EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of 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 Pusat, -.

RECOMMENDATION BUY Moreover, DMAS has multiple access points with -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 P/E (x) 14.4 15.5 14.7 16.4 24.3 19.9 Geri Eka Putra [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

223,700 223,700

212,800 212,800

206,800 206,800

204,600 204,600

201,000 201,000

195,500 195,500

191,700 191,700

183,700 183,700

182,800 182,800

176,000 176,000

174,300 174,300

157,000 157,000

132,500 132,500

129,800 129,800

113,700 113,700

102,600 102,600

94,000 94,000 85,400 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.

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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.

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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 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

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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.

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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. Coincidentally, DMAS were surrounded or nearby with some of major national construction project, both those that are fully operational or are still ongoing project or in the planning stage.

Figure 6 Infrastructure Development to Support Industry

Sources: Company

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EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

MULTIPLE ACCESS POINTS Kota Deltamas is a prime township with a strategic location that will also score up many benefits from the construction of the Jakarta-Cikampek II South Toll Road which will be an exit and entry access from the Southside, while from the Northside there is the Jakarta-Cikampek Elevated Toll Road that already on commissioning phase and construction of the Jakarta Outer Ring Road (JORR) 2. Kota Deltamas can be accessed directly from Jakarta-Cikampek toll road through Km 37 gate, which currently serves as its main access and can be reached through Lippo Cikarang’s KM 34 toll gate.

A LARGE ONE-STOP INTEGRATED TOWNSHIP Kota Deltamas location with total development area up to around 3,200 Ha are exclusively non- scattered land, thus enabling the management to accept enquiries for large land plots especially from industrial-related customers and make changes to land allotment to meet the number of specific requests which typically derives from anchor tenants and would subsequently attract smaller tenants. DMAS was striving for excellent to continue to develop its world-class infrastructures to support Kota Deltamas. New facilities will continue to emerge in the township, ranging from educational institutions, serviced apartments, and commercial center development plan in Kota Deltamas. In addition, proper estate management, including assurance of security, clean environment, and convenience, as well as a comprehensive master plan has become the excellence of Kota Deltamas as an integrated township with comprehensive facilities and infrastructure.

ECO-FRIENDLY Kota Deltamas has implemented varied environmentally initiatives at Kota Deltamas, both for the existing tenant and upcoming business activities. The Company requires all customers to use the Company's wastewater treatment plant, and that every company that uses chimneys must install environmentally friendly chimneys. The company prohibits the use of coal energy. Besides, the Company will ensure that 30% of industrial land remains dedicated to open space and public facilities.

BENEFICIARY FROM SHAREHOLDERS As of October 2019, DMAS major ownership were hold by PT Sumber Arusmulia (57.28%) or well known as Sinarmas Land as a business group of Sinar Mas Group and by Sojitz Corporation (25%) as subsidiary of Sojitz Corporation Group from Japan that developing its wide-ranging general trading company operations in roughly 50 countries and regions across the globe. With the existence of these two large groups, DMAS will benefit from the ease of access to international customers through marketing support provided by the Sojitz Corporation Group and the Sinar Mas Group.

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EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

COMPANY PORTFOLIO KOTA DELTAMAS Kota Deltamas is a self-sustaining city which is one of the Sinar Mas Land and Sojitz developments through PT Puradelta Lestari Tbk (DMAS). With a total area of 3181 Ha, Kota Deltamas is divided within 3 main areas: industrial area, residential area, and commercial area. As of September 2019, 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.

Figure 7 Area Development (Ha) 1,400 1,200 Land Bank 22% 1,000 Land Sold Industrial 800 Commercial 600 1,272 54% Residential 400 200 446 481 513 24% 276 193 - Industrial Commercial Residential Sources: Company

Furthermore to ensuring sustainability of Kota Deltamas, 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. Therefore, DMAS involve world class estate planning and design such as:  Lend Lease (Australia)  Nippon Koei (Japan)  Gibb Transport Planning Reading  Doxiadis Associates (Greece)

As a counterpart and support to a self-sustaining city, Kota Deltamas also equipped with supporting facilities such as:  HOTEL AND APARTMENT SERVICES, consist of Le Premier Hotel, Sakura Park Hotel and Residence, and Sancrest Serviced.  SPORT AND RECREATION CENTER, consist of Deltamas Sports Center, Badminton Court, Futsal Corner, Malibu Club House, Pasadena Swimming Pool, and Lake City of Deltamas.

