Apr 18, 2016 09:00:02
Blue Bird: Look Beyond The Near-Term Speed Bump
We maintain our BUY call on Blue Bird with a revised IDR7,500 TP (from IDR8,500, 29% upside) given its potential earnings improvement from higher average daily revenue and improved utilisation rates. We foresee the short- to medium term overhang from online ride operators to continue haunting conventional taxis. It is not likely to be set in stone, as we believe the 33% price discount price vis-à-vis conventional taxis would not be permanent. Thus, we lower our FY16-17F earnings by 11-15% respectively due to such circumstances.

¨ The Government’s two options. The Transportation Ministry has provided two options for ride-sharing application (app) operators, namely to be a transport operator or an app provider. If the online operators opt to be transportation operators, then the app players must have a public transport operating license. This means that such fleets should be metered. If they opt to be an app provider, the online ride operators should cooperate with official transportation companies or cooperatives that are already registered. We foresee that the online ride operators would probably choose option two as it is not likely to give a positive impact to the domestic taxi industry in the short to medium term. This is because unequal pricing still exists.

¨ Short- to medium-term overhang remains. In our opinion, the current euphoria over online ride apps should not last over the longer period. Customers are currently interested to use the online ride apps due to their promotional packages. We foresee the steep discounts from the online ride operators (33% when compared to conventional taxis) would not be permanent. As we have seen in other Asian countries, the tariffs were gradually adjusted.

¨ 4Q15 results slightly below our estimate. Blue Bird reported a IDR5.47trn revenue (+15% YoY), ie in line with our IDR5.49trn estimate. Topline was supported by higher average daily revenue in FY15 of IDR633,000 (+7% YoY). Meanwhile, FY15 utilisation rates were relatively flat at 74.3% (FY14: 74.8%). However, its earnings came in at IDR824bn (+12% YoY), ie slightly below our IDR872bn estimate, or 94.4% of our forecast. Earnings were dragged by the lower gains from the sale of property, plant and equipment (PPE) by 40% YoY, which was due to the softening condition in the second-hand car market.

¨ Maintain BUY. We lower our earnings estimates by 11-15% in FY16-17 respectively due to the short-term headwind from the online ride operators – the unequal price remains. We maintain our BUY call with a lower IDR7,500 (from IDR8,500) on Blue Bird given its potential earnings growth from higher average daily revenue and improvement in utilisation rates, strong brand equity, healthy balance sheet, high ROEs vs peers, and standardised quality of services and infrastructure.