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Danareksa Equity Snapshot - ADHI 24 Mei 2018
May 24, 2018 10:03

Adhi Karya(ADHI IJ)

A new train project is coming to town


Jakarta’s municipal government plans to invite investors to participate in the development of the Greater Jakarta LRT stage 2. ADHI as a contractor in stage 1 will have the opportunity to participate as the contractor or investor in the project. For stage 1 of the project, ADHI expects the second tranche of payment from Kereta Api Indonesia (KAI) amounting to around IDR1.8tn to be made in the near future. We maintain our BUY call on ADHI with an unchanged TP of IDR2,900.


Greater Jakarta LRT stage 2. The investment needed for the Greater Jakarta LRT stage 2 is estimated at IDR9.8tn (USD700mn). The line will connect the Velodrome (in Rawamangun) to Tanah Abang. There will be 10 stations (revised up from 6 stations in the initial plans) and the Jakarta Governor plans to invite the private sector to participate in the project through the PPP scheme. The financing scheme in stage 2 will be totally different from the financing scheme for stage 1 for which the project is owned by the government through KAI. Regarding the PPP scheme, our concerns relate to the subsidies given to ensure low ticket prices. We also note that the investor will have the privilege to appoint the contractor for the project.


Progress of the Greater Jakarta LRT stage 1. As of early May 18, the LRT stage 1 progress reached 37.4%, with the progress of each service line as follows: Cawang – Cibubur 59.0%, Cawang – Kuningan – Dukuh Atas 21.2%, and Cawang – Bekasi Timur 33.3%. For this project, ADHI has won IDR22.8tn of civil works contracts with construction expected to be finished by 2019.


Received part payment for the Greater Jakarta LRT stage 1. ADHI received the first tranche of payment for the project amounting to IDR3.4tn in early Mar 18. The payment is based on works carried out as of Sep 2017. The second payment of around IDR1.8tn based on works carried out from Oct – Dec 2017 is expected to be received in 2Q18. ADHI booked receivables of IDR4.4tn from the project as of Mar 18.


New contracts in 4M18 reached IDR3.8tn, or reaching 16.3% of the management’s full year target of IDR23.3tn. Compared to the previous year, the new contracts in 4M18 are 13.4%yoy lower than the IDR4.4tn of new contracts booked in 4M17. ADHI booked IDR800bn of new contracts in Apr 18, including contracts for some major projects such as RSKIA stage 2 (IDR279.5bn), Cordova Apartment (IDR164bn), and Novotel Bali (IDR153bn).


Maintain BUY. We maintain our forecast and recommendation on ADHI as we expect more new contracts to be booked in the coming months. ADHI also has a bigger chance to participate as the contractor or investor in the Greater Jakarta LRT stage 2 project. ADHI currently trades at an attractive valuation of 2018 PE of 9.1x, lower than its historical -1SD PE of 13.1x.


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