October 8, 2015 Puradelta Lestari · 2019-11-04 · o n se u Companies Data Stock Price October 8,...

COMPANY FOCUS PT Trimegah Securities Tbk - www.trimegah.com 1

Puradelta Lestari Company Focus Wisnu Budhiargo

[email protected]

Largest non-scattered landbank in West Java Puradelta Lestari holds the largest net saleable landbank in the immedi-ate area (+130% to LPCK, +420% BEST, +30% KIJA) and has the ability to accommodate any upcoming anchor tenants with ease due to their landbank being one big bulk land, in which would be beneficial since anchors would require at least 50+ Ha of non-scattered land. As a result, as FDI picks up, Puradelta Lestari should be their first pick for investment.

Solid marketing sales despite softening market

Currently management has secured 78 % of their 2015 marketing sales target (Rp 1.9tr in 2015), thanks to the recent bulk sales of 60 Ha to SGMW Motor, a consortium between SAIC Motor, General Motors and Liuzhou Wuling, which focuses on four-wheel automotive. We believe the remaining 18 Ha target should be easily absorbed by supporting manufactures given the new tenant’s sheer manufacturing scale. The land sale to a Chinese auto manufacturer also suggests that Deltamas is not a ‘one trick pony’, it can also sell land to non-Japanese factories despite having Sojitz as its Japanese partner in marketing industrial land.

12% downside risk Vs. 38-120% upside risk Puradelta Lestari has substantial room for growth thanks to their un-derutilized residential sector considering the amount of upcoming crowd-pullers entering their estate, such as AEON mall & ITB expansion to name a few, as well as their ability to utilize neighboring estate’s exist-ing facilities at practically zero cost. We highlight that in a bear case scenario of zero cash flow from residential and commercial, there is only 12% downside Versus 38% upside to our base case and 120% upside to our bull case scenario (see p4 for details).

Cheap assets with ability to unleash new heights; initiate BUY

We derive our DCF-based TP of IDR310 (43% upside), implying 8x 2016 P/E. Price target is based on our DCF estimate, with Beta of 1.5, risk-free rate of 8.4% and WACC of 14%. The stock is trading at 9x/8x 2015E/2016E P/E.

PT Puradelta Lestari sells industrial, resi-dential and commercial land through their estate, Kota Deltamas.

Share Price Rp217 Sector Property Price Target Rp310 (43%)

Year end Dec 2013 2014 2015F 2016F 2017F

Sales 1,904 1,658 2,020 2,032 1,450 EBITDA 947 1,041 1,738 1,861 1,082 Net Profit 952 981 1,627 1,746 1,000 EPS 22 23 34 36 21 DPS (Rp) 0 0 0 0 0 P/E (x) 10 10 6 6 10 Div Yield (%) 0% 0% 0% 0% 0%

Buy Rp310

Reuters Code DMAS.JK Bloomberg Code DMAS.IJ Issued Shares 48,198,111,100 Mkt Cap. (Rpbn) 9,495 Avg. Value Daily 6 Month (Rpbn) 5.7

52-Wk range 146-223

Sojitz Corporation 22.5% AFO International Capital Ltd. 41.3% Fame Bridge Investments Ltd. 22.5% Public 10.0%

EPS 15F 16F Consensus (Rp) 21 25 TRIM vs Cons. (%) 62 44

An Industrial Metropolis in the Making

Company Update

Stock Data

Major Shareholders

Consensus

Stock Price Companies Data

October 8, 2015

http://www.trimegah.com

mailto:[email protected]

