15 April 2014

EQUITY RESEARCH

Construction Sector

Sector Update

Our preferred infrastructure plays

The construction sector is a key beneficiary of post-election infra spending Rising contracts-in-hand supports earnings growth and visibility We forecast sector earnings to grow by a 25% CAGR in FY13-16F We reiterate our bullish view. Top picks: PTPP (unchanged); WSKT (new)

Stocks Adhi Karya Pembangunan Perumahan Wijaya Karya Waskita Karya

Ticker ADHI IJ PTPP IJ WIKA IJ WSKT IJ

We remain bullish on all four construction stocks in our coverage, despite their massive outperformance so far in 2014 (+62% vs JCIs +9%), as we view the sector as a key beneficiary of post-election infrastructure spending. We forecast sector earnings to grow by a 25% CAGR in FY13-16F on the back of rising contracts-in-hand, expanding higher-margin precast concrete and property businesses, and better risk management, while concerns over the negative impact of currency weakness appear to be diminishing. We have added WSKT to our sector picks, along with PTPP. Infrastructure is a key economic policy issue Post-elections in 2014, a new government will likely focus on accelerating infrastructure projects to show results and achieve stronger economic growth. This is evident from the focus on infrastructure development in the economic policies promoted by most major political parties during the campaign period. Although the funding of these projects from the state budget may continue to be restrained by large fuel-subsidy spending, we expect most infrastructure financing to come from SOEs and public-private partnership (PPP) programs. Contracts-in-hand support earnings visibility The four construction companies have contracts-in-hand totaling Rp118tn in 2013, equivalent to nearly 3 years of revenue. This, coupled with a trend towards higher-margin pre-cast concrete and property businesses, better risk management and diminishing concerns over the impact of currency weakness, should support earnings visibility in the sector, in our view. WIKA and PTPP have by far the largest value of contracts-in-hand relative to revenues, reflecting their focus on multi-year projects, while ADHI is more exposed to single-year projects. Strong earnings growth outlook We forecast earnings of the four companies to grow by 25% CAGR in FY13-16F on the back of existing contracts-in-hand and a 21% CAGR in new contracts (including joint-operations). The corresponding growth of earnings and new contracts in FY10-13 were 30% and 34% CAGR, respectively, reflecting the launch of the MP3EI infrastructure development master-plan in 2011. Target price upgrades We reiterate our bullish view on the sector despite its strong outperformance year-to-date, as we believe the sector valuation is still undemanding. We have raised our target prices for WIKA, PTPP and ADHI by 21-54% and for WSKT by a steep 75%, mainly due to our FY14-15F earnings upgrades of 29-53% on our higher margin assumptions. Our revised TPs imply a target FY15F P/E of 16.4x for the sector. We believe this is still not demanding compared with the broader market, which is currently trading at a FY15F P/E of around 14x. Our top picks are PTPP and WSKT (due to their lower valuations than WIKA).

Share Performance
3M Absolute (%) Relative to JCI (%) 52-wk range (Rp) 43.7 33.8 6M 45.2 38.4 3,578 7,296 12 M 18.5 20.8

Price Chart
160 150 140 130 120 110 100 90 80 70 60 21-Mar 21-Jun
JCI

21-Sep

21-Dec

21-Mar

IP Construction Basket Index

IP Construction Basket is an index that consists of ADHI, PTPP, WIKA and WSKT Source: Bloomberg

Natalia Sutanto natalia.sutanto@ipc.co.id +62 21 5793 1168

Ticker ADHI PTPP WIKA WSKT Sector

M.Cap USDMn 442 709 1,138 577

Rec BUY BUY BUY BUY

Price Target Upside (Rp) (Rp) (%) 2,860 1,790 2,360 760 4,000 2,200 2,900 1,000 39.9 22.9 22.9 31.6

P/E at CP FY14F 11.7 16.6 20.5 15.9 17.3 FY15F 9.5 12.1 15.8 12.2 13.2

EPS growth (%) FY14F 8.0 23.8 23.3 24.7 21.4 FY15F 24.3 37.2 30.1 41.4 33.2

P/E at TP FY14F 14.8 20.5 25.2 21.0 21.6 FY15F 11.9 14.9 19.4 16.0 16.4

Source: IndoPremier, Bloomberg. Closing price 11 April 2014

1
Refer to important disclosures on the last of this report

Sector Update

Quick Comparisons
Ytd relative share price performance
80.0% 72.8% 70.0%
25 30

Rolling P/E of four construction companies (2009 start)

60.0%

56.2%
20

50.0%

15

40.0% 31.5% 30.0% 21.3% 20.0% ADHI WSKT PTPP WIKA

10

0 Jan-09 Jan-10 Ja n-11 Ja n-12 Jan-13 Jan-14

ADHI

PTPP

WIKA

WSKT

Source: Bloomberg

Source: Bloomberg, IndoPremier

Contracts-in-hand vs revenues, FY14F (Rp tn)

Source of contracts, FY13

Govt/SOE Other

Contracts-in-hand 50.0 43.0 40.0 30.0 30.0 20.0 10.0

Revenue

100% 80% 60% 40% 65 66 48 78 35 52 34 22

19.4 14.1 14.5 11.8

19.0 12.2

20% 0%

WIKA
Source: IndoPremier

WIKA

PTPP

WSKT

ADHI

PTPP

WSKT

ADHI
Source: Companies

FY14-15F earnings growth (%)

Gross profit contribution, FY14F

Construction related Property, precast, mining 3.5 16.2

2014F 60.0 50.0 40.0 30.1 30.0 20.0 10.0 WIKA PTPP 23.3 23.8 37.2

2015F 53.6

100% 80% 60%

5.5

50.7

94.5

96.5 83.8

24.7

40%

24.3
20% 49.3

8.0

0% WIKA PTPP WSKT ADHI

WSKT

ADHI
Source: Companies, IndoPremier

Source: Companies, IndoPremier

Sector Update

An earnings upgrade based on expected improved margins ahead Three construction companies (ADHI, WSKT and PTPP) out of four in our coverage reported 9-16% higher-than-consensus estimates of FY13 earnings, with above estimate margins as well. We believe improved risk management, as well as increasing contractsin-hand, was the reason behind this good result. Therefore, we have upgraded our FY1415F earnings by 2-10%, and given a major upgrade to WSKT. Previously, we saw a risk of lower FY14-15 margins at WSKT as a result of a high government single-year project contribution to FY13 new contracts. Going into 2014, we have more confidence in WSKT following the companys focus to maintain its margins going forward through selective project acquisitions. In 2015, we also estimate a significant increase in profits from joint-operations (JO), due to the revenue recognition from a property project in Alam Sutera (Serpong) and pre-cast plants. Thus, we have revised up our WSKT FY14-15F earnings by 29-53%.
2013 Revenue ADHI Net profit ADHI WIKA WSKT
Source: IndoPremier

