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Indonesia | Construction Indonesia Equity Research
ADHI KARYA| BUY
07 Oct 2019
MARKET CAP: IDR4.451T AVG DAILY TURNOVER: IDR3.56B Company Update
REMAINS PROMISING ALBEIT SLOW LRT PROGRESS
Rating
• Plenty of new works to come in 2H19 BUY
• Toll roads to offset slow LRT progress Fair Value Current Price
• Maintain BUY, with unchanged TP of IDR2,300 IDR2,300 IDR1,250
add: 12m dividend 12m total return
Solo-Yogyakarta concession auction process is in underway forecast Forecast
Until 1H19 ADHI has secured new contract of IDR 5,4 t (-15% yoy), this IDR42 87%
implies a run rate of 18% from our full year estimate. New contract
achievements mostly derived from subsidized apartment projects in Price performance chart
Tangerang (IDR206 b) and building of Financial Service Authority in Solo
ADHI IJ - LHS JCI Index - RHS
and Yogyakarta (IDR120 b). In the remaining quarters, we believe ADHI
3000 6,800
will obtain more new contracts as several large value infrastructure project 6,600
auctions are underway. One of the auctions comes from toll road segment, 2500
6,400
namely Solo-Yogyakarta concession with a length of 92 km and 2000 6,200
construction work worth of IDR15,8 t. The project derives from ADHI and 6,000
1500
its business partner as an intiator, ADHI has the right to equalize the other 5,800
offers. Other infrastructure project auction that ADHI will participate are 1000 5,600
six segments of Jakarta inner-ring road phase I section C - Grogol-Kelapa 500
5,400
Gading, Cikunir-Ulujami concession (elevated) along with various sectors 5,200
0 5,000
including building, oil and gas. Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19
Sources: Bloomberg, PTOS estimates
Toll road to offset slow LRT progress Financials summary
In IDR b 2018 2019E 2020E
ADHI posted 1H19 revenue of IDR5,4t (-11% yoy) and net profit of
IDR215b (+1% yoy), this implies a run rate of 30% and 28% from our full Revenue 15,655 17,690 20,344
year estimates. The decline in revenue was due to slow LRT progress, Gross profit 2,506 2,668 3,155
which just reached 64,62% for Cawang-Cibubur (84,13%), follow by EBIT 1,557 1,581 1,828
Cawang –Dukuh Atas (54,26%) and Cawang-Bekasi Timur (58,30%) as Net profit 644 751 888
per Aug-19. Despite slow LRT progress, we still keep our FY19E earnings EPS (IDR/share) 181 211 250
Div/share 36 42 50
projection unchanged as we believe that construction of existing toll roads Sources: Bloomberg, PTOS estimates
and building projects will offset the underperformance of LRT progress,
Results highlights
including Aceh-Sigli toll road concession, Jakarta inner ring road phase I InIDR b 1H18 1H19 YoY%
section B Semanan-Grogol, while from building project will come from
Revenue 6,082 5,426 -11%
Transpark Bintaro, Urban Sky and Transpark Bekasi. Lower tax expense
Gross profit 923 853 -8%
and surge in profit from join operation have led to an increase in IH19 net
profit, however jumps in interest expense has slowed the net profit Operating profit 633 516 -19%
growth. Net profit 212 215 1%
Sources: Bloomberg, PTOS estimates
Security information
Awaits for the fourth LRT payment
ADHI posted a decline on receivable payment to IDR to IDR5,1 t in 1H19 Market Cap. (IDR b) 4,5
from IDR6,8 t in 1H18. A decline in receivable payment coupled with the Daily turnover (IDR b) 3.7
Free float (%) 49
increase of supplier payment have resulted in higher negative operating
Shares outstanding (m) 13,573
cash flow to IDR2,5 t. A drops on customer payment was led by several
Ticker ADHI
turnkey projects such as toll roads and a wide gap on LRT receivable Top shareholder REPUBLIC OF INDONESIA – 51%
around IDR7 t. Yet we are still optimistic that ADHI can reduce its negative
operating cash flow to IDR680 b at the end of year as soon as turnkey Analyst(s)
projects payment received, especially from the fourth LRT payment of LigaMaradona
around IDR3,1 t at the latest by 4Q19.
[email protected]
Maintain BUY with unchanged TP of IDR2,300
In spite of unexciting results in 1H19, we are still optimistic ADHI’s
perfromance to improved in 2H19 as payment received from the fourth
LRT projects will lower negative operating cash flow, as well as better new
contracts achievement and plenty of work orders. In all, we maintain our
BUY rating on ADHI with unchanged TP of IDR2,300 implying 10,8x 2019E
P/E which equivalent to -1 st. Dev below 5 year mean P/E.
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