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P H
Dec 16,2016 11:55:44

$ADHI berencana melakukan spinoff bisnis hotel. ADHI akan menggabungkan bisnis TOD dan hotel dahulu pada awal tahun 2017, baru setelah itu akan dilakukan spin off pada semester kedua tahun 2017. Kami merekomendasikan BELI dengan target harga Rp2.500.

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P H
Dec 01,2016 23:12:01

Adhi Karya ($ADHI) : Downgrade rekomendasi menjadi HOLD dengan TP baru di IDR1,900 per saham.

• Berdasarkan riset report Adhi Karya ($ADHI), Pandu Anugrah mendowngrade rekomendasi menjadi HOLD (dari BUY), serta menurunkan TP menjadi IDR1,900 (dari IDR3,500) per saham.

• TP baru mewakili 14x 2017 P/E, atau rata-rata P/E dalam 3 tahunterakhirnya.

• Pandu menurunkan rekomendasi menjadi HOLD, karena dia melihat bahwa langkah pemulihan akan tertahan oleh beberapa factor seperti: tantangan dalam pendanaan LRT, kemungkinan pertumbuhan tipis dari proyek2 secara regular. Demikian proyek2 yang secara sessional proyek2 di kwartal IV lebih banyak, kemungkinan tidak banyak membantu.

• Karena itu, Pandu juga menurunkan pertumbuhan laba bersih per saham (EPS) sebesar 45-50% seiring dengan lebih konservatifnya proyek2 yang dapat dikerjakan (revenue/total order book).

• Pandu melihat bahwa kinerja laba bersih di 4Q16 kemungkinan masih akan lemah, seiring dengan kerugian proyek2 EPC yang telah mencapai IDR187miliar di 9M16. Adhi kemungkinan masih melanjutkan proyek yang rugi, dimana diperkirakan kerugian total mencapai IDR400milar tahun ini.

• Pandu juga fokus terhadap resiko pembiayaan LRT. Dimana jika ADHI dibayar ketika proyek2 tersebut jadi di tahun 2019. Hal tersebut tentunya akan meningkatkan pinjaman modal kerja yang akan mendorong meningkatnya beban bunga, meskipun hal tersebut terkompensasi dengan margin yang meningkat, dari Turnkey project (proyek2 yang ditalangi pembiayaannya terlebih dahulu).

• Pandu melihat kinerja ADHI juga terdiscount 30% dari sektornya dan masih akan berlanjut, kecuali mulai adanya beberapa perbaikan dari eksekusi, dan juga kejelasan dari pembiayaan LRT. Demikian juga resiko juga dapat terkompensasi dari potensi pengembangan sektor property yang dekat dengan proyek2 LRT.

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P H
Dec 01,2016 23:09:49

Key Takeaway from Adhi Karya’s ($ADHI) public expose

  • Adhi expects to sign the IDR23trn LRT Greater Jakarta 1st phase the latest in March 2017, later than our expectation, as Adhi is waiting the approval from Ministry of Transportation. Government plans to finance this project using the state budget and bank loan in FY17 – FY19F. Adhi expects that Government will allocate IDR10trn. Thus, during the construction Adhi will have to borrow up to IDR13trn from bank and would bear the interest const during the construction state. Post the project completion the loan will be passed to the government including interest expense.
  • The management estimates to have a gross loss of IDR400bn in EPC division this year, bigger than our initial estimates of IDR300bn.Moreover, there is a potential loss of IDR200bn in EPC projects next year.
  • Having said that, Adhi Karya ($ADHI) has revised its FY16F net profit target to IDR301bn (-35% YoY), much lower than our estimates of IDR388bn.
  • Conservatively, Adhi’s management guided FY17F’s NPAT of IDR500bn, lower than our initial estimates of IDR688trn. The company also aims to obtain IDR21trn new contracts and IDR14.31trn revenue next year.
  • Currently, we are reviewing our earnings estimates and our recommendation. (Dony Gunawan)


 

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P H
Nov 29,2016 10:07:40

Adhi Karya ($ADHI) to invest Rp4tn in water purification business
The company plans to allocate Rp2tn capital expenditure for the business segment in 2017. In addition, ADHI also aims to
invest in toll road projects, such as Cileunyi – Sumedang – Dawuan (Cisumdawu) toll road section in West Java. In separate
news, the company’s subsidiary, Adhi Persada Properti would develop Grand Taman Melatin Margonda 2 in March 2017 with
Rp372bn investment cost, the company hopes to finish the project by December 2019. (Bisnis Indonesia)

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P H
Nov 28,2016 12:17:19

Adhi Karya ($ADHI): The Train is Not Here Yet

Downgrade to NEUTRAL with a lower TP of IDR2,085 (from IDR3,150) as the LRT Greater Jakarta Phase 1 contract may likely be signed latest in Mar 2017, and to reflect the bigger-than-expected loss in the EPC project. Thus, we adjust our orderbook assumption and trim FY16F-17F earnings to IDR266bn and IDR492bn respectively, as we expect lower projections from the company. Management announced a conservative earnings guidance of IDR500bn for FY17, as there may be a potential further loss in EPC projects next year.