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EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

 INFRASTRUCTURE AND TRANSPORTATION, consist of Power supply from PLN 2X60MVa, Telecommunication (Fiber Optic), gas network of Liquid Petroleum Gas supply from PGN, Clean Water Supply Treatment and Waste Water Management System, Gas Station by Pertamina, and Shuttle Bus.  EDUCATION, consist of School, such as: Pangudi Luhur, Vocational High School (SMK) Ananda Mitra Industri , Nur Rahman Islamic School, Fajar Hidayah SIT and Cikarang 2 State High School. University, such as: ITSB ( Institute of Technology and Science) which is a collaboration between Sinar Mas and ITB (Bandung Institute of Technology) and K-Eduplex (Korean Education Complex - Jakarta International University).  HEALTH, the company will build and provide Hospital & Clinic.

Figure 8 Diverse Mix Customers

Sources: Company

Moreover, DMAS is attracting a diverse mix of customers across the various sectors such as Auto and Auto Related, logistics, and Food and Beverage because of its flexibility in the size and shape of the desired land. DMAS has the flexibility to propose changes to the allocation of land banks if the allocation for industrial, residential, and commercial areas is not adequate to meet market needs. This may take three to nine months to adjust.

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EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

INDUSTRIAL ESTATE As of September 2019, industrial estate posted a total land sold of 1,272 Ha and a land bank of 446 Ha. Futhermore, Industrial Esatate have two major concept:

 Greenland International Industrial Center (GIIC) has an area of 1,458 Ha. Whereas of 1H19, around 1,256 Ha have been sold to industrial customers (80% are Japanese companies). Furthermore, in 2017 the GIIC region has joined the KLIK area, the Construction Direct Investment Area. In this GIIC estate, there is also the Indonesia-China Integrated Industrial Zone (KITIC) with a development area of 200 Ha for Chinese industries that will open businesses in Indonesia. Until 1H19 DMAS recorded aproximately 120 induatrial tenant ini GIIC that mostly were auto or auto related sectors and mostly Japanese companies.

Figure 9 GIIC Industrial Estate

Sources: Company

 Batavia's Greenland with an area of 150 Ha has been sold out. The area features an eco- friendly system in addition to a cluster system with Standard Factory Building (SFO).

Figure 10

Big Tenant Customers

Sources: Company

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EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

COMMERCIAL ESTATE As of September 2019, commercial estate posted a total land sold of 276 Ha and a land bank of 481 Ha. The lattest development update from commercial area were: Cikarang Japanese School has started the operation since April 2019. It is providing education facilties for the children of Japanese expatriates. The presence of Cikarang Japanese School is expected to attract Japanese expatriates to live in Kota Deltamas and subsequently boost the commercial activities. At the same times, SMK Ananda Mitra Industri Deltamas has been built and operating in Kota Deltamas. Figure 11 Kota Deltamas Commercial Tenant

Sources: Company

Kota Deltamas also has the upcoming development of commercial area such as AEON Mall that originated from Japan and this will becoming the biggest AEON mall in Southeast Asia and China with an area of 200.000 M2 and is expected to start operating in 2022. Moreover, a chain restaurant and several commercial tenants has purchased land in Kota Deltamas such as Mitra Keluarga Hospital (open in 2021), gas station, etc.