2014F

2015F

Drivers

-6.1%

1.0%

9.2%

Higher FY15 revenue on stronger FY14-15 growth in new contracts Spill-over effect of higher FY15 revenue with maintained margins Improved margins on more oil and gas projects Higher JO profit from property and improved FY14-15 margins on the construction division

3.6% 1.8% 8.0%

1.9% 4.0% 29.3%

6.7% 9.8% 53.2%

. also led to higher TPs with a further rerating Construction companies share prices have outperformed the JCI by 62% ytd, with the expectation that a new government will prioritize infrastructure development, with construction companies the major beneficiaries. Therefore, in line with our expectation of seeing improved margins from most of these construction companies, we expect a further rerating ahead and therefore upgrade our TPs by 20-75%. Based on our new TPs, we expect the construction sector to trade at a FY15F P/E of 16.4x, which is in line with the broader market.
% TP Increase P/E 15F 13.2 14.9 19.4 16 16.4 54% 26% 21% 75%

Old forecast New TP 4,000 2,200 2,900 1,000

New forecast

Old TP ADHI PTPP WIKA WSKT Sector

Source: IndoPremier

P/E 14F 7.1 12.1 17.4 13.8 14.3

P/E 15F 9.2 11.9 17.6 13.0 14.4

P/E 14F 16.4 20.5 25.2 21 21.8

2,600 1,750 2,400 570

Sector Update

Peer comparison
WIKA PTPP WSKT ADHI Sector

Recommendation Target price (Rp) Current price (Rp) Upside (%)

BUY 2,900 2,120 36.8

BUY 2,200 1,675 31.3

BUY 1,000 685 46.0

BUY 4,000 2,805 42.6

Market cap (Rp tn) Avg daily turnover (Rp bn)

13.0 88.3

8.1 37.5

6.6 56.3

5.1 83.7

Market cap (USDMn) Avg daily turnover (USD million) Float (%) Majority shareholder

1,138 7.7 34.6% Govt of Indonesia (65.2%)

709 3.3 42.8% Govt of Indonesia (51%)

577 4.9 32.0% Govt of Indonesia (68%)

442 7.3 49.0% Govt of Indonesia (51%)

PE (FY14F) at TP (x) PE (FY15F) at TP (x)

25.2 19.4

20.5 14.9

21.0 14.8

16.4 13.2

21.8 16.4

PE (FY14F) at CP (x) PE (FY15F) at CP (x)

18.4 14.2

15.6 11.4

14.4 10.2

11.5 9.3

15.8 11.9

ROE FY14F (%) Gross margin after JO FY14F (%) Operating margin FY14F (%) Net margin FY14F (%)

18.4 13.6 10.4 5.0

21.9 11.4 9.8 3.6

16.3 10.4 6.9 3.9

23.6 13.1 9.8 3.6

19.7 12.3 9.5 4.2

Debt to equity FY14F (%) Interest coverage FY14F (x)

53.7 24.0

96.1 4.0

72.2 3.2

95.7 9.2

74.4 12.6

FY14F Earnings growth (%) FY15F Earnings growth (%)

Source: IndoPremier, Bloomberg. Closing price: 11 April 2014

23.3 30.1

23.8 37.2

24.7 41.4

8.0 24.3

21.4 33.2

Sector Update

Pembangunan Perumahan

Bigger and better

Large contracts-in-hand should support visibility of revenue and earnings As an experienced port developer, we expect more major projects with significant contract values ahead Diversification into higher-margin businesses (property and pre-cast) Undemanding valuation; PTPP is our top pick, with a TP of Rp2,200

PTPP IJ
Target Price Previous TP Current Price Upside (downside)

BUY
Rp2,200 Rp1,750 Rp1,675 31%

Share Performance
3M Absolute (%) Relative to JCI (%) 52-wk range (Rp) 27.4 17.5 6M 50.9 44.1 830 1,960 12 M 30.9 33.1

We reiterate our BUY recommendation on PTPP on the back of: 1) large contracts-in-hand of Rp47tn, which would translate into greater visibility on revenue and earnings; 2) on track to obtain major projects (Pelindo, PLN) given its experience in the port and electricity businesses. We expect PTPP to book a FY13-16F earnings CAGR of 27% with a net margin in the range 3.6%-3.9%. Diversification efforts into pre-cast and property will also sustain earnings growth ahead. BUY with a higher TP of Rp 2,200, translating into an implied 2014-15 P/E of 20.5x-14.9x. Large contracts-in-hand for greater earnings visibility In 2013, PTPP booked new contracts worth Rp19.6tn, with major contributions from building (57%), EPC (13%) and roads & bridges (13%). This led to FY14F total contracts-inhand of Rp43tn (including JO Rp47tn), providing greater visibility on our FY14F revenue forecast of Rp14.5tn, +24% yoy. Indonesias huge infrastructure development needs, which will be realized through increased projects from government and SOEs, should support the company to book FY14F new contracts of Rp23tn, +20% yoy. By 1Q14, PTPP had booked new contracts worth Rp3.6tn (15% of our FY14F target), mostly from coal terminal construction in East Kalimantan and property projects. In line for the next major projects Backed by its experience in developing Phase I of the Kalibaru Port, we expect PTPP to be in line for further major projects from Pelindo, which has stated its intention of expanding the new port (Phases II and III), as well as developing existing ports in several provinces across Indonesia. The recently completed Compressed Natural Gas (CNG) storage owned by PLN also provides a sound track record of accomplishment for PTPP, given its position as the license holder to build an upcoming five new CNG storages. FY13-16F earnings CAGR of 27% PTPP reported higher-than-expected FY13 earnings, at about 9% above consensus, but in line with our forecast. In 2014, we estimate the company to book a FY14F top line of Rp14.5tn, translating into a FY12-14F CAGR of 29%. We estimate a FY14F net profit of Rp521bn, +24% yoy with maintained margin at 3.6%. Downside risk to our forecast is a high contribution of building (57%) to FY13 new contracts, which could distort construction margins if there are defaults from project owners resulting in higher allowance for bad receivables. Expanding business with attractive valuation, reiterate BUY PTPP is trading at attractive valuation of a FY14F P/E of 15.6x, at par with the sector P/E of 15.8x. The companys expansion into property and precast, as well as swelled FY14F contracts-in-hand, should continue to support PTPPs outperformance, in our view. Thus, we reiterate our BUY recommendation on PTPP with a TP Rp2,200, and an implied FY15F P/E of 14.9x.
Key Financials Revenue (Rp bn) Gross profit (Rp bn) Operating profit (Rp bn) Net income (Rp bn) EPS (Rp) EPS growth (%) P/E (x) P/BV (x) EV/EBITDA (x) ROE (%) 2012A 8,004 855 853 310 64 29 26.2 4.9 5.2 19 2013A 11,656 1,273 1,168 421 87 36 19.3 4.1 8.8 21 2014F 14,504 1,532 1,417 521 108 24 15.6 3.4 7.7 22 2015F 18,347 1,945 1,806 714 148 37 11.4 2.8 6.1 24 2016F 22,047 2,338 2,160 870 180 22 9.3 2.3 5.2 24

