Indonesia Company Guide Pakuwon Jati

Version 8 | Bloomberg: PWON IJ | Reuters: PWON.JK Refer to important disclosures at the end of this report

DBS Group Research . Equity 29 Oct 2018

HOLD Consistent earnings growth Last Traded Price ( 26 Oct 2018): Rp478 (JCI : 5,784.90) Price Target 12-mth: Rp520 (9% upside) (Prev Rp610) Higher revenue from both development and investment properties. Pakuwon Jati (PWON) booked 3Q18 earnings of Analyst Rp651bn (+24% y-o-y, +15% q-o-q), supported by higher Victor STEFANO +6221 3003 4934 [email protected] revenue from both development property (+38.5% y-o-y, + 5.8% q-o-q) and investment property (+19.1% y-o-y, +8.4% q- What’s New o-q). Despite foreign exchange (forex) losses of Rp284bn, PWON’s 9M18 earnings came in at Rp1.78tr which was above  Booked 3Q18 earnings of Rp651bn, in line with our estimates but above consensus consensus estimates (82% of FY18F) but in line with ours (76% of FY18F). Higher revenue from development and investment  Where we differ: Maintain HOLD. Despite the strong properties earnings delivery, we maintain our HOLD call since the property sector lacks positive near term catalysts.  Secured 65% of its FY18 pre-sales target in 9M18 Improvement in pre-sales among property Maintain HOLD with lower TP of Rp520 Potential catalyst.  developers could change investor sentiment on PWON. The company’s new project in Bekasi, which is expected to launch next year, could serve as PWON`s re-rating catalyst. Price Relative Valuation: We maintain our HOLD call with a lower TP of Rp520 as we take into account further rupiah depreciation and raise our risk-free rate to 8.6% (from 8.0%). Our TP is derived by applying 27% discount to our RNAV of Rp716 which is at -1SD from its five-year average to take into account uncertainties in the 2019 presidential election and a prolonged property Forecasts and Valuation demand recovery . FY Dec (Rpbn) 2016A 2017A 2018F 2019F Revenue 4,841 5,718 6,201 7,238 EBITDA 2,593 3,160 3,552 4,028 Key Risks to Our View: Pre-tax Profit 2,057 2,406 2,984 3,496 USD depreciation and higher interest rate Net Profit 1,671 1,873 2,336 2,752 USD debt and construction costs (especially for high-rise Net Pft (Pre Ex.) 1,645 2,067 2,530 2,946 projects) have exposed PWON to forex risks. A higher interest Net Pft Gth (Pre-ex) (%) 6.9 25.7 22.4 16.5 rate environment might also translate into lower property EPS (Rp) 34.7 38.9 48.5 57.1 EPS Pre Ex. (Rp) 34.1 42.9 52.5 61.2 demand. EPS Gth Pre Ex (%) 7 26 22 16 Diluted EPS (Rp) 34.7 38.9 48.5 57.1 At A Glance Net DPS (Rp) 4.50 4.50 4.50 4.50 Issued Capital (m shrs) 48,160 BV Per Share (Rp) 180 214 258 311 Mkt. Cap (Rpbn/US$m) 23,020 / 1,517 PE (X) 13.8 12.3 9.9 8.4 Major Shareholders (%) PE Pre Ex. (X) 14.0 11.1 9.1 7.8 P/Cash Flow (X) 10.2 9.3 10.0 7.1 Burgami Investment Ltd 20.9 EV/EBITDA (X) 10.9 8.7 7.5 6.2 Pakuwon Arthaniaga 16.8 Net Div Yield (%) 0.9 0.9 0.9 0.9 Concord Media Investment 7.4 P/Book Value (X) 2.7 2.2 1.9 1.5 Free Float (%) 47.8 Net Debt/Equity (X) 0.3 0.2 0.1 CASH 3m Avg. Daily Val (US$m) 0.92 ROAE (%) 21.0 19.7 20.5 20.1 ICB Industry : Financials / Real Estate

