mncs company update - mnc sekuritas · 2017-08-31 · page 3 company update report | mnc sekuritas...

MNCS COMPANY UPDATE

MNC Sekuritas Research Division July 7, 2017

Please see important disclaimer at the back of this report

Key Financial Highlight In billion IDR 2015 2016 2017E 2018F 2019F Revenues 2,266.17 2,379.02 2,857.81 3,139.72 3,814.20

Gross Profit 404.62 480.35 557.99 615.89 715.68

Operating Profit 228.56 283.90 328.14 360.44 405.55

Net Profit 191.19 219.50 251.15 277.43 312.45

Gross Profit Margin (%) 15.11 17.66 18.08 17.90 17.24

Operating Profit Margin (%) 10.09 11.93 11.48 11.48 10.63

Net Income Margin (%) 8.44 9.23 8.79 8.84 8.19

Total Assets 2,846.15 2,950.56 3,228.00 3,493.16 3,833.68

Net Debt/EBITDA (x) (2.95) (2.16) (1.45) (1.26) (0.52)

Debt/Equity (x) 0.05 0.03 0.02 0.01 0.01

Persistent 1Q17 Performance Results: Still Inline with MNCS Expectation Total Bangun Persada Tbk (TOTL) booked revenue of IDR 648.50 bn, increased by 1.85% YoY in 1Q17, as construction service contributed 99.48% to total consolidated revenue. 1Q17 revenue is still inline within MNCS estimate, representing 22.71% of MNCS projection. Meanwhile, new contracts in 1Q17 increased significantly, by 158.09% YoY, to IDR 813 bn, compared to the number recorded for the same period last year. Inspite of slower revenue growth, TOTL consistently stretched its costs prudently. TOTL was able to maintain its GPM at 18.08% in 1Q17, which was higher than 17.66% in FY16. As for the results, net income of TOTL rose slightly by 2.97% YoY to IDR 63.75 bn in 1Q17. It accounted for 25.48% of MNCS estimates. Key Growth Catalysts in 2017/2018 We believe that the trend toward better profitability can still potentially extend through this year, supported by: 1) Focus on high-rise buildings and quality of product; 2) Continuing to maintain EBITDA margin of about 11.81% in FY17E; 3) Dividend play stock with Dividend Payout Ratio (DPR) - more than 60%; 4) Healthy balance sheet with almost zero Debt-to-Equity Ratio (DER) and prudent cash management; 5) Attractive valuation, as one of the cheapest in the sector. We estimate TOTL revenue will potentially grow by 20.13%/9.86% YoY to IDR 2,857.81bn/ IDR 3,139.72 bn in FY17E/FY18F, while net profit is estimated to increase by 14.42%/10.46%YoY to IDR 251.15bn/ IDR 277.43 bn in FY17E/FY18F. Valuation and Recommendation: Buy with TP IDR 975 We believe the strategic decision of TOTL to implement cost efficiency will yield a positive impact on financial performance. Recommendation: BUY with target price (TP) of IDR 975 per share for next 12 months, indicating 33.56% potential upside from current share price at Rp 730 (as of July 7th 2017). The calculation of TP is based on DCF model by using 12% of WACC, 1.26 of Beta and 4.5% of risk premium. Our valuation implies 13.24x/11.98x of PE17E/PE18F.

Total Bangun Persada (TOTL) Building Construction

Prominent High-End Builder

BUY

Stock Data

Target Price : 975

Current Price : 735

52wk Range : 690-920

Share Outstanding : 3,410 million

Free Float (%) : 33.67

Mkt Capitalization (IDR bn)

: 2,506

Major Shareholders

Research Analyst

Gilang Anindito [email protected] (021) 2980 3111 ext. 52235

Source : Company, MNCS Estimate

www.mncsekuritas.id MNC Sekuritas 1-500-899 [email protected]

Djajang Tanuwidjaja

: 8.01%

PT Totalindo : 56.50%

Pinarto Sutanto : 1.83%

Widodo : 0.01%

Anton Lio Sudarto : 0.00%

Public : 33.65%

Company Update Report | MNC Sekuritas Research Division


TOTL booked revenue of IDR 648.50 bn in 1Q17,for a 1.85% YoY increase compared to the same period last year. The biggest revenue composition for TOTL is from its construction service, with more than 99% of revenue derived from construction. Its revenue increased slightly, up 0.04% in 1Q17. We estimate TOTL’s revenue to still be dominated by construction service for the next few years. TOTL booked new contracts of IDR of 813 bn,increased 158.09% in 1Q17, compared to the same period last year. We estimate that TOTL will potentially book more new contracts in 2H17, supported by its high rate of tender-winning rate with 39% - 61% over the past five (5) years.


1Q17 Results Highlights

Exhibit 01. Revenue Composition 2016 and 2017

Source : Company

Exhibit 02. New Contract (In Millions)

Source : Company

99.44%

0.56%

Q1 2017Construction Service Others

99.48%

0.52%

Q1 2016Construction Service Others

270 198 417 391 264 285 315 813

675 666 341 480 1,219 1,325

1,812 459 617 579 556

1,144

235

664

149

697 880 305

935

332

24

20 204

211

30

-

1,000

2,000

3,000

4,000

5,000

6,000

2010 2011 2012 2013 2014 2015 2016 Est 2017

Q1 Q2 Q3 Q4 Addendum from previous contract / est 2017

2,1952,421

3,592

1,956

2,791

2,177

4,000




TOTL is still focused on high-rise residential developments, in a premium category. This segment is uniqe, compared to another construction company which develops middle and low segment property. Revenue contribution from high-rise residential projects represents 53% of total revenue in 1Q16. An increase occured in Q1 2017, when revenue contribution from high-rise residential projects marked 55% of total revenue. Even though the property market is currently stalled, TOTL can still seize its share.

Focus on High-Rise Buildings and Quality of Product

Exhibit 03. Project Classification Q1 2016 and 2017

Source : Company

TOTL also serves clients with the best-quality product. In order to measure client satisfaction, TOTL conducts a survey every year. In 2016, TOTL had an average customer satisfaction level score at 79.15%, which is considered ‘satisfying”. Compared to 2015, average score of customer satisfaction was 75.24%, or lower than in 2016. We see that TOTL will still deliver the best quality in all projects next year.

We believe TOTL continues to maintain EBITDA margin. We estimate for FY17E, EBITDA margin will be 11.81%, driven by operational cost efficiency. TOTL will lower operational costs in anticipation of a property sector slowdown. What's more, revenue recogniton of TOTL is determined by an agreement between client and subcontracor (direct contract): the client decides to buy materials from other vendors. Consequently, TOTL margin declines. But, TOTL, as the main contractor, is still responsible for the entire project, even though the client has signed a direct contract. We see that the size of direct contracts in 2017 as 38% toward scope of work, or lower than last year’s figure of 47%; margins will be maintained.

Still Maintaining EBITDA Margin

Office Building26%

Shopping Center13%

Hospital3% Education

3%

High Rise Residential

56%

Office Building29%

Shopping Center10%

Hospital2%

Utilities6%

High Rise Residential

53%




Exhibit 04. Scope of Work

Source : Company

TOTL has disbursed higher dividends than other construction companies. To maintain its dividend payout ratio, TOTL should sustain its profitability. We see that TOTL will be more than 60% DPR for next year, based on average dividend distributed over recent years. This is an advantage for investors because other construction companies customarily pay out DRP below 60%.

Exhibit 05. Dividend Payout Ratio

Source : Company

Attractive DPR Compared to Construction Companies

20%30% 30%

20%30%

40%

20%

40% 40%30% 30% 30%

20%30%30% 30% 30%

20% 20%8%

30%20%

30%

57%61% 63%

71% 69%

2012 2013 2014 2015 2016

ADHI ACST PTPP WIKA WSKT TOTL

1,541 1,569 1,834 2,287 2,106 2,266 2,379 3,100

559 898 1,150

1,073 1,294 1,534 2,121

1,900

2,100 2,469

2,986

3,360 3,400

3,800 4,500 5,000

27%

36%39%

32%

38%40%

47%

38%

-500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

0%5%

10%15%20%25%30%35%40%45%50%

2010 2011 2012 2013 2014 2015 2016 EST 2017

DIRECT CONTRACT DIRECT CONTRACT TOWARDS SCOPE OF WORK

Company Update | MNC Sekuritas Research Division


Lowest DER Compared to Peers

We perceive TOTL is having no problem with funding issues. Debt-to-Equity (DER) ratio of TOTL is lower than that of other construction companies, and far below the average banking covenant, which is on a 2x level. TOTL has displayed a lower DER ratio at almost zero since 2012. The low DER of construction companies indicates more space for a increased leverage, whichin this case can be advantageous for sustainable development and growth potential for TOTL.

TOTL is currently traded at PE17E/18F of 10.05x – 9.10x, or the cheapest of all contruction companies. We see that property sector has recovered increased in 1Q17, especially high-rise building segment. Based on the Commercial Property Demand Index from Commercial Property Survey-Bank Indonesia, demand for apartments and office space rose, at 1.52% YoY;demand for office space is up 1.54%. We conclude this is an improvement in property sector, and an opportunity for TOTL to develop more high-rise buildings and generate more profit from this situation.


Lowest Valuation and Brighter Outlook

Exhibit 06. Debt-to-Equity Ratio

Source : Bloomberg

Exhibit 06. Debt-to-Equity Ratio

Ticker

Market Cap

(Rp bn)

PER (x)

FY17E FY18F

ACST 2,135 18.68 16.80

ADHI 7,655.8 15.14 11.70

PTPP 19,777.7 15.29 12.12

TOTL 2,523.4 10.05 9.10

WIKA 20,092.7 16.89 13.67

WSKT 31,491.1 13.46 11.27

AVERAGE

14.92 12.44

Source : Bloomberg




Exhibit 21. Financial Projection

Income Statement Balance Sheet

Source : Company, MNCS Estimate

Cash Flow Ratios

IDR Billion 2015 2016 2017E 2018F 2019F

Revenues 2,266.17 2,379.02 2,857.81 3,139.72 3,814.20

COGS 1,923.85 1,958.87 2,341.15 2,577.83 3,156.53

Gross Profit Before JO 342.32 420.15 516.66 561.89 657.68

Joint Operation 62.30 60.20 41.34 54.00 58.00

Gross Profit After JO 404.62 480.35 557.99 615.89 715.68

G/A Expenses 169.78 188.88 220.49 243.24 294.89

Depreciation 5.87 7.15 8.84 11.66 14.55

Operating Profit 228.56 283.90 328.14 360.44 405.55

EBITDA 234.84 291.47 337.50 372.66 420.79

Interest Expenses (0.11) (4.14) (2.76) (2.19) (1.73)

Others (38.00) (61.00) (65.63) (72.09) (81.11)

Earning Before Tax 197.36 225.80 259.75 286.16 322.71

Tax Expenses 6.07 4.57 6.62 6.54 7.80

Net Income Before MI 191.29 221.23 253.13 279.62 314.91

Minority Interest (0.11) (1.73) (1.98) (2.19) (2.46)

Net Income 191.19 219.50 251.15 277.43 312.45

EPS (full amount) 56.07 64.37 73.65 81.36 91.63

IDR Billion 2015 2016 2017E 2018E 2019F

CFO Total 306.20 208.74 177.99 315.08 187.94

Net Income 191.19 219.50 251.15 277.43 312.45

Depreciation 22.78 35.90 38.70 54.50 65.81

Change in Working Capital

146.88 17.13 11.91 5.19 12.78

Change in others (54.64) (63.79) (123.77) (22.04) (203.09)

CFI Total (119.19) (143.10) (113.43) (97.40) (172.17)

Change in ST Investment (8.40) (36.71) (22.59) (13.30) (31.83)

Change in LT Investment 14.28 54.18 (7.69) (4.53) (10.83)

Capex (150.72) (37.69) (36.02) (51.82) (63.12)

Change in Others 25.66 (122.88) (47.12) (27.75) (66.38)

CFF Total (43.40) (149.03) (207.73) (243.63) (270.07)

Change in ST debt 15.96 (7.32) 1.74 1.02 2.45

Change in LT debt 23.64 (6.64) (4.00) (8.00) (5.00)

Equity financing - 0.86 (0.17) 0.17 0.17

Dividend payment (102.30) (136.40) (153.00) (163.25) (180.33)

Others 19.30 1.34 (52.30) (73.58) (87.36)

Net Cash Increase 143.61 (83.39) (143.17) (25.95) (254.29)

Closing Balance 733.01 655.59 512.82 486.87 232.58

IDR Billion 2014 2015 2016 2017E 2018F

LIQUIDITY

Current Ratio 125.83% 128.07% 125.61% 124.09% 120.83%

Quick Ratio 60.99% 56.78% 45.70% 41.89% 28.12%

ASSET/LIABILITIES

Asset/Liabilities 228.54% 213.02% 206.77% 199.43% 195.15%

Liabilities/Equity 4.57% 2.72% 2.22% 1.41% 1.07%

Debt to Equity 0.00% 0.00% 0.00% 0.00% 0.00%

PROFITABILITY

Gross Profit Margin 15.11% 17.66% 18.08% 17.90% 17.24%

Operating Profit Margin 10.09% 11.93% 11.48% 11.48% 10.63%

EBITDA Margin 10.36% 12.25% 11.81% 11.87% 11.03%

EBITDA Growth -16.47% 24.11% 15.79% 10.42% 12.92%

Net Profit Margin 8.44% 9.23% 8.79% 8.84% 8.19%

ROA (%) 6.72% 7.44% 7.78% 7.94% 8.15%

ROE (%) 22.07% 23.29% 23.87% 23.78% 24.06%

IDR Billion 2015 2016 2017E 2018F 2019F

Current Assets 2,236.11 2,284.94 2,404.66 2,542.17 2,662.16

Cash and Cash Equivalents 732.98 655.99 512.82 486.87 232.58

Account Receivable 350.85 357.00 362.10 371.40 386.95

Inventories 6.48 16.49 21.61 26.99 29.79

Others current Assets 1,145.79 1,255.46 1,508.13 1,656.90 2,012.84

Non-Current Assets 610.05 665.62 823.34 950.99 1,171.51

Fix Asset - net 194.30 186.50 247.79 318.67 403.35

Other Non-Current Assets 415.75 479.12 575.55 632.33 768.16

TOTAL ASSETS 2,846.15 2,950.56 3,228.00 3,493.16 3,833.68

Current Liabilities 1,777.04 1,784.17 1,914.34 2,048.66 2,203.26

Account Payable 155.64 188.94 211.06 230.94 262.06

Short Term Loan 15.96 8.63 10.37 11.39 13.84

Other Current Liabilities 1,605.44 1,586.60 1,692.91 1,806.33 1,927.36

Non-Current Liabilities 202.80 223.78 261.39 277.90 331.52

Long-term Loan 23.64 17.00 13.00 5.00 -

Other Liabilities 179.15 206.78 248.39 272.90 331.52

TOTAL EQUITY 1,956.19 1,990.95 2,162.73 2,321.56 2,534.78

Page 11

MNC SEKURITAS RESEARCH TEAM

Edwin J. Sebayang Head of Retail Research, Technical, Auto, Mining [email protected] (021) 2980 3111 ext. 52233

I Made Adesaputra Head of Fixed Income Research [email protected] (021) 2980 3111 ext. 52117

Yosua Zisokhi Plantation, Cement, Poultry, Cigarette [email protected] (021) 2980 3111 ext. 52234

Disclaimer This research report has been issued by PT MNC Sekuritas, It may not be reproduced or further distributed or published, in whole or in part, for any purpose. PT MNC Sekuritas has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; PT MNC Sekuritas makes no guarantee, representation or warranty and accepts no responsibility to liability as to its accuracy or completeness. Expression of opinion herein are those of the research department only and are subject to change without notice. This document is not and should not be construed as an offer or the solicitation of an offer to purchase or subscribe or sell any investment. PT MNC Sekuritas and its affiliates and/or their offices, director and employees may own or have positions in any investment mentioned herein or any investment related thereto and may from time to time add to or dispose of any such investment. PT MNC Sekuritas and its affiliates may act as market maker or have assumed an underwriting position in the securities of companies discusses herein (or investment related thereto) and may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies.

Page 12


Victoria Venny Telco, Infrastructure, Logistics [email protected] (021) 2980 3111 ext. 52236

Rr. Nurulita Harwaningrum Banking [email protected] (021) 2980 3111 ext. 52237

Krestanti Nugrahane Research Associate [email protected] (021) 2980 3111 ext. 52166

Sukisnawati Puspitasari Research Associate [email protected] (021) 2980 3111 ext. 52307

Thendra Crisnanda Head of Institutional Research, Strategy [email protected] (021) 2980 3111 ext. 52162

Gilang Anindito Property, Construction [email protected] (021) 2980 3111 ext. 52235

Rheza Dewangga Nugraha Junior Analyst of Fixed Income [email protected] (021) 2980 3111 ext. 52294

MNC Research Investment Ratings Guidance BUY : Share price may exceed 10% over the next 12 months

HOLD : Share price may fall within the range of +/- 10% of the next 12 months SELL : Share price may fall by more than 10% over the next 12 months

Not Rated : Stock is not within regular research coverage

PT MNC SEKURITAS MNC Financial Center Lt. 14 – 16

Jl. Kebon Sirih No. 21 - 27, Jakarta Pusat 10340 Telp : (021) 2980 3111 Fax : (021) 3983 6899 Call Center : 1500 899

Benny Narendro Head of Institutional Client [email protected] (021) 2980 3111 ext. 52198

Sri Laksamanawati Head Marketing of Institutional Client [email protected] (021) 2980 3111 ext. 52173

Nesya Kharismawati Equity Sales Manager [email protected] (021) 2980 3111 ext. 52182

Okhy Ibrahim Manager Equity Trader [email protected] (021) 2980 3111 ext. 52180

Harun Nurrosyid Manager Equity Trader [email protected] (021) 2980 3111 ext. 52187

Anastasia Pratiwi Manager Equity Institution [email protected] (021) 2980 3111 ext. 52181

Agus Eko Santoso Manager Equity Trader [email protected] (021) 2980 3111 ext. 52185

Gilang Ramadhan Manager Equity Trader [email protected] (021) 2980 3111 ext. 52178

Iman Hadimulya, ST Manager Equity Institution [email protected] (021) 2980 3111 ext. 52174

MNC SEKURITAS EQUITY SALES TEAM


mncs company update - mnc sekuritas · 2017-08-31 · page 3 company update report | mnc sekuritas...

Documents