Price Chart
200 180 160 140 120 100 80 21-Mar 21-Jun 21-Sep
JCI PTPP

21-Dec

21-Mar

Source: Bloomberg

Share Data
Out shares (m) Market Cap (US$ m) 6 M avg.daily (US$) 4,842 710.6 2,886,745

Shareholder Information
Government of Indonesia Employees Cooperative Free float 51.0% 6.1% 42.9%

Source: PTPP, IndoPremier estimates. Closing price 11 April 2014

Sector Update

Large contracts-in-hand for greater revenue visibility (Rp tn)

FY13-16F new contracts CAGR of 18% (Rp tn)

Contracts in hand 70.0 60.0 50.0 40.0 30.0 20.0 23.9 33.9 43.0

Revenue 65.5 54.9

35.0 32.2 30.0 29.3

25.0

23.4 19.6

20.0
22.0 18.3 11.7 8.0 14.5

10.0 2012
Source: PTPP, IndoPremier

15.0 2013 2014F 2015F 2016F

2013

2014F

2015F

2016F
Source: PTPP, IndoPremier

Revenue contributions, FY10-15F

Increasing revenue with improved margin

Construction 100%

EPC

Realty

Property

25 20 15 3.9%

Revenue (Rp tn)

Net Profit Margin (RHS) 3.9% 3.9%

4.5% 4.0% 3.5% 3.0% 2.5% 2.0%

17%

12%

12%

11%

11%

3.6%

3.6%

80% 87% 87%

10 5 0 2012 2013 2014F 2015F 2016F

85% 82%

86%

60% 2012 2013 2014F 2015F 2016F

Source: PTPP, IndoPremier

Source: PTPP, IndoPremier

PTPP rolling P/E

PTPP relative share price performance

50% 44.1%

20

19x (+2 Std. Dev.)

40% 31.5% 33.1%

15

15x (+1 Std. Dev.) 12x (average)

30%

20%

17.5%

10

8x (-1 Std. Dev.)

10%

5x (-2 Std. Dev.)

0% Ytd 1 Mo -7.2% 3 Mo 6 Mo 12 Mo

0 Feb-10 Feb-11 Fe b-12 Feb-13 Feb-14

-10%

Source: Bloomberg, IndoPremier estimates

Source: Bloomberg

Sector Update

Financial Summary
Income Statement Year to Dec 31 (Rp bn) Revenue and sales COGS Gross profit Operating income Interest expense Impairment expense EBT Tax EAT Non-controlling interest Net profit 2013 11,656 10,383 1,273 1,168 (267) (107) 767 (346) 421 (0) 421 2014F 14,504 12,972 1,532 1,417 (297) (133) 947 (426) 521 (0) 521 2015F 18,347 16,402 1,945 1,806 (286) (165) 1,299 (584) 714 (0) 714 2016F 22,047 19,709 2,338 2,160 (326) (190) 1,582 (712) 870 (0) 870 Balance Sheet Year to Dec 31 (Rp bn) Cash Receivables Inventories Investments Fixed assets Other Total assets Payables Interest bearing debts Shareholders' equity Non-controlling interest Other Total liabilities & equity 2013 2,397 6,418 1,777 290 377 1,157 12,416 6,726 2,065 1,984 1 1,641 12,416 2014F 1,890 7,982 2,239 308 609 1,449 14,477 8,048 2,285 2,378 1 1,765 14,477 2015F 1,662 9,895 2,921 328 859 1,913 17,578 10,207 2,202 2,936 1 2,232 17,578 2016F 1,843 11,433 4,314 347 1,079 2,317 21,334 12,552 2,506 3,592 1 2,682 21,334

Cash Flow Statement Year to Dec 31 (Rp bn) Net income Depreciation Non cash adjustments Net interest effect Changes in net WC CFO Capex Change in non-current assets Interest income CFI Debts Equity issuance Interest expenses Dividends Other CFF 2013 421 12 1 255 24 712 (148) (16) 13 (152) (314) 0 (267) (93) 1,208 534 2014F 521 18 0 282 (967) (147) (260) (3) 15 (248) 103 (297) (126) 208 (112) 2015F 714 25 0 275 (714) 300 (285) (7) 11 (280) (82) (286) (156) 278 (247) 2016F 870 31 0 309 (809) 401 (260) (8) 17 (251) 304 (326) (214) 267 31

Key Ratios Year to Dec 31 Profitability Gross margin Gross margin after JO EBITDA margin Pre-tax margin Net margin ROA ROE 10.9% 11.7% 10.1% 6.6% 3.6% 3.4% 21.2% 10.6% 11.4% 9.9% 6.5% 3.6% 3.6% 21.9% 10.6% 11.4% 10.0% 7.1% 3.9% 4.1% 24.3% 10.6% 11.4% 9.9% 7.2% 3.9% 4.1% 24.2% 2013 2014F 2015F 2016F

Growth Revenue and sales EBITDA Pre-tax profit Net profit EPS 45.6% 37.2% 40.6% 35.8% 35.8% 24.4% 21.6% 23.5% 23.8% 23.8% 26.5% 27.6% 37.2% 37.2% 37.2% 20.2% 19.7% 21.8% 21.8% 21.8%

Leverage Cash flow Beginning cash balance Ending cash balance 1,094 1,303 2,397 (507) 2,397 1,890 (227) 1,890 1,662 181 1,662 1,843 Debt to asset Debt to equity Net debt/(cash) to equity Interest cover (x) 16.6% 104.1% -16.6% 4.4 15.8% 96.0% 16.6% 4.8 12.5% 75.0% 18.4% 6.4 11.7% 69.7% 18.5% 6.7

Sources: PTPP, IndoPremier estimates

Sector Update

Waskita Karya

Better days ahead, upgrade TP to Rp1,000

Selective project acquisitions for improved risk mitigation Further income diversified from FY15 onwards into property and precast Major beneficiary of government infrastructure spending Reiterate our BUY call with a higher TP of Rp1,000/share

WSKT IJ
Target Price Previous TP Current Price Upside (downside)