PT Trimegah Securities Tbk - www.trimegah.com SECTOR FOCUS 2

INVESTMENT THESIS

Puradelta Lestari is an estate developer, established in 1993, best known for their integrated estate “Kota Delta-

mas” located in Central CIkarang, Bekasi, West Java. The estate has direct access to Jakarta-Cikampek Toll

through the KM 37 gate. Kota Deltamas holds a total gross landbank of 3,049 Ha, in which 1,204 Ha had been

developed and sold prior 2015. Puradelta Lestari mainly focuses on sales of industrial-related land through their

industrial estate within Kota Deltamas, Greenland International Industrial Center (GIIC), typically from auto-

related customers. GIIC itself takes up 47% of Kota Deltamas’ total landbank, measuring 1,435 Ha gross land, in

which 445 Ha are available for sale. We like the company for the following reasons:

1. Largest listed industrial land developer

Landbank is king to a property developer, as it practically serves as the commodity being sold for profit. Pu-

radelta Lestari holds the largest landbank among other listed developers in the immediate competition area of

Cikarang – Karawang, a total of 3,049 Ha of land, in which 1,845 Ha of gross landbank is available to utilize,

conveniently located within Kota Deltamas.

2. Non-scattered landbank

Puradelta Lestari’s landbank are exclusively non-scattered land, concentrated within Kota Deltamas’ estate thus

enabling the management to accept enquiries for large land plots especially from industrial-related customers,

which typically derives from anchor tenants and would subsequently attract smaller tenants.

3. Diversified pipeline, with unleashed potential from residential-sector

Puradelta Lestari allocates 47% of their landbank to residential-related developments. Apart from enabling Pu-

radelta Lestari to mitigate FDI-related industrial land demand risks, would also grant the ability to monetize po-

tential residential demand from existing factory’s workers, both expatriates and non-expatriates, as well as from

the upcoming commercial developments that are scheduled to enter the estate which we believe would serve as

a highly effective crowd-puller.



Stock Data

Development Props. (Rp Bn) 9,503 Investment Props. (Rp Bn) 364 Total Gross Assets (Rp Bn) 9,867 Add: Cash 5,043 Less: Debt 321 NAV 14,589 Target Price 310

Figure 2. SOTP Calculation

VALUATION We initiate coverage on Puradelta Lestari with a Buy rating and price target of Rp 310,- (43% upside). We apply DCF from cash flow of pre-selling activities less cost, with WACC of 12.6%, Risk-free rate of 8.4% and Long-term growth of 5%. We assume 2016’s marketing sales to be 40% lower than 2015’s given the bearish tone in industrial sales, with emphasize on residential sales starting form 2017 and afterwards following the establish-ment of residential demand generators.

Valuation Assumptions:

The assumptions in our valuation is based on the probable sales scenarios as follows:

1. Bullish Scenario

In our bullish scenario, we assume an active industrial market, where the 445 Ha industrial is fully absorbed within 6 years with 10% ASP CAGR. Given the rapid industrial absorption, which we believe should drive the resi-dential and commercial demand higher, we expect both sector to be fully absorbed within 19 and 21 years re-spectively, with ASP growth at 10% CAGR.

Description 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F

Cash receipt 1,830 1,458 1,976 2,167 2,498 3,002 1,607 1,228 1,432 1,669

Less: Cash payment -76 -259 -418 -451 -503 -593 -439 -423 -489 -565

Less SG&A (ex. depreciation) -69 -96 -109 -118 -165 -98 -78 -89 -101 -80

Less property tax payment -133 -191 -213 -228 -332 -170 -118 -137 -160 -186

Net CF after tax 1,551 913 1,236 1,369 1,499 2,141 973 579 682 838

NPV 1,551 791 927 889 843 1,043 410 211 216 229

Figure 1. DCF Calculations

Stock Data

Risk free rate 8.4% Market premium 5.0% Beta 1.5 Debt proportion 3.0% Equity cost of capital 12.9% Debt cost of capital 1.8% WACC 15.5% LT Growth Rate 5.0%

Figure 3. WACC Calculation

Source: TRIM Research

Source: TRIM Research Source: TRIM Research

Stock Data

Target Price Rp 460 (120% upside)

