F 2017F 2018F

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2014 Revenue (Rp bn) 1,520 EBIT (Rp bn) 345 Minority (Rp bn) 159 Net Profit (Rp bn) 110 EPS (Rp) 53 EPS Growth (%) 0.6 OPM (%) 22.7 NPM (%) 17.7 ROE (%) 29.8 ROA (%) 24.9 ROIC (%) 58.8 P/E (x) 22.7 P/B (x) 6.8 Source: Company, Sucorinvest estimates

Cardig Aero Services

Soekarno Hatta developments

We recently visited the CAS Cargo manager and Angkasa Pura VP to inquire on ongoing developments and future plans around Soekarno

East cross taxiway to provide further capacity

Current capacity with two runways and one taxiway is 72 aircrafts/hour taxiway, this is expected to provide up to 86 aircrafts/hour. We expect this will boost CASS’s ground handling revenues.

Runway 3 hopefully expected to be completed by 2018

As the Asian games will happen in August 2018, the urgency of t see the government push for the creation of runway 3 as the largest capacity issue stems from limited aircraft movement. Current land acquisition stands at 30 largest issue. After completion, the runway is the total including the new taxiway to 122 aircrafts/hour.

Cargo village in planning and consulting phase

The cargo village is expected to triple the current warehouse space. As CASS’s problem is with capacity, additional space can boost revenue from cargo handling by up to three times. With land fully acquired, we believe the project will finish on time around 2018/19 once a final schedule is set.

Terminal 3 Ultimate soft opening expected by June 2016

T3U is expected to open in late May or early June and will start serving Garuda Indonesia’s domestic flights. The full terminal is supposed to be completed and in operation by early 2017. This terminal is created to address the issue of overcapacity

Train infrastructure targeted to complete by 2018/19

The train leading to the airport from the city and the “people mover” expected to carry passengers between terminals is expected to be complete by 2018/19 to e problem of traffic in airport.

Stable 1Q16 results

Revenue for 1Q16 was up by 9% to Rp433bn and EBIT by 3% to Rp105bn but net income dropped by 21% to Rp65bn on the back of forex loss and higher interest expenses. Excluding the forex loss, net income grew by 3% YoY.

Company Update

Key investment metrics

2015 2016F 2017F 2018F 1,632 1,847 2,100 2,389 414 493 588 692 175 194 229 263 119 156 201 250 57 75 96 120 7.9 31.2 28.8 24.1 25.4 26.7 28.0 29.0 18.0 19.0 20.5 21.5 26.7 28.9 30.5 30.8 22.9 23.6 26.2 27.8 58.7 70.6 72.0 74.9 21.0 16.0 12.5 10.0 5.6 4.6 3.8 3.1 Share Performance (%) Month 3m 6m 12m

Cardig Aero Services

Soekarno Hatta developments set for 2018

We recently visited the CAS Cargo manager and Angkasa Pura 2’s business development VP to inquire on ongoing developments and future plans around Soekarno-Hatta airport.

East cross taxiway to provide further capacity in 2018

Current capacity with two runways and one taxiway is 72 aircrafts/hour. With the addition taxiway, this is expected to provide up to 86 aircrafts/hour. We expect this will boost CASS’s

Runway 3 hopefully expected to be completed by 2018

games will happen in August 2018, the urgency of this situation will most likely see the government push for the creation of runway 3 as the largest capacity issue stems from limited aircraft movement. Current land acquisition stands at 30-40% and remains the largest issue. After completion, the runway is expected to add 30-36 aircrafts/hour bringing the total including the new taxiway to 122 aircrafts/hour.

Cargo village in planning and consulting phase

The cargo village is expected to triple the current warehouse space. As CASS’s problem is , additional space can boost revenue from cargo handling by up to three times. With land fully acquired, we believe the project will finish on time around 2018/19 once a

Terminal 3 Ultimate soft opening expected by June 2016

xpected to open in late May or early June and will start serving Garuda Indonesia’s domestic flights. The full terminal is supposed to be completed and in operation by early

to address the issue of overcapacity not add passengers.

Train infrastructure targeted to complete by 2018/19

The train leading to the airport from the city and the “people mover” expected to carry passengers between terminals is expected to be complete by 2018/19 to ease current

Revenue for 1Q16 was up by 9% to Rp433bn and EBIT by 3% to Rp105bn but net income dropped by 21% to Rp65bn on the back of forex loss and higher interest expenses. Excluding the forex loss, net income grew by 3% YoY.