BUY
Rp1,000 Rp570 Rp685 46%

Share Performance
3M Absolute (%) Relative to JCI (%) 52-wk range (Rp) 34.3 24.4 6M 18.1 11.3 400 1,080 12 M -2.1 0.1

We believe WSKT will continue to see better days ahead with greater earnings visibility, supported by (1) improved risk management through selective project acquisitions, (2) mounting contracts-in-hand, and (3) further diversification into pre-cast and property, as well as investment projects including power plants and toll roads. Following higher-than-expected FY13 earnings, we have upgraded our FY14-15F earnings by 29-53%, as we expect the company to improve margins going forward. We believe WSKT will remain a major beneficiary of increasing government and SOE spending ahead, which could contribute 70-80% of the companys total contracts. We reiterate our BUY with a higher TP of Rp1,000/share Selective project acquisitions would sustain high margins As the only pure construction play, Waskita has improved its profitability through continued efficiencies, lowering financing cost combined with an enlarged FY11-13 new contract CAGR of 34%, which led to a FY11-13 earnings CAGR of 44% and a near doubling of FY13 net margin to 3.8% (FY10: 2.1%). To mitigate the impact of currency weakness last year, the company has persistently negotiated for USD-linked contracts, resulting in only 12% of total contracts being negatively impacted by rupiah depreciation. This small portion of total contracts was offset by the companys receivables in USD. In 2014, the companys focus on improved risk management by selective project acquisitions based on required margins should sustain the margin improvement story ahead, in our view. On track to book FY14 new contracts of Rp15.7tn In March 2014, the company reported 1Q14 new contracts of Rp3.3tn, on track to reach our FY14 new contracts target of Rp15.7tn (including JO), +19% yoy. The companys continued focus on government infrastructure and SOE projects (70-80% of total portfolio) should generate sizeable contracts this year, in our view. Total 2014 contracts-in-hand of Rp25.3tn should also provide greater earnings visibility this year. Diversified earnings from 2015 onwards; reiterate BUY with a higher TP We estimate WSKT to book strong FY14-15F top line growth of 22%. Combined with additional JO earnings from property, we estimate the company to book strong FY14-15F bottom line growth of 25-41%, with a net margin ranging from 3.9-4.5%. Going forward, WSKT will continue to diversify into property (adding two new projects), and precast (building new plants), as well as investments in power plants (total five new power plants in the next five years) and toll roads. Reiterate our BUY recommendation on WSKT with a higher TP of Rp1,000 as our second top pick, translating into an undemanding FY14-15 P/E of 21.0x and 14.8x. Risks to our call would include lower-than-expected project acquisitions/realizations, and higher funding costs.

Price Chart
180 160 140 120 100 80 60 40 21-Mar 21-Jun
JC I

21-Sep
WSKT

21-Dec

21-Mar

Source: Bloomberg

Share Data
Out shares (m) Market Cap (US$ m) 6 M avg.daily (US$) 9,632 587.1 3,534,375

Shareholder Information
Government of Indonesia Free float 68.0% 32.0%

Key Financials Revenue (Rp bn) Gross profit (Rp bn) Operating profit (Rp bn) Net income (Rp bn) EPS (Rp) EPS growth (%) P/E (x) P/BV (x) EV/EBITDA (x) ROE (%)

2012A 8,808 732 540 254 26 -8 26.0 3.3 25.6 13

2013A 9,687 911 672 368 38 45 17.9 2.8 14.0 15

2014F 11,836 1,066 822 459 48 25 14.4 2.3 11.6 16

2015F 14,432 1,334 1,090 649 67 41 10.2 1.9 8.9 19

2016F 18,108 1,672 1,425 916 95 41 7.2 1.5 6.6 21

Sources: WSKT, IndoPremier estimates. Closing price 11 April 2014

Sector Update

Increasing new contracts, FY12-16F (Rp tn)

Government and SOEs as major contract contributors

100%
30.0

90% 80% 34% 56% 54% 56% 27% 11% 32% 23% 22% 39% 23% 2011 Private
2012 2013 2014F 2015F 2016F
Source: WSKT, IndoPremier

25.0

24.9

70% 60% 50%

54%

20.0 15.7 15.0 12.3 10.0 13.2

19.7

40% 30% 20% 10% 0%

23%

22% 2012 SOE 2013

23% 2014F

2010

Government

Source: WSKT, IndoPremier

Increasing contracts-in-hand for greater revenue visibility (Rp tn)

Total contracts-in-hand 40.0 35.0 30.3 30.0 25.3 25.0 20.0 15.0 10.0 5.0 2012 2013 2014F 2015F 2016F 8.8 9.7 18.8 14.4 11.8 22.0 18.1 Revenue 37.3

Strong earnings growth with expanding margin

Net profit - Rp bn (LHS) 1,400 1,200 1,000 800 600 400 200 2012 2013 2014F

Net margin (RHS) 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 2015F 2016F

Source: WSKT, IndoPremier

Source: WSKT, IndoPremier

WSKT rolling P/E

WSKT relative share price performance

60% 56.2%

25

50%
22x (+2 Std. Dev.)

40%

20

18x (+1 Std. Dev.)

30%

24.4%

15

14x (average)

20% 11.3% 10%

11x (-1 Std. Dev.)

10

0.1% 0%
7x (-2 Std. Dev.)

Ytd -10%

1 Mo

3 Mo

6 Mo

12 Mo

5 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14

-13.3% -20%

Source: Bloomberg, IndoPremier

Source: Bloomberg

Sector Update

Earnings revision
Changes in earnings forecast Old 2013F Revenue Gross profit Gross profit after JO Operating profit Net profit Margins GPM GPM after JO OPM NPM 8.5% 9.5% 6.2% 3.3% 8.3% 9.3% 6.0% 2.9% 8.3% 9.3% 5.9% 3.0% 9.4% 10.5% 6.9% 3.8% 9.0% 10.4% 6.9% 3.9% 9.2% 10.9% 7.6% 4.5% 10,370 881 987 646 341 2014F 12,117 1,007 1,130 722 355 2015F 14,149 1,179 1,323 833 424 2013A 9,687 911 1,012 672 368 New 2014F 11,836 1,066 1,225 822 459 2015F 14,432 1,334 1,568 1,090 649 2013A -6.6% 3.3% 2.6% 4.0% 8.0% Changes 2014F -2.3% 5.9% 8.4% 13.9% 29.3% 2015F 2.0% 13.1% 18.5% 30.9% 53.2%

