SECTOR UPDATE REPORT MNC Sekuritas Research Division June 22, 2017

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1 SECTOR UPDATE REPORT MNC Sekuritas Research Division June 22, 2017 CONSTRUCTION SECTOR UPDATE Lucrative Entry Point Construction Sector Driven by Government Spending The focus of government to accelerate infrastructure development through the National Mid-term Development Plan (RPJMN), positively affects the construction sector. This sector s growth in recent years parallels the trend of Indonesian economic growth, with average growth of CAGR FY12-FY18E of around 20%, the result of government spending for infrastructure, a budget that keeps increasing - around 20% in the last 5 years. The government projected the budget need for infrastructure development at Rp 4,796 trillion. Therefore, the infrastructure budget kept increasing, along with rising state income through tax revenues and budget efficiency. Further, the government also encourages investors to directly invest in infrastructure developments, taking into account that in 2017 Indonesia achieved Investment Grade, which makes Indonesia worth investing in, especially in the infrastructure sector. Key Investment 2017/2018 Growth in construction sector can be seen from the increasing new contract value by the state-owned construction companies, with CAGR growth ( F) reaching 25%. This directly affects the financial performance of those companies with CAGR growth ( ) with revenue amounting to 16% YoY and net profit of 25% YoY. Several state-owned construction companies are consistently able to show financial performance above 100%. The projects from the government provide a positive contribution to the Company s financial performance. Investment Risks: Concerns about Funding Issues The main issue in the construction sector is funding. If a construction company gets many projects with high project value, yet does not have enough funds on hand for construction, the project will not run smoothly. Therefore, it is important for the construction sector to have sufficient funding to run a business. OVERWEIGHT Outlook with Top Picks: PTPP, WIKA, and WSKT We believe that in 2017 the construction sector will experience an increase, caused by several supporting factors, such as: 1) Low share price of state-owned construction companies, which does not reflect its positive financial performance, 2) Low Debt-to-Equity Ratio (DER), 3) The availability of Non-state Budget Infrastructure Funding (PINA) which can function as an alternative scheme for infrastructure funding, 4) Support from government regulations which accelerate infrastructure development. Recommendation: OVERWEIGHT with Top Picks: PTPP (BUY; TP: Rp 4500) WIKA (BUY; TP: Rp 3250) and WSKT (BUY; TP: Rp 3160). Research Analyst Gilang Anindito D. gilang.dhirobroto@mncgroup.com (021) ext Ticker Market Cap (Rp bn) Sources: Companies, MNCS Estimate PER (x) EV/EBITDA (x) Target Price Rec. FY17E FY18F FY17E FY18F (Rp) PTPP 19, BUY 4,500 WIKA 20, BUY 3,250 WSKT 31, BUY 3,160 Page 1

2 Higher Growth Expectation on Construction Sector with 7.9% YoY vs. 5.1% - 5.3% Indonesia GDP growth in FY17E Currently, the government is focusing on economic development, by encouraging infrastructure upgrading across Indonesia. The main sector to receive positive advantage from the development is construction, which in recent years has set a growth figure above Indonesian economic growth. Nevertheless, there has been a noticeable slowdown in the construction sector since Construction sector is one of the contributors to Indonesian infrastructure development, with average growth (FY12-FY18F) of around 20%, or far above Indonesian economic CAGR average growth, which is around 0.2%. We have seen a slowdown in this sector from 2014 until 2016, along with a general economic growth dip. However, in 2017, the government targets construction sector growth to reach 7.9%, supported by high budgets for infrastructure: around Rp 4,792 trillion until Its growth is expected to be higher than the Indonesian GDP growth assumption of around 5.1% - 5.3% in FY17E. Multiplier Effects of Infrastructure Development The increase in infrastructure development growth will affect the employment and consumer behavior. What's more, the increase will positively affect the ease of doing business, such as decreasing logistic costs as well as distribution of goods, which influences a company's performance. This will tend to increase Indonesian economic growth from the production side. We see those factors will exert a positive impact on construction sector growth, pushing it above 6%, which in the end will help national economic growth rise above 5% in several years. This is in line with the prediction of the Finance Ministry that projects economic growth above 5.4% by Exhibit 01. Indonesia GDP vs. Information & Construction Sector Growth (% YoY) GDP (%) Construction Sector Growth (%) CAGR Construction Sector 25% APBN Source : Statistics Indonesia (BPS), Ministry of Finance Page 2

