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Equity Research

Integra Indocabinet BUY


WOOD IJ / WOOD.JK (Unchanged)

Company Update | BCAS Virtue | Furniture Sector

19 March 2019
Enterprising approach to new markets
Upbeat revenue growth paints 2019F picture; U/G TP to IDR1,200
We upgrade our revenue growth projection by 28% YoY in 2019F, against a Willy Suwanto
previous 15% YoY, following solid indicated FY18 performance (in line with willy.suwanto@bcasekuritas.co.id
our and street estimates) and upcoming revenue driver from potential new +6221 23587222 ext 178
contracts. With higher net profit growth estimate of 25% YoY in 2019F, we
upgrade our DCF-based TP to IDR1,200, a definite BUY. Nevertheless, our
Pandu Anugrah
model depicts a more conservative outlook when compared to Company’s
pandu.anugrah@bcasekuritas.co.id
50% YoY revenue projection in 2019F, providing potential upside.
+6221 23587222 ext 168
Strong potential in building component; next target: Australia
2019F revenue growth will derive from additional rattan furniture orders and
new product lines, such as wooden blinds and metal furniture, but most
Current Price: IDR890
importantly from a MoU with US-based Composite Tech Int’l (CTI) on white
prime molding lines (“gesso”) signed in Dec-18. Currently, WOOD has gesso Target Price: IDR1,200
production capacity of 100 containers/month, with potential orders from CTI (IDR800 previously)
rising to 250 containers/month. Taking advantage of the ongoing US-China Upside potential: 34.8%
trade war, WOOD has started production of metal furniture products, having
acquired Chinese personnel and knowhow. What’s more, WOOD eyes the
opportunity to make its products more competitive against Chinese furniture 12M PRICE PERFORMANCE
in the promising Australian market, following the Indonesia-Australia
(IDR) (%)
Comprehensive Economic Partnership Agreement (IA-CEPA), which allows in
1,000 250.0
most Australia-bound Indonesian goods free of tariff. Meanwhile, WOOD is in
200.0
discussions with a major furniture retailer in Australia and New Zealand. Such 800
150.0
a venture will certainly broaden WOOD’s export portfolio, in which current
Australia sales contribution stands at a pitiful < 1%. 600 100.0
50.0
Stable raw material prices 400
-
No fluctuation in Meranti price is expected, although the price remains
200 (50.0)
elevated at IDR2.3-2.4mn/m3. In addition, WOOD’s inventory days have WOOD IJ (LHS) Rel. to JCI performance (RHS)
reached ~12 months and ~80% of inventory is comprised of raw material.
300
This, of course, will expedite massive orders from major WOOD retailer clients.
Vol (mn)

That said, we expect WOOD’s expansion focus on building components will 150
result in slightly lower 2019F gross margin of 32.1% from indicative 2018
-
margin of 35.6% (Exhibit 3). Mar-18 Jun-18 Sep-18 Dec-18 Mar-19