Source: WSKT, IndoPremier estimates

10

Sector Update

Financial Summary
Income Statement Year to Dec 31 (Rp bn) Revenue and sales COGS Gross profit Gross profit after JO Operating income Interest expense Impairment expense EBT Tax EAT Non-controlling interest Net profit 2013 9,687 8,776 911 1,012 672 (97) 5 611 (243) 368 0 368 2014F 11,836 10,770 1,066 1,225 822 (132) 6 722 (263) 459 0 459 2015F 14,432 13,098 1,334 1,568 1,090 (136) 6 970 (321) 649 0 649 2016F 18,108 16,436 1,672 2,008 1,425 (138) 6 1,320 (404) 916 0 916 Balance Sheet Year to Dec 31 (Rp bn) Cash Receivables Inventories Investments Fixed assets Other Total assets Payables Bank loans/bonds Shareholders' equity Non-controlling interest Other Total liabilities and equity 2013 1,122 2,003 194 196 453 4,823 8,788 4,228 1,623 2,382 1.0 554 8,788 2014F 1,592 2,292 37 196 707 5,706 10,530 4,669 2,033 2,815 1.0 1,012 10,530 2015F 1,531 2,795 45 196 898 6,967 12,430 5,670 2,099 3,427 1.0 1,233 12,430 2016F 1,905 3,507 56 196 1,076 8,324 15,064 7,103 2,121 4,291 1 1,547 15,064

Cash Flow Statement Year to Dec 31 (Rp bn) Net income Depreciation Non cash adjustments Net interest effect Changes in net wc CFO Capex Change in non-current assets Interest income CFI Debts Equity issuance Interest expenses Dividends Other CFF 2013 368 52 1 70 (623) (133) (480) (2) 27 (455) (296) 30 (97) (20) (90) (474) 2014F 459 46 108 184 797 (801) 24 (777) 410 (132) (29) 200 449 2015F 649 59 113 (182) 639 (711) 23 (688) 66 (136) (37) 94 (13) 2016F 916 71 109 (35) 1,061 (681) 29 (652) 22 (138) (52) 134 (35)

Key Ratios Year to Dec 31 Profitability Gross margin Gross margin after JO EBITDA margin Pre-tax margin Net margin ROA ROE 9.4% 10.5% 7.5% 6.3% 3.8% 4.2% 15.4% 9.0% 10.4% 7.3% 6.1% 3.9% 4.4% 16.3% 9.2% 10.9% 8.0% 6.7% 4.5% 5.2% 18.9% 9.2% 11.1% 8.3% 7.3% 5.1% 6.1% 21.3% 2013 2014F 2015F 2016F

Growth Revenue and sales EBITDA Pre-tax profit Net profit EPS 10.0% 32.7% 32.9% 44.9% 44.9% 22.2% 20.0% 18.1% 24.7% 24.7% 21.9% 32.3% 34.4% 41.4% 41.4% 25.5% 30.2% 36.1% 41.2% 41.2%

Leverage Cash flow Beginning cash balance Ending cash balance (1,062) 2,184 1,122 470 1,122 1,592 (61) 1,592 1,531 374 1,531 1,905 Debt to asset Debt to equity Net debt/(cash) to equity Interest cover (x) 18.5% 68.1% 21.1% 7.5 19.3% 72.2% 15.7% 6.6 16.9% 61.2% 16.6% 8.4 14.1% 49.4% 5.0% 10.9

Sources: WSKT, IndoPremier estimates

11

Sector Update

Wijaya Karya

Most diversified
High-margin businesses contribute 45-50% to WIKAs profit Expanding property, precast and mining businesses Large contracts to support FY14-15 revenue Reiterate BUY with a higher TP of Rp2,900

WIKA IJ
Target Price Previous TP Current Price Upside (downside)

BUY
Rp2,900 Rp2,400 Rp2,120 37%

Share Performance
3M Absolute (%) Relative to JCI (%) 52-wk range (Rp) 9.3 -0.6 6M 12.2 5.4 12 M -3.6 -1.4

WIKA has successfully diversified its revenue sources towards highermargin businesses, which now account for 30-33% of the top line and contributes 45-50% to WIKAs earnings. The recent acquisition of asphalt/bitumen producer (Sarana Karya) will enable WIKA to form vertical integration supporting its main construction business. Continued expansion into related businesses such as property and precast, as well as the companys proven capabilities in the oil and gas sector, should pave the way for sustainable earnings growth, in our view. Thus, we upgrade our TP to Rp2,900 with an implied FY14-15F P/E of 25.2x-19.4x. BUY Large contracts, mostly from government and SOEs In 2014, WIKA will continue to focus on projects funded by government and SOEs (61% of total), as well as the private sector, mostly in the oil and gas sector. By 1Q14, WIKA had obtained Rp4.8tn new contracts, mostly from two EPC projects from Pertamina, which should support our FY14F new contract target of Rp20tn. Large FY14F total contracts-in-hand totaling Rp44tn should also support greater revenue and earnings visibility. Diversifying towards higher-margin businesses WIKA has successfully diversified its revenue stream towards higher-margin businesses. With the recent acquisition of Sarana Karya, businesses that produced double-digits margin (precast, property and mining/asphalt sales) will contribute around 30% of the companys total top line. However, these businesses should provide greater impact on earnings with a 45-50% contribution, enabling WIKA to maintain its position in SOE construction with the highest margins among its peers.

1,350 2,900

Price Chart
180 160 140 120 100 80 60 21-Mar 21-Jun
JCI

21-Sep
WIK A

21-Dec

21-Mar

Source: Bloomberg

Share Data
Out shares (m) Market Cap (US$ m) 6 M avg.daily (US$) 6,134 1,139.3 5,358,674

Unlocking value from WIKA Beton, support for expansion ahead Through the listing of WIKA Beton, the company obtains Rp1.2tn to finance further expansions ahead. The company plans to add another three precast plants in the next three years, bringing total capacity to 2.6mn tons by 2016. Having a larger capacity than its competitors, we believe the expansion of precast should support the companys vertical integration into the construction industry and provide economies of scale for more competitive contracts going forward. More investments to sustain earnings, reiterate BUY with a higher TP WIKA has several expansion plans in the pipeline to sustain future earnings. Other than pre-cast and property, the company will also focus more on investments, including water projects, the leasing of container terminals and industrial plants. Once materialized, these projects should generate recurring income and sustainable earnings going forward. We estimate WIKA to book a FY13-16F earnings CAGR of 24%, with improved margins. We reiterate our BUY recommendation with a TP Rp2,900, translating to an implied FY14-15 P/E of 25.2x-19.4x. WIKAs premium valuation is warranted in our view, given its high net margins compared with its peers, its diversified businesses, proven track record, and solid expansion plan. BUY.
Key Financials Revenue and sales (Rp bn) Gross profit (Rp bn) Operating profit (Rp bn) Net income (Rp bn) EPS (Rp) EPS growth (%) P/E (x) P/BV (x) EV/EBITDA (x) ROE (%) 2012A 9,905 958 870 476 78 32.6 27.2 4.6 9.2 16.8 2013A 11,885 1,322 1,216 570 93 19.7 22.7 4.0 13.5 17.7 2014F 14,129 1,595 1,475 703 115 23.3 18.4 3.4 11.2 18.4 2015F 17,124 1,953 1,780 914 150 30.1 14.2 2.8 9.2 20.0 2016F 20,044 2,319 2,088 1,100 180 20.4 16.1 3.2 7.1 20