¨ Update on LRT Greater Jakarta. Adhi Karya expects to sign the IDR23trn LRT Greater Jakarta Phase 1 contract at the latest in Mar 2017, which is later than our expectation of Dec 2016. It submitted the proposal to the Ministry of Transportation in October and is currently in discussions over the payment scheme of the projects. The company also expects to incur a minimum gross margin of 10% from the projects.

¨ The Government plans to finance this project using the state budget and a bank loan in FY17-19. Adhi Karya expects the Government to allocate IDR10trn for the project. Thus, during construction, it would have to borrow up to IDR13trn from the bank – which would be reflected in its balance sheet. Furthermore, the company would bear the interest cost during the construction stage. After the project is completed, the loan will be passed to the Government (including interest expense).

¨ Loss in EPC projects. Management expects its EPC unit to incur a gross loss of IDR400bn this year, vs our initial estimate of IDR300bn. Hence, we adjust our loss estimate to IDR414bn for this year. In FY17, we also expect this unit to book a potential loss of c.IDR214bn as there may be a loss stemming from the potential cancellation of a power plant project.

¨ Orderbook. We expect new contracts won to hit IDR16trn by the end of this year – which is below the company’s guidance of IDR18trn – as we see that its current level of orders is still relatively slower than the seasonal norm. We pare down our new contracts assumption for FY17 to a conservative IDR18trn (ex-LRT Greater Jakarta Phase 1, which is worth IDR23trn). Up to the third week of November, Adhi Karya’s new contracts reached 71.3% of our full-year estimate.

¨ Cutting our earnings estimates. We cut our FY16F earnings to IDR266bn this year as the delay on the LRT Greater Jakarta contract signing and loss in the EPC division may hurt the company. Conservatively, management guided FY17F’s NPAT to be IDR500bn, lower than our initial estimate of IDR688trn. As such, we cut our FY17F earnings to IDR492trn.

¨ Downgrade to NEUTRAL. Our new TP of IDR2,085 (from IDR3,150, 7% upside) is derived from 15.1x FY16F P/E, its 5-year historical forward P/E mean. (Dony Gunawan)

 

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P H
Jul 27,2016 12:20:46
Talk of a Reshuffle today

Reshuffle Kabinet akan diumumkan pk.11.00 pagi ini dan Kabinet baru dilantik pk.14.00 sore ini juga.
1. Menteri Keuangan Bambang
    S Brojonegoro diganti Sri
     Mulyani Indrawati.
2. Menpan RB Yuddy
    Chrisnandi diganti Asman
    Abnur (partai PAN).
3. Kepala Bappenas Sofyan
    Djalil diganti Bambang
    Brojo.
4. Menteri ATR-BPN Ferry
    Mursidan Baldan diganti
    Sofyan Djalil.
5. Mentri Perdagangan Tomas
    Lembong diganti
    Enggartiasto Lukito.
6. Menteri Perindustrian Saleh
    Husein diganti Erlangga
    Hartarto.
7. Menteri Perhubungan Jonan
    diganti Budi Karya.
8. Mentri Desa Marwan Jaffar
    diganti Eko Putro (PKB).
9. Mentri ESDM Sudirman Said
    diganti Chandra Tahar
    (profesional).
10. Mendiknas Anis Baswedan
       diganti Prof Muhajir
       (Muhamadiyah).
11. Menkopolhukam Luhut
       Panjaitan diganti Wiranto.
12. Menko Maritim Rizal Ramli
       diganti Luhut Panjaitan.
13. Kepala BKPM Franky
      Sibarani diganti Tomas
      Lembong.
14. Franky Sibarani akan
       menjabat Wkl. Mentri
       Perindustrian.

Menteri perindustrian Erlangga Hartarto -> has a good relationship with $AKRA, which happens to have an industrial estate in East Java

Menteri perhubungan Budi Karya -> could be positive for $WIKA and $ADHI. We may see faster approvals for LRT jakarta (Adhi) and HSR (WIKA)

Menteri keuangan Sri Mulyani -> positive sentiment for index in general and banks in particular

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P H
Jul 27,2016 08:50:23
EARNINGS CALENDAR (Half Year 2016 - Estimated)

JULY 2016

Jul 25, 2016 :
$BBTN (Bank Tabungan Negara (Persero) Tbk PT)

Jul 26, 2016
$BDMN (Bank Danamon Indonesia Tbk PT)
$BMRI (Persero) Tbk PT Earnings Release - 4:00PM GMT+7