3 Infrastructure Spending as the Engine of Sustainable Growth With increasing infrastructure development, the government needs a greater level of funds, allocating them in the State Budget to realize infrastructure development. Increasing every year, the State Budget infrastructure section averages 20% growth in the last 5 years. In the 2017 State Budget, the government allocates Rp trillion for government infrastructure spending, or around 29% of the total State Budget considerably greater that the average infrastructure budget in the past several years. We see that national budget growth for infrastructure development will keep increasing until However, the infrastructure budget will potentially decline after 2019, with the assumption of a government's change in focus. If the government shifts its focus, it can negatively impact the construction sector. With a high infrastructure budget until 2017, the construction sector will grow along with projects from the government Exhibit 02. Infrastructure Budget and National State Budget (Rp Trillion) Infrastructure Budget Growth % Infrastructure Budget to State Budget % % % 29% % 16% 25% 22% 15% -2% -3% 9% % 60% 50% 40% 30% 20% 10% 0% -10% Source : Ministry of Finance Indonesian Government Determined to Support Infrastructure Development at any Cost but... The strategy pursued by the government in its quest to realize infrastructure development is through State Budget efficiency. Since 2015, the government has reduced consumers subsidies, allocating moneys instead into more productive directions. Government moved the energy subsidy allocation to infrastructure budget. In 2015, energy subsidy budget decreased 61% and the impact was that the infrastructure budget increased up to 63%. We see the government's move to increase productive budget can positively affect the construction sector in Government's move toward budget efficiency will be carried out every year. If until 2018 the government has not achieved the target from the infrastructure development goal, they will likely need more funds. Therefore, there will be room for other budget efficiencies to be directed to the infrastructure budget in following years. Page 3

4 Exhibit 03. Infrastructure Budget and Energy Subsidies Energy Subsidies Infrastructure Source : Ministry of Finance...Risk from Low Execution with Average of 80% of Total Infra Budget Still Lingering Although the budget for infrastructure is high, we see a major challenge, which is slow infrastructure budget absorption. In 2016, the absorption was only 65% of the total budget. This absorption was very small compared to previous years, which averaged above 80%. We conclude the slow budget absorption was caused by a transition to a new government, so that there are adjustments, either in administration or field implementation. However, there was an absorption increase in 2016, up to 99%. We assume this year the infrastructure budget absorption increase will not be as good as in This is because in February 2017, the infrastructure budget absorption was only 8.1% or lower compared to 2016 (around 9.1%). To increase construction sector growth this year, faster budget absorption is needed in the remaining semester, with absorption of around 90%. Exhibit 04. Absorption Infrastructure Budget Infrastructure Realization Source : Ministry of Finance, MNCS Estimate Page 4

