15 March 2019

Pembangunan Perumahan (PTPP IJ)

Results Note
BUY (Unchanged)
Stock Data Lower than expectation FY18
Target price (Rp) Rp2,400
Earnings of Rp1.5tn in FY18 (+3% yoy), below consensus and ours.
Prior TP (Rp) Rp2,600
Equity | Indonesia | Construction

Shareprice (Rp) Rp2,090 Possible order book adjustment due to project revision and delays.
Upside/downside (%) +14.8 We revise down our FY19F/20F by 9%/7%.
Sharesoutstanding (m) 6,200 Maintain Buy amid lower TP of Rp2,400 (from 2,600).
Marketcap. (US$ m) 908
Free float (%) 49.0 Strong top line, but higher COGS, Opex and impairment loss. PTPP recorded
Avg. 6m dailyT/O (US$ m) 3.3 earnings of Rp1.5tn in FY18 (+3% yoy), which came below expectation, forming
only 94% of consensus/our forecast. Margin were squeezed all across the board in
Price Performance
FY18 as hike in COGS (+18% yoy) and Opex (+26% yoy), offset the top line
3M 6M 12M growth of 17%. Despite slower financing cost growth of +16% yoy (FY17: 60%
Absolute (%) 4.8 37.5 -25.4 yoy), PTPP recorded +74% hike in impairment losses on receivable of Rp236bn,
Relative to JCI (%) 0.8 27.4 -26.9 which contracted net margin to 6.0% in FY18. In quarterly basis, PTPP recorded
strong earnings of Rp627bn in 4Q18 (+59% qoq, +35% yoy), forming 42% of
52w high/low (Rp) 2,840 - 1,330
company’s FY18 earnings.
110
100 Order book imbalances due to project revision and delays. PTPP new
90 managements are considering writing off order book balance difference which was
80 resulted from: 1) contract revisions from project owner and 2) project delays.
70
Project value downward revision might caused order book to be overstated while
60
project delays would resulted in lower burn rate. Thus, we also were considering
50
40
the possible of impairment losses which came from the delay in financial closing of
Oct-18
Oct-18
Mar-18

Mar-19
May-18
Jun-18
Jun-18
Jul-18

Jan-19
Jan-19
Apr-18
Apr-18

Aug-18
Aug-18
Sep-18

Nov-18
Dec-18

Feb-19

Meulaboh power plant project. According to our calculation, with estimate project
time of 3 years, we believe PTPP has total receivables of around Rp550bn from
PTPP-Rebase JCI Index-Rebase
the project given the commencement of the project since May 2018 and project
Major Shareholders value of Rp2.2tn (33% burn rate/year).
Government of Indonesia 51.0%
Revise down our FY19F/20F forecast by %/%. We reduce our FY19F/20F
Public 49.0%
earning forecast by 9.5%/6.6% as we apply lower order book assumption for
FY19F/FY20F by 4%/3% due to possible order book write-off. In addition, we also
Estimate Change; Vs. Consensus apply higher allowance for impairment assumption of 0.8% of revenue in
2019 2020 FY19F/FY20F (from: 0.6%) to adjust on several projects tender delay (2016-
Latest EPS (Rp) 272.4 306.7 2017: 0.5-0.6%).
Vs. Prior EPS (%) 9.5 6.6
Maintain Buy amid lower TP of Rp2,400 (from 2,600). Despite lower
Vs. Consensus (%) (8.2) (12.1)
earnings outlook, we maintain our positive stand to the counter given company’s
Source: Bloomberg relatively DER (0.9x) and zero exposure towards turnkey projects. Given lower
earnings estimate, our DCF-based TP (WACC: 11.3%, TG: 2%) was decreased to
Rp2,500/share representing FY19F P/E of 8.8x. Key risk to our call might come
from lower than expected new contract achievement and additional impairment
losses.

Year To 31 Dec 2017A 2018A 2019F 2020F 2021F

Revenue (RpBn) 21,502 25,120 29,245 33,859 36,086
EBITDA (RpBn) 2,820 3,126 3,917 4,531 4,909
EBITDA Growth (%) 36.2 10.9 25.3 15.7 8.3
Net Profit (RpBn) 1,453 1,502 1,689 1,902 2,207
EPS (Rp) 234 242 272 307 356
EPS Growth (%) 25.0 3.3 12.5 12.6 16.1
Net Gearing (%) (5.5) 19.0 32.7 26.6 22.8
PER (x) 8.9 8.6 7.7 6.8 5.9
Joey Faustian PBV (x) 0.9 0.8 0.8 0.7 0.7
PT Indo Premier Sekuritas Dividend Yield (%) 2.4 2.2 3.5 3.9 4.4
joey.faustian@ipc.co.id EV/EBITDA (x) 4.4 6.2 5.4 4.7 4.1
+62 21 5793 1168 Source: PTPP, IndoPremier Share Price Closing as of : 14-March-2019

