I n d o n e s i a D a i l y Wednesday, 24 October 2018

PLEASE CLICK ON THE PAGE NUMBER TO MOVE TO THE RELEVANT PAGE. REGIONAL MARKET
Market Close +/- Chg (%)
KEY HIGHLIGHTS MSCI Indonesia 6,453.6 (59.3) (0.9)
MSCI Asia-Ex Japan 588.6 (15.0) (2.6)
Re-initiate Coverage KLCI 1,697.6 (24.9) (1.5)
FSSTI 3,031.4 (46.7) (1.5)
AKR Corporindo (AKRA IJ/BUY/Rp3,600/Target: Rp4,730) Page 2 SET 1,658.6 - -
Stabilising petroleum margins; potential land sales to Freeport Indonesia. Hang Seng 25,346.6 (806.6) (3.2)
Nikkei 22,010.8 (604.0) (2.7)
Shanghai Comp 2,594.8 (60.1) (2.3)
TRADERS’ CORNER Page 5 Dow Jones 25,191.4 (126.0) (0.5)
Semen Indonesia (SMGR IJ): Technical BUY Source: Bloomberg

Astra International (ASII IJ): Technical BUY INDONESIA STOCK EXCHANGE

Level +/- Chg (%)
Index 5,797.9 (42.5) (0.7)
LQ-45 910.9 (7.5) (0.8)
Value (US$m) 374.6 (20.2) (5.1)

FOREIGN TRADE IN IDX

Net (US$m) Buy Sell Total (%)
(5.1) 106.5 111.6 29.1

TOP VOLUME
Company Price Chg Volume
(Rp) (%) ('000)
Trada Alam Minera 199 (1.5) 400,860
Inti Agri Resources 208 0.0 384,675
Bumi Resources 170 (2.3) 161,644
Perusahaan Gas Negara 2,350 0.4 134,216
Bank Rakyat Indonesia 3,020 (1.0) 58,554

TOP GAINERS
Company Price Chg Volume
(Rp) (%) ('000)
Jaya Konstruksi 490 5.2 0.2
Hexindo Adiperkasa 2,950 3.5 3
Bentoel Int'l 342 3.0 29
Jaya Real Property 575 1.8 1,796
Ramayana LS 1,205 1.7 2,080

TOP LOSERS
Company Price Chg Volume
(Rp) (%) ('000)
Humpuss 660 (7.7) 3
Indosat 2,660 (6.3) 3,686
Panin Financial 274 (4.9) 48,012
Ciputra Development 810 (4.1) 5,351
Indah Kiat 13,150 (3.8) 3,565

COMMODITY TREND
23 Oct 18 Chg (%)
Closing 1-day 1-mth
Forex (Rp/US$) 15,181 (0.2) 2.3
Crude Oil NYMEX (US$/bbl) 66.43 (4.0) (6.1)
Coal Fut Newc (US$/tonne) 109.50 (0.5) n.a.
Nickel 3M LME 12,375 (1.2) (6.6)
Tin 3M LME 19,300 0.4 1.6
Gold SPOT (US$/oz) 1,234 0.9 2.4
CPO Fut Msia (MYR/tonne) 2,122 (1.1) 0.3
Wheat CBT (US$/bu) 542 0.4 (1.9)
Source: Bloomberg, UOB Kay Hian

