DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019
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EQUITY RESEARCH MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019 STURDY STEP AHEAD MASSIVE LAND BANKS As of 3Q19, DMAS has sold roughly 1,741 Ha over total development area up to around 3,181 Ha. Leaving more than 1,440 Ha land bank to generate revenue for future growth. With roughly around 130 Ha of land are underdeveloped, with remain land bank divided into: industrial area (446 Ha), PT PURADELTA LESTARI, Tbk. residential area (513 Ha), and commercial area (481 Ha), the Company still has massive land banks to Ticker: DMAS sell in the incoming years. Last Price (05/12/19): 304 # Shares (billion): 48.2 STRATEGIC LOCATION Market Cap (billion rupiah): 14,652 DMAS were located in the epicenter of the industrial zone on Cikarang Pusat, Bekasi-West Java. RECOMMENDATION BUY Moreover, DMAS has multiple access points with Jakarta-Cikampek Toll Road through Km 37 gate, which 12-Month Target Price: 334 currently serves as its main access. From the Southside: Jakarta-Cikampek II South Toll Road, while from Upside Potential: 9.87% the Northside there is the Jakarta-Cikampek Elevated Toll Road that already on commissioning phase SHAREHOLDERS and construction of the Jakarta Outer Ring Road (JORR) 2. The toll road also connects to Soekarno Hatta Sojitz Corporation 25.00% International Airport, Tanjung Priok Seaport, and Patimban Deep Seaport. PT Sumber Arusmulia 57.28% Public 17.72 A LARGE ONE-STOP INTEGRATED TOWNSHIP PRICE PERFORMANCE DMAS is an integrated township with the development of Industrial estate supported by development of Residential and Commercial areas with total development area around 3,200 Ha are exclusively non- scattered land. DMAS was striving for excellence to continue developing its world-class infrastructures to support Kota Deltamas. New facilities will continue to emerge, ranging from educational institutions, serviced apartments, and commercial center development plan in Kota Deltamas. BUY RECOMMENDATION WITH TP SET Rp334/SHARE (+9.8% UPSIDE) DMAS vs. JCI (LAST ONE YEAR) We initiate coverage on DMAS with target price of Rp 334/share, with 58% discount to RNAV and implied 2019F P/E of 16.4x. DMAS remains attractive given its massive land banks and upcoming development which soon starts operating immediately such as Kalbe - Maxxis - Kohler - Hyundai in Industrial area, and AEON Mall - Mitra Keluarga Hospital in Commercial area. Furthermore, DMAS is in a stable net cash position and does not have any loans, we also expect DMAS to remain debt-free at least for foreseeable future. In Billion IDR 2016A 2017A 2018A 2019F 2020F 2021F Revenues 1,594 1,336 1,036 1,579 1,071 1,141 EBITDA 727.2 625.4 419.3 754.8 437.6 459.5 Profit from Operation 724.1 624.1 415.4 750.4 438.9 467.1 Net Profit 757.2 656.7 496.2 891.3 602.8 735.1 EPS (Full IDR) 15.7 13.6 10.3 18.5 12.5 15.3 ANALYST BVPS 153.3 145.4 149.1 159.4 157.2 162.5 Geri Eka Putra P/E (x) 14.4 15.5 14.7 16.4 24.3 19.9 [email protected] P/B (x) 1.5 1.2 0.9 1.9 1.9 1.9 EV/EBITDA (x) 12.3 15.0 22.5 11.5 16.5 15.7 EQUITY RESEARCH MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019 INDUSTRIAL OUTLOOK STRONG INVESTMENT CURRENT Indonesian Investment Coordinating Board (BKPM) in 1H19 announced investment realization numbers on Domestic Direct Investment (DDI) and Foreign Direct Investment (FDI) recorded the amount of total investment Rp395.6 trillion. Deriving from DDI Rp182.8 trillion up by 16.4% (Y/Y) and FDI Rp212.8 trillion up by 4.0% (Y/Y). Both of DDI and FDI in 1H19 still dominated by Transportation, Warehouse, and Telecommunication (Rp71.8 T-18.0%), followed by Electricity, Gas, and Water Supply (Rp56.8 T-14.4%) and Construction (Rp32.0 T-8.2%). Figure 1 Indonesia Investment Realization (Million IDR) DDI FDI 223,700 212,800 206,800 204,600 201,000 195,500 191,700 183,700 182,800 176,000 174,300 157,000 132,500 129,800 113,700 102,600 94,000 85,400 1H2015 2H2015 1H2016 2H2016 1H2017 2H2017 1H2018 2H2018 1H2019 Sources: BKPM, MPIS Research On the other side, FDI in the housing sector, industrial estate, and offices of Rp22.2 T or down 44.7% vs. 1H18 of Rp40.9 T. On the contrary side, DDI in the housing sector, industrial estate, and offices up by 41% to Rp7.4 T vs.1H18 of Rp5.2 T. This decline was based on the uncertainty of the global investment climate related to the U.S-China trade war. Nevertheless, with the increase in FDI and DDI in Indonesia, automatically the demand for industrial land will also increase as a pair. DMAS location is also considered as the biggest investment realization based on location target, as of 1H19 West Java takes the biggest chunk by 22.6% for FDI, while Special Territory of Jakarta by 13.0%. The centralized investment in West Java and the Special Territory of Jakarta will further enhance DMAS's competitiveness over other more than 10 industrial estates alongside the Jakarta - Cikampek Toll Road. 2 EQUITY RESEARCH MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019 GOVERNMENT REFORM TO BOOST INDUSTRY SECTOR In order to further increase investment value in Indonesia and enhancing business license service standard to accelerate ease of doing business, accelerate industry sector, improving the competitiveness, and investment incentive, the government through Presidential Regulation has been launched: Import Duty exemption on machinery/goods/materials. Tax Allowance and Tax Holiday and VAT exemption on import or delivery of capital goods. Online Single Submission (OSS). Implementing a licensing checklist for Special Economic Zones (KEK), Free Trade Zones (FTZ), and Industrial Zones & Tourist Zones. With those incentives hopefully, both foreign and domestic investors were attracted to invest, especially in DMAS. COMMERCIAL PROPERTY GOLDEN ERA From data showed below, both industrial estates supply and demand since 4Q2017 start to pick up and speeding up since 3Q2018, except for warehouse supply and demand still flattened. Citing from Colliers, that consumer goods, logistics/warehouse, food, steel-related and automotive sectors will continue to propel the industrial market over the next three years. Figure 2 Commercial Property Index 110.0 108.6 108.0 Industrial Estates Supply Index 106.0 104.0 102.6 Industrial Estates Demand Index 102.0 100.0 Warehouse Complex 98.0 Supply Index Warehouse Complex Demand Index Axis Title Sources: BI, MPIS Research The presidential election on April 17, 2019, continued to impact buyer sentiment in 1Q19 and we are unlikely to see a turnaround in the market until the 2Q2019. Therefore, we predict that after the presidential inauguration on October 20, 2019, it will boost the investor's appetite and strengthen the investors confidence to invest or build factories in Indonesia, specifically in the DMAS industrial estate. 3 EQUITY RESEARCH MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019 COMPANY PROFILE COMPANY AT GLANCE Established since 1993, the Company continually has developed Kota Deltamas as a modern urban area in the east of Jakarta, especially in Bekasi district and as an integrated township with the development of Industrial estate supported by development of Residential and Commercial areas. As it goes, in 1996 changed company status to foreign capital investment company, (Sojitz Corporation) became 25% shareholder of the Company. In 2002, DMAS launched the first Residential development then followed by Bekasi Regency Government Center officially relocated to Kota Deltamas. In 2008, DMAS develops the Greenland International Industrial Center (GIIC) industrial area. Finally in 2005, the company listed in IDX and then in 2017 the GIIC obtained KLIK facility (Direct Construction After Investment) from BKPM. Figure 3 Ownership Structure of the Company Sources: Company Figure 4 Ownership in Shares and Percentage DMAS Ownership Sojitz Corporation 27,608,772,200 25.00% PT Sumber Arusmulia 12,049,527,800 57.28% Public 8,539,811,100 17.72% TOTAL 48,198,111,100 100% Sources: IDX, Company 4 EQUITY RESEARCH MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019 Figure 5 Kota Deltamas Integrated Township Sources: Company As of 2Q2019, DMAS allocates approximately 54% of Kota Deltamas area for industrial use. Meanwhile, 24% of the land is used for commercial activities, and the remaining 22% is for residential area with total development area up to around 3,181 Ha. In carrying out its business activities, the Company revenue came from passive income and recurring income. The company records sales from the Industrial, Commercial, and Residential area along with the other commercial products for instance shophouses and landed houses. Furthermore, DMAS will continue to expand its land bank and build infrastructure and facilities with international standards that can attract foreign investors, especially the main customers of industrial producers. 5 EQUITY RESEARCH MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019 COMPANY COMPETITIVENESS STRATEGIC LOCATION DMAS were located in epicenter of the industrial zone (Jakarta-Cikampek Toll Road KM 37, Cikarang Pusat, Bekasi, West Java). The toll road also connects to Soekarno Hatta International Airport, Tanjung Priok Seaport, and Patimban Deep Seaport. The future development of the Patimban port will further emphasize the importance of the eastern part of greater Jakarta as a major industrial center in Indonesia. Therefore with this strategic location, DMAS will benefit due to its proximity to the transportation option and delivery of goods by land or air.