Earnings Rev (%): 0 7 6 Consensus EPS (Rp): N/A 45.7 51.1 Other Broker Recs: B: 21 S: 0 H: 4 Source of all data on this page: Company, DBSVI, Bloomberg Finance L.P

ed: KK`/ sa: MA, CW, CS Company Guide

Pakuwon Jati

WHAT’S NEW Consistent earnings growth

In line 3Q18 earnings Valuation Pakuwon Jati (PWON) booked 3Q18 earnings of Rp651bn We maintain our HOLD call with a lower TP of Rp520 as we (+24% y-o-y, +15% q-o-q), supported by higher revenue from take into account further rupiah depreciation and raise our both development property (+38.5% y-o-y, + 5.8% q-o-q) and risk-free rate to 8.6% (from 8.0%). Our TP is derived by investment property (+19.1% y-o-y, +8.4% q-o-q). Despite applying 27% discount to our RNAV of Rp716 which is at - forex losses of Rp284bn, PWON 9M18 earnings came in at 1SD from its five-year average to take into account Rp1.78tr which was above consensus estimates (82% of uncertainties related to the 2019 presidential election and a FY18F) but in line with ours (76% of FY18F). prolonged property demand recovery.

Continuous growth of investment property PWON investment properties continue to support its top line

by contributing 49% of 3Q18 revenue. PWON booked PWON recurring revenue (Rp bn) investment property revenue of Rp902bn (+19.1% y-o-y, 1000 +8.4% q-o-q) which represents 15.3% compound annual 900 growth rate (CAGR) in the past three year. Despite lacking 800 new projects, 3Q18 the investment property segment still 15.3% CAGR 700 grew q-o-q on the back of rental adjustment at its Kota 600 Kasablanka mall, and the newly opened extension in 500 Tunjungan Plaza 6 and Pakuwon Mall. 400

300 New project launch next year 200 Despite the Anti Corruption Commission nailing several 100 conglomerates regarding licensing/permit issues recently, 0 PWON is expected to launch its new project located in Bekasi, 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 West Java, after the presidential election next year. The project will be a mixed use development which will contribute to Source: Bloomberg Finance L.P., DBSVI higher development and investment property revenue if the project kicks in.

PWON discount to RNAV band PWON secured 65% of its FY18 pre-sales target Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 PWON booked pre-sales of Rp611bn in 3Q18, bringing its -20% 9M18 pre-sales to Rp1.7tr (-5% y-o-y). 9M18 pre-sales formed -10% +2SD 65% and 70% of the company’s FY18 target and our FY18 0% forecast respectively. Condo sales continued to make up a +1SD 10% higher proportion of PWON’s pre-sales (Rp350bn) with the AVG launch of La Viz in Surabaya and ongoing sales from its Kota 20% Kasablanka condos. Landed residential units contributed 30% -1SD Rp250bn pre-sales in 3Q18, which was supported by its land 40% -2SD plot sales in Pakuwon City. 50%

Surabaya continued to dominate PWON’s pre-sales, supported 60% by the recurring sales of landed residential projects in Pakuwon City and Grand Pakuwon, land plot sales in Pakuwon City, and Source: Bloomberg Finance L.P., DBSVI the newly launched La Viz apartments. Kota Kasablanka

apartment phase 2 (Angelo, Bella, Chianti) continued to

dominate Jakarta pre-sales.

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Pakuwon Jati

Quarterly / Interim Income Statement (Rpbn) FY Dec 3Q2017 2Q2018 3Q2018 % chg yoy % chg qoq

Revenue 1,443 1,730 1,852 28.3 7.1 Cost of Goods Sold (607) (712) (743) 22.4 4.4 Gross Profit 836 1,018 1,109 32.6 8.9 Other Oper. (Exp)/Inc (131) (135) (147) 11.9 9.2 Operating Profit 705 884 962 36.5 8.8 Other Non Opg (Exp)/Inc 5.40 10.4 11.7 118.2 12.8 Associates & JV Inc (2.5) (4.2) (1.8) 27.1 (56.4) Net Interest (Exp)/Inc (24.9) (9.8) (37.4) (49.9) (280.6) Exceptional Gain/(Loss) (20.7) (139) (107) (419.8) (22.8) Pre-tax Profit 662 741 827 24.9 11.6 Tax (90.2) (102) (106) 17.1 3.6 Minority Interest (47.6) (72.6) (70.2) (47.6) (3.4) Net Profit 524 566 651 24.2 15.0 Net profit bef Except. 545 706 759 39.2 7.5 EBITDA 705 884 962 36.5 8.8