Refer to last page for important disclosures. 1

I n d o n e s i a D a i l y Wednesday, 24 October 2018

RE-INITIATE COVERAGE BUY

AKR Corporindo (AKRA IJ)
Stabilising Margins And Potential Land Sales To Freeport Are Key Catalysts Share Price Rp3,600
Falling petroleum margins are reflected in the steep share price decline. Margins Target Price Rp4,730
could have bottomed and we expect them to improve post 2019 elections. Margins Upside +31.4%
will also increase on contribution from its new gas-station JV with BP. Land sales (Previous TP Rp7,400)
and lease to Freeport will be a game-changer for AKRA’s JIIPE and major catalysts
for further upside in valuation. Re-initiate with BUY and SOTP-based target price of COMPANY DESCRIPTION
Rp4,730, implying 19.2x 2019F PE, slightly below -1SD of its 5-year mean. AKR primarily engages in petroleum and
chemicals distribution with vast logistic supply
WHAT’S NEW chain network. The company also diversifies
to industrial estate (JIIPE) and retail petroleum
• Lower distribution margin largely priced in... AKR Corporindo (AKRA) share price has business (through JV with BP).
declined 45% ytd and 55% from its 52-week high, mainly due to falling gross profit from
fuel distribution. Gross margin is expected to decline from Rp700/litre to Rp500-550/ litre. STOCK DATA
Using the average share price between the 52-week high and ytd low vs current share GICS sector Industrials
price, we calculate that the implied earnings lost caused by share price depreciation has Bloomberg ticker: AKRA IJ
covered 127% and 81% of the implied net income loss respectively. Thus, we conclude Shares issued (m): 4,014.7
that the lower distribution margin is largely priced in. Market cap (Rpb): 14,452.9
• ...and margin recovery in sight. The quantum decline in margin has slowed but likely to Market cap (US$m): 951.3
stay at current levels of Rp550/litre (from Rp700/litre during good times in 2015-16) in the 3-mth avg daily t'over (US$m): 3.5
short term, given rising oil prices and a strengthening US$ environment coupled with Price Performance (%)
upcoming elections (in Apr 19) that might hinder the government to raise domestic fuel
52-week high/low Rp7,925/Rp3,260
prices. Post elections, we believe the government would have greater flexibility to
1mth 3mth 6mth 1yr YTD
gradually hike domestic fuel prices, which could indirectly translate into more stable
0.3 (20.5) (35.4) (51.7) (43.3)
margins for AKRA.
Major Shareholders %
• JV with BP means sustainable volume growth and higher margin. The JV with BP
Arthakencana Rayatama PT 58.4
would open up greater opportunity for AKRA to tap into a growing gasoline market which
has relatively higher margins than diesel. The company aims to open 350 new gas FY18 NAV/Share (Rp) 2,024
stations in the next 10 years, mainly in Greater Jakarta, Surabaya and Bandung. FY18 Net Debt/Share (Rp) 210
Earnings contribution from this JV should start to pick up from 2020 as the JV reaches
greater operating leverage. PRICE CHART
• Land sales and lease to Freeport a game-changer. Freeport Indonesia has shown (lcy) AKR CORPORINDO TBK PT AKR CORPORINDO TBK PT/JCI INDEX (%)
strong interest in AKRA’s JIIPE industrial estate in Gresik, East Java, as the location for 9000 120

its second smelter. The new smelter is estimated to use 80-100ha of land. Assuming a 8000
110

100
down-right acquisition at Rp1.8m/sqm (a conservative 20% discount from JIIPE’s current 7000
90
ASP), AKRA could book Rp400b-600b in net profit. The smelter construction would also 6000 80

bring in potential demand from Freeport’s value chain as well as increase its recurring 5000
70

income contribution from JIIPE’s facilities and supporting infrastructure. 60

4000
50

KEY FINANCIALS 3000 40

150
Year to 31 Dec (Rp) 2016 2017 2018F 2019F 2020F Volume (m)
100
Net turnover 15,212.6 18,287.9 24,094.2 25,610.6 27,586.2 50
EBITDA 1,416.8 1,185.7 1,353.4 1,707.6 2,026.4 0
Operating profit 1,189.0 1,112.7 1,044.2 1,373.3 1,665.6 Oct 17 Dec 17 Feb 18 Apr 18 Jun 18 Aug 18 Oct 18

Net profit (rep./act.) 1,010.8 1,201.7 1,474.3 987.0 1,206.4

Net profit (adj.) 1,010.8 898.4 738.5 987.0 1,206.4 Source: Bloomberg
EPS 254 226 184 246 301
PE (x) 14.2 15.9 19.5 14.6 12.0 ANALYST(S)
P/B (x) 2.1 1.9 1.8 1.7 1.6
EV/EBITDA (x) 13.0 14.6 12.4 9.8 7.9 Edward Lowis
Dividend yield (%) 3.6 3.6 3.6 3.6 3.6 +6221 2993 3917
Net margin (%) 6.6 4.9 3.1 3.9 4.4 edwardlowis@uobkayhian.com
Net debt/(cash) to equity (%) 39.2 18.5 10.4 8.4 (1.3)
Interest cover (x) 59.5 n.a. 23.9 61.1 96.8
ROE (%) 15.7 12.5 9.4 12.0 13.8
Consensus net profit - - 1,108 1,118 1,194
UOBKH/Consensus (x) - - 0.67 0.88 1.01
Source: AKRA, Bloomberg, UOB Kay Hian

Refer to last page for important disclosures. 2

I n d o n e s i a D a i l y Wednesday, 24 October 2018

LOWER MARGIN LARGELY PRICED IN EARNINGS RECOVERY REFLECTED IN QUARTERLY

AKRA IJ 52-week avg Ytd 2018 52-week high CORE PROFIT
350
Average share price (Rp) 5,623 4,898 8,025

(Rp b)
Current share price (Rp) 3,600 3,600 3,600 300
Difference (Rp) 2,023 1,298 4,425 250
No. of shares outstanding (b) 4.01 4.01 4.01
200
Decline in market cap (Rpb) 8,108 5,202 17,740
5-year average PE (x) 24.7 24.7 24.7 150
Implied earnings loss (Rpb) (328) (211) (718) 100
Potential earnings (assuming Rp700/l margin) (Rpb) 998 998 998
50
UOBKH 2018 net profit estimate (Rpb) 739 739 739
Potential earnings loss (Rpb) (259) (259) (259) -

1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
Implied earnings loss/potential earnings loss (%) 126.5 81.2 276.8
Source: AKRA, Bloomberg, UOB Kay Hian
Source: AKRA, UOB Kay Hian
STOCK IMPACT STRONG BALANCE SHEET TO FUEL GROWTH
• 3Q18: Stable volume; improving margins to support earnings. We gathered that 5,000 0.9
4,500 0.8
distribution volume in Sep 18 could have declined due to a hiccup in the implementation
4,000 0.7
of the B20 programme. However, 3Q18 volume could have remained stable on a qoq 3,500 0.6
basis, compensated by stronger volume in Jul-Aug 18. We expect 3Q18 earnings to 3,000
0.5
improve yoy and qoq, mainly on higher distribution margin. 2,500
0.4
2,000
0.3
• Huge divestment gains could translate into higher dividends. AKRA booked total 1,500
1,000 0.2
gains of Rp1.04t from the disposal of its businesses in China (logistics service “Guigang” 500 0.1
and Sorbitol manufacturer Khalista) and a coal unit with a mining concession in West 0 -
Kalimantan. These huge gains could translate into higher dividends, in our view, given 2013 2014 2015 2016 2017 2018F 2019F
the absence of major capex in the near term The company paid an interim dividend of Net debt (Rp b) (LHS) Net debt-to-equity (x) (RHS)

Rp120/share in early-3Q18 (implying 3.3% yield at current price). Source: AKRA, UOB Kay Hian

JV WITH BP TO PENETRATE THE GROWING

• Strong balance sheet. AKRA’s net debt-to-equity improved significantly to 0.18x in
GASOLINE MARKET
1H18, from its peak of 0.8x in 2012, thanks to excellent working capital management. Its
cash conversion cycle has also turned negative since 2016 and the trend is likely to stay,
given its credibility with suppliers, selected customer base and efficient inventory
management. These are vital ingredients to fund growth.
• Indirect beneficiary of B20 programme. The government appointed only 11 biodiesel
distributors (including AKRA) and imposed a hefty penalty of Rp6,000/litre on distributors
who fail to comply with regulations. AKRA could benefit from growing demand for its tank
storage lease and this could also eliminate smaller players that do not have storage or
blending facilities. AKRA recently expanded its storage capacity in Jakarta Tank Terminal
(JJT) by 100,000kl to 350,000kl and grew its total capacity to 836,000kl by end-18, up
25% from 2016.
EARNINGS REVISION/RISK Source: MEMR, USDA Foreign Agricultural Service, AKRA, UOB Kay Hian