Jul 27, 2016
$AALI (Astra Agro Lestari Tbk PT)
$HMSP (Hanjaya Mandala Sampoerna Tbk PT)
$LPPF (Matahari Department Store Tbk PT)
$MPPA (Matahari Putra Prima Tbk PT)
$PTBA (Bukit Asam (Persero) Tbk PT)

Jul 28, 2016
$ASII (Astra International Tbk PT)
$BEST (Bekasi Fajar Industrial Estate Tbk PT)
$BJBR (PT Bank Pembangunan Daerah Jawa Barat dan Banten Tbk)
$DOID (Bloomberg)
$NCO (Vale Indonesia Tbk PT)
$JPFA (Bloomberg)
$PSAB (Bloomberg)
$SSMS (Bloomberg)
$SMGR (Semen Indonesia (Persero) Tbk PT)
$UNTR (United Tractors Tbk PT)
$UNVR (Unilever Indonesia Tbk PT)

Jul 29, 2016
$ASRI (Alam Sutera Realty Tbk PT)
$ADHI (Bloomberg)
$BSDE (Bumi Serpong Damai Tbk PT)
$BNGA (Bloomberg)
$BNLI (Bloomberg)
$BNII (Bloomberg)
$BKSL (Bloomberg)
$BHIT (Bloomberg)
$BISI (Bloomberg)
$CPIN (Bloomberg)
$CTRA (Ciputra Development Tbk PT)
$CTRP (Bloomberg)
$ELSA (Bloomberg)
$GIAA (Bloomberg)
$GJTL (Bloomberg)
$GGRM (Gudang Garam Tbk PT)
$NKP (Bloomberg)
$INTP (Indocement Tunggal Prakarsa Tbk PT)
$INDF (Indofood Sukses Makmur Tbk PT)
$ICBP (Indofood CBP Sukses Makmur Tbk PT)
$INDY (Bloomberg)
$KARW (Bloomberg)
$KAEF (Bloomberg)
$KIJA (Bloomberg)
$KLBF (Kalbe Farma Tbk PT)
$KRAS (Bloomberg)
$LPKR (Lippo Karawaci Tbk PT)
$LSIP (Perusahaan Perkebunan London Sumatra Indonesia Tbk PT)
$MAPI (Bloomberg)
$PWON (Bloomberg)
$PNBN, $PNLF, $PNIN (Bloomberg)
$PTPP (Bloomberg)
$RALS (Bloomberg)
$SMRA (Bloomberg)
$TBLA (Bloomberg)
$TLKM (Telekomunikasi Indonesia (Persero) Tbk PT)
$TOTL (Bloomberg)
$WSKT (Bloomberg)

AUGUST 2016
Aug 1, 2016
$HRUM (Harum Energy Tbk PT)
$SSIA (Surya Semesta Internusa Tbk PT)

Aug 10, 2016
$ITMG (Indo Tambangraya Megah Tbk PT)

Aug 12, 2016
$EXCL (XL Axiata Tbk PT)

Aug 29, 2016
$ADRO (Adaro Energy Tbk PT)
$ANTM (Aneka Tambang (Persero) Tbk PT)
$BBRI (Bank Rakyat Indonesia (Persero) Tbk PT)
$ISAT (Indosat Tbk PT)
$PGAS (Perusahaan Gas Negara (Persero) Tbk PT)

SEPTEMBER

Sep 13, 2016
$SMCB (Holcim Indonesia)

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P H
Jun 15,2016 10:18:17
Oil at US$50/bbl – Sweet Spot for Indonesia; Tax Amnesty – On Schedule for June 2016 Implementation

- Higher oil price will reduce fiscal deficit — The Indonesian government now expects incremental revenue from the recent bounce in oil price to ~US$50/bbl. Despite Indonesia is a net importer of oil & gas, fiscal deficit could decline by Rp0.1- 0.9trn based on government’s calculation for every US$1/bbl of oil price increase. The government is currently using an oil price of US$35/bbl in their 2016 proposed budget and thus with higher oil prices, they should receive additional revenue from the oil & gas sector.

- Gasoline being sold at c.US$50/bbl equivalent after taking into account the distribution margins of Pertamina — The current price of gasoline at Rp6,550/litre translates to c.US$48-50/bbl of oil prices. Thus the government is already at a comfortable level in terms of the selling prices of gasoline, and should see no pressure to increase the prices unless the oil prices were to increase to a higher level, say US$55-60/bbl. At Rp6,550/litre, Pertamina is making a distribution margin of Rp1,010/litre, as per government calculations (see Fig 1 for government’s detailed calculation of fuel prices).

- Non-subsidized fuel (RON97) in Malaysia is cheaper vs that in Indonesia — RON95 gasoline price in Indonesia (Rp8,250/litre) is +22% higher than RON97 price in Malaysia (Rp6,715/litre). The RON97 in Malaysia is a non-subsidize fuel while the RON95 is still being subsidized and sold at Rp5,575/litre.

