Better earnings expected in 4Q18- We forecast earnings of Rp11bn in FY18F (9M18: loss of Rp66bn).
- Likely to win Patimban toll road construction worth Rp1.2tn.
- Subang estate to start presales in early 2020.
- Maintain Buy with higher TP of Rp700 (from Rp630).
Better than expected operational performance across all business lines. We forecast SSIA to book earnings of Rp11bn in FY18F, given stronger than expected marketing sales, new contract and better performance from hospitality business in 4Q18. SSIA is guiding for Revenue of Rp3.5tn, while indicating positive earnings turnaround due to immediate recognition of industrial land sales, which is SSIAs only high margin business. Throughout 2018, SSIA reported marketing sales of 8.3ha (FY17: 2.1ha), with ASP of US$120/sqm (-18% yoy), exceeding our FY18 marketing sales assumptions of 5ha. In addition, NRCA managed to book new contract of Rp2.7tn in FY18 (-4% yoy), also exceeding our FY18 assumption new contract of Rp2.5tn. In the other hand, SSIAs recorded better occupancy rate in all its hospitality facilities supported by Asian games and IMF World bank annual meeting in Bali.
Huge contribution from Patimban toll road construction. Despite project tender delay, we believe SSIA will win the tender process in 2H19 given SSIAs right-to-match privilege as the project initiator with JSMR, PT Daya Mulia Turangga and PT Jasa Sarana. We expect NRCA to reach new contract of Rp3tn in FY19F (SSIA: Rp3.5tn), supported by building and infrastructure (Patimban toll road) project of Rp1.7tn and Rp1.3tn, respectively. In the other hand, we forecast SSIA to book 12ha industrial sales in FY19F (SSIA: 15ha), supported by 30ha inquiries from consumer goods, auto, and building material sector.
Subang first phase development of 300ha. SSIA is planning to start the infrastructure development in Subang industrial estate by 2H19, along with the development of Patimban toll road access. The company expected 300ha first phase development with target presales of 40ha in early 2020 with ASP USD90-100/sqm. According to the company, most of the inquiries for Subang industrial estate were from Japanese and auto related sector.
Maintain Buy with higher TP of Rp700. We maintain our positive view on the counter given better than expected 2018s operational performance. In addition, we also expect higher earnings forecast by 10% in FY19F as we increase NRCA contract assumption to Rp3tn in FY19F (from: Rp2.7tn) and Batiqa occupancy rate to 67% (from 65%). Given higher earnings outlook going forward, our RNAV calculation was increased to Rp700/share. SSIA currently trades at 58% discount to our RNAV estimate or FY19F P/B of 0.6x.
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