5 Increasing Tax Ratio to Secure Infrastructure Financing Besides budget efficiency, the government needs to increase state income via tax revenues. If seen from the tax ratio towards the GDP, there was a decrease from 2012 until 2016, caused by many factors, including low per capita income as well as compliance levels of Taxpayers. The government predicted the tax ratio will increase in 2017, assuming the completion of the tax amnesty program that ran from 2016 until We see that with the increasing tax ratio in 2017, there will be an improvement in state tax revenue, so that the government can allocate a larger infrastructure fund, which will positively impact the construction sector. Issues with a lack of funds were overcome, so that the project result came in on time and was not abandoned. Exhibit 05. Tax Ratio Tax Ratio (%) APBNP 2016 APBN 2017 Source : Ministry of Finance Huge Growth Potential from Massive Investment in Infrastructure by 2019 Infrastructure development requires a great amount of funds. The government has made a program through its National Mid-term Development Plan (RPJMN) in 2015 until The projects planned are a total of 35,000 MW power generation, 2,650 km of new roads, 1,000 km of toll roads, 46,770 km of road maintenance, 15 new airports, 24 new ports, 3,258 km of railways in Java, Sumatra, Sulawesi, and Kalimantan, as well as other projects. We see that with the big projects and investments, there will be a positive influence towards the construction sector. Stateowned construction companies can profit from most projects, taking into account that they have stronger budget advantage compared to other companies. However, the government hopes to allocate more funds to private companies than to stateowned enterprises. This will be difficult if the government does not provide facilities, either from bank funding access or other accesses such as land acquisition and permissions. Exhibit 06. Government s Projects Source : Bappenas Sector Amount % of (Rp Tn) total Road Infrastructure Railway Infrastructure Sea Transportation Air Transportation Land Transportation 47 1 Urban Transportation 86 2 Electricity Infrastructure 1, Oil & gas Infrastructure Telecommunication and information Infrastructure Water Resource Dringking and waste water Housing Total 4, Annual spending Page 5

6 Positive Impact of Investment Grade from S&P: Lower Borrowing Cost In 2017, Indonesia finally achieved Investment Grade from various ranking institutions; S&P finally raised Indonesia's rating to BBB- on May 19, The new ranking generates an increasing investment climate, so that there will be more investors putting their money into the country. We also believe that in the future, Indonesia will potentially achieve another rating increase from Fitch, moving from BBB- to BBB, and Moody's from Baa3 to Baa2. This will positively affect the construction sector, where many investors become involved. Exhibit 07. Indonesia s Historical Sovereign Ratings Source : Rating Agency Positive Impact of Investment Grade from S&P: Lower Borrowing Cost We see the positive impact from Indonesia's ranking increase for construction companies, is that they may qualify for cheaper loans. In fact, creative financing is offered by many foreign lenders, leading to a decrease in lending rates. Construction companies can borrow funds from the bank with at a lower lending rate compared to previous periods. Construction companies can also issue obligations to obtain alternatives and cheaper funding. We would like to explain briefly that in 2017, global bonds with a 10-year tenor are predicted to reach 7% % yield, or lower compared to 2016, with 7.7%. By receiving cheaper funding, we conclude construction companies will exhibit better financial performance, along with greater value and better numbers in project potential. We perceive strong commitment of the government in developing infrastructure to support economic activity, as well as increasing international support, so that the investment climate can be improved and economic growth encouraged; that will certainly result in a positive impact for the construction sector. Page 6

7 Exhibit Year Global Bond Yields E Source : Bloomberg, MNCS Supported by a Higher Competitiveness Ranking in Based on date of IMD World Competitiveness Ranking 2017, Indonesia is 42th out of 63 countries, or increasing 6 ranks compared to However, Indonesia is still behind neighbors such as Singapore, Malaysia, Thailand, and the Philippines. This means that Indonesia's competitiveness against other countries is still low. Among many indicators was unequal and inadequate infrastructure. Exhibit 09. World Competitiveness Ranking 2017 Source : IMD Page 7

8 Poor infrastructure quality, pointed out by Global Competitiveness's research in , showed Indonesian infrastructure is still behind that of its neighbors, at 60th of 138 countries. Again, Indonesia is behind Singapore, Malaysia, and Thailand. Indonesia's wide demographic presents a challenge for the government to improve infrastructure quality in the country. If such a challenge is overcome, infrastructure quality in Indonesia can compete against that of other countries, which will result in a positive investment climate in Indonesia. We see that with the current infrastructure ranking of Indonesia, there is a positive opportunity for the construction sector. There are still much infrastructure in the country (especially in eastern Indonesia) that needs better infrastructure development. Thus the potential to obtain national projects is wide open in upcoming years. What's more, construction companies can expand into other countries, so that they can compete against other companies. This will enable better competitiveness, which can promote the construction sector in Indonesia. Exhibit 10. Infrastructure Ranking Singapura Malaysia Thailand Filipina Indonesia Vietnam Source : Global Competitiveness Report... and Still an Attractive Investment Destination in the Long Run Investment is important for Indonesian economic growth. Such investment can come from both inside and outside the country. The average domestic investment plan (PMDN) for construction from 2011 up to 2016 was 285%. Meanwhile, for real estate, industrial estates, and business activities this was 716%. For electricity, gas, and water supplies, the average investment value was 119%. We note from Exhibit 10 that there was a trend toward a decline in domestic investment in Since 2015, domestic investment has displayed a stable trend, the tendency caused by low investment from the private sector. Page 8

9 Exhibit 11. Domestic Direct Investment (DDI) ,000 in Billion Rupiah Construction Real Estate, Ind. Estate & Business Activities Electricity, Gas & Water Supply 60,000 36,297 50,000 21,947 22,795 40,000 30,000 20,000 10,000-25,831 13,112 6,510 9,193 9,135 3,797 4,930 17, ,152 12,098 14, ,587 6, Source : BKPM Meanwhile, the average foreign investment for construction from 2011 until 2016 was 16%. There was a decrease in construction, real estate, industrial estate, and other activities. Also, this was the case for electricity, gas, and water supply in 2016, respectively 80%, 5%, and 29%. A deep decrease occurred in the construction sector. We see foreign investors invest their money into construction are still hampered by a perceived lack of funds required from government for infrastructure development over the next several years; thus, investors see uncertainty. However, Indonesia's ranking increase to Investment Grade can provide a potential for this sector, as foreign investors will feel more secure about investing in the construction sector, so that there will be more foreign funding for this sector pouring into Indonesia. Exhibit 12. Foreign Direct Investment (FDI) ) in Million US$ 7,000 Construction Real Estate, Ind. Estate & Business Activities Electricity, Gas & Water Supply 6,000 5,000 4,000 3,000 2,000 1,000-3,029 2,140 1,249 1,429 2,222 1,168 2,434 1,865 1,515 1,050 2, , Source : BKPM Page 9

10 As a Result: Uptrend in SOE's Contractors New Order Books With government programs that focus on infrastructure, construction companies financial performance will be affected. For CAGR growth extending from 2013 until 2017E, there was a 25% increase in new contracts for state-owned construction companies. In 2016 alone, there was a steep increase of 77%. This was caused by a spike in new contracts for Waskita Karya, up to 118%, and Wijaya Karya, around 117%, or beyond the target of the companies. We see how new contract performance which grows annually can exert a positive impact on construction sectors. The high growth since 2015 was caused by a Rp 290 trillion infrastructure budget reserved by the government (a 63% increase). We see total new contract growth for FY17E supported by ongoing government infrastructure projects, with the assumption FY17E will reach Rp 185 trillion. We project new contract growth will continue until 2019, spurred by many infrastructure projects since , valued at around Rp 4,792 trillion. Exhibit 13. SOE Contractors New Contracts ADHI, PTPP,WIKA,WSKT CAGR New Contract 25% 173, ,040 98,271 61,427 69, F Source : Companies, MNCS Estimate As a Result: Uptrend in SOE's Contractors New Order Books State-owned construction companies total revenue growth from shows a positive trend. We project a trend of aggressive net profit growth in CAGR revenue growth from was 16%, with a 36.21% increase in FY17E valued at around Rp 91.2 trillion, the highest in the last several years. We see this high growth was caused by an increase in new contracts over the last several years, the annual total trending upward. This will affect recognition of positive construction company income. Page 10