Looking more attractive – with first dividend Source: Bloomberg


Given the above expansion plans, we suspect a potential capital requirement
for facility expansion. In addition, WOOD has expressed its intention to offer STOCK PERFORMANCE
a dividend for the first time since its IPO in 2017. Although Management is YTD 1M 3M 12M
still weighing its options, we project 20% DPR, signifying a 0.9% dividend
Absolute 44.7% 24.5% 53.4% 206.9%
yield. Risks: IDR/USD exchange rate stronger-than-expected, hiccups in
JCI Return 5.1% 0.2% 7.0% 3.2%
market expansion plans.
Relative 39.6% 24.3% 46.4% 203.7%
Exhibit 1. Financial Summary Source: Bloomberg
YE to 31 Dec (IDR bn) 2016 2017 2018F 2019F 2020F
Revenue 1,323 1,735 1,981 2,569 2,921
EBITDA 332 447 528 651 769 MARKET DATA
EV/EBITDA (x) 20.0 14.8 12.6 10.2 8.6 2M price range (IDR) : 282 - 900
Net Profit 141 174 240 299 368 2M PE range (x) : 7.4 - 18.8
BCAS/consensus (%) n.a. n.a. 101.9 104.8 109.6
Outstanding shares (mn) : 6,306
EPS (IDR) n.a. 28 38 48 59
EPS Growth (%) n.a. n.a. 38.2 24.8 23.1 Market cap (IDRbn)/(USDmn) : 5,613 / 394
DPS (IDR) n.a. n.a. 8 10 12 Avg daily turn. (IDRbn/USDmn) : 26.0 / 1.8
PE (x) n.a. 31.2 22.5 18.1 14.7 Source: Bloomberg
Dividend yield (%) n.a. n.a. 0.9 1.1 1.4
BVPS (IDR) n.a. 306 345 385 434
PB (x) n.a. 2.8 2.5 2.2 2.0 SHAREHOLDERS
ROE (%) 13.2 10.4 11.8 13.1 14.4 PT Integra Indo Lestari : 79.3%
Net Gearing (%) 75.7 66.2 51.2 51.1 49.2 Others (each below 5%) : 20.7%
Sources: Company, BCA Sekuritas
Source: Bloomberg
Exhibit 2. Financial Summary
Income Statement
2016 2017 2018F 2019F 2020F
Year-end 31 Dec (IDRbn)
Revenue 1,323 1,735 1,981 2,569 2,921
Cost of revenue 865 1,174 1,345 1,743 1,945
Gross profit 458 561 637 826 976
EBITDA 332 447 528 651 769
Depreciation 49 94 103 113 122
EBIT 284 353 425 537 647
Interest income 1 5 0 2 2
Interest expense (106) (127) (141) (165) (180)
Forex gain/(losses) 9 (0) 10 - -
Other income/(expense) 7 3 18 16 18
Pre-tax profit 195 234 312 390 486
Taxes (54) (62) (72) (90) (117)
Minority interests 0 (2) 1 1 1
Net income 141 174 240 299 368
EPS (IDR) n.a. 28 38 48 59
Balance Sheets
2016 2017 2018F 2019F 2020F
Year-end 31 Dec (IDRbn)
Cash and equivalents 30 54 306 340 363
Accounts receivables 267 192 269 351 395
Inventories 893 1,173 1,242 1,310 1,460
L-T invest & receivables 83 466 238 387 525
Fixed assets 1,643 1,680 1,833 1,920 1,998
Other assets 165 278 322 409 460
Total assets 3,082 3,843 4,210 4,717 5,201
S-T liabilities 943 1,230 1,315 1,449 1,579
Other S-T liabilities 299 255 380 460 494
L-T liabilities 170 91 96 120 120
Other L-T liabilities 239 355 264 284 295
Total liabilities 1,652 1,930 2,054 2,312 2,488
Minority interests 26 22 27 24 24
Equity 1,404 1,890 2,130 2,381 2,690
Total liabilities and equity 3,082 3,843 4,210 4,717 5,201
Cash Flow Statement
2016 2017 2018F 2019F 2020F
Year-end 31 Dec (IDRbn)
Net income 141 174 240 299 368
Depreciation 49 94 103 113 122
Change in working capital (344) (359) (60) (145) (208)
Operating cash flow (154) (92) 283 267 283
Capital expenditure (737) (131) (256) (200) (200)
Others (64) (385) 222 (160) (141)
Investing cash flow (800) (516) (34) (360) (341)
Dividend Paid - - - (48) (60)
Net change in debt 114 207 90 158 130
Others 755 425 (87) 17 11
Financing cash flow 869 632 3 127 81
Change in cash (86) 24 251 34 23
Beginning cash flow 116 30 54 306 340
Ending cash flow 30 54 306 340 363
Key Ratios 2016 2017 2018F 2019F 2020F
Gross margin (%) 34.6 32.3 32.1 32.1 33.4
EBITDA margin (%) 25.1 25.8 26.7 25.3 26.3
EBIT margin (%) 21.4 20.4 21.5 20.9 22.1
Pretax margin (%) 14.7 13.5 15.8 15.2 16.6
Net margin (%) 10.6 10.0 12.1 11.6 12.6
ROAE (%) 13.2 10.4 11.8 13.1 14.4
ROAA (%) 5.5 5.0 6.0 6.7 7.4
Current ratio (x) 1.1 1.1 1.2 1.2 1.3
Acid ratio (x) 0.2 0.1 0.3 0.3 0.3
Gearing (%) 77.8 69.0 65.4 65.2 62.6
Net gearing (%) 75.7 66.2 51.2 51.1 49.2
AR turnover (days) 40 37 34 33 35
Inventory turnover (days) 306 317 323 263 256
AP turnover (days) 34 30 33 29 30
Major Assumptions 2016 2017 2018F 2019F 2020F
Furniture prod (m3) 16,155 25,116 26,372 30,032 33,518
Building mat prod (m3) 57,008 78,728 82,531 94,261 92,833
Sources: Company, BCA Sekuritas
Integra Indocabinet, 19 March 2019 2
Exhibit 3. WOOD’s indicative FY18 results
WOOD IJ QoQ YoY YoY 2018/ 2018/
Profit and loss statement (IDRbn) 4Q17 3Q18 4Q18 (%) (%) 2017 2018 (%) BCAS Cons.
Revenue 463 473 668 41.2 44.2 1,735 2,047 18.0 103.3 104.3
Gross profit 145 180 252 40.5 73.4 561 728 29.8
EBIT 88 118 147 24.5 67.2 353 464 31.3 109.1 106.1
Net profit 38 68 55 (19.0) 45.8 174 236 36.0 98.4 100.3