Shareholder Information
Government of Indonesia Free float 65.2% 34.8%

Source: WIKA, IndoPremier estimates. Closing price 11 April 2014

12

Sector Update

Precast, property and Asphalt, which generate double-digit gross margins, contribute around 30-33% to revenue .
Construction, Electricity, EM 100% 80% 60% 40% 20% 0% 2012 2013 2014F 2015F 30% 33% 33% 32% Precast, Property, Asphalt

. with higher contributions (45-50%) to gross profit

Construction, Electricity, EM 100% 80% 60% 40% Precast, Property, Asphalt

45%

50%

48%

47%

70%

67%

67%

68%

55% 20% 0% 2012

50%

52%

53%

2013

2014F

2015F

Source: WIKA, IndoPremier

Source: WIKA, IndoPremier

Large contracts-in-hand for greater revenue visibility (Rp tn)

Strong earnings growth with expanding margin

45

Total contracts in hand

Revenue

Revenue
25.00

NPM (RHS)
5.7%

40

5.5%
41.0
20.00 5.5%

5.3% 5.0%
5.3%

35

34.8
30

15.00

4.8%

30.0
25

5.1% 10.00

25.0
20

25.9

4.8%
20.0 17.1 14.1 11.9 9.9
5.00

4.9%

15

4.7%

10

2012 2013F 2014F 2015F 2016F

4.5%

5 2012 2013 2014F 2015F 2016F

Source: WIKA, IndoPremier

Source: WIKA, IndoPremier

Contracts-in-hand by segment, 2009-13

Toll, road, bridge Building Precast Industry Port, Irrigation & barrage Realty Power plant and Ind. Plant Industry and Manufacturing

Wika Betons capacity compared with its closest competitor

45% 40% 35% 39%

100% 80% 60% 40% 20%

12 19.2 3.2 9.5

9.9 17.8 3.4 12.8 29.3

9.2 8.7 4 15.3

9.9 6.2 5.4 20.2

10.3 1.5 5.8 23.9

30% 25% 20% 15% 16% 10% 7% 4%

33.2

27.4

26.3

10% 5%

20.9 0% 2009
Source: WIKA

16.5 2010

18.9 2011

19.2 2012

22.5 2013

0% WB Adhimix Precast Jaya Beton JHS Concrete Beton Prima

Source: BCI Asia

13

Sector Update

WIKA rolling P/E

30

WIKA relative share price performance

25% 21.3% 20%

25

21x (+2 Std. Dev.)

20

15% 10% 5.4%

16x (+1 Std. Dev.)

15

5% 0% Ytd 1 Mo 3 Mo -0.6% 6 Mo -5% 12 Mo -1.4%

12x (average)
10

7x (-1 Std. Dev.)

5

-10% -15% -20%

2x (-2 Std. Dev.)

0 Ja n-09 Jan-10 Ja n-11 Jan-12 Jan-13 Ja n-14

-13.8%

Source: Bloomberg, Indopremier

Source: Bloomberg

Earnings revision
Changes in earnings forecast
(old) Year to Dec 31 (Rp bn) Revenue COGS Gross profit EBIT Net income Margins Gross margin EBIT margin Net margin 10.1% 9.0% 4.8% 10.0% 9.1% 4.8% 10.0% 9.1% 4.9% 11.1% 10.2% 4.8% 11.3% 10.4% 5.0% 11.4% 10.4% 5.3% 2013F 11,552 10,388 1,163 1,044 560 2014F 13,943 12,550 1,394 1,265 676 2015F 16,911 15,221 1,690 1,542 833 2013A 11,885 10,562 1,322 1,216 570 (new) 2014F 14,129 12,534 1,595 1,475 703 2015F 17,124 15,172 1,953 1,780 914 2013 2.9% 1.7% 13.7% 16.5% 1.8% (%) change 2014 1.3% -0.1% 14.5% 16.6% 4.0% 2015 1.3% -0.3% 15.6% 15.4% 9.8%

Source: WIKA, IndoPremier estimates

14

Sector Update

Financial Summary
Income Statement Year to Dec 31 (Rp bn) Revenue and sales COGS Gross profit Gross profit after JO Operating income Interest expense Impairment expense EBT Tax EAT Non-controlling interest Net profit 2013 11,885 10,562 1,322 1,583 1,216 (64) (85) 1,017 (392) 624 (54) 570 2014F 14,129 12,534 1,595 1,921 1,475 (92) (99) 1,238 (466) 772 (70) 703 2015F 17,124 15,172 1,953 2,324 1,780 (95) (100) 1,583 (579) 1,005 (90) 914 2016F 20,044 17,725 2,319 2,732 2,088 (98) (103) 1,881 (672) 1,209 (109) 1,100 Balance Sheet Year to Dec 31 (Rp bn) Cash Receivables Inventories Investments Fixed assets Other Total assets Payables Bank loans Shareholders' equity Non-controlling interest Other Total liabilities & equity 2013 1,387 4,043 1,118 1,548 1,705 2,655 12,456 5,465 1,672 2,949 278 2,231 12,595 2014F 1,656 5,032 1,889 1,768 2,167 3,135 15,647 6,809 2,045 3,481 330 2,982 15,647 2015F 1,929 6,099 1,870 1,990 2,600 3,653 18,141 7,942 2,115 4,184 398 3,502 18,141 2016F 3,567 6,590 2,185 2,213 3,003 4,054 21,612 9,645 2,182 5,010 480 4,295 21,612

Cash Flow Statement Year to Dec 31 (Rp bn) Net income Depreciation Non cash adjustments Net interest effect Changes in net WC CFO Capex Change in non-current assets Interest income CFI Debts Equity issuance Interest expenses Dividends Other CFF 2013 570 120 38 40 (263) 505 (1,051) 111 24 (915) 417 (78) (64) (137) 127 264 2014F 703 137 52 68 (10) 950 (1,070) 84 24 (962) 373 (92) (171) 171 281 2015F 914 167 68 69 33 1,252 (1,072) 77 26 (969) 70 (95) (211) 227 (9) 2016F 1,100 197 82 74 1,136 2,590 (974) 70 24 (880) 67 (98) (274) 232 (73)