11 Exhibit 14. SOE s Contractors Revenue ADHI,PTPP,WIKA,WSKT CAGR Revenue 16% 91,232 66,980 43,027 43,831 51, F Source : Companies, MNCS Estimate Robust Net Income Growth, up by % in FY17E We estimate a net profit growth trend that will keep moving upward until The net profit of state-owned construction companies is projected to grow significantly, at around 30.03%in FY17E, marking approximately Rp 5.2 trillion. Net profit growth above CAGR growth will be around 25%. We see this increase as the result of high infrastructure sector growth. Exhibit 15. SOE Contractors Net Income ADHI,PTPP,WIKA,WSKT CAGR Net Income 25% 5,282 4,062 2,877 1,765 1, F Source : Companies, MNCS Estimate Page 11

12 Lucrative Opportunities: Uptrend in EPS Growth vs. Lagging Stock Price Along with increasing profits for state-owned construction companies, companies financial performance also shows a positive trend. We see the EPS of construction companies as a strengthening trend in every quarter. However, the share price of each company is weakening. Therefore, the financial performance of construction companies is not comparable to their weak share price. Exhibit 16. EPS SOE s Contractors vs. Stock Price Q Q Q Q Q Q Q Q Q Q Q Q Q WIKA WSKT PTPP ADHI EPS ADHI,PTPP,WIKA,WSKT Source : Companies, MNCS Key Investment Risk: Concern about Funding Issues? Construction sector is influenced by the amount of projects and their value. However, if a construction company is awarded many projects with great value without a sufficient budget, the project will not run smoothly. Therefore, big funding is important for the construction sector, to expedite its business. A great quantity of funds is required to realize government infrastructure projects. The government predicts that until 2019, they will need a Rp 4,796 trillion budget. The scheme for infrastructure budget allocation through the State Budget and Regional Budget is around Rp 1,979 trillion (or 41.3% of the total), through stateowned enterprises around Rp1,066 trillion (or 22.2% of the total), and through private sectors around Rp 1,751 trillion or (36.5% of the total budget). We see the need for big funds has become a prime issue in infrastructure development. The budget required shows the biggest portion as emanating from the private sector. For state-owned enterprises, access to great funds is wide open through various doors. However, for the private sector, there will be issues in access to funding. Page 12

13 Still Have More Room for Financing and... We see construction companies are still secure about finding funds. Although there is a great need for funding, a construction company has a chance to get funds from a bank. This has been the case since 2012: the Debt-to-Equity (DER) ratio of construction companies is still relatively low far below the average banking covenant, which is on a 2x level. The low DER of construction companies indicates more space for a leverage increase of those companies. This can be advantageous for the sustainable development and growth potential of this sector. Exhibit 17. Debt-to-Equity Ratio/DER (x) Source : Bloomberg Supported by PINA Alternative Funding Schemes The great projects of the government are still hampered by a lack of funds. Currently, the government is putting together an infrastructure funding scheme named Non-State Budget Infrastructure Funding (PINA). PINA is a scheme for funding that does not burden the government's budget. The source can be capital markets, insurance, or various recognized financial institutions. We see this scheme can accelerate infrastructure development which is currently hampered by a lack of funding. Taking into account the loan limits from banks with a limited amount of funds, as well as short-to-middle term, the PINA is long-term. We see the government can only fulfill the demand for funds for infrastructure until 2019: around Rp 1,979 trillion, or 41.3% of the total funds needed. With PINA, the Rp 2,817 trillion lack of funds (around 58.7%) can be overcome by securing funding from State -Owned Enterprises and the private sector. We see the solution for the success of infrastructure development: an alternative funding scheme. Page 13