Industrial land sales period 6 years

ASP growth 10%

Commercial land sales period 21 years

ASP growth 10%

Residential land sales period 19 years

ASP growth 10%

Figure 4. Bullish Scenario Asssumptions




Stock Data

Target Price Rp 190 (12% Downside) Industrial land sales period 6 years ASP growth 6.2%

Commercial land sales period - ASP growth -

Residential land sales period - ASP growth -

Figure 5. Bearish Scenario Assumptions


Stock Data Target Price Rp 310 (43% Upside) Industrial land sales period 6 years ASP growth 7.7%

Commercial land sales period 21 years ASP growth 5.2%

Residential land sales period 26 years ASP growth 6.4%

Figure 6. TRIMEGAH BASE SCENARIO ASSUMPTIONS

2. Bearish Scenario

On our bearish scenario, we assume that the management will NOT launch any non-industrial projects until they have ran out of industrial land supply, which is estimated to occur within 6 years of marketing. We assume an ASP growth of 6.2% CAGR, with sales volume being constant at 60% of their 2015 target until 2020, where an additional anchor buyer is expected to purchase land.

TRIMEGAH TP Scenario: Residential reaching new heights

On our TP scenario, we assume the same industrial sales scenario to our bearish scenario, in which sales would be over in 6 marketing years, however, with higher ASP of 7.7% growth CAGR. We expect the management to become active in marketing their residential developments starting in 2017, in accordance to the opening of AE-ON Mall at said year, as well as the opening of ITB Bekasi campus. As residential-traffic starts picking up, we expect another anchor industrial sales in 2020, which would further increase potential residential traffic, hence we forecast a stable 10% growth in residential sales afterwards.


Stock Data Figure 7. Income Composition


100%

36%23%

16%

20%

47%56%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

BearishScenario

Trimegah TP BullishScenario

Industrial Commercial Residential

Stock Data Figure 8. TRIMEGAH TP vs scenarios


150

200

250

300

350

400

450

Trimegah TP Bearish Scenario Bullish Scenario

TARGET PRICE Rp310

Bearish scenario Rp190

Bullish scenario Rp460



KEY CATALYSTS

1. Strong 2015 sales performance

Management had booked 78% (as of August) of their 2015 marketing sales target of Rp1.9tr despite sluggish economy with 98% of the target being industrial land sales and the rest being residential and commercial related sales. As Foreign Direct Investments (FDI) slows down, Puradelta Lestari being able to secure 78% of their FDI-heavy target should gain the company a competitive edge compared to its peers, especially considering how the peers are struggling upon keeping their target intact.

2. Taking currency hike as an advantage

Region’s ASP remains stable on a IDR basis (15.4% CAGR), however, on a foreign inventor's point of view, given how transactions are being done in IDR, might seem cheap in USD basis. On a US$ basis, ASP was down by 4% YTD with no sight of IDR strengthening anytime soon, which should translate to further decrease in USD-based ASP.

Figure 11. ASP Growth of industrial estates in Greater Jakarta

Source: Cushman Wakefield, TRIM Research

Figure 9. DMAS H115 presales vs peers

78%

26%

42%

62%

0%10%20%30%40%50%60%70%80%90%

100%

DMAS BEST KIJA LPCK

H1 2015 Marketing Sales

Source: Company, TRIM Research

46%

54%

Non-Anchor Anchor


Figure 10. Sales Breakdown



INDUSTRY ATTRACTIVENESS

Figure 12. Porter’s five competitive forces analysis


Figure 13. SWOT analysis




Figure 14. Puradelta Lestari net saleable land vs peers as per H2 2015


RISKS

1. FDI & Macro-related demand

Although Puradelta Lestari’s main asset is diversified between sectors, its main income portion still relies on in-dustrial land sales, making it vulnerable to any FDI & macro setbacks which would directly affect existing facto-ry’s utilization as well as their expansion probability. Company’s 2016 target could potentially be lower than 2015’s given the bearish tone in industrial demand.