Based on its location, existing commercial & public Facilities in the commercial area on Kota Delatamas. This makes it easy for residents to meet their daily needs, so far the number of commercial clusters that have been built is 16 areas and divided into categories:  Commercial Lot - Greenland Square is a commercial lot complex with a total area of 17 Ha located on the main boulevard of Kota Deltamas.  Main Boulevard, consist of : Diamante (premium business gallery), and the others have been sold out (El Premio Shophouses, Boulevard Fresno, Spanish Square, Porto Square, Al-Hambra Modern Market, Palais De Paris).  Community Commercial & Dormitory, consist of : Green Leaf Terrace (dormitory), and the others have been sold out (Waikiki Boutique Shop, Pasadena Boutique Shop, Coral Blue).  Artery Boulevard - have been sold out, consist of : Calgary & Riviera and Verona Gallery.

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EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

RESIDENTIAL AREA As of September 2019, residential area posted a total land sold of 193 Ha with total units sold up to >2,600 units and a land bank of 513 Ha. The main products of Kota deltamas in residential area is landed house in residential clusters with middle income to high income segment as target market. In this residential area also equipped with club house, swimming pool and fitness centre. Futhermore, Kota Deltamas collaborating with Panahome Asia Pacific Pte. Ltd., a real estate company under Panasonic Group, to develop sustainable smart-town residential clusters of “SAVASA”. Figure 12 Kota Deltamas Residential Clusters

Sources: Company

The latest development update from commercial area were:  Woodspring–Woodchester (a cozy minimalist style cluster with an environmentally friendly and energy-efficient concept with lots of green open areas).  Naraya Park (cluster housing in a modern minimalist style).  American Zone, consist of: Malibu (premium housing cluster - colonial modern architecture style with Malibu Club House as the main facilities), Bahama (housing cluster with the same concept as the Malibu Cluster but with a smaller house type), and the last were Pasadena (housing cluster with green living concept - sold out).  European Zone (sold out), housing cluster with an area of 20 Ha that adapts the concept of architectural buildings of famous tourist areas in Europe. In this zone consists of (Parthenon cluster, Nice cluster, Catania cluster, Catalonia cluster. 12

EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

FINANCIAL PERFORMANCE FINANCIAL HIGHLIGHTS As seen in figure XX, DMAS revenues originated from industrial, commercial, residential, and the last from hotel & rental. As of 3Q19, the biggest chunks of DMAS revenues came from industrial land (51.1%), followed by commercial (47.2%), and residential (0.9%). Figure 13 DMAS Revenues Source (Billion IDR)

2016A 2017A 2018A 2019F 2020F 2021F Hotel & Rental 11.1 33.6 15.8 12.9 13.5 14.1 Commercial 17.0 110.3 67.1 639.9 72.1 74.8 Residences 22.5 122.3 94.4 14.2 14.8 15.5 Industrial 1,543 1,070 859 912 971 1,037 Sources: Company, MPIS Research

DMAS revenues in 3Q19 amount as Rp1.27 Trillion or up by 220.6% (Y/Y) Vs. 3Q18 as Rp396.1 Billion and to be estimated to hit Rp1.57 Trillion in FY2019. Industrial land sales remain solid, in 3Q19 DMAS sold 17.2 Ha industrial land after in 1H19 the Company sold 25.3 Ha industrial land. This adds industrial land sales up to 42.5 Ha (YTD). Despite industrial land sales, DMAS also sold 12.2 Ha commercial land in the period of January to September 2019. Volume wise, industrial land sales have surpassed the whole industrial sales achievement in 2018 of 33 Ha. Figure 14 DMAS Revenue (Billion IDR) 1,800.0 60% 1,600.0 50% 1,400.0 40% 1,200.0 30% 20% 1,000.0 10% 800.0 0% 600.0 -10% 400.0 -20% 200.0 1,593.8 1,336.4 1,036.2 1,578.6 1,070.9 1,141.0 -30% - -40% 2016A 2017A 2018A 2019F 2020F 2021F

Revenue (LHS) Growth (RHS)

Sources: Company, MPIS Research

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EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

Furthermore, DMAS will be benefited with Kalbe - Maxxis - Kohler - Hyundai in Industrial area, and AEON Mall - Mitra Keluarga Hospital in Commercial area which soon starts operating immediately. With those progress from Industrial and Commercial area, the Residential area will automatically pick up soon.

Figure 15 DMAS Marketing Sales (Billion IDR)

1,600 1,400 1,200 1,000 800 600 400 200 1,072 1,408 884 1,601 1,250 - 2016A 2017A 2018A 9M19A 2019 Target

Sources: Company, MPIS Research

As of 9M19, DMAS marketing sales hit Rp1.6 Trillion outstripped the Company’s marketing sales target of Rp1.25 Trillion. Those hikes caused by the soaring commercial sales, from Rp57.9 Billion in 3Q18 jump to Rp598.8 Billion in 3Q19 that caused by land sales to PT Pilar Sinergi BUMN Indonesia (PSBI) as a SOE Consortium that hold 60% shares of PT Kereta Cepat Indonesia China (KCIC) or Indonesia China High Speed Rail Consortium. KCIC will operate high-speed rail systems in Indonesia (high-speed rail Jakarta Bandung as the first project that across the Kota Deltamas at the commercial area.

The latest update, DMAS sold 77.6 Ha of Industrial area to Hyundai Motor Company. Hyundai planned to build a car factory in Indonesia with an investment of US$ 1.55 billion, or around Rp 21.7 trillion. This manufacturing facility will begin construction in December 2019 and is expected to start commercial production in 2Q21.

Futhermore, Hyundai will inject an investment of 61.1 trillion KRW (US$ 51.81 billion) or more than Rp 725 trillion to Indonesia, which is planned to be implemented in 2020 - 2025. About 20 trillion KRW will be used for future technology, such as driverless vehicles. (assuming an exchange rate of Rp 14,000 / US$)

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EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

Soaring DMAS EBITDA Margin in 2019 was caused by sales increase, especially by sales of Commercial areas that have the highest selling value compared to Residential and Industrial areas, so that it will automatically increase EBITDA Margin. Henceforward in 2020F and 2021F, the sales composition and revenue from each segment will return to normal. Induatrial (82.9%), Residential (9.1%), Commercial (6.5%), Hotels & Rentals (1.5%). These things should cause DMAS EBITDA Margin waning down in 2020F and 2021F after hitting 47.8% in 2019. Figure 16 DMAS EBITDA (Billion IDR) and EBITDA Margin (%)

800 45.6% 46.8% 47.8% 50.0% 700 40.5% 40.9% 40.0% 45.0% 40.0% 600 35.0% 500 30.0% 400 25.0% 300 20.0% 15.0% 200 10.0% 100 727 625 419 754 437 456 5.0% - 0.0% 2016A 2017A 2018A 2019F 2020F 2021F EBITDA (LHS) EBITDA Margin (%)-(RHS)

Sources: Company, MPIS Research DMAS was striving to maintain good financial performance, which can be seen from the gradual increase in Net Profit Margin up to 56.3% in 2020F and 64.4% in 2021F amid slumping EBITDA Margin. Futhermore, DMAS Net Profit in 2019F estimated to reach Rp891.3 Billion up to 79.6% Vs. Rp496.2 Billion in 2018. DMAS Net Profit in 2020F and 2021F did experience a decrease compared to 2019. But if it is assumed that in 2019 there will be no commercial sales to PSBI-KCIC, then DMAS Net Profit will still show positive growth. Figure 17 DMAS Net Profit (Billion IDR) and Net Profit Margin (%)

1,400 64.4% 70.0% 56.5% 1,200 56.3% 60.0% 47.5% 49.1% 47.9% 1,000 50.0%

800 40.0%

600 30.0%

400 20.0%

200 10.0% 757 656 496 891 602 735.1 - 0.0% 2016A 2017A 2018A 2019F 2020F 2021F Net Profit (LHS) Net Profit Margin (%)-(RHS)

Sources: Company, MPIS Research 15

EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

It’s proven that DMAS were consistent to maintain high dividend pay out ratio, even though in 2018 pays dividend up to 204%. Futhermore, for the next three years we expect that DMAS will maintain its dividend payout ratio by 80%. This expectation is based on solid and steady cash and cash equivalent which is estimated to hit Rp2.9 trillion in 2020 and 2021.

Figure 18 DMAS Dividend Payout Ratio (%) & Cash & Cash Equivalents (Billion IDR) 3,500 250% 204% 3,000 200% 2,500

2,000 150% 95% 95% 1,500 80% 80% 80% 100% 1,000 50% 500 1,219 785 746 1,481 2,959 2,950 - 0% 2016A 2017A 2018A 2019F 2020F 2021F

Cash and Cash Equivalents (LHS) Dividend Pay Out Ratio (RHS) Sources: Company, MPIS Research

DMAS is in stable net cash position and does not have any loans, which we believe creates competitive advantages for DMAS compared to its peers. As a result, concerns regarding net profit margin erosion due to interest expense should be minimal going forward. We also expect DMAS to remain debt-free at least for foreseeable future. Currently, liabilities consist of long-term employee benefits liabilities for non-current liabilites and for current liabilities like: sales advances, security deposit, taxes payable, and others. Figure 19 DMAS Assets Vs. Liabilities Vs. Equity (Billion IDR)

Sources: Company, MPIS Research

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EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

VALUATION VALUATION: Rp334TP, BUY RECOMMENDATION (+11.4% UPSIDE) We initiate coverage on DMAS with BUY recommendation and target price of Rp334/share, implying forward 2019F P/E at 16.4x and PBV at 1.9x. Figure 20 DMAS RNAV

Sources: Company, MPIS Research

Figure 21 DMAS Stock Price Discount to RNAV

Sources: Company, MPIS Research

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EQUITY RESEARCH

MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

Figure 22 Property Sector Discount to RNAV

Sources: Company, MPIS Research

Figure 23 DMAS Stock Price vs. JCI (Last One Year)

Sources: Company, MPIS Research

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MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

APPENDIX

Figure A – 1 INCOME STATEMENT (Million IDR) 2016A 2017A 2018A 2019F 2020F 2021F NET REVENUE Industrial 1,543,242 1,070,243 858,924 911,610 970,561 1,036,721 Residences 22,452 122,269 94,425 14,164 14,806 15,480 Commercial 17,005 110,274 67,094 639,866 72,059 74,797 Hotel 9,996 30,132 10,353 7,247 7,558 7,885 Rental 1,100 3,473 5,433 5,667 5,911 6,166 TOTAL NET REVENUES 1,593,794 1,336,391 1,036,230 1,578,554 1,070,895 1,141,049

COST OF REVENUES Industrial 682,354 449,933 394,180 410,224 436,752 466,524 Residences 8,666 35,515 44,576 4,249 4,442 4,644 Commercial 3,091 33,967 14,537 159,967 18,015 18,699 Hotel 407 1,075 1,308 916 955 996 Rental 3,423 1,048 808 843 879 917 TOTAL COST OF REVENUES 697,942 521,538 455,409 576,199 461,043 491,781

Industrial 860,888 620,310 464,744 501,385 533,808 570,196 Residences 13,785 86,754 49,849 9,915 10,364 10,836 Commercial 13,914 76,307 52,557 479,900 54,044 56,098 Hotel 9,588 29,057 9,044 6,331 6,603 6,889 Rental (2,323) 2,425 4,626 4,824 5,032 5,250 GROSS PROFIT 895,852 814,853 580,820 1,002,355 609,852 649,268

OPERATING EXPENSES 171,726 190,784 165,391 251,951 170,924 182,121 Profit from Operation 724,126 624,068 415,429 750,404 438,928 467,147 Interest Income 9,812 23,720 19,327 52,213 103,653 207,131 Financial Charge ------Other Income (Charges) - Net 41,424 22,455 79,621 121,291 82,284 87,675 PROFIT BEFORE INCOME TAX (EBT) 775,362 670,244 514,376 923,908 624,865 761,952 Income tax (17,814) (13,124) (18,011) (32,351) (21,880) (26,680) Minority interest 310 400 116 207 140 171 NET PROFIT 757,238 656,719 496,249 891,349 602,845 735,101 Source: Company, MPIS Research

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MINNA PADI INVESTAMA SEKURITAS DMAS - INITIATE COVERAGE Member of Indonesia Stock Exchange December 2019

Figure A – 2 CASH FLOW (Million IDR) 2016A 2017A 2018A 2019F 2020F 2021F Net Cash Used in Operating Activities 716,533 641,336 367,412 1,158,198 2,222,376 509,713 Net Cash Used in Investing Activities (142,583) (35,795) (93,314) (28,327) (33,049) (38,557)

Financing Cash Flow (529,451) (1,039,266) (313,584) (395,000) (711,080) (480,276) Net Change in Cash 44,498 (433,725) (39,486) 734,871 1,478,248 (9,119) Source: Company, MPIS Research

Figure A – 3 ASSETS (Million IDR) 2016A 2017A 2018A 2019F 2020F 2021F Cash and cash equivalents 1,219,104 785,379 745,893 1,480,764 2,959,011 2,949,892 Account Receivables - 49,818 82,748 126,056 85,516 91,119 Inventories 2,379,892 2,601,937 2,679,078 2,525,802 2,021,010 2,155,751 Advances 78,340 81,061 32,095 2,272 4,222 4,498 Other Current Assets 36,500 17,633 28,769 123,535 36,500 17,633 Total Current Assets 3,713,837 3,535,828 3,568,584 4,258,428 5,106,259 5,218,893

Investment properties 29,796 31,239 110,964 120,425 131,661 144,968 Fixed assets 305,374 319,502 311,839 306,224 302,340 300,476 Other non current assets 3,754,845 3,584,374 3,508,647 3,472,819 2,355,968 2,510,307 Total Noncurrent Assets 4,090,015 3,935,114 3,931,450 3,899,467 2,789,969 2,955,752 TOTAL ASSETS 7,803,852 7,470,942 7,500,033 8,157,896 7,896,228 8,174,644 Source: Company, MPIS Research

LIABILITIES (Million IDR) 2016A 2017A 2018A 2019F 2020F 2021F Account Payables 39,345 18,634 2,099 1,667 (172) 2,470 Other Current Liabilities 356,064 419,168 277,307 422,439 286,583 305,358 Total Current Liabilities 395,409 437,802 279,406 424,106 286,411 307,827

Other Non-Current Liabilities 20,058 27,302 32,124 48,936 33,198 35,373 Total Noncurrent Liablities 20,058 27,302 32,124 48,936 33,198 35,373 TOTAL LIABILITIES 415,467 465,104 311,530 473,042 319,609 343,201

EQUITY (Million IDR) 2016A 2017A 2018A 2019F 2020F 2021F Capital Stock 4,819,811 4,819,811 4,819,811 4,819,811 4,819,811 4,819,811 Paid-in Capital 379,730 379,730 379,730 379,730 379,730 379,730 Retained Earnings - Appropriated 2,000 4,000 6,000 8,000 10,000 12,000 Retained Earnings - Unappropriated 2,183,480 1,798,532 1,979,453 2,473,803 2,363,569 2,616,394 Minority Interest 3,364 3,764 3,509 3,509 3,509 3,509 Total Equity 7,388,385 7,005,838 7,188,504 7,684,853 7,576,619 7,831,444 Source: Company, MPIS Research

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Bayu Santoso Geri Eka Putra [email protected] [email protected] +62 21 525 5555 ext. 310 +62 21 525 5555 ext. 308 Disclaimer

This research report is prepared by PT MINNA PADI INVESTAMA SEKURITAS Tbk. for information purposes only and is not to be used or considered as an offer or the solicitation of an offer to sell or to buy or subscribe for securities or other financial instruments. The report has been prepared without regard to individual financial circumstance, need or objective of person to receive it. The securities discussed in this report may not be suitable for all investors. The appropriateness of any particular investment or strategy whether opined on or referred to in this report or otherwise will depend on an investor’s individual circumstance and objective and should be independently evaluated and confirmed by such investor, and, if appropriate, with his professional advisers independently before adoption or implementation (either as is or varied). 21