Margins (%) Gross Margins 57.9 58.9 59.9 Opg Profit Margins 48.8 51.1 51.9 Net Profit Margins 36.3 32.7 35.2

Source of all data: Company, DBSVI

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PWON RNAV summary PWON portfolio Stakes RNAV Investment Property 19,430

East Coast Center 100% 153

Tunjungan Plaza (I-IV) mall 100% 3,976

Tunjungan Plaza V mall 100% 659

Tunjungan Plaza VI mall 100% 746

Sheraton Hotel 100% 481

Tunjungan Plaza 4-star hotel 100% 376

Gandaria City 83% 2,361

Kota Kasablanka 100% 3,396

Gandaria 8 Office 83% 519

Kota Kasablanka Office 88 - Tower A (part leased) 100% 805

Kota Kasablanka Office 88 - Tower B (all leased) 100% 736

Gandaria 5-star hotel 83% 595

Supermal Pakuwon Indah - Phase 1 & Trade Center 67% 1,590

Supermal Pakuwon Indah - Phase 2 & 3 67% 1,193

Supermal Pakuwon Indah - Phase 4 67% 232

Royal Plaza Mall 50% 451

Somerset Berlian 67% 162

Blok M Plaza 67% 461

Ascott Residence 67% 181

Pullman 5 star hotel 67% 199

Ibis 3-star hotel 67% 158

Development properties & Landbank 16,071

Tunjungan V - The Peak 100% 159

Tunjungan VI - Apartment 100% 223

Tunjungan V - Pakuwon Center 100% 155

Tunjungan VI - Office 100% 271

Pakuwon City - Palm Beach 100% 985

Pakuwon City - Community 1 100% 1,559

Pakuwon City - Community 2 (+ remaining landbank) 100% 3,266

Grand Pakuwon 1 100% 911

Grand Pakuwon 2 (+ remaining landbank) 100% 2,199

Kota Kasablanka tower 3 100% 280

Kota Kasablanka tower 4 100% 285

Kota Kasablanka tower 5 100% 774

Gandaria office - expansion 83% 1,015

Kota Kasablanka office - expansion 100% 1,295

4.5ha landbank in TB Simatupang 70% 788

4.1ha landbank in Kota Kasablanka 100% 1,230

1.9ha landbank in Gandaria City 83% 394

Pakuwon Indah - 6 apartments 67% 282

Net Debt 1,024

RNAV 34,476

Fully Diluted Share base (bn) 48.2

Fully Diluted RNAV per share 716

Source: Company, DBSVI

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Marketing sales (Rpbn) CRITICAL DATA POINTS TO WATCH

Critical Factors Large portion of recurring revenue from investment properties PWON generated 50% of its consolidated revenue from investment properties, mostly retail malls. We expect this proportion to be stable for the next few years as PWON has a balanced property portfolio. The large component of recurring revenue should provide PWON with a buffer against slower marketing sales in this challenging property market. This is in line with PWON’s long term target of 50-50 mix of recurring and non-recurring revenue. Net profit trend (Rpbn)

Marketing sales achieved Property developers such as PWON generally recognise non- recurring revenue from marketing sales achieved in the previous 2- 3 years. We expect revenue to grow moderately at 11% CAGR over 2015-18F given that marketing sales grew at 33% CAGR over 2011-15. We estimate that marketing sales can still grow at a moderate CAGR of 10% over the next three years, supported by its existing residential townships and high-rise developments in Indonesia’s two largest cities – Jakarta and Surabaya.