2. Failure to maintain land supply

Given that Puradelta Lestari’s main source of income is land sales, the ability to replenish land is crucial. Assum-ing that the company will only focus on industrial land sales, we estimate that Puradelta Lestari has 6 years of saleable land supply. However, it should be noted that the company holds 700 Ha of non-industrial saleable land up their sleeve.

COMPETITIVE STRENGTHS

1. Established estate with multiple access points

Puradelta Lestari’s Kota DEltamas can be accessed directly from Jakarta-Cikampek toll roud through Km 37 gate, which currently serves as its main access. However, since it is located adjacent to Lippo Cikarang’s estate, as well as being freely accessible with adequate infrastructure, Kota Deltamas can be reached through Lippo’s KM 34 toll gate. Future alternative toll road access through KM 41 is on their pipeline, Which would separate the ac-cess of their residential / commercial and industrial tenants.

Cikarang Pusat TollGate Cikarang Pusat TollGate

Access to Orange County Future Toll Access (KM 41)

Future Access to Jatiasih –Cikampek (Proposed)



Figure 15. Puradelta Lestari net saleable land vs peers as per H2 2015


2. Abundant landbank, largest of its peers

Puradelta Lestari holds 3,049 Ha of total land, in which 1,175 Ha are saleable to date. As a property developer, typically one that focuses on land sales, the amount of available landbank highly matters, thus we believe grants the company an upper-hand considering the vast amount of net saleable land that they hold as opposed to its peers.

Aside from their available landbank, management guides for 140 Ha of land acquisition in 2015, in which would last the company 2 years of saleable land supply (based on average blended saleable ratio of 65%). We believe Puradelta has an edge in this matter, where the company should be able to acquire new land rather easily con-sidering how underutilized their surrounding neighborhood is (whilst peers are tightly located between each oth-er).

3. Non-scattered land

Puradelta Lestari’s landbank are exclusively non-scattered land, concentrated within Kota Deltamas’ estate thus enabling the management to accommodate any upcoming anchor tenants with ease, in which would be advanta-geous considering anchors would typically require at least 50% Ha of non-scattered land. On a side note, Pu-radelta’s tenants are 80% related to auto-sector, thus their supporting industries would most likely require large spaces as well given the scale of machinery that they use to produce their goods.

Figure 16. Puradelta Lestari Industrial


Industrial Land

Figure 17. Tenancy Breakdown


80%

10%

10%Automotive

Food & consumergoods

Storage & logistic

1,043

448

782

200

-

200

400

600

800

1,000

1,200

DMAS LPCK KIJA BEST

Saleable Land (ha)



4. Potential unleashed upside from residential sector

Puradelta Lestari focuses mainly on industrial-sector (as seen on their 98% industrial related marketing sales target), however, we believe their competitive advantage lies on their ability to diversify their land utilization, especially in the residential sector given the sheer amount of crowd-puller entering the estate.

A. Foreign residential demand AEON & Japanese all-in-one school

AEON Bekasi, AEON’s second mall in Indonesia, with a total land area of 20 Ha (vs 10 Ha AEON BSD), is sched-uled to commence operations in 2017. With Cikarang-Karawang being the central hub of Japanese-based auto industry, combined wiith the planned all-in-one (preschool to high school) Japanese oriented school (vs currently limited to preschool to middle-school in Jakarta Japanese School) would gain potential as Japanese expatriate’s main choice of residency.

B. High living cost in Cikarang—Karawang , but still in high demand

Sancrest Residence, a 106-room Japanese oriented serviced apartment in Kota Deltamas, has an asking rate of US$ 2,000 (ex. Tax) per month (vs US$ 2,200—2,300 per month in comparable units in South Jakarta). The asking price is fairly expensive considering the limited available entertainment facilities (compared to Jakarta), however, still manages to achieve strong average occupancy of 80+%. As an effort to increase their recurring income portfolio, Puradelta Lestari will build a 126-room serviced apartment in Kota Deltamas. Given the imme-diate area’s average occupancy, as well as ASP, we believe should perform well. The property itself is scheduled to be operational in 2016, with a capex of Rp130bn.