INDONESIA

LOGISTICS

Share Price Performance

Alexander Budiman [email protected] +62 21 8067 313 10 Stock Data Bloomberg Ticker Outs. Share (bn) Mkt Cap (Rp 52 Week Range ( 6M Avg Vo YTD Returns (%) Beta (x) Current Price target Upside Share Performance (%)

Month Absolute Relative

3m -20.8 -21.3 6m -17.5 -22.9 12m -16.1 -10.2

BUY

INDONESIA

LOGISTICS

Share Price Performance

Alexander Budiman

[email protected]

+62 21 8067 3134

10 May 2016

Stock Data

Bloomberg Ticker CASS IJ Equity Outs. Share (bn) 2,086.9 Mkt Cap (Rp bn) 2,066.1 52 Week Range (Rp) 990-1350 6M Avg Vol (Rp mn) 12.4 YTD Returns (%) -12.4 Beta (x) 0.5 Current price Rp 980 Price target Rp1,750 Upside/Downside +78.57%

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Figure 2: Comparison of cargo and handling

(Rp bn) 2017F 2018F 2019F 2020F 2021F Base case 2100 2389 2774 3209 3756 Middle case 2100 2389 3266 4314 5064 Best case 2100 2506 3963 5073 5818 % Middle/Base 0 0 18 34 35 % Best/Base 0 5 43 58 55

Source: Company, AP2, Sucorinvest estimates

Figure 4: Middle case scenario

(Rp bn) 2017F 2018F 2019F 2020F 2021F

Revenue 2100 2389 3266 4314 5064

Cargo + Ground 1518 1710 2448 3386 4029

Cargo handling 789 876 1390 2038 2466

Ground handling 729 834 1058 1347 1563

Cargo village ('000 tons) 515 520 750 1000 1100

Aircraft movements/hour 77 82 95 110 116

East-cross taxiway 0 7 11 14 14

Runway 3 0 0 12 24 30

New runway and cargo village to rocket revenue

From our discussion with the VP of AP2 business development, we find that the aircraft movements per hour can increase up to 122 in the next five years from the current 72. If utilization of aircraft movements per hour is maximized, then we can see an increase of up to 70% more flights.

The increase can be found from two sources; the first one by the East Cross Taxiway which is expected to increase movement by 14 and the runway which is expected to increase movement by 36. This will increase revenue from the ground handling side significantly.

The cargo village will be expected to triple in capacity, increasing potential revenues for cargo handling by three times assuming the same proportion of current international-domestic cargo.

In our middle case scenario, we predict that by the latest the cargo village will be completed by 2020. We do not expect the cargo to triple in capacity the first year of operations but gradually. As for our aircraft movements, we expect that land clearing issues may stall the runway creation until 2019. From then, we expect flights to gradually increase.

Figure 3: Base case scenario (current)

(Rp bn) 2017F 2018F 2019F 2020F 2021F

Revenue 2100 2389 2774 3209 3756

Cargo + Ground 1518 1711 1956 2280 2721

Cargo handling 789 876 974 1124 1361

Ground handling 729 834 982 1156 1361

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In our best case scenario, we expect that the cargo is finished by end of 2018 and in full operation by 2019. Also, we expect that the runway 3 be finished before the Asian games and flights will increase dramatically afterwards.

1Q16 Results: Forex loss and higher interest decreasing bottomline

Revenue increased by 10% and EBIT by 3% but net profit decreased by 24% on the back of higher financial expenses and forex loss. Excluding forex, clean net profit increased by 4% YoY.

Going forward, we expect revenue to increase by double digits and clean net income to keep growing at a stable single digit. We are confident in CASS’s abilities as a company to provide excellent services and due to their strong position in the industry, a massive growth potential exists for them.

Figure 5: Best case scenario

(Rp bn) 2017F 2018F 2019F 2020F 2021F

Revenue 2100 2506 3963 5073 5818

Cargo + Ground 1518 1827 3145 4144 4783

Cargo handling 789 876 1853 2650 3139

Ground handling 729 951 1292 1494 1644

East-cross taxiway 5 10 14 14 14

Runway 3 0 12 30 36 36

Figure 6: 1Q16 Results

(Rp bn) 1Q16 1Q15 % YoY 2016F % to FY

Revenue 433 397 9 1,847 23

EBIT 106 103 3 493 21

NPAT to Parents 25 32 (24) 160 15 Source: Company, Sucorinvest estimates

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4 Financial Summary

Figure 7: Income statement highlights

(Rp bn) 2014 2015 2016F 2017F 2018F Revenues 1,520 1,632 1,847 2,100 2,389 Operating expenses 1,175 1,218 1,354 1,511 1,697 EBIT 345 414 493 588 692 DA 53 56 68 76 85 EBITDA 398 469 561 664 777 Pre-tax Income 375 414 486 598 712