Gross margin (%) 31.4 37.9 37.7 32.3 35.6


EBIT margin (%) 19.0 25.0 22.0 20.4 22.7
Net margin (%) 8.1 14.3 8.2 10.0 11.5
Sources: Company, BCA Sekuritas

Exhibit 4. Revenue contribution, FY18 Exhibit 5. Revenue contribution by segment, FY18


(IDRbn)
3,000 2,921 Trading, 2%
2,569
2.4% 2.5%
2,500 12.9% 13.8%
2,047
2,000 2.3% Forestry,
1,735 30.3% 16%
16.3% 32.1%
2.3%
7.7%
1,500 1,323
23.9%
1,119 2.7% 30.3%
1.4%8.9%
8.8% Local, 15%
1,000 29.9%
17.7% Export, 66%
52.7% 53.4%
500 59.7% 57.4%
72.0% 58.4%

0
2015 2016 2017 2018 2019F 2020F

Furniture Building components Forestry Trading

Sources: Company, BCA Sekuritas Sources: Company, BCA Sekuritas

Exhibit 6. WOOD’s top customers, FY18 Exhibit 7. PE band

(x)
Home Depot 18.0

Gema Lestari Indonesia 16.0


14.0
China National Forest
12.0
Kayu Lapis Asli Murni 10.0
DMI 8.0
6.0
Alpine Furniture
4.0
IKEA
2.0
CTI -
Dec-17

Oct-18

Dec-18
Oct-17

Mar-18
Sep-17

Apr-18

Sep-18
Aug-17

Aug-18
Jul-17

Nov-17

Jan-18

Jan-19
May-18
Jun-18
Jul-18
Feb-18

Nov-18

Costco

Target
Forward P/E +2.0sd +1.0sd
(IDRbn) 0 50 100 150 200 mean -1.0sd -2.0sd

Sources: Company, BCA Sekuritas


Sources: Company, BCA Sekuritas

Integra Indocabinet, 19 March 2019 3


Exhibit 8. New market prospects in 2019

Target market Capacity Est. launch date


Wooden blinds USA, EU countries, UK 30 containers/month (13.2k m3/yr) 2Q19
White prime molding/”gesso” US, then UK 300 containers/month (132k m3/yr) 2Q19/3Q19
Metal furniture USA, EU countries, UK, local 10 containers/month (1.65k m3/yr) 3Q19
Rattan furniture USA, EU countries 30 containers/month (4.95k m3/yr) 3Q19/4Q19
Sofa USA, local 50 containers/month (5.5k m3/yr) 3Q19/4Q19
Source: Companies, BCA Sekuritas

Exhibit 9. Earnings revisions

2018F 2019F 2020F


(IDR bn) Old New ∆ (%) Old New ∆ (%) Old New ∆ (%)
Revenue 1,981 1,981 - 2,313 2,569 11.1 2,601 2,921 12.3
Gross profit 637 637 - 733 826 12.7 882 976 10.6
Net profit 240 240 - 253 299 18.2 322 368 14.4
EPS (IDR) 38 38 - 40 48 18.2 52 59 14.4
Gross margin (%) 32.1 32.1 31.7 32.1 33.9 33.4
Net margin (%) 12.1 12.1 10.9 11.6 12.4 12.6
Source: BCA Sekuritas

Integra Indocabinet, 19 March 2019 4


Equity Research Division Institutional Equity Market Division Sales Equity Market Division
research@bcasekuritas.co.id ecm@bcasekuritas.co.id sales@bcasekuritas.co.id

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Integra Indocabinet, 19 March 2019 5