C. High demand in fore-sale units

In terms of resi-demand, we believe the market is still attractive as evidenced by the take up rate of residential units in the immediate location. Lippo Cikarang’s Cosmo Estate residential cluster managed to achieve 100 units per month take up, despite relatively high ASP (Rp1.15bn lumpsum asking price for their 105 sm unit).

Figure 18. Rental Accomodations in Cikarang-Karawang vs South Jakarta


Share Price Rpx,xxx Sector xxx Price Target Rpx,xxx (xx%)

Company Update Share Price Rpx,xxx Sector xxx Price Target Rpx,xxx (xx%)

Company Update Sample Name Total Units Take Up (Units per Month)

Trivium Terrace (1 Tower) 342 13—17

One Sentosa Cikarang City 941 20

Elvis Tower (Jababeka) 448 27

Jakarta Apartments

Aspen Residence 332 15

The Nine Residence 350 20

Figure 19. Nearby for-sale residential sales performance vs Jakarta Apt.




C. FDI-related pipeline

Puradelta lestari’s recent success upon securing 60 Ha land sales to SGMW motor exposes the estate to potential additional expatriate traffic, as well as supervisor-above level individuals who would require adequate accommo-dation in the immediate area. Should be noted that at the current state the estate lacks in entertainment facili-ties, however, such risk can be mitigated by borrowing Lippo Cikarang’s existing, functioning facilities with ease, which creates a relatively similar living environment as in Lippo Cikarang at a relatively lower cost.

D. Local residential demand: ITB’s expansion to Bekasi

40 Ha of land had been given to Institut Teknologi Bandung (ITB) to accommodate the institution with the devel-opment of their multi-campus, following their previous expansions to Jatinangor in 2012. Considering that ITB admits approximately 3,500 new students per year, in which most are either from Jakarta or Bandung, would require a decent amount of accommodation facilities in the immediate area given the rather discouraging dis-tance for daily commute between two said cities to Kota Deltamas, thus would help create room for additional ASP appreciation.

Similar ASP growth spurt occurred in their previous expansion, ITB Jatinangor, where channel check indicates that land prices had appreciated roughly 400% over 3 years in selected areas given the increase in traffic as well as accommodation needs from students, despite ITB having their own student accommodation within their campus estate.

Figure 20. Kota Deltamas: Distance to Jakarta & Bali




COMPANY BACKGROUND

Puradelta Lestari is an integrated estate developer established in 1993. It sells industrial land on its estate to companies, as well as develop and sell residential and commercial properties. They also provide infrastructure services to their industrial tenants. Puradelta Lestari is most known for their integrated estate “Kota Deltamas”. The company was listed in May 2015. Puradelta Lestari is part of Sinarmas group, which also owns many other assets, including Bumi Serpong Damai (BSDE), another public listed property company.

Currently, the company has one main asset in its portfolio.

Kota Deltamas

Puradelta Lestari’s main project. Holds a total of 3,049 Ha land, with 47% occupied by Greenland International Industrial Center (GIIC), their in-house industrial estate, with the rest being commercial and residential develop-ments. The estate is located approximately 50 km. Sojitz, a Tokyo Stock Exhange listed Japanese-based trading company, holds 22.5% of stake in Puradelta Lestari and acts as their global marketing agent. Currently GIIC has 250 tenants, with high-profile anchors such as Suzuki, Mitsubishi, Takata and Toyo, in which entered the estate with the help of Sojitz.



