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RESULTS NOTE : PTPP : Lower than expectation FY18
Friday, March 15, 2019       09:17 WIB

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Lower than expectation FY18
  1. Earnings of Rp1.5tn in FY18 (+3% yoy), below consensus and ours.
  2. Possible order book adjustment due to project revision and delays.
  3. We revise down our FY19F/20F by 9%/7%.
  4. Maintain Buy amid lower TP of Rp2,400 (from 2,600).

Strong top line, but higher COGS , Opex and impairment loss. recorded earnings of Rp1.5tn in FY18 (+3% yoy), which came below expectation, forming only 94% of consensus/our forecast. Margin were squeezed all across the board in FY18 as hike in COGS (+18% yoy) and Opex (+26% yoy), offset the top line growth of 17%. Despite slower financing cost growth of +16% yoy (FY17: 60% yoy), recorded +74% hike in impairment losses on receivable of Rp236bn, which contracted net margin to 6.0% in FY18. In quarterly basis, recorded strong earnings of Rp627bn in 4Q18 (+59% qoq, +35% yoy), forming 42% of company's FY18 earnings.
Order book imbalances due to project revision and delays. new managements are considering writing off order book balance difference which was resulted from: 1) contract revisions from project owner and 2) project delays. Project value downward revision might caused order book to be overstated while project delays would resulted in lower burn rate. Thus, we also were considering the possible of impairment losses which came from the delay in financial closing of Meulaboh power plant project. According to our calculation, with estimate project time of 3 years, we believe has total receivables of around Rp550bn from the project given the commencement of the project since May 2018 and project value of Rp2.2tn (33% burn rate/year).
Revise down our FY19F/20F forecast by %/%. We reduce our FY19F/20F earning forecast by 9.5%/6.6% as we apply lower order book assumption for FY19F/FY20F by 4%/3% due to possible order book write-off. In addition, we also apply higher allowance for impairment assumption of 0.8% of revenue in FY19F/FY20F (from: 0.6%) to adjust on several projects tender delay (2016-2017: 0.5-0.6%).
Maintain Buy amid lower TP of Rp2,400 (from 2,600). Despite lower earnings outlook, we maintain our positive stand to the counter given company's relatively DER (0.9x) and zero exposure towards turnkey projects. Given lower earnings estimate, our DCF-based TP ( WACC : 11.3%, TG: 2%) was decreased to Rp2,500/share representing FY19F P/E of 8.8x. Key risk to our call might come from lower than expected new contract achievement and additional impairment losses.

Sumber : IPS RESEARCH

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