Income tax exp 105 121 136 167 199

Minority Interest 159 175 190 229 263

Net Profit 110 119 160 201 250

Source: Company, Sucorinvest estimates Figure 8: Balance sheet (Rp bn) 2014 2015 2016F 2017F 2018F Cash 152 155 381 533 602

Accounts receivable 331 387 415 489 556

Inventories 17 17 20 20 22

Prepaids and advances 90 172 202 230 262

Total Current Assets 590 730 1,019 1,272 1,442 Loans to a related party 181 202 111 -

-PP&E - net 236 247 261 277 297

Goodwill - net 17 17 17 17 17

Others 61 83 80 80 88

Total Non-Current Assets 496 549 468 374 402

Total Assets 1,085 1,280 1,487 1,646 1,844 Accounts payable 81 73 111 124 139

Accrued expenses 92 157 202 230 262

Other current liabilities 86 93 100 100 100

Current maturities 94 95 100 75 50

Total Current Liabilities 353 417 514 529 551

Long-term loan 157 212 200 200 200

Others 86 91 100 100 100

Total Non-Current Liabilities 244 304 300 300 300

Total Liabilities 597 721 814 829 851 Common Shares 74 74 74 74 74 Minority Interest 118 112 131 154 181 Retained Earnings 298 372 468 589 739 Others (1) - - - -Shareholders' equity 489 558 673 817 993 Source: Company, Sucorinvest estimates

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5

Figure 9: Statement of cash flows

(Rp bn) 2014 2015 2016F 2017F 2018F

Cash Flows from Operating Activities

Net Income 110 119 160 201 250

Depreciation Expense 53 56 68 76 85

NWC 69 75 (30) 61 54

Total 94 100 257 216 280

Cash Flows from Investing Activities Capex (111) (66) (82) (92) (105)

Others (3) (43) 95 111 (8)

Total (115) (109) 13 18 (113)

FCF (18) 34 175 124 175

Cash Flows from Financing Activities Change in Equity 1 1 - -

-Dividend (44) (44) (64) (80) (100)

Adjustment (0) (0) - -

-Change in Long-Term Liabilities 16 5 9 -

-Change in Short-Term Debt 31 1 5 (25) (25)

Change in Long-Term Debt 35 55 (12) -

-Change in minority interest 12 (6) 19 23 26

Total 52 11 (43) (83) (98)

Beginning Cash 121 152 155 381 533

Change in Cash 31 3 226 152 69

Ending Cash 152 155 381 533 602 Source: Company, Sucorinvest estimates

Figure 10: Key Ratios

(%) 2014 2015 2016F 2017F 2018F

Operating Profit Margin 22.7 25.4 26.7 28.0 29.0 Net Profit Margin 17.7 18.0 19.0 20.5 21.5 ROIC 58.8 58.7 70.6 72.0 74.9 ROE 29.8 26.7 29.5 30.4 30.7 Net Debt/EBITDA 25.0 32.6 (14.5) (38.8) (45.3) * 2016 above CASS is net cash

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6 Sucorinvest rating definition, analysts’ certification, and important disclosure

Ratings for Sectors

Overweight : We expect the industry to perform better than the primary market index (JCI) over the next 12 months. Neutral : We expect the industry to perform in line with the primary market index (JCI) over the next 12 months. Underweight : We expect the industry to underperform the primary market index (JCI) over the next 12 months

Ratings for Stocks

Buy : We expect this stock to give return (excluding dividend) of above 10% over the next 12 months. Hold : We expect this stock to give return of between -10% and 10% over the next 12 months. Sell : We expect this stock to give return of -10% or lower over the next 12 months

Analyst Certification

The research analyst(s) primarily responsible for the preparation of this research report hereby certi20 that all of the views expressed in this research report accurately reflect their personal views about any and all of the subject securities or issuers. The research analyst(s) also certi20 that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.

Disclaimers

This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not make any representations as to its accuracy or completeness. PT Sucorinvest Central Gani accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities. PT Sucorinvest Central Gani and its directors, officials and/or employees may have positions in, and may affect transactions in securities mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies. PT Sucorinvest Central Gani may also seek investment banking business with companies covered in its research reports. As a result investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.

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