- Tax amnesty is still on schedule to be passed in June 2016 — We see such an outcome as not being priced in by the market (see our recent Indonesian strategy note - Still Positive: Spotlight on Five Key Issues for Market). The parliament head of commission XI, Ahmadi Noor Supi, mentioned that tax amnesty bill will not get delayed since it is a critical part of the government’s 2016 budget revision. As per the government, they have included proceeds amounting to ~Rp103trn (US$7-8bn) from the tax amnesty bill in the 2016 revised budget.

- Maintain our positive view on the market — At a 1-year forward PER of 15.1x, the JCI is not cheap but nor does it look overly expensive, and we maintain our 5,700 target (+16%) set last October. Sector-wise, we continue to like property, construction and infra. $ASII rejoins our top picks and we see more value in banks as gainers from the expected passage of a tax amnesty bill. Top picks: $BBNI, $BBTN, $LPPF, $TLKM, $ASII, $MIKA, $PTPP, $ADHI, $BSDE, $CTRA, $PWON and $JSMR.

- Key market catalysts and risks — 1) Tax amnesty; 2) Lower personal income tax which would lift purchasing power. Risks: 1) Fed rate hikes; 2) Delay in passage of tax amnesty; 3) Heavy-handed policy intervention

 
Bull
P H
May 13,2016 09:28:45
PT Adhi Karya Tbk: Disagreement in LRT Project (ADHI, Rp2.530, Neutral, TP Rp2.800).
 
 
Konflik antara Kemenhub dan Pemda DKI Jakarta telah menyebabkan penundaan pada proyek Light Rail Transit (LRT) Jabodetabek. Perbedaan mengemuka karena Kemenhub lebih memilih jalur sempit (1.067mm) untuk menyesuaikan anggaran. Kami memprediksi ADHI akan membukukan penjualan 2016 sebesar Rp3 triliun dari proyek LRT itu (vs. target manajemen Rp4 triliun-Rp5 triliun).
 
 
Different perception on track gauge width. Berdasarkan pemberitaan di beberapa media, perdebatan antara Kemenhub dan pemerintah Jakarta telah mengakibatkan pekerjaan proyek LRT. Kemenhub lebih suka gauge sempit (1.067mm) karena keamanan yang lebih baik dan biaya yang lebih ringan dan sesuai dengan anggaran awal mereka.
 
 
Sementara itu, Pemda Jakarta berencana membangun LRT Jabodetabek dengan ukuran standar (1.435mm). Karena sebagian besar jaringan LRT akan terletak di dalam wilayah mereka, pemerintah Jakarta meyakini bahwa Kemenhub harus mengikuti langkah mereka dan menggunakan alat ukur standar untuk LRT Jabodetabek, yang saat ini sedang dibangun oleh ADHI.
 
 
Cabinet meeting to provide clearer answer. Untuk menengahi konflik Dephub dan pemerintah Jakarta, Presiden Jokowi berencana melakukan Rapat Kabinet Terbatas. Kami meyakini bahwa pentingnya proyek itu dalam mengurangi kemacetan lalu lintas dan komitmen Presiden Jokowi dalam proyek ini akan menjamin perkembangannya.
 
 
Dengan demikian, kami berharap pemerintah akan mengakomodasi keinginan Kementerian Perhubungan dengan mengalokasikan anggaran yang lebih tinggi untuk proyek tersebut. Kami memprediksi pembayaran tahunan Rp5 triliun-Rp7 triliun untuk proyek ini pada 2017-2019 (2016 anggaran Kemenhub: Rp46 triliun).
 
 
Slow progress in LRT construction. Pada 1Q16, ADHI melaporkan pendapatan Rp200 miliar dari proyek LRT (2015: Rp290 miliar). Dengan penundaan lanjutan dalam kontrak LRT, kami meyakini akan sulit untuk mencapai Rp4 triliun-Rp5 triliun sesuai proyeksi awal manajemen. Kami memprediksi kontribusi Rp3 triliun dari proyek LRT pada 2016.
 
 
Saat ini, kami masih menetapkan kembali rekomendasi Neutral dengan TP Rp2.800 dan masih menunggu keputusan Presiden Jokowi dalam pertemuan kabinet. Rekomendasi dan TP itu didasari valuasi rasio harga saham per laba (PE ratio) 2016 sebesar 19x. (Bob Setiadi/Riset Mandiri Sekuritas)

Bear
P H
May 03,2016 13:19:24
Adhi Karya (ADHI): Soft 1Q16 earnings

1Q was weak as usual; Maintain BUY
ADHI’s 1Q16 result was rather weak, but remained in line with the historical seasonality and continued to be the most volatile among the four listed SOE contractors. We believe that execution will improve in the subsequent quarters, partly driven by its strong 2016 backlog growth of 58% YoY and the slew of project awards with sizeable contract to come from the Light Rail Transit (LRT) in Greater Jakarta. Our TP of IDR3,300 translates to 2016 PE of 17x, in line with the historical discount of 20% to the sector average.