Sales trend (Rpbn) Product mix About 65% of PWON’s non-recurring revenue comes from high- rise projects, and this segment has been generating stable gross profit margins (c.50%). Given the large share of recurring revenue (50% of consolidated revenue) and stable sustainable margins, we expect overall gross profit margins to remain steady.

Good control of operating costs PWON has been able to keep selling, general and administrative (SG&A) expenses (as a % of revenue) under control, despite the larger-than-average increase in two key items of its SG&A EBIT margin (%) expenses, 1) “advertising, promotion, commission and events” for the purpose of attracting more demand for its developments during this challenging period and, 2) “salaries and allowances” given new substantial projects in its portfolios.

Strong bargaining power for retail mall operators Given the limited supply of retail space supply in good areas, PWON (as one of the largest retail space owners and operators in Jakarta and Surabaya) should benefit from strong demand for retail space from both foreign and local brands. Disc to RNAV trend Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 -20%

-10% +2SD 0% +1SD 10% AVG 20%

30% -1SD

40% -2SD

50%

60%

Source: Company, DBSVI

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Appendix 1: A look at Company's listed history – what drives its share price?

Recurring income as critical factor to PWON’s share price

800 900 Potential upside 700 800 from stable recurring income 600 700 growth Less affected 600 500 by property bubble Tax 500 400 amnesty effect 400 300 Slow 300 200 economic 200 growth 100 100 0 0 Jan‐11 Jan‐12 Jan‐13 Jan‐14 Jan‐15 Jan‐16 Jan‐17

Share Price Recurring income

Source: Company, Bloomberg Finance L.P, Company, DBSVI

Among companies in our coverage, Pakuwon Jati (PWON) has proportion among its peers, which will support its top line in the largest composition of recurring income. About half of its times of declining marketing sales. revenue comes from investment properties and the other half from development properties (via marketing sales). With its strong base in Jakarta and Surabaya, the two largest cities in Indonesia, PWON has strong brand equity in the During property boom periods, PWON’s share price appreciated investment property business. We believe the ability to grow its thanks to the growth of both marketing sales and recurring investment properties further will act as a re-rating catalyst for income. However, historically after a property market its share price. This will hold true in a weak property market slowdown, marketing sales had less influence on PWON’s share environment where investment properties will help support price. We believe this is due to its high recurring income PWON’s revenue growth.

During property sector slowdowns, PWON’s share price has negative correlation with property price appreciation

800 25

700 20 600 Propertyboom: Price growth accelerated - marketing sales 500 (thus share price) rose Propertyslowdown: 15 Potential significantly Price growth 400 decelerated - share downside from 300 price keep moving up 10 bottoming price due to its nature of growth 200 high recurring income 5 100 0 0 Jan‐09 Jan‐10 Jan‐11 Jan‐12 Jan‐13 Jan‐14 Jan‐15 Jan‐16 Jan‐17 Share Price Residential Property Price Index (% y‐o‐y) ‐ LHS Source: Bloomberg Finance L.P, BI, Company, DBSVI

In theory, property price appreciation should be a positive We believe this has to do with the market preference for catalyst for property developers’ share price re-rating. This holds property developers with more stable earnings. PWON is one of true for most developers, including PWON, during property the best candidates in this space due to the fact that half of its boom times. revenue comes from investment properties. It has been able to grow its recurring income during property market slowdowns. However, the relationship has shown a divergence on PWON’s However, we think that property prices have already hit the share price after the property market slowdown in late 2013. bottom. The acceleration of property price gains might result in Since early 2014, the property market slowdown has resulted in a change in the market preference towards other property lower property price appreciation but this had no impact on developers with more upside potential (mainly arising from their PWON’s share price which kept trending up. development property business).

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Leverage & asset turnover (x)

Balance Sheet: Net gearing level is reasonable As a superblock developer, PWON’s gearing has been higher than other developers. Net gearing has seen troughs and peaks, but overall it has improved significantly compared since 2008. With the company’s strong cash generation from asset monetization currently, PWON’s net gearing should stay at a reasonable level of c.40% in the next few years.

Capex to normalise Capital expenditure We project capital expenditure (capex) to normalise going forward, after the spike in 2014 from major acquisitions (acquired a 67% stake in Pakuwon Permai project and 4.2ha landbank in T.B. Simatupang, South Jakarta).

Share Price Drivers: Marketing sales achieved and project pipeline Marketing sales is a good indicator for all Indonesian property developers (including PWON) as it is a leading indicator of revenue generation for the next 2-3 years (depending on the revenue recognition). ROE (%)

Key Risks: Potential interest rate hike. Property demand is sensitive to and is negatively correlated to interest rate movements. Exposure to US$, both in terms of financials (debt in balance sheet) and operations (i.e. higher material cost especially for high-rise projects with higher US$-linked items), is a risk amid the weak IDR environment. Strict implementation of potential revisions to housing development balance ratio (for low-end, mid-range and luxury houses). If such revisions are implemented strictly and Forward PE Band (x) retroactively, this could potentially mean additional costs for property developers and more complicated property development planning. Capital-intensive projects require large funding. High-rise and retail mall developments require large upfront capital. Cost of external financing has to be kept in check.

Company Background A mixed-use property and residential township developer with assets in Jakarta and Surabaya. PWON has a balanced portfolio with a large share of recurring revenue from retail malls. PB Band (x)

Source: Company, DBSVI

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Key Assumptions FY Dec 2015A 2016A 2017A 2018F 2019F

Marketing Sales (Rpbn) 3,060 2,277 2,505 2,421 2,866 Net Profit Trend (Rpbn) 1,262 1,671 1,873 2,336 2,752 Sales Trend (Rpbn) 4,625 4,841 5,718 6,201 7,238 EBIT Margin (%) 49.0 46.7 48.9 50.7 49.6

Segmental Breakdown FY Dec 2015A 2016A 2017A 2018F 2019F

Revenues (Rpbn) Apartment & Office 1,510 1,464 1,978 1,375 1,788 Kavling & Building 799 824 785 1,201 1,604 Hotel 158 244 350 660 698 Rental & Maintenance 2,159 2,309 2,605 2,965 3,148 Total 4,625 4,841 5,718 6,201 7,238 Gross Profit (Rpbn) Apartment & Office 757 715 1,115 775 1,007 Kavling & Building 663 657 663 1,015 1,283 Hotel 64.8 86.2 117 297 244 Rental & Maintenance 1,183 1,296 1,469 1,672 1,776 Total 2,669 2,754 3,364 3,759 4,310 Gross Profit Margins (%) Apartment & Office 50.1 48.8 56.3 56.3 56.3 Kavling & Building 83.1 79.7 84.5 84.5 80.0 Hotel 41.1 35.3 33.5 45.0 35.0 Rental & Maintenance 54.8 56.1 56.4 56.4 56.4 Total 57.7 56.9 58.8 60.6 59.6

Income Statement (Rpbn) FY Dec 2015A 2016A 2017A 2018F 2019F

Revenue 4,625 4,841 5,718 6,201 7,238 Cost of Goods Sold (1,957) (2,088) (2,353) (2,442) (2,928) Gross Profit 2,669 2,754 3,364 3,759 4,310 Other Opng (Exp)/Inc (404) (494) (569) (617) (721) Operating Profit 2,265 2,260 2,795 3,142 3,590 Other Non Opg (Exp)/Inc (169) 8.20 14.6 0.0 0.0 Associates & JV Inc (2.9) (8.5) (12.0) 0.0 0.0 Net Interest (Exp)/Inc (74.5) (229) (198) 36.2 100 Exceptional Gain/(Loss) (277) 26.3 (194) (194) (194) Pre-tax Profit 1,741 2,057 2,406 2,984 3,496 Tax (341) (276) (381) (350) (394) Minority Interest (139) (110) (152) (298) (350) Preference Dividend 0.0 0.0 0.0 0.0 0.0 Net Profit 1,262 1,671 1,873 2,336 2,752 Net Profit before Except. 1,539 1,645 2,067 2,530 2,946 EBITDA 2,535 2,593 3,160 3,552 4,028 Growth Revenue Gth (%) 19.4 4.7 18.1 8.5 16.7 EBITDA Gth (%) 2.6 2.3 21.9 12.4 13.4 Opg Profit Gth (%) 19.8 (0.2) 23.7 12.4 14.3 Net Profit Gth (Pre-ex) (%) 7.2 6.9 25.7 22.4 16.5 Margins & Ratio Gross Margins (%) 57.7 56.9 58.8 60.6 59.6 Opg Profit Margin (%) 49.0 46.7 48.9 50.7 49.6 Net Profit Margin (%) 27.3 34.5 32.8 37.7 38.0 ROAE (%) 18.9 21.0 19.7 20.5 20.1 ROA (%) 7.1 8.5 8.5 10.3 11.5 ROCE (%) 13.2 12.6 13.5 15.4 16.6 Div Payout Ratio (%) 8.6 17.2 13.0 11.6 9.3 Net Interest Cover (x) 30.4 9.9 14.1 NM NM Source: Company, DBSVI

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Quarterly / Interim Income Statement (Rpbn) FY Dec 3Q2017 4Q2017 1Q2018 2Q2018 3Q2018

Revenue 1,443 1,324 1,647 1,730 1,852 Cost of Goods Sold (607) (466) (708) (712) (743) Gross Profit 836 857 940 1,018 1,109 Other Oper. (Exp)/Inc (131) (199) (124) (135) (147) Operating Profit 705 659 815 884 962 Other Non Opg (Exp)/Inc 5.40 3.20 (11.4) 10.4 11.7 Associates & JV Inc (2.5) (4.1) (1.0) (4.2) (1.8) Net Interest (Exp)/Inc (24.9) (76.3) (24.7) (9.8) (37.4) Exceptional Gain/(Loss) (20.7) 4.80 (42.0) (139) (107) Pre-tax Profit 662 586 736 741 827 Tax (90.2) (107) (96.3) (102) (106) Minority Interest (47.6) (31.1) (76.9) (72.6) (70.2) Net Profit 524 448 563 566 651 Net profit bef Except. 545 443 605 706 759 EBITDA 705 659 815 884 962

Growth Revenue Gth (%) (8.2) (8.3) 24.4 5.0 7.1 EBITDA Gth (%) (7.9) (6.5) 23.8 8.4 8.8 Opg Profit Gth (%) (7.9) (6.5) 23.8 8.4 8.8 Net Profit Gth (Pre-ex) (%) (27.4) (18.6) 36.5 16.6 7.5 Margins Gross Margins (%) 57.9 64.8 57.0 58.9 59.9 Opg Profit Margins (%) 48.8 49.8 49.5 51.1 51.9 Net Profit Margins (%) 36.3 33.9 34.2 32.7 35.2

Balance Sheet (Rpbn) FY Dec 2015A 2016A 2017A 2018F 2019F

Net Fixed Assets 10,344 12,164 12,461 13,038 13,557 Invts in Associates & JVs 0.0 0.0 0.0 0.0 0.0 Other LT Assets 5,269 5,227 6,193 6,593 6,812 Cash & ST Invts 2,071 2,433 3,406 1,087 3,688 Inventory 10.3 16.0 18.2 18.2 18.2 Debtors 268 186 449 344 401 Other Current Assets 815 649 832 998 1,198 Total Assets 18,778 20,674 23,359 22,078 25,675

ST Debt 536 770 402 270 270 Creditor 198 212 364 299 358 Other Current Liab 4,046 4,038 4,569 4,252 4,505 LT Debt 4,372 4,471 5,026 1,842 2,242 Other LT Liabilities 171 165 206 206 206 Shareholder’s Equity 7,219 8,684 10,320 12,439 14,974 Minority Interests 2,236 2,336 2,472 2,770 3,120 Total Cap. & Liab. 18,778 20,674 23,359 22,078 25,675

Non-Cash Wkg. Capital (3,151) (3,399) (3,635) (3,191) (3,246) Net Cash/(Debt) (2,837) (2,808) (2,021) (1,025) 1,177 Debtors Turn (avg days) 20.9 17.1 20.2 23.3 18.8 Creditors Turn (avg days) 42.9 44.0 66.9 53.7 52.5 Inventory Turn (avg days) 2.2 3.3 3.3 3.3 2.7 Asset Turnover (x) 0.3 0.2 0.3 0.3 0.3 Current Ratio (x) 0.7 0.7 0.9 0.5 1.0 Quick Ratio (x) 0.5 0.5 0.7 0.3 0.8 Net Debt/Equity (X) 0.3 0.3 0.2 0.1 CASH Net Debt/Equity ex MI (X) 0.4 0.3 0.2 0.1 CASH Capex to Debt (%) 44.9 59.9 28.0 65.7 46.8 Z-Score (X) 2.6 2.5 2.5 2.5 2.6 Source: Company, DBSVI

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Cash Flow Statement (Rpbn) FY Dec 2015A 2016A 2017A 2018F 2019F

Pre-Tax Profit 1,741 2,057 2,406 2,984 3,496 Dep. & Amort. 271 333 366 411 438 Tax Paid (341) (276) (381) (350) (394) Assoc. & JV Inc/(loss) 0.0 0.0 0.0 0.0 0.0 Chg in Wkg.Cap. 449 248 236 (444) 54.8 Other Operating CF (139) (110) (152) (298) (350) Net Operating CF 1,982 2,253 2,474 2,302 3,245 Capital Exp.(net) (2,204) (3,141) (1,520) (1,387) (1,177) Other Invts.(net) 0.0 0.0 0.0 0.0 0.0 Invts in Assoc. & JV 126 99.9 136 298 350 Div from Assoc & JV 0.0 0.0 0.0 0.0 0.0 Other Investing CF (744) 1,024 (66.8) 0.0 0.0 Net Investing CF (2,822) (2,017) (1,451) (1,088) (827) Div Paid (217) (217) (217) (217) (217) Chg in Gross Debt 312 332 188 (3,316) 400 Capital Issues 0.0 0.0 0.0 0.0 0.0 Other Financing CF 7.30 10.7 (20.2) 0.0 0.0 Net Financing CF 102 126 (49.4) (3,533) 183 Currency Adjustments 0.0 0.0 0.0 0.0 0.0 Chg in Cash (738) 361 974 (2,319) 2,601 Opg CFPS (Rp) 31.8 41.6 46.5 57.0 66.2 Free CFPS (Rp) (4.6) (18.5) 19.8 19.0 42.9 Source: Company, DBSVI

Target Price & Ratings History

Source: DBSVI Analyst: Victor STEFANO

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DBSVI recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends

Completed Date: 29 Oct 2018 10:04:42 (WIB) Dissemination Date: 29 Oct 2018 15:59:36 (WIB)

Sources for all charts and tables are DBSVI unless otherwise specified.

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The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation 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 for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies.

Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report.

This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.

The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that:

(a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein.

Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report.

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DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.

ANALYST CERTIFICATION The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible for the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant) and the research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. DBS Group has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the DBS Group and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of DBS Group's compensation to any specific investment banking function of the DBS Group.

COMPANY-SPECIFIC / REGULATORY DISCLOSURES 1. DBS Bank Ltd, DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS'') or their subsidiaries and/or other affiliates do not have proprietary position in the securities recommended in this report as of 30 Sep 2018.

2. Neither DBS Bank Ltd nor DBS HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. Compensation for investment banking services:

3. DBSVUSA does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

Disclosure of previous investment recommendation produced:

4. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates may have published other investment recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd (''DBSVS''), their subsidiaries and/or other affiliates in the preceding 12 months.

1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst.

2 Financial interest is defined as interests that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at arm's length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.

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RESTRICTIONS ON DISTRIBUTION General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Australia This report is being distributed in Australia by DBS Bank Ltd, DBSVS or DBSV HK. DBS Bank Ltd holds Australian Financial Services Licence no. 475946.

DBSVS and DBSV HK are exempted from the requirement to hold an Australian Financial Services Licence under the Corporation Act 2001 (“CA”) in respect of financial services provided to the recipients. Both DBS Bank Ltd and DBSVS are regulated by the Monetary Authority of Singapore under the laws of Singapore, and DBSV HK is regulated by the Hong Kong Securities and Futures Commission under the laws of Hong Kong, which differ from Australian laws.

Distribution of this report is intended only for “wholesale investors” within the meaning of the CA.

Hong Kong This report has been prepared by an entity(ies) which is not licensed by the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong). This report is being distributed in Hong Kong and is attributable to DBS Bank (Hong Kong) Limited, a registered institution registered with the Hong Kong Securities and Futures Commission to carry on the regulated activity of advising on securities pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong).

For any query regarding the materials herein, please contact Carol Wu (Reg No. AH8283) at [email protected]

Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.

Malaysia This report is distributed in Malaysia by AllianceDBS Research Sdn Bhd ("ADBSR"). Recipients of this report, received from ADBSR are to contact the undersigned at 603-2604 3333 in respect of any matters arising from or in connection with this report. In addition to the General Disclosure/Disclaimer found at the preceding page, recipients of this report are advised that ADBSR (the preparer of this report), its holding company Alliance Investment Bank Berhad, their respective connected and associated corporations, affiliates, their directors, officers, employees, agents and parties related or associated with any of them may have positions in, and may effect transactions in the securities mentioned herein and may also perform or seek to perform broking, investment banking/corporate advisory and other services for the subject companies. They may also have received compensation and/or seek to obtain compensation for broking, investment banking/corporate advisory and other services from the subject companies.

Wong Ming Tek, Executive Director, ADBSR

Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 196800306E) or DBSVS (Company Regn No. 198600294G), both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, DBS Bank Ltd accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.

Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.

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United This report is produced by PT DBS Vickers Sekuritas Indonesia which is regulated by the Otoritas Jasa Keuangan (OJK). Kingdom This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.

Dubai This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at units 608 - 610, 6th Floor, International Gate Precinct Building 5, PO Box 506538, DIFC, Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated Financial by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the Centre DFSA rulebook) and no other person may act upon it.

United Arab This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as Emirates defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.

United States This report was prepared by PT DBS Vickers Sekuritas Indonesia (''DBSVI''). DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.

Other In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, jurisdictions professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.

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DBS Regional Research Offices

HONG KONG MALAYSIA SINGAPORE DBS (Hong Kong) Ltd AllianceDBS Research Sdn Bhd DBS Bank Ltd Contact: Carol Wu Contact: Wong Ming Tek (128540 U) Contact: Janice Chua 11th Floor The Center 19th Floor, Menara Multi-Purpose, 12 Marina Boulevard, 99 Queen’s Road Central Capital Square, Marina Bay Financial Centre Tower 3 Central, Hong Kong 8 Jalan Munshi Abdullah 50100 Singapore 018982 Tel: 852 3668 4181 Kuala Lumpur, Malaysia. Tel: 65 6878 8888 Fax: 852 2521 1812 Tel.: 603 2604 3333 Fax: 65 65353 418 e-mail: [email protected] Fax: 603 2604 3921 e-mail: [email protected] e-mail: [email protected] Company Regn. No. 196800306E

THAILAND INDONESIA DBS Vickers Securities (Thailand) Co Ltd PT DBS Vickers Sekuritas (Indonesia) Contact: Chanpen Sirithanarattanakul Contact: Maynard Priajaya Arif 989 Siam Piwat Tower Building, DBS Bank Tower 9th, 14th-15th Floor Ciputra World 1, 32/F Rama 1 Road, Pathumwan, Jl. Prof. Dr. Satrio Kav. 3-5 Bangkok Thailand 10330 Jakarta 12940, Indonesia Tel. 66 2 857 7831 Tel: 62 21 3003 4900 Fax: 66 2 658 1269 Fax: 6221 3003 4943 e-mail: [email protected] e-mail: [email protected] Company Regn. No 0105539127012 Securities and Exchange Commission, Thailand

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