Refer to Important disclosures in the last page of this report

PTPP IJ Results Note

Fig. 1: Earnings to grow by 21% CAGR in FY18-20F Fig. 2: Burn rate to stabilize around 25%

Net income growth (%) New contract Carry over Burn Rate
(Rp Bn) (Rp bn)
42% 180,000 26%
2,500 45%
39% 38% 160,000
40% 25%
2,000 140,000 25%
35%
30% 120,000
24%
1,500 100,000
25% 24%
16% 20% 80,000
1,000 23%
12% 15% 60,000
23%
500 13% 10% 40,000
3% 22%
5% 20,000

- 0% - 22%

2015A 2016A 2017A 2018A 2019F 2020F 2021F 2015A 2016A 2017A 2018A 2019F 2020F 2021F

Source: Company, IndoPremier Source: Company, IndoPremier

Fig. 3: Revenue to grow by 20% CAGR in FY18-20F Fig. 4: PTPP has second highest OB-to-Revenue ratio

Construction EPC Property and realty PTPP WIKA WSKT ADHI

(x)
Equipment rent Precast growth 6.0
(Rp Bn)
40,000 35% 5.0
35,000 30%
4.0
30,000 25%
25,000 3.0
20%
20,000
15% 2.0
15,000
10,000 10%
1.0
5,000 5%
- 0% 0.0
2015A 2016A 2017A 2018A 2019F 2020F 2021F 2013A 2014A 2015A 2016A 2017A 2018F 2019F 2020F

Source: Company, IndoPremier Source: Company, IndoPremier

Fig. 5: DER to decrease going forward Fig. 6: Margin trend

Gross margin Operating margin Net margin

DER
18.0%
1.0 0.9
0.9 0.8 0.9 16.0%
0.8
0.8 14.0%
0.7 0.7 0.7
0.7 12.0%
0.6
10.0%
0.5
8.0%
0.4
0.3 6.0%
0.2 4.0%
0.1 2.0%
0.0
0.0%
2015A 2016A 2017A 2018A 2019F 2020F 2021F
2014A 2015A 2016A 2017A 2018A 2019F 2020F 2021F

Source: Company, IndoPremier Source: Company, IndoPremier

Refer to Important disclosures in the last page of this report 2

PTPP IJ Results Note

Fig.7: FY18 Earnings Result

% of
(Rp bn) FY18 FY17 YoY 4Q18 3Q18 QoQ % of Ours
Consensus
Revenue 25,120 21,502 17% 10,333 5,280 96% 90% 99%
Gross profit 3,546 3,251 9% 1,318 765 72% 85% 92%
Operating profit 3,047 2,887 6% 1,236 732 69% 84% 99%
Net profit 1,502 1,453 3% 627 395 59% 96% 94%

Gross margin 14.1% 15.1% 12.8% 14.5%

Operating margin 12.1% 13.4% 12.0% 13.9%
Net margin 6.0% 6.8% 6.1% 7.5%
Source: Company, IndoPremier

Fig. 8: Change in earnings forecast

Old New Change
Year to Dec 31 (Rp bn) 2019F 2020F 2018F 2019F 2018F 2019F
Revenue 33,037.8 34,081.1 29,244.6 33,859.5 -11.5% -0.7%
Gross profit 5,166.6 5,395.6 4,464.9 5,153.4 -13.6% -4.5%
Operating profit 4,406.3 4,555.6 3,851.3 4,349.9 -12.6% -4.5%
Net income 1,867.2 2,035.6 1,689.1 1,901.8 -9.5% -6.6%

Margins
Gross margin 15.6% 15.8% 15.3% 15.2%
EBIT margin 13.3% 13.4% 13.2% 12.8%
Net margin 5.7% 6.0% 5.8% 5.6%