Unexciting 1Q16 earnings on forex and EPC losses
1Q16 earnings growth was tepid at 0.5% YoY to IDR11b, accounting for 1.6% of our full-year forecast, which is in line with the historical seasonality of 1%-5% of 1Q earnings achievement. The unexciting 1Q16 was mainly due to forex loss on the strengthening IDR as ADHI held account receivables in USD. On top of that, ADHI continued to register a loss in its EPC segment, which partially offset its strong 1Q16 construction gross profit growth of 53% YoY with margin expanded to 13.1% vs. 9.2% in 1Q15. Nevertheless, ADHI’s 1Q15 operating performance came largely in line with the historical seasonality.

2H to account for 70% of full year
ADHI’s 1Q16 earnings do not prompt us to revise our full-year target, given that acceleration would typically unfold in the subsequent quarters, particularly towards the end of the year. 2H16 earnings typically account for 70% of full-year target.

Awaiting inclusion of LRT
LRT project inclusion as part of new contracts has not materialised, as the company is still waiting for the official contract with the Ministry of Public Transportation, given the category is a turnkey project. We expect official awards on LRT with maximum value of IDR34t to unfold in 2Q16- 3Q16.

$ADHI

Bull
P H
May 02,2016 14:29:40
Adhi Karya – 1Q16 result – Below (ADHI; Rp2,675; BUY; Rp3,200)

- Weak 1Q16 result. ADHI booked 1Q16 net earnings of Rp11bn (+0.5% y-y), accounted for only 2% of ours and consensus estimate. This weak result was caused by Rp13bn forex loss (1Q15: forex gain of Rp15bn) as well as loss in EPC business.

- Slow growth in construction revenues. We noticed that ADHI recorded the slowest growth in construction and EPC business (1Q16: +8.3% y-y) among listed construction companies. We believe that this was contributed high number of contracts from private segments in 2015. On a brighter side, ADHI was actually recorded an impressive GPM in construction of 13.1% (1Q15: 9.2%) while property GPM still hovering at 30% mark (1Q16: 28.8%; 1Q15: 29.4%). However,  ADHI’s EPC business continues to underperform by recorded a negative GPM of 32.1% (1Q15: 5.8%) which due to loss in several projects from PLN. (LRT) project.

- End of five consecutive quarters of forex gain. In 1Q16, ADHI recorded its forex loss of Rp13bn, the first since 4Q14. ADHI stated that the loss was attributed to account receivable in USD denomination from Pertamina’s RFCC project. Going forward, we believe that the impact from forex loss/gain would be reduced following the completion of RFCC project in 2015.

- High cash level on LRT signing delay. On balance sheet level, ADHI owns a high cash level of Rp3.7tn (1Q15: Rp903bn) by the end of 1Q16 as the company still have not fully utilize the Rp2.75tn proceeds from 2015 rights issue. Delay in contracts signing has caused slow progress in the construction delay in the Greater Jakarta Light-Rail-Transit (LRT) project which only contributed around Rp200bn in sales in 1Q16. Note that ADHI expects around Rp4-4.5tn from the project in 2016 with the expectation that the LRT contracts would be signed in 1H16.

- Recommendation under review. We are currently reviewing our numbers and rating for ADHI due to the worse-thanexpected performance from ADHI’s EPC division. We will publish our new recommendation following a conference call with management.

$ADHI
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P H
May 02,2016 08:46:43
ADHI posts flat 1Q6 earnings, still tracking historical seasonality

Adhi Karya ($ADHI) reported 1Q16 net income of Rp10.7 bn, up by only 1% YoY, which met only 2% of our FY16 net income forecasts. we still consider this as in-line with historical seasonality as 1Q was historically the weakest quarter of the year (2-5% of FY numbers) while 3Q was the strongest quarter (55-70% of FY numbers). 1Q16 revenue managed to grow 7% YoY to Rp1.32 tn but consolidated GPM contracted by 110bps to 9.6%, dragged down by negative EPC margin and 830bps decline in property margin as the company started launched its product only in April. On the flipside, ADHI booked Rp200 bn (15% of total) in revenue from LRT project and precast revenue jumped more than fourfold to Rp39 bn. Meanwhile, 1Q16 construction service GPM was 13.1% vs. historical numbers of 9-12%.  Opex that rose 10% YoY has further erode profitability , bringing operating profit down 17% to Rp53.6 bn. Below operating level, forex loss , 23% increase in interest expense, and higher effective tax rate also ate up profitability.