Income Statement (Rpbn)

Year end Dec 2013 2014 2015F 2016F 2017F

Revenue 1,904 1,658 2,020 2,032 1,450 Revenue Growth (%) 37% -13% 22% 1% -29%

Gross Profit 1,019 1,110 1,819 1,915 1,160

EBIT 944 1,037 1,732 1,853 1,073

EBIT Growth (%) 157% 10% 67% 7% -42%

EBITDA 947 1,041 1,738 1,861 1,082 EBITDA Growth (%) 156% 10% 67% 7% -42%

Pretax income 1,047 1,064 1,723 1,849 1,073

Net income 952 981 1,627 1,746 1,000

Gross margin 54% 67% 90% 94% 80%

Net margin 47% 59% 81% 86% 69%

Balance Sheet (Rpbn)

Cash Flow (Rpbn)

Year end Dec 2013 2014 2015F 2016F 2017F

Cash receipts 1,667 1,306 1,771 1,932 1,581

Cash payments -356 -375 -178 -194 -410

Taxes paid -89 -60 -96 -102 -72

CF from op. 1,238 876 1,487 1,636 1,095

Payments for land -145 -95 0 0 0

Inv. Prop. Acq. 0 -4 10 0 0

PPE Acquisition -15 -89 -130 -80 -80

CF from Inv. -160 -188 -120 -80 -80

CF from financing -1,091 -591 970 -230 -321

Net cash flow -13 97 2,337 1,326 695

Cash at BoY 1,232 1,285 1,381 3,718 5,043

Cash at EoY 1,285 1,381 3,718 5,043 5,738

Key Ratio & Drivers Analysis

Year end Dec 2013 2014 2015F 2016F 2017F

Profitability

Gross Margin (%) 54% 67% 90% 94% 80%

Net Margin (%) 47% 59% 81% 86% 69%

EBITDA Margin (%) 50% 63% 86% 92% 75%

Core Net Margin (%)

47% 59% 29% 58% 58%

ROAE (%) 19% 17% 9% 13% 9%

Stability

Current ratio (x) 2.5 4.0 16.7 28.6 20.8

Gross D/E (x) 0.2 0.1 0.1 0.0 0.0

Net D/E (x) 0.0 -0.1 -0.4 -0.4 -0.5

Presales (Rp Bn) 1,503 1,642 1,953 1,332 1,906

Volume (Ha) 71 97 100 61 67

ASP (Rp mn / sqm) 3 2 3 3 4

Interim Result (Rpbn) 2Q15

Revenue 1279

Revenue Growth (%) -

Gross Profit 809

Operating Profit 735

Operating Growth (%) -

Net Profit 772

Net Profit Growth (%) -

Gross Margin 63.2%

Operating Margin 57.4%

Net margin 60.4%

Capital History Date

29-May-15 IPO@Rp210

Year end Dec 2013 2014 2015F 2016F 2017F

Cash & equiv. 1,285 1,381 3,718 5,043 5,738

Inventories 1,780 2,236 2,132 2,154 2,195

Undeveloped land 4,444 3,792 3,792 3,792 3,792

Inv. properties 0 10 0 0 0

PPE 52 134 258 331 402

Total Assets 7,673 7,603 9,951 11,368 12,178

Sales advances 808 521 272 172 303

ST debt 342 307 0 0 0

LT debt 957 286 551 321 0

Total liabilities 2,242 1,207 916 585 396 Total equities 5,428 6,393 9,032 10,778 11,778


PT Trimegah Securities 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 Securities 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 solicitation of any offer to buy. This report has been produced independently and the forecasts, opinions and expectations contained herein are entirely those of Trimegah Securities. While all reasonable care has been taken to ensure that information contained herein is not untrue or misleading at the time of publication, Trimegah Securities 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 Securities who are expected to make their own investment decisions without reliance on this report. Neither Trimegah Securities nor any officer or employee of Trimegah Securities accept any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. Trimegah Securities and/or persons connected with it may have acted upon or used the information herein contained, or the research or analysis on which it is based, before publication. Trimegah Securities may in future participate in an offering of the company’s equity securities.


October 8, 2015 Puradelta Lestari · 2019-11-04 · o n se u Companies Data Stock Price October 8,...

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