Source: Company, IndoPremier

Refer to Important disclosures in the last page of this report 3

PTPP IJ Results Note

Year To 31 Dec (RpBn) 2017A 2018A 2019F 2020F 2021F

Income Statement

Net Revenue 21,502 25,120 29,245 33,859 36,086

Cost of Sales (18,251) (21,574) (24,780) (28,706) (30,438)
Gross Profit 3,252 3,546 4,465 5,153 5,648
SG&A Expenses (726) (918) (1,053) (1,265) (1,328)
Operating Profit 2,526 2,628 3,412 3,889 4,320
Net Interest (421) (489) (635) (655) (619)
Forex Gain (Loss) 3 44 0 0 0
Others-Net 328 629 279 240 220
Pre-Tax Income 2,436 2,813 3,057 3,473 3,921
Income Tax (712) (854) (871) (1,007) (1,076)
Minorities (271) (457) (497) (564) (637)
Net Income 1,453 1,502 1,689 1,902 2,207

Balance Sheet

Cash & Equivalent 9,587 9,036 7,325 8,044 7,866

Receivable 16,229 22,145 21,821 24,909 27,362

Inventory 2,421 4,659 5,363 6,203 6,594

Other Current Assets 1,671 1,694 2,031 2,185 2,345

Total Current Assets 29,908 37,534 36,540 41,341 44,167

Fixed Assets - Net 9,057 10,390 12,015 12,683 13,185

Goodwill 0 0 0 0 0

Non Current Assets 1,635 2,767 3,569 4,546 5,810

Total Assets 41,783 52,549 54,287 61,075 65,830

ST Loans 2,154 2,465 2,870 3,323 3,541

Payable 14,506 19,571 0 24,889 27,351

Other Payables 2,731 3,104 3,616 4,380 5,038

Current Portion of LT Loans 1,309 1,382 1,167 1,319 1,393

Total Current Liab. 20,700 26,523 28,506 33,911 37,323

Long Term Loans 5,144 7,903 8,002 7,522 6,780

Other LT Liab. 1,696 1,807 1,985 2,190 2,374

Total Liabilities 27,540 36,234 38,493 43,623 46,478

Equity 7,391 7,491 7,491 7,491 7,491

Retained Earnings 4,063 5,274 6,513 7,908 9,545

Minority Interest 2,789 3,550 1,790 2,053 2,316

Total SHE + Minority Int. 14,243 16,316 15,794 17,452 19,352

Total Liabilities & Equity 41,783 52,549 54,287 61,075 65,830

Source: PTPP, IndoPremier

Refer to Important disclosures in the last page of this report 4

PTPP IJ Results Note

Year to 31 Dec 2017A 2018A 2019F 2020F 2021F

Cash Flow

Net Income (Excl.Extraordinary&Min.Int) 1,724 1,959 2,186 2,466 2,844

Depr. & Amortization 650 423 505 642 589

Changes in Working Capital (1,139) (2,684) 644 175 (437)

Others 561 424 225 524 525

Cash Flow From Operating 1,796 121 3,561 3,807 3,521

Capital Expenditure (4,939) (2,889) (2,932) (2,287) (2,354)

Others (370) (588) (212) (268) (48)

Cash Flow From Investing (5,309) (3,477) (3,144) (2,555) (2,402)

Loans 1,861 3,144 288 125 (450)

Equity 0 0 0 0 0

Dividends (307) (291) (451) (507) (570)

Others 1,838 213 (2,374) (332) (323)

Cash Flow From Financing 3,392 3,066 (2,537) (714) (1,343)

Changes in Cash (120) (290) (2,120) 538 (225)

Financial Ratios

Gross Margin (%) 15.1 14.1 15.3 15.2 15.7

Operating Margin (%) 11.7 10.5 11.7 11.5 12.0

Pre-Tax Margin (%) 11.3 11.2 10.5 10.3 10.9

Net Margin (%) 6.8 6.0 5.8 5.6 6.1

ROA (%) 4.0 3.2 3.2 3.3 3.5

ROE (%) 11.6 9.8 10.5 11.4 12.0

ROIC (%) 9.2 8.0 7.3 7.6 8.4

Acct. Receivables TO (days) 95.8 122.0 118.7 101.1 107.7

Acct. Receivables - Other TO (days) 136.6 156.8 155.7 150.8 156.7

Inventory TO (days) 7.2 6.1 4.9 5.0 4.8

Payable TO (days) 247.4 288.3 297.7 290.8 313.2

Acct. Payables - Other TO (days) 0.0 0.0 0.0 0.0 0.0

Debt to Equity (%) 60.4 72.0 76.2 69.7 60.5

Interest Coverage Ratio (x) 0.3 0.3 0.2 0.2 0.2

Net Gearing (%) (5.5) 19.0 32.7 26.6 22.8

Source: PTPP, IndoPremier

Refer to Important disclosures in the last page of this report 5

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

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 analysts 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.

DISCLAIMERS
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 recommendations 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 Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this
report.