Comment: although looking weak at first glance, we believe it is too early to revise down our earnings forecasts.  Recall that in 1Q15, the company booked YoY net profit decline of 35%, but turned to 42% growth for full-year 2015. At this juncture, we maintain our Buy rating and TP of Rp3,440 for ADHI as we believe ADHI’s performance will gradually improve toward the end of year.
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P H
Apr 29,2016 09:42:41
Indonesia: 12th stimulus policy – Further Streamlining in Various Permits
 
The government released the details of its 12th stimulus policy, which mostly aim to further simplify various permits in doing business. While the latest policy appears to be an accentuation of previous stimulus to streamlines business process, in our view the government continues to show its focus to attract more investment into domestic economy, especially given sizeable contribution from Gross Fixed Capital Formation (GFCF) to overall Indonesia’s economy.
 
Efforts to lure more investment
President Joko Widodo through several cabinet meetings has emphasized his means to increase the rating of the country’s Ease of Doing Business (EODB) to the 40th rank. The World Bank surveyed that Indonesia stood at rank 109th from a total of 189 surveyed countries. Other ASEAN countries such as Singapore and Malaysia stand at the 1st and 18th rank of the list. Currently, there are 10 indicators that measure the EODB rank for a country. The indicators are business starting process, construction permit dealing process, tax payment, credit accessibility, contract enforcement, electricity supply, across border trading, insolvency settlement, and minority investors protection. To comply with the indicators, the Indonesian Economic Ministry along with the Investment Coordinating Board formed deregulations through the 12th Economic Stimulus.
 
Key points of the 12th stimulus policy
The 12th stimulus introduced a new deregulation scheme that will cut 94 procedures into only 49 procedures and 9 permits to only 6 permits. Furthermore, the stimulus package is followed by the release of 16 new regulations.
¨ For the business starting process, the initial regulation requires investors to go through 13 procedures that will take 47 days and IDR6.8m-7.8m to obtain Business Permit (SIUP), Company Registration (TDP), Deed of Establishment, location permit, and nuisance permit. With the deregulation, investors will only need 7-10 days procedure with IDR2.7m fee. Moreover, the government will only require 3 permits for micro, small and medium enterprises (MSME), which are SIUP, TDP, and deed of establishment.
¨ The government also released a new regulation through regulation no 7/2016 on changes in authorised capital for limited company. With the new regulation, MSME’s authorised capital will be determined by mutual agreement of the founders as outlined in the deed of establishment. However, the regulation will keep enacting the minimum requirement of IDR50m for limited company.
¨ As for building construction permit, the government will cut the process into 14 procedures within 52 days from initial of 17 procedures and 210 days of processing time. Moreover, the building construction permit fee will be reduced to IDR70m from the initial fee of IDR86m.
¨ Tax payment process will be cut into 10x payments with online system from an initial of 54x payments. While property registration will be cut into 3 procedures in 7 days with a fee of 8.3% from the value of property. The government previously imposed 5 procedures with 25 processing days and 10.8% fee for the property registration.
¨ The government also decreases the simple lawsuit settlement process to only 8 procedures in 28 days. Any disagreement on the verdict will be able to appeal with additional 3 procedures and maximum of 10 days of settlement.
 
Follow-up measure to reduce overall execution risk

Before the release of the 12th stimulus package, the government has released a total of 195 regulations from September 2015- April 2016. The government stated that as of 18 April, it has successfully completed 169 regulations or 87% from the total regulation released. There are 16 (8%) regulations that are still in the discussion process, while the remaining 10 regulations that will be taken out from the Economic Stimulus Package. The government stated that each packages received positive responses from investors and citizens. However, the government will increase its socialisation and evaluate the implementation through dissemination and business clinics. The business clinics aimed to further discuss the stimulus packages with stakeholders to ensure the on the ground efficiency of the packages. Moreover, the business clinic will also serve as the communication facility between investors and government to resolve any problems, including the export increment issues. The clinics and dissemination will be implemented in 3 regions, such as Palembang, Balikpapan, and Lombok.
 
The near term catalyst is the tax amnesty approval
We continue to believe that tax amnesty approval could serve as one of major catalyst in the near term. Post the Parliament’s recess session, the long-awaited tax amnesty bill is finally being discussed under the Commission XI, which has been holding hearing sessions with experts, business leaders and other stakeholders. Given its importance on the overall budget and the progress of infrastructure development, the Government is mulling over the fact that the bill could take effect in June. We believe the initial approval of the tax amnesty could be an important catalyst for the near term, as well as a major step taken in the right direction to finally foster the compliance of taxpayers – which could help solidify the Government’s overall budget composition going forward. As such, we expect further foreign fund inflows to support the market post the approval of the tax amnesty although we acknowledge that execution risks still remain at this juncture. Our top pick in the market are $BBCA, $BBTN, $ICBP, $INDF, $ADHI, $LPPF, $MIKA, $TLKM, $BSDE and $LSIP.


