7.5% in 3Q18 (vs. 2Q18: 5.6%) given lower opex and increase in other income of Rp144bn (-39% qoq) and Rp186bn (+85% qoq), respectively.

  Modest 3Q18, still in-line Earnings grew by 53% in 9M18, in-line with our forecast. Resilient 9M18 contract achievement (+2% yoy). To invest in Energy and Water treatment projects. Maintain Buy albeit lower TP of Rp2,100 (Target P/E of 8.0x).

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

• 62 21 5793 1168
• 5,000

• 5,000 10,000 15,000 20,000 25,000
• 20,000 40,000 60,000 80,000 100,000

  9M17

  10.0% 12.0% 14.0% 16.0% 18.0%

  WSKT ADHI WIKA PTPP 0.0% 2.0% 4.0% 6.0% 8.0%

  2.5 WSKT ADHI WIKA PTPP (x)

  2

  1.5

  1

  0.5

  0.8

  1.1

  1.3

  2.2

  9M18 (Rp bn) New contract % to FY Target

  9M16

  Fig. 1: Revenue by segment Fig. 2: 9M18 revenue by segments Source: Company, IndoPremier Source: Company, IndoPremier

  30,000 35,000

  62% 64% 66% 68% 70% 72% 74%

  (Rp bn) 72% 72% 66%

  120,000 2014A 2015A 2016A 2017A 2018F 2019F 2020F Carry over New contract

  Construction EPC Property and realty Equipment rent Precast Energy Infrastructure

  65% 20% 12%

  Construction EPC Property and realty Equipment rent Precast growth

  2014A 2015A 2016A 2017A 2018A 2019A 2020A (Rp Bn)

  10,000 15,000 20,000 25,000 30,000 35,000 40,000

  0% 5% 10% 15% 20% 25% 30% 35%

  

Fig. 5: PTPP has the lowest DER among SOE peers Fig. 6: Margin to improve given property and EPC contribution

Source: Company, IndoPremier Source: Company, IndoPremier

  Fig. 3: Order book to grow by 7% CAGR in FY17A-FY20F Fig. 4: 9M new contract achievements Source: Company, IndoPremier Source: Company, IndoPremier

  2014A 2015A 2016A 2017A 2018F 2019F Gross margin Operating margin Net margin

  Fig.7: 9M18 earnings result (Rp bn)

  9M18

  9M17 YoY

  3Q18

  2Q18 QoQ FY17/ ours FY17/ consensus

  Revenue 14,787 13,762 7% 5,280 5,824 -9% 53% 55% Gross profit 2,228 1,994 12% 765 905 -15% 53% 54% Operating profit 1,811 1,701 6% 732 710 3% 50% 55% Net profit 875 990 -12% 395 324 22% 54% 50% Gross margin 15.1% 14.5% 14.5% 15.5% Operating margin 12.2% 12.4% 13.9% 12.2% Net margin 5.9% 7.2% 7.5% 5.6%

  Source: Company, IndoPremier

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

  Net Revenue 16,459 21,502 27,938 33,038 36,103 Cost of Sales (14,003) (18,251) (23,748) (27,871) (30,341) Gross Profit 2,456 3,251 4,190 5,167 5,762 SG&A Expenses (487) (726) (934) (1,158) (1,364) Operating Profit 1,968 2,525 3,257 4,008 4,398 Net Interest (360) (421) (820) (1,129) (1,077) Forex Gain (Loss)

  22

  3 Others-Net 213 328 366 372 382 Pre-Tax Income 1,843 2,436 2,802 3,251 3,703 Income Tax (552) (712) (865) (1,023) (1,127) Minorities (128) (271) (311) (361) (412) Net Income 1,163 1,453 1,626 1,867 2,164

  Balance Sheet

  9,424 9,587 10,995 13,295 13,524 Cash & Equivalent

  11,154 16,229 18,179 20,065 22,368 Receivable

  2,656 2,421 3,239 3,961 4,404 Inventory

  1,110 1,671 2,551 2,875 2,871 Other Current Assets

  24,344 29,908 34,964 40,197 43,168 Total Current Assets

  5,640 9,057 10,508 11,913 12,518 Fixed Assets - Net Goodwill 762 1,635 1,552 2,124 2,448 Non Current Assets

  31,233 41,783 48,562 56,053 60,121 Total Assets

  1,996 2,154 3,701 4,333 4,710 ST Loans

  10,237 14,506 19,415 19,483 Payable

  1,943 2,731 2,667 3,105 3,413 Other Payables

  1,702 1,309 618 713 770 Current Portion of LT Loans

  15,879 20,700 24,928 27,565 28,376 Total Current Liab.

  3,048 5,144 7,314 10,051 10,942 Long Term Loans

  1,510 1,696 2,150 2,624 3,124 Other LT Liab. 20,437 27,540 34,392 40,240 42,442

  Total Liabilities 6,874 7,391 7,391 7,391 7,391

  Equity 2,922 4,063 5,257 6,637 8,241

  Retained Earnings 1,000 2,789 1,527 1,790 2,053

  Minority Interest 10,796 14,243 14,175 15,817 17,684 Total SHE + Minority Int.

  Total Liabilities & Equity 31,233 41,783 48,567 56,057 60,126

  Source: PTPP, IndoPremier

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

  1,291 1,724 1,937 2,229 2,575 Net Income (Excl.Extraordinary&Min.Int) 526 650 649 674 655 Depr. & Amortization

  (406) (1,139) (213) (1,295) (2,561) Changes in Working Capital 705 561 592 1,099 957 Others

  2,116 1,796 2,965 2,707 1,627 Cash Flow From Operating

  (3,576) (4,939) (2,018) (2,652) (1,584) Capital Expenditure

  (114) (370) (305) (251) (126) Others

  (3,690) (5,309) (2,322) (2,902) (1,709) Cash Flow From Investing

  3,068 1,861 3,026 3,463 1,325 Loans

  4,414 Equity

  (148) (307) (436) (488) (560) Dividends 508 1,838 (1,739) (471) (387) Others

  7,842 3,392 851 2,505 378 Cash Flow From Financing

  6,268 (120) 1,494 2,310 296 Changes in Cash

  Financial Ratios

  14.9

  15.1

  15.0

  15.6

  16.0 Gross Margin (%)

  12.0

  11.7

  11.7

  12.1

  12.2 Operating Margin (%)

  11.2

  11.3

  10.0

  9.8

  10.3 Pre-Tax Margin (%)

  7.1

  6.8

  5.8

  5.7

  6.0 Net Margin (%)

  4.6

  4.0

  3.6

  3.6

  3.7 ROA (%)

  14.6

  11.6

  11.4

  12.5

  12.9 ROE (%)

  9.8

  9.2

  7.8

  7.3

  7.3 ROIC (%)

  85.4

  95.8

  93.3

  89.5

  89.3 Acct. Receivables TO (days) 136.2 136.6 131.5 121.7 125.2

  Acct. Receivables - Other TO (days)

  5.4

  7.2

  8.4

  7.7

  7.3 Inventory TO (days) 236.2 247.4 249.4 244.6 234.0

  Payable TO (days)

  0.0

  0.0

  0.0

  0.0

  0.0 Acct. Payables - Other TO (days)

  62.5

  60.4

  82.1

  95.4

  92.9 Debt to Equity (%)

  0.2

  0.3

  0.3

  0.3

  0.3 Interest Coverage Ratio (x) (22.0) (5.5)

  6.4

  13.4

  18.3 Net Gearing (%)

  Source: PTPP, 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