Key Ratios Year to Dec 31 Profitability Gross margin Gross margin after JO Operating margin EBITDA margin Pre-tax margin Net margin ROA ROE 11.1% 13.3% 10.2% 11.2% 8.6% 4.8% 4.5% 17.7% 11.3% 13.6% 10.4% 11.4% 8.8% 5.0% 4.5% 18.4% 11.4% 13.6% 10.4% 11.4% 9.2% 5.3% 5.0% 20.0% 11.6% 13.6% 10.4% 11.4% 9.4% 5.5% 5.1% 20.0% 2013 2014F 2015F 2016F

Growth Revenue and sales EBITDA Pre-tax profit Net profit EPS 20.0% 39.9% 22.1% 19.7% 19.7% 18.9% 20.7% 21.8% 23.3% 23.3% 21.2% 20.7% 27.9% 30.1% 30.1% 17.0% 17.3% 18.8% 20.4% 20.4%

Cash flow Beginning cash balance Ending cash balance

(145) 1,532 1,387

269 1,387 1,656

274 1,656 1,929

1,637 1,929 3,567

Leverage Debt to asset Debt to equity Net debt/(cash) to equity Interest cover (x) 13.3% 51.8% 8.9% 20.9 13.1% 53.7% 10.2% 17.5 11.7% 46.1% 4.0% 20.5 10.1% 39.7% -25.2% 23.3

Sources: WIKA, IndoPremier estimates

15

Sector Update

Adhi Karya

Cheap construction play

At 73% ytd, the highest performing construction stock, yet it remains cheap Rp22tn contracts-in-hand to support FY14F revenue and earnings Potential rerating on positive outlook for the sector Reiterate BUY with a higher TP of Rp4,000

ADHI IJ
Target Price Previous TP Current Price Upside (downside)

BUY
Rp4,000 Rp2,600 Rp2,805 28%

Share Performance
3M Absolute (%) Relative to JCI (%) 52-wk range (Rp) 68.0 58.0 6M 50.0 43.2 12 M -4.9 -2.7

ADHI is the top performing stock in the sector (73% ytd, compared with the JCI), but remains the cheapest within our coverage. At the current price, ADHI is trading at an FY14F P/E of 11.5x, still a 27% discount to the sectors 15.8x. In our view, the positive outlook for continued infrastructure spending from the realization of MP3EI should drive a potential rerating. The realization of monorail projects this year should provide upside for our FY14F new contracts target and further catalysts for share-price performance. BUY with a higher TP of Rp4,000, translating into an implied FY14-15F P/E of 16.4x-13.2x Higher-than-consensus FY13 earnings on forex gain ADHI reported 16% higher-than-consensus FY13 net profit but in line with our forecast. The construction/EPC division, which contributed 93% to the companys FY13 revenue, reported a lower margin of 10% (FY12: 11.5%), due to higher raw material costs/rupiah weakness during 2H13. However, a 7% revenue contribution from property and realty supported ADHI to maintain a FY13 gross margin of 12.2%. Manageable opex and a Rp110bn forex gain helped ADHI to book a FY13 net profit of Rp406bn, +92% yoy. Excluding forex gains and asset sales, ADHIs FY13 net profit was still Rp285bn, +48% yoy. FY14F earnings of Rp438bn, +8% yoy Supported by carry-over contracts of Rp8.7tn and a FY14F new contracts estimate of Rp13.4tn, we estimate ADHI FY14F revenue of Rp12.2tn, +24% yoy with the major contribution from construction/EPC (93%). Property and realty should contribute 7% to ADHIs FY14F revenue, with a 16% contribution to gross profit. We estimate a FY14F gross margin of 12.1%, with support from the construction and property businesses. Higher interest expenses to support the companys expansion and the continued high allowance for impairment of receivables will continue to put pressure on the bottom line, in our view. We estimate FY14 net profit at Rp438bn, +8% yoy with a lower net margin of 3.6%. Potential rerating ahead, BUY with higher TP of Rp4,000 ADHI is the top outperformer construction stock within the sector (73% ytd compared to JCI), yet remains the cheapest within our coverage. At the current price, ADHI is trading at a FY14F P/E of 11.5x, still at a 27% discount to the sector P/E of 15.8x. In our view, the positive outlook for future infrastructure spending will create a potential rerating ahead. From the company, the realization of monorail projects this year should provide upside for our FY14F new contracts target and further catalysts for share price performance. BUY with a higher TP of Rp4,000.

1,425 4,000

Price Chart
140 130 120 110 100 90 80 70 60 50 40 21-Mar 21-Jun
JCI

21-Sep
ADHI

21-Dec

21-Mar

Source: Bloomberg

Share Data
Out shares (m) Market Cap (US$ m) 6 M avg. daily (US$) 1,801 442.7 5,377,143

Shareholder Information
Government of Indonesia ABN Amro Bank N.V Free float 51.0% 5.0% 44.0%

Key Financials Revenue and sales (Rp bn) Gross profit (Rp bn) Operating profit (Rp bn) Net income (Rp bn) EPS (Rp) EPS growth (%) P/E (x) P/BV (x) EV/EBITDA (x) ROE (%)

2012A 7,628 956 792 212 117 16 23.9 4.3 4.0 18

2013A 9,800 1,193 919 406 225 92 12.4 3.3 6.8 26

2014F 12,165 1,478 1,197 438 243 8 11.5 2.7 5.2 24

2015F 15,163 1,817 1,483 545 302 24 9.3 2.2 4.0 24

2016F 19,339 2,219 1,828 708 393 30 7.1 1.8 3.0 25

Source: ADHI, IndoPremier estimates. Closing price 11 April 2014

16

Sector Update

Increasing contracts-in-hand to support revenue visibility (Rp tn)

Revenue 30.0 24.8 25.0 20.1 20.0 14.8 15.0 9.8 10.0 5.0 2012 2013 2014F 2015F 2016F 7.6 12.2 15.2 22.2 19.3 26.0 Contracts in hand

Government still the major contract contributor

Govt (APBN, APBN, BUMN/D) 100% 23 80% 60% 40% 20% 0% 2010 2011 2012 2013 2014F 77 82 79 52 18 26 48 21 Private

74

Source: ADHI, IndoPremier

Source: ADHI, IndoPremier

Construction services and EPC provide more than 70% contribution to the top line

We estimate flat 2014-15 net margins

Revenues
Construction EPC Property and real estate

Net margin

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

16,000
6.3 10.6 19.3 7.2 6.6 7.7 5.7 6.5 4.8 6.6

4.1% 3.6% 3.3%

3.6%

4.5% 4.0% 3.5%

14,000 12,000 2.7% 10,000 8,000 2.8%

3.0% 2.5% 2.0%

83.1 73.5

85.7

87.8

88.6

6,000 4,000 2,000 2010 2011 2012 2013 2014F 2015F

1.5% 1.0% 0.5% 0.0%

2012

2013

2014F

2015F

2016F

Source: ADHI, IndoPremier

Source: ADHI, IndoPremier

ADHI rolling P/E band

18 16 14 12 10 8 6 4 2 0 Jan-09 Jan-10 Jan-11 Jan-12
0x (-2 Std. Dev.) 3x (-1 Std. Dev.) 7x (Average) 11x (+1 Std. Dev.) 15x (+2 Std. Dev.)