Bull
P H
Apr 26,2016 09:00:30
Higher Infrastructure Spending: Where Does The Money Come From?
 
¨ The government’s energy subsidy reform has allowed it to increase its infrastructure spending since 2015 via saving from the subsidy.

¨ Indonesia’s state budget, however, will likely face downward pressure due to lower-than-expected oil price compared with the budget’s assumption of USD50/barrel. Taking into account our macro assumptions of the government continues its spending in 2016, coupled with the uncertainty of tax amnesty bill to be introduced in 1H16, we project the fiscal deficit to widen to 2.7% of GDP, from last year’s -2.5% of GDP.

¨ Nonetheless, to overcome the income shortfall, the government plans to cut its budget expenditure. This will likely affect the country’s economic growth somewhat, posing a downside risk to our real GDP growth forecast of 5.1% for 2016.

¨ In the short run, excise duties on selected products could be increased, including tobacco, fuel, and vehicles. Over the medium term, tax reform should aim at broadening the tax base and increasing the VAT rate, while tax administration should adopt a risk-based approach to reduce tax evasion.

$WSKT $ADHI $PTPP $WIKA
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P H
Mar 07,2016 10:10:43
Wijaya Karya Beton ($WTON), We Expect Its GPM To Improve ….

… although it may still be below its historical highs of 13.1-14.9% since competition in the precast industry may intensify this year as its competitors increase their capacities. Also uncertainty of the high-speed train project could have a negative impact on its performance. FY15 NPAT was above our estimates, but lower then consensus, therefore we remain NEUTRAL on Wika Beton, while our DCF-derived TP of IDR870 (from IDR830, 8% downside) implies a 31.9x FY16F P/E.

¨ Competition remains stiff. We expect Wijaya Karya Beton (Wika Beton) to see intense competition from other state-owned enterprises (SOEs) such as Waskita Karya ($WSKT), Pembangunan Perumahan ($PTPP) and Adhi Karya ($ADHI). Waskita Karya is scheduled to grow its capacity to 2.35m tonnes pa from 1.63m tonnes pa and would become the second biggest precast producer in the market. Meanwhile, Pembangunan Perumahan may add 400,000 tonnes pa production capacity via its facilities in Sentul and Bekasi.

¨ We expect GPM to recover this year, given increased spending by the Government, while Wika Beton’s parent Wijaya Karya’s ($WIKA) new contract target would benefit the former. Thus, we expect its GPM to improve to approximately 12.8% in FY16-17, vs 12.4% last year. However, this is far below its historical high GPMs of c.13.1-14.9% (recorded in 2012-2014), given the potentially tough competition in the precast industry.

¨ The high-speed train (HST) project still has an uncertain future. The Ministry of Transportation has not given yet the approval for the project to the consortium (made up of Indonesian SOEs and a Chinese partner) tasked to the project. Meanwhile, the Chinese counterpart is requesting for a guarantee from the Government. While revenue contribution from the HST project may reach IDR6trn-8trn in 3-4 years, we expect contributions to begin in FY17– if the project goes through.

¨ FY15 results. Earnings of IDR174bn (-47% YoY) were about 9% above our estimate – but 10% below consensus – on lower-than-expected tax expenses, while revenue of IDR2.6trn (-19% YoY) was in line. GPM fell to 12.4% due to the lower utilisation rate early last year.

¨ Improvement in 4Q15. 4Q15 revenue (+68% QoQ, +16% YoY) contributed 42% of total revenue last year – above its normal c.27% contribution due to an increase in projects in the quarter. Meanwhile, NPAT surged >100% QoQ but fell by 18% YoY, due to the lower tax expenses.

¨ Maintain NEUTRAL with a DCF-derived TP of IDR870 (from IDR830) that also implies 31.2x FY16F P/E. Currently, the stock is trading at 33.9x FY16F P/E.
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P H
Mar 07,2016 09:20:16
Menteri perhubungan Ignasius Jonan menolak $ADHI sebagai operator LRT karena dianggap tidak berpengalaman dalam mengelola kereta api. Namun Jonan menawarkan $ADHI untuk menjadi pengembang properti di kawasan seputar jaringan LRT.
Bull
P H
Mar 01,2016 15:33:58
Adhi Karya ($ADHI) - Do Not Miss The Train!

We continue to like Adhi Karya on a potentially huge FY16 orderbook and the LRT project, which ought to give it better earnings visibility up to FY18. Moreover, precast needed to support the LRT project is likely to lead to higher gross margins. Maintain BUY with a IDR3,400 TP (from IDR3,430, 29% upside, which implies 18-14x FY16F-17F P/Es respectively.

