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Friday , 11 May 2018 04:27

PT ADHIKARYA(PERSERO) TBK

On the threshold of better expectations

 

 

1Q18 result proved to be a good start for ADHI, whichbottom line surprisingly grew by 282.8% YoY to Rp73billion (accounting for 17.6% of our estimates), thanks to LRT Jakarta Cawang – Cibuburprojects, TelukLamong dock project in East Java, and EPC business.This robust earnings growth came on the back of 39.7% YoY net revenue and a higher margin as the result of EPC business has started reap the positive margin after the loss making since 2014.  As of 1Q18, the company has secured Rp3 trillion of new contract and accounting for13% of our new contract target in 2018F of Rp23 trillion.  We believe this decent 1Q18 overall result and its recovery in EPC business will be the positive catalyst for the counter.  Hence, we maintain our BUY call to the stock with target price at Rp2,800/share. 

 

Bottom line improvement came from its main star: construction

The company recordedan improvement with the total net income grew by 282.8% YoY to Rp73 billionon the back of 39.7% YoY revenues growth (Rp3.1 trillion) and higher margins which contributed by LRT Jakarta Cawang – Cibubur project, TelukLamong dock project in East Java, and EPC business.Segment wise, construction remainedkey as it contributed 84% of consolidated sales, followed by EPC (8.1%), property (5.2%) and precast division (2.7%). GPM grew by 316 bps YoY to 13.7% mostly due to positive gross margin of 14.1% in EPC power plant project in south Sumatra, after years of loss making since 2014. Consequently, the NPM expanded 2.3% grew by 148 bps YoY.

 

Moderate new contract achievement

As of 1Q18, ADHI has managed to booknew contract of Rp3 trillion (accounting for only 13% of our FY18 new contracts target of IDR23tn) mainly came from the construction, building and energy business projects such as Trans Park Bekasi, Bakauheni – Terbanggi toll gate in Lampung, Gelora Bung Karno refurbishment.The management is also confident that they will soon obtain additional tender of building project worthof Rp400 billion and infrastructure project of Rp967 billion.

 

LRT Jakarta Cawang – Cibubur project update

As of April 2018, the companyhas accomplished the LRT project of 36.3%, comprises of: Cawang – Cibubur section (58.4%), Cawang – Kuningan – DukuhAtas section (19.9%) and Cawang Bekasi Timur section (32%).On more positive notes, ADHI has received its first phase collection of Rp3.4 trillion.The payment is based on the works carried out as of September 2017. ADHI is scheduled to receive second phase collection of Rp1.5 trillion this month. Hence, we project the company will recorded positive operating cash flow by this year. In regards of TOD project development, the company will receive another additional funds to expand TOD’s property and infrastructure once it has approval from the shareholder to spin off and execute an IPO plan of Adhi Commuter Properti.

 

Maintain BUY rating – Target price at Rp2,800 per share

Based on our DCF-10 year valuation, we generate the fair equity value of ADHI at Rp2,800 per share which represents a 2018F PER target of 6.93x and EV/EBITDA target of 2.49x. Based on yesterday’s closing price, ADHI was trading at an attractive valuation of 8.78x PER and 3.59x EV/EBITDA 2018F indicating that our fair value offers 55.9% upside potential. Hence, we maintain our BUY recommendation to the stock.

 

 

Financial Summary

 (Rp billion)

2016A

2017A

2018F

2019F

2020F

 Revenue

11,064

15,156

18,423

22,004

23,811

 EBITDA

786

1,827

1,828

2,212

2,393

 Net profit

313

515

728

993

1,098

 EPS (Rp)

88

145

204

279

308

 PER (x)

23.86

14.51

8.78

6.44

5.82

 BVPS (Rp)

1,525

1,645

1,796

1,999

2,203

 PBV (x)

1.38

1.28

1.00

0.90

0.81

 EV/EBITDA (x)

7.56

4.24

3.59

1.93

1.64

 Dividend yield (%)

1.55

2.55

4.21

5.75

6.36

RoE (%)

5.92

9.13

11.88

14.69

14.67

 

Source: Company data and Lotus Andalan Research