22 January 2014 EQUITY RESEARCH Construction Sector Initiating Coverage Stocks Adhi Karya Jaya Konstruksi Manggala Pratama Pembangunan Perumahan Wijaya Karya Waskita Karya Share Performance Ticker ADHI IJ JKON IJ PTPP IJ WIKA IJ WSKT IJ 3 M 6 M 12 M Absolute (%) -3.2-15.5 26.1 Relative to JCI (%) -2.0-10.8 25.2 52-WK range (Rp) 4,571 8,276 Price Chart 180 160 140 120 100 80 16-Jan 16-Apr 16-Jul 16-Oct 16-Jan JCI IP Construction Basket Index IP Construction Basket is an index that consists of ADHI, JKON,PTPP, WIKA and WSKT Source: Bloomberg A secular growth story Indonesia has huge infrastructure development needs over the next decade. The 2011-25 MP3EI master plan identified c.usd150bn in infra spending. 3 CAGR of new contracts in 2010-13F should sustain revenue growth. We prefer companies with strong earnings visibility. Top picks: PTPP, WIKA We initiate coverage on the construction sector with a bullish view. We believe Indonesia s infrastructure spending needs of USD150bn, as identified under the 2011-25 MP3EI master plan, will sustain earnings growth of the five construction companies in our coverage. Rising material costs, due to inflation and a weakening currency, have increased uncertainty over near-term earnings, but we believe those companies with improved risk management will see limited negative impact. We prefer companies with stronger earnings visibility arising from a more diversified revenue base, exposure to multi-year projects and/or higher contribