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Please see important disclosure information on the final page of this documentwww.relitrade.com Analysts:
Robertus Yanuar Hardy
62 21 5790 5455 ext. 204 robertus@reliance-securities.com
Shanti Dwi Jayanti
(Research Associate)
shanty@reliance-securities.com
Equity Research
March 2nd, 2015Net profit declined after the recording of mining
impairment losses
The recording of mining impairment losses as a result of weakening coal price has led to Astra’s declining consolidated net profit (yoy).
FY 2014 Financial Performance
Sales revenue grew 4% from Rp193.89 in 2013 to Rp201.7 trillion in 2014, while the recording of mining impairment losses has led to declining net income by 1.2% from Rp19.4 trillion in 2013 to Rp19.2 in 2014. However, gross profit still managed to grew 9.9% as a result of cost efficiency. According to the management, there is still a possibility of impairment reversal in the future, if there will be a significant increase of coal price.
Forex gain from business segments related to commodities such as Palm Plantation and Coal Mining has led to positive contribution from Astra Agro Lestari and United Tractors.
In our view, the company will have a better performance from this year forward. We believe the auto segment will recover despite challenges from other emerging 4-wheels products especially in the middle segment. The management of Toyota, Daihatsu, and Isuzu dealers are fully committed to maintain market share above 50%, although it slightly declined to 46% in January 2015 due to declining demand from the market. While in the 2-wheels segment, Astra Honda is considered very successful in dominating the market with 68% of market share in January 2015. We believe the company’s aggressive expansion to several new business segments last year will bring more benefits from this year forward. Among others are Astra Aviva Life Insurance that is preparing to enter the promising domestic insurance market, while Acset Indonusa (ACST) is starting to approach several state-owned construction companies to seek for opportunities as a sub contractor in several government infrastructure projects. The completion of Kertosono – Mojokerto and Kunciran – Serpong toll road, together with Tangerang – Merak that already operating will add more contribution from the infrastructure business segment. As for the Property business segment, the company is planning to finish Astra Tower and Anandamaya Residences projects in 2018. Both projects are located in a neighboring area in Jakarta’s Central Business District.
Other Opportunities and Challenges
We see the declining price of Coal as a challenge that the company still have to handle, especially for United Tractors that is still highly correlated to the coal industry. However we expect the company’s decision to start expanding to construction business and gold mining will bring positive result.
Meanwhile for business segment related to Crude Palm Oil (CPO), we expect better sales performance from PT. Astra Agro Lestari (AALI) due to the weakening of Malaysia’s palm oil industry after flood disaster recently. We also believe the company’s decision to invest in the downstream of palm oil processing will add more value to the company’s end products.
Rating, valuation, and recommendation
We are maintaining our Buy rating with an upgraded target price to Rp8,500, from our previous target price at Rp7800,-.
Our new target price is implying a 15.5x of 2016E P/E Ratio, which is also in-line with the company’s historical average P/E Ratio in the last 5 years.
PT Astra International, Tbk (ASII)
Company Update
BUY
Target Price (Rp) 8,500 Current Price (Rp) 7,850 Miscellaneous Indust ry Bloomberg Ticker ASII IJ
Reuters Ticker ASII JK
52 week High 8,175 52 week Low 6,325 Market Cap (bn Rp) 317,796 Free float (%) 50 Daily Average Vol
('000 shares) 33,566 5 yrs average P/E 15.5 Major Shareholders (%): Jardine Cycle &
Carriage Ltd 50.10 Others under 5% 49.90 Relat ive Performance vs JCI:
Please see important disclosure information on the final page of this document
2
Other Possible Opportunities:
Possible Higher Auto Industry Turnovers and Government’s Prioritization of Public Transportation
In order to reduce traffic jams, the Jakarta city government has banned motorcycle from passing through several protocol streets, and planning to limit old cars, above 10 years old, from traveling around Jakarta streets. The regulation is planned to be fully implemented in 2017.
We believe these regulations will increase automotive product turnovers. Even though the used-car market in several neighboring cities outside Jakarta will likely be oversupplied, we expect new car and motorcycle sales in the city will increase, due to the high dependency of most Jakarta residents to private transportation. Corporates and transportation businesses who will be affected by these regulations will also be forced to upgrade their vehicles.
The commitment from the city government to increase public transportation’s fleet starting this year will bring opportunity to Astra’s subsidiary, PT. United Tractors, Tbk (UNTR), to involve in the procurement project. As been reported before, there is interest from the governor to UNTR’s Scania bus.
Floating Fuel Price
The administration of President Joko Widodo has erased fuel subsidy for gasoline that leads to floating fuel price. In the declining trend of global crude oil price, we expect consumer’s purchasing power will increase along with declining fuel price.
Connection to Current Government
We expect a further support from the current government to Indonesia’s manufacturing industry in the future.
Mr. Johnny Darmawan, a former Toyota Astra Motor’s board of director, and the current President Commissioner of Astra Otoparts (AUTO) recently has been appointed as a special staff to Mr. Rachmat Gobel, the Minister of Trade. Both names are previously known as executives in manufacturing industry that are expected to bring some breakthroughs to support government’s development plan.
Please see important disclosure information on the final page of this document
3
Past Financial Performance and Future ForecastsIncome St at ement Balance Sheet
(bn Rp) 2013A 2014A 2015E 2016E (bn Rp)
Revenue 193,880 201,701 213,198 225,883 Asset s 2013A 2014A 2015E 2016E
Gross Profit 35,311 38,809 41,554 44,591 Cash 18,557 20,902 29,270 40,201 EBT 27,523 27,352 29,391 31,561 Other Investments 262 277 291 305 EAT 22,297 22,125 23,774 25,530 Receivables 19,843 21,332 21,865 22,412 Min Interest 2,880 2,944 3,163 3,397 Financing Receivables 28,814 30,297 31,812 33,402 Net Income 19,417 19,181 20,611 22,133 Other Receivables 2,988 3,130 3,208 3,288 EPS 480 474 509 547 Inventories 14,433 16,986 17,411 17,846 Prepaid taxes 2,283 3,168 3,247 3,328 Current Price 7,850 Other prepayments 1,172 1,149 1,178 1,207
P/E 14.4 Tot al Current Asset s 88,352 97,241 108,282 121,991 Target Price 8,500 Financing Receivables 25,863 30,408 31,168 31,947
P/E 15.5 Other Receivables 3,389 2,543 2,607 2,672 Investment in assc & joints 23,870 27,250 27,931 28,630
Rat ios & Margins: Other investments 4,177 5,455 5,591 5,731 Revenue growth 3.1% 4.0% 5.7% 5.9% Defered tax assets 2,488 2,891 2,963 3,037 Gross Profit margin 18.2% 19.2% 19.5% 19.7% Investment properties 1,372 2,534 2,597 2,662 Net Profit margin 10.0% 9.5% 9.7% 9.8% Plantations 4,973 6,007 6,157 6,311 Net Profit growth -0.02% -1.2% 7.5% 7.4% Fixed Assets 37,862 41,250 43,412 44,093 DPR (as paid) 44.6% 45.6% 45.6% 45.6% Mining properties 12,027 9,149 9,378 9,612 DPS (as paid) 214 216 232 249 Concession/ Joint operation 3,982 4,930 5,053 5,180 BVPS 2,623 2,972 3,329 3,711 Goodwill 1,534 1,534 1,534 1,534 ROA 9.1% 8.1% 8.2% 8.2% Other intangible assets 1,615 1,968 2,017 2,068 ROE 18.3% 15.9% 15.3% 14.7% Other assets 2,490 2,869 2,941 3,014 Total Debt 63,030 69,023 67,880 66,782 Tot al Non Current Asset s 125,642 138,788 143,350 146,491 Net Debt 44,473 48,121 38,609 26,581 Tot al Asset s 213,994 236,029 251,632 268,481 DER 41.9% 40.0% 28.7% 17.7%
DPS (as paid) 214 216 232 249 Liabilit ies 2013A 2014A 2015E 2016E
DPR (as paid) 44.6% 45.6% 45.6% 45.6% Short term borrowings 12,854 10,586 10,904 11,231 Payables 17,275 18,839 19,781 20,770
Cash Flows 2013A 2014A 2015E 2016E Other liabilities 5,135 5,648 5,817 5,992 Chg in work cap (13,384) (14,363) (2,888) (2,920) Taxes payable 1,600 2,132 2,239 2,351 Net income 19,417 19,181 20,611 22,133 Accruals 6,013 5,450 5,614 5,782 Depreciation 5,518 4,151 5,189 6,486 Employee ben obligations 252 430 430 430
Net CF From Operat ion 11,551 8,969 22,911 25,699 Unearned income 3,461 3,603 3,963 4,360 Capex (9,054) (7,539) (7,351) (7,167) Current portion of LT debt 24,549 26,835 26,164 25,510
Net CF From Invest ing (9,054) (7,539) (7,351) (7,167) Bank loan 14,832 17,898 17,451 17,014 Loans and Debts 7,766 5,549 (1,170) (1,123) Debt securities 9,198 8,487 8,275 8,068 Employee Benefit Liabs 282 411 161 169 Finance lease 519 450 439 428 Non Ctrling Int 3,637 2,463 2,963 3,181 Tot al Current Liabilit ies 71,139 73,523 74,911 76,425 Chg in Equity 1,950 1,290 249 262 Other Liabilities 822 947 994 1,044 Dividend (8,664) (8,744) (9,396) (10,090) Unearned income 2,364 2,537 2,791 3,070
Net CF From Financing 5,005 915 (7,192) (7,601) Defered tax liabilities 3,268 2,645 2,777 2,916 Provisions 116 192 202 212
Equit ies 2013A 2014A 2015E 2016E Employee ben obligations 2,977 3,210 3,371 3,539
(bn Rp) Long term debt 27,120 32,651 31,835 31,039
Issued & fully paid capital 2,024 2,024 2,024 2,024 Bank loan 12,885 19,587 19,097 18,620 Additional paid in capital 1,139 1,139 1,139 1,139 Debt securities 13,261 12,465 12,153 11,850 Retained earning 77,076 87,459 98,674 110,717 Finance lease 974 599 584 569 Approriated 425 425 425 425 Tot al Non Current Liabs 36,667 42,182 41,969 41,820 Unapproriated 76,651 87,034 98,249 110,292 Tot al Liabilit ies 107,806 115,705 116,881 118,244 Other rsv, equity chg 3,699 4,989 5,238 5,500
Minority Interest 22,250 24,713 27,676 30,857
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All opinions contained herein constitute the views of the analyst(s) named in this report, they are subject to change without notice and are not intended to provide the sole basis of any valuation of the subject securities and companies mentioned in this report.
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STOCK RATING DEFINITION :
Reliance Securities research recommendations are based on an Absolute Total Return (price appreciation + dividends) Rating system, defined as follows
BUY – Expected positive Total Return of 15% or more over the next 12 months.
HOLD – Expected Total Return of between -15% and +15% over the next 12 months.
SELL – Expected negative Total Return of 15% or more over the next 12 months.
NOT RATED - Stock is not within regular research coverage
Disclosure of Interest Statement
1. Analyst ownership of the stock No 2. Clients/Company Associates ownership of the stock No 3. Broking relationship with company covered No 4. Investment Banking relationship with company covered No
Reliance Securities research is available on the following electronic platform: Reliance Securities (www.reliance-securities.com), Reuters and Bloomberg (RIJK GO).
RESEARCH DIVISION
Jasa Adhi Mulya jasamulya@reliance-securities.com
Robertus Yanuar Hardy robertus@reliance-securities.com
Lanjar Nafi Taulat I lanjar@reliance-securities.com
Hansen Teguh hansen@reliance-securities.com
Aji Setiawan aji@reliance-securities.com
Alan Milgerry alan@reliance-securities.com
Pieter Djatmiko pieter@reliance-securities.com
Shanti Dwi Jayanti shanty@reliance-securities.com
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