¨ Giant orderbook since Adhi Karya has IDR11.5trn (+41.2% YoY) in carryover contracts for FY16 (FY15: IDR8.1trn). It is also expecting to land IDR41.5trn (+197.1% YoY) in new contracts in FY16. Given that huge estimated orderbook, we opine for a higher earnings visibility ahead for the contractor.

¨ Light rail transit (LRT) project. We see the LRT project as improving Adhi Karya’s earnings visibility due to its huge value, which would last until 2019. The firm’s gross margins would likely improve also on higher contributions from its precast business, which is needed to build this project. Regarding the recent issue on its request to become the LRT’s operator, we see a potential negative impact on its operating cash flow. However, the LRT possess more benefits by having subsidised ticket fares from the Government. In conclusion, we favour the LRT over transportation projects like the High-Speed Rail (HSR). In the case of the HSR, this is because there is no financial support for it from the Government, the construction cost per km is higher and there is more daily traffic from the LRT vs the HSR. The key downside risks are a delay in LRT project and lower-than-expected new contracts obtained for this year would impact profitability.

4Q15 earnings: in line

¨ Maintain BUY with a IDR3,400 TP (from IDR3,430). Post our FY16F NPAT adjustment, we maintain our BUY call with a TP of IDR3,400 which is based on an unchanged 18x FY16F P/E, +1SD from Adhi Karya’s 4-year mean. This stock is also the cheapest state-owned contractor in the market, with attractive growth and clearer earnings visibility due to the LRT project.
Bull
P H
Feb 19,2016 08:34:38
ADHI: Bigger Than Expected

Maintain BUY but raise TP to IDR3,430 (from IDR2,740, 27% upside) on 18x target P/E. Based on channel checks, Adhi Karya booked >IDR460bn net profit in FY15, 10.6%/13.3% higher than our/consensus estimates, while revenue rose to >IDR12trn. We continue to like the firm for its higher LRT project value, potential strong FY15 results and earnings visibility on the LRT project. It is also the cheapest state-owned contractor in the market.

¨ Light rail transit (LRT) project bigger than expected. Adhi Karya’s initial LRT project value was estimated at IDR23.8trn last year but after further discussion with the Transportation Ministry, this value could go up to IDR34trn. The company said the final value is slated for announcement in March. By comparison, Adhi Karya only booked IDR13.9trn in new contracts last year. The LRT project has less land clearing risks vis-à-vis other infrastructure projects, as its train tracks are to use the sides of Jasa Marga’s existing toll roads. The company is also targeting for IDR25.1trn in new contracts (+80.6% YoY) this year, and this number excludes the IDR34trn for the LRT project. Therefore, total new contract wins could hit up to IDR59trn (vs our new estimates of IDR51.5trn), which is 324.5% higher than 2015’s IDR13.9trn. With this huge number in new contract wins and less land clearing risks, we see better earnings visibility for Adhi Karya.

¨ Aggressive guidance and better earnings visibility. Based on our channel checks, Adhi Karya’s FY15 net profit reached >IDR460bn while revenue grew to >IDR12trn, ie higher than our IDR416bn and IDR10trn estimates respectively. Furthermore, we expect its FY16 earnings to rise to IDR666bn while revenue grows to IDR16.8trn. Note that we are conservative with our forecast, given that Adhi Karya guided for net PAT and revenue of IDR750bn and IDR20trn respectively for this period.

¨ Gross margins expansion on higher precast contributions. Adhi Karya is likely to benefit from higher precast contributions to revenue due to the LRT project. This is as the project is likely to require >50% of precast for the civil works portion. We are of the view that Adhi Karya would experience gross margins expansion, given that precast gross margins are higher than those of its construction services business. Precast’s gross margins are around 15-18% higher when compared to construction services, which is normally ~10% only.

¨ Upgrade our TP to IDR3,430. Maintain BUY with a IDR3,430 TP (from IDR2,740) derived from 18x target P/E (+1SD from Adhi’ Karya’s 4-year average rolling forward P/E) on its FY16F revised earnings. The stock is currently trading at 14.1x FY16F P/E, below the sector average of 21x (Figure 2). This counter is also the cheapest state-owned contractor in the market with attractive growth and clearer earnings visibility due to the LRT project.
Bull
P H
May 21,2015 21:11:26
Our top picks: 5 mass consumption, 3 infrastructure related, 1 bank, and 1 industrial property. Top picks in Indonesia (in alphabetical order) 1 ADHI Adhi Karya 2 BBRI Bank Rakyat Indonesia 3 BEST Bekasi Fajar 4 GGRM Gudang Garam 5 INDF Indofood Sukses 6 JSMR Jasa Marga 7 KLBF Kalbe Farma 8 PTPP Pemb Perumahan 9 TLKM Telkom Indonesia 10 TELE Tiphone Mobile Indo Source: Maybank Kim Eng
Bull
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ADHI
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Adhi Karya (Persero) Tbk.
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