14 Better Solutions and More Support from Government Regulations The government must be able to pass regulations as a solution for the issues faced by construction companies. Issues such as land acquisition can be overcome through Law No. 2/2012 on land procurement for development aimed for the public interest. This law can overcome land disputes by providing decent and fair compensation for the land owner. If the dispute persists, they will need to abide by the verdict of the court, which has permanent strength. Further, in 2017 the government issued Financial Ministry Regulation No. 60/2017 on central government warranty grant procedures for national strategic project acceleration. This regulation will provide a guarantee from the government, through the Finance Ministry, which will result in a solution to a hampered strategic project, and its impact on a business entity's finances. We see how regulations issued by the government will help expedite the permit process currently also an issue. Technical issues will be overcome through clear and bonding regulations. Therefore, we see how infrastructure development accelerationrelated regulation can overcome issues in the field. OVERWEIGHT Outlook with Top Picks: PTPP, WIKA, and WSKT We are OVERWEIGHT for this sector as still a high number of new contracts was granted in FY17E, increasing 6.4% - and stocks are still undervalued. Our top picks for the Indonesian construction sector are PTPP (BUY; TP: Rp 4500), WIKA (BUY; TP: Rp 3250) and WSKT (BUY; TP: Rp 3160). Currently PTPP is traded at PE17E/18F of 15.29x 12.12x and EV to EBITDA17E/18F of 8.72x x, WIKA is traded at PE17E/18F of 16.89x 13.67x and EV to EBITDA17E/18F of 8.47x x, while WSKT is traded at PE17E/18F of 13.46x x and EV to EBITDA17E/18F of x. We believe that PTPP, WIKA, and WSKT will be solid performers in FY17E. Exhibit 18. Valuation Ticker Market Cap (Rp bn) PER (x) EV/EBITDA (x) Target Price Rec. FY17E FY18F FY17E FY18F (Rp) ACST 2, BUY 3,600 ADHI 7, BUY 2,730 PTPP 19, BUY 4,500 TOTL 2, BUY 975 WIKA 20, BUY 3,250 WSKT 31, BUY 3,160 Source : MNCS Estimate Page 14

15 Figure 19. ACST P/E Ratio Band Figure 20. ADHI P/E Ratio Band PE_RATIO Mean Std-1 Std-2 Std+1 Std+2 PE_RATIO MEAN STD-1 STD-2 STD+1 STD /6/2014 8/6/ /6/ /6/2014 2/6/2015 4/6/2015 6/6/2015 8/6/ /6/ /6/2015 2/6/2016 4/6/2016 6/6/2016 8/6/ /6/ /6/2016 2/6/2017 4/6/2017 6/6/2017 6/6/2014 8/6/ /6/ /6/2014 2/6/2015 4/6/2015 6/6/2015 8/6/ /6/ /6/2015 2/6/2016 4/6/2016 6/6/2016 8/6/ /6/ /6/2016 2/6/2017 4/6/2017 6/6/2017 Source : Bloomberg Source : Bloomberg Figure 21. PTPP P/E Ratio Band Figure 22. TOTL P/E Ratio Band PE_RATIO Mean Std-1 Std-2 Std+1 Std PE_RATIO MEAN STD-1 STD-2 STD+1 STD /6/2014 8/6/ /6/ /6/2014 2/6/2015 4/6/2015 6/6/2015 8/6/ /6/ /6/2015 2/6/2016 4/6/2016 6/6/2016 8/6/ /6/ /6/2016 2/6/2017 4/6/2017 6/6/2017 Source : Bloomberg Figure 23. WIKA P/E Ratio Band Figure 24. WSKT P/E Ratio Band PE_RATIO Mean Std-1 Std-2 Std+1 STd /6/2014 8/6/ /6/ /6/2014 2/6/2015 4/6/2015 6/6/2015 8/6/ /6/ /6/2015 2/6/2016 4/6/2016 6/6/2016 8/6/ /6/ /6/2016 2/6/2017 4/6/2017 6/6/2017 6/6/2014 8/6/ /6/ /6/2014 2/6/2015 4/6/2015 6/6/2015 8/6/ /6/ /6/2015 2/6/2016 4/6/2016 6/6/2016 8/6/ /6/ /6/2016 2/6/2017 4/6/2017 6/6/2017 Source : Bloomberg P/E Mean Std-1 Std-2 Std+1 Std /6/2014 8/6/ /6/ /6/2014 2/6/2015 4/6/2015 6/6/2015 8/6/ /6/ /6/2015 2/6/2016 4/6/2016 6/6/2016 8/6/ /6/ /6/2016 2/6/2017 4/6/2017 6/6/2017 Source : Bloomberg Source : Bloomberg Page 15

16 MNC SEKURITAS RESEARCH TEAM Thendra Crisnanda Head of Institutional Research, Strategy (021) ext Victoria Venny Telco, Infrastructure, Logistics (021) ext Rr. Nurulita Harwaningrum Banking (021) ext Edwin J. Sebayang Head of Retail Research, Technical, Auto, Mining (021) ext Yosua Zisokhi Plantation, Cement, Poultry, Cigarette (021) ext Krestanti Nugrahane Research Associate (021) ext I Made Adesaputra Head of Fixed Income Research imade.saputra@mncgroup.com (021) ext Rheza Dewangga Nugraha Junior Analyst of Fixed Income rheza.nugraha@mncgroup.com (021) ext Sukisnawati Puspitasari Research Associate sukisnawati.sari@mncgroup.com (021) ext Gilang Anindito Property, Construction gilang.dhirobroto@mncgroup.com (021) ext MNC SEKURITAS EQUITY SALES TEAM Benny Narendro Head of Institutional Client benny.narendro@mncgroup.com (021) ext Sri Laksamanawati Head Marketing of Institutional Client sri.laksamanawati@mncgroup.com (021) ext Nesya Kharismawati Equity Sales Manager nesya.kharismawati@mncgroup.com (021) ext Harun Nurrosyid Manager Equity Trader harun.nurrosyid@mncgroup.com (021) ext Okhy Ibrahim Manager Equity Trader okhy.ibrahim@mncgroup.com (021) ext Anastasia Pratiwi Manager Equity Institution anastasia.pratiwi@mncgroup.com (021) ext Agus Eko Santoso Manager Equity Trader agus.santoso@mncgroup.com (021) ext Gilang Ramadhan Manager Equity Trader gilang.ramadhan@mncgroup.com (021) ext Iman Hadimulya, ST Manager Equity Institution iman.hadimulya@mncgroup.com (021) ext MNC Research Investment Ratings Guidance BUY : Share price may exceed 10% over the next 12 months HOLD : Share price may fall within the range of +/- 10% of the next 12 months SELL : Share price may fall by more than 10% over the next 12 months Not Rated : Stock is not within regular research coverage PT MNC SEKURITAS MNC Financial Center Lt Jl. Kebon Sirih No , Jakarta Pusat Telp : (021) Fax : (021) Call Center : Disclaimer This research report has been issued by PT MNC Sekuritas, It may not be reproduced or further distributed or published, in whole or in part, for any purpose. PT MNC Sekuritas has based this document on information obtained from sources it believes to be reliable but which it has not independently verified; PT MNC Sekuritas makes no guarantee, representation or warranty and accepts no responsibility to liability as to its accuracy or completeness. Expression of opinion herein are those of the research department only and are subject to change without notice. This document is not and should not be construed as an offer or the solicitation of an offer to purchase or subscribe or sell any investment. PT MNC Sekuritas and its affiliates and/or their offices, director and employees may own or have positions in any investment mentioned herein or any investment related thereto and may from time to time add to or dispose of any such investment. PT MNC Sekuritas and its affiliates may act as market maker or have assumed an underwriting position in the securities of companies discusses herein (or investment related thereto) and may sell them to or buy them from customers on a principal basis and may also perform or seek to perform investment banking or underwriting services for or relating to those companies. Page 16