ADHI - relative share price performance

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

72.8%

58.0%

43.2%

Ytd

1 Mo -7.0%

3 Mo

6 Mo

12 Mo -2.7%

Jan-13

Jan-14

Source: Bloomberg, IndoPremier

Source: Bloomberg

17

Sector Update

Earnings revision
Changes in earnings forecast
(old) Year to Dec 31 (Rp bn) Revenue COGS Gross profit EBIT Net income Margins Gross margin EBIT margin Net margin 12.6% 10.9% 3.8% 12.2% 10.3% 3.6% 12.1% 10.3% 3.7% 12.2% 9.4% 4.1% 12.1% 9.8% 3.6% 12.0% 9.8% 3.6% 2013F 10,436 9,119 1,317 1,136 392 2014F 12,040 10,572 1,468 1,236 430 2015F 13,887 12,203 1,684 1,424 511 2013A 9,800 8,606 1,193 919 406 (new) 2014F 12,165 10,687 1,478 1,197 438 2015F 15,163 13,346 1,817 1,483 545 2013 -6.1% -5.6% -9.4% -19.2% 3.6% (%) change 2014 1.0% 1.1% 0.7% -3.2% 1.9% 2015 9.2% 9.4% 7.9% 4.1% 6.7%

Source: ADHI, IndoPremier estimates

18

Sector Update

Financial Summary
Income Statement Year to Dec 31 (Rp bn) Revenue and sales COGS Gross profit Gross profit after JO Operating income Interest expense Impairment expense EBT Tax EAT Non-controlling interest Net profit 2013 9,800 8,606 1,193 1,248 919 (108) (65) 714 (306) 408 (2) 406 2014F 12,165 10,687 1,478 1,590 1,197 (142) (140) 874 (432) 441 (3) 438 2015F 15,163 13,346 1,817 1,932 1,483 (146) (222) 1,107 (559) 548 (3) 545 2016F 19,339 17,120 2,219 2,367 1,828 (178) (218) 1,425 (713) 713 (4) 708 Balance Sheet Year to Dec 31 (Rp bn) Cash Receivables Inventories Investments Fixed assets Other Total assets Payables Bank loans Bonds and sukuk payable Shareholders' equity Non-controlling interest Other Total liabilities & equity 2013 1,940 5,158 162 257 271 1,933 9,721 5,466 212 1,497 1,539 9 998 9,721 2014F 2,020 7,003 205 664 336 2,660 12,887 7,791 277 1,497 1,854 12 1,455 12,887 2015F 2,383 8,517 256 817 429 3,252 15,653 9,741 331 1,498 2,267 15 1,800 15,653 2016F 3,154 10,863 328 969 525 4,000 19,839 12,492 353 1,874 2,812 19 2,288 19,839

Cash Flow Statement Year to Dec 31 (Rp bn) Net income Depreciation Non cash adjustments Net interest effect Changes in net WC CFO Capex Change in non-current assets Interest income CFI Debts Equity Interest expenses Dividends Other CFF 2013 406 10 2 75 343 837 (502) (31) 33 (501) 760 1 (108) (42) 43 654 2014F 438 12 3 118 310 881 (683) 62 24 (598) 66 (2) (142) (122) (3) (203) 2015F 545 15 3 123 314 1,000 (461) (2) 23 (441) 55 (146) (132) 26 (197) 2016F 708 18 4 155 241 1,127 (466) (3) 23 (447) 398 (178) (163) 35 91

Key Ratios Year to Dec 31 Profitability Gross margin Gross margin after JO Operating margin EBITDA margin Pre-tax margin Net margin ROA ROE 12.2% 12.7% 9.4% 9.5% 7.3% 4.1% 4.2% 26.4% 12.1% 13.1% 9.8% 9.9% 7.2% 3.6% 3.4% 23.6% 12.0% 12.7% 9.8% 9.9% 7.3% 3.6% 3.5% 24.0% 11.5% 12.2% 9.5% 9.5% 7.4% 3.7% 3.6% 25.2% 2013 2014F 2015F 2016F

Growth Revenue and sales EBITDA Pre-tax profit Net profit EPS 28.5% 16.9% 68.8% 91.9% 91.9% 24.1% 30.1% 22.3% 8.0% 8.0% 24.6% 23.9% 26.8% 24.3% 24.3% 27.5% 23.3% 28.7% 30.0% 30.0%

Cash flow Beginning cash balance Ending cash balance

991 949 1,940

81 1,940 2,020

362 2,020 2,383

771 2,383 3,154

Leverage Debt to asset Debt to equity Net debt/(cash) to equity Interest cover (x) 18.2% 114.0% -11.3% 8.6 13.8% 95.1% -13.2% 8.5 11.7% 80.1% -24.2% 10.2 11.2% 78.6% -32.7% 10.4

Sources: ADHI, IndoPremier estimates

19

Head Office
PT INDO PREMIER SECURITIES Wisma GKBI 7/F Suite 718 Jl. Jend. Sudirman No.28 Jakarta 10210 - Indonesia p +62.21.5793.1168 f +62.21.5793.1167

Institutional Equity & Private Client

Benny B. Soebagjo Angkula Ruriawan Alexander Salim Edward Azizy Henry Sutanto Isna Alfiathi Thomas Samuil

Head of Equities Equity Sales Equity Sales Equity Sales Equity Sales Equity Sales Sales Trader

benny.soebagjo@ipc.co.id angkula.ruriawan@ipc.co.id alexander.salim@ipc.co.id edazizy@ipc.co.id henry.sutanto@ipc.co.id isna.alfiathi@ipc.co.id thomas.samuil@ipc.co.id

INVESTMENT RATINGS Buy : Expected total return of 10% or more within a 12-month period Hold: Expected total return between -10% and 10% within a 12-month period Sell : Expected total return of -10% or worse within a 12-month period ANALYSTS CERTIFICATION. The views expressed in this research report accurately reflect the analyst's personal views about any and all of the subject securities or issuers; and no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report. DISCLAIMER: This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or sell any securities. PT. Indo Premier Securities or its affiliates may be involved in transactions contrary to any opinion herein to make markets, or have positions in the securities recommended herein. PT. Indo Premier Securities or its affiliates may seek or will seek investment banking or other business relationships with the companies in this report.