• Earnings set to improve from 2019. We expect net profits to increase by 34% and 22% CURRENTLY TRADES AT -2SD, FURTHER DONWSIDE
yoy in 2019-20 respectively, assuming a conservative petroleum margin of Rp600- IS LIMITIED
45 AKRA PE
630/litre. We believe AKRA’s petroleum distribution margin could increase gradually post
40
elections in Apr 19.
35

• We have not taken into account the potential impact of JIIPE’s land sales to 30
Freeport. However, our back-of-the-envelope calculation shows that the potential land 25
sales of 80-100ha could translate into Rp400b-600b in net profit. Should this materialise
20
and assuming similar PE multiple of 19.2x, our target price could re-rate further to
15
Rp7,100.
10
VALUATION/RECOMMENDATION Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep Jan May Sep
13 13 13 14 14 14 15 15 15 16 16 16 17 17 17 18 18 18
-3STDEV 10.9x -2STDEV 15.5x -1STDEV 20.1x
• Re-initiate with BUY. AKRA currently trades at -2SD of forward PE, and further Average 24.7x 1STDEV 29.4x 2STDEV 34.0x
AKRA IJ
downside risk is already limited in our view. Meanwhile, potential land sales to Freeport, Source: Bloomberg, UOB Kay Hian
would bring further upside to share price in the medium term. Our target price of Rp4,730
is based on SOTP, assuming 10.1% WACC, and implies 19.2x 2019F PE, or slightly
below -1SD of its 5-year mean.

Refer to last page for important disclosures. 3

I n d o n e s i a D a i l y Wednesday, 24 October 2018

PROFIT & LOSS BALANCE SHEET

Year to 31 Dec (Rpb) 2017 2018F 2019F 2020F Year to 31 Dec (Rpb) 2017 2018F 2019F 2020F
Net turnover 18,288 24,094 25,611 27,586 Fixed assets 5,775 6,140 6,257 6,459
EBITDA 1,186 1,353 1,708 2,026 Other LT assets 2,232 2,308 2,377 2,452
Deprec. & amort. 73 309 334 361 Cash/ST investment 1,771 2,379 1,493 1,318
EBIT 1,113 1,044 1,373 1,666 Other current assets 7,045 7,476 7,803 8,045
Total other non-operating income 24 (6.5) (6.7) (6.9) Total assets 16,823 18,302 17,930 18,275
Associate contributions 5.9 6.0 6.2 6.4 ST debt 955 735 746 709
Net interest income/(expense) 13 (57) (28) (21) Other current liabilities 4,474 5,258 5,592 5,996
Pre-tax profit 1,156 987 1,345 1,644 LT debt 2,218 2,488 1,451 490
Tax (155) (170) (236) (289) Other LT liabilities 146 152 159 165
Minorities (103) (79) (122) (149) Shareholders' equity 7,558 8,115 8,388 9,156
Net profit 1,202 1,474 987 1,206 Minority interest 1,472 1,555 1,594 1,759
Net profit (adj.) 898 739 987 1,206 Total liabilities & equity 16,823 18,302 17,930 18,275

CASH FLOW KEY METRICS

Year to 31 Dec (Rpb) 2017 2018F 2019F 2020F Year to 31 Dec (%) 2017 2018F 2019F 2020F
Operating 1,795 1,692 1,162 1,514 Profitability
Pre-tax profit 1,156 987 1,345 1,644 EBITDA margin 6.5 5.6 6.7 7.3
Tax (155) (170) (236) (289) Pre-tax margin 6.3 4.1 5.3 6.0
Deprec. & amort. 73 309 334 361 Net margin 6.6 6.1 3.9 4.4
Working capital changes 285 (21) (97) 15 ROA 5.5 4.2 5.4 6.7
Other operating cashflows 436 587 (184) (217) ROE 12.5 9.4 12.0 13.8
Investing (171) (311) (348) (416)
Capex (100) (425) (348) (416) Growth
Investments (67) 114 0.0 0.0 Turnover 20.2 31.7 6.3 7.7
Others (3.9) 0.0 0.0 0.0 EBITDA (16.3) 14.1 26.2 18.7
Financing (1,215) (773) (1,700) (1,272) Pre-tax profit 0.0 (14.6) 36.3 22.3
Dividend payments (600) (917) (713) (439) Net profit 18.9 22.7 (33.1) 22.2
Issue of shares 102 0.0 0.0 0.0 Net profit (adj.) (11.1) (17.8) 33.6 22.2
Proceeds from borrowings (973) 61 (1,026) (999) EPS (11.2) (18.4) 33.6 22.2
Others/interest paid 256 83 39 165
Net cash inflow (outflow) 409 608 (886) (174) Leverage
Beginning cash & cash 1,367 1,771 2,379 1,493 Debt to total capital 26.0 25.0 18.0 9.9
equivalent
Changes due to forex impact (4.9) 0.0 0.0 0.0 Debt to equity 42.0 39.7 26.2 13.1
Ending cash & cash equivalent 1,771 2,379 1,493 1,318 Net debt/(cash) to equity 18.5 10.4 8.4 (1.3)
Interest cover (x) n.a. 23.9 61.1 96.8

Refer to last page for important disclosures. 4

I n d o n e s i a D a i l y Wednesday, 24 October 2018

TRADERS’ CORNER
SMGR.JK - Daily 10/23/2018 Open 9050, Hi 9125, Lo 8975, Close 9100 (1.1%) 12,000
Semen Indonesia (SMGR IJ)
11,500

Technical buy with 5% potential return

11,000

Resistance : Rp9,575, Rp9,925

10,500

Support : Rp8,825, Rp8,650

10,000

9,500
Stop Loss : Rp8,950
9,100
9,000
SMGR is still in consolidation trend but closed
positive yesterday Thus, a further strengthening
8,500
is expected today. The RSI indicator is still in
8,000
bullish territory, which should support share price.
7,500 BUY at Rp9,050 and take profit at Rp9,550.
7,000
Approximate timeframe on average: 1 week.
Our institutional research has a fundamental
6,500
Mar Apr May Jun Jul Aug Sep Oct
SMGR.JK - RSI(13) = 52.16
70
BUY and target price of Rp10,300.
52.1604

30

SMGR.JK - Volume = 6,946,300.00, MA(Volume,15) = 5,964,793.50

15M

10M
6,946,300
5M
5,964,794

Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com

Source: Amibroker

ASII.JK - Daily 10/23/2018 Open 7200, Hi 7375, Lo 7125, Close 7350 (1.0%)
8,600
Astra International (ASII IJ)
8,400
Technical buy with 4% potential return
8,200

8,000
Resistance : Rp7,450, Rp7,600
7,800
Support : Rp7,250, Rp7,100
7,600
Stop Loss : Rp7,200
7,400
7,350

7,200 ASII continued to strengthen and formed a

7,000 significant bullish candlestick, supported by
6,800 indicators which gave a golden cross signal last
6,600 week. The RSI indicator has also moved into
6,400 bullish territory. BUY at Rp7,300 and take profit at
6,200 Rp7,600.
Mar Apr May Jun Jul Aug Sep Oct
ASII.JK - RSI(13) = 59.47
70 Approximate timeframe on average: 1 week.
59.4688

Our institutional research has a fundamental BUY

30
and target price of Rp9,200.
ASII.JK - Volume = 38,954,800.00, MA(Volume,15) = 24,546,826.00 100M

80M
60M
38,954,800
40M
24,546,826
20M

Created with AmiBroker - adv anced charting and technical analy sis sof tware. http://www.amibroker.com

Source: Amibroker

ANALYST(S)
Maskun Ramli, CFTe
+6221 2993 3915
maskunramli@uobkayhian.com

Refer to last page for important disclosures. 5

I n d o n e s i a D a i l y Wednesday, 24 October 2018

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Refer to last page for important disclosures. 6

I n d o n e s i a D a i l y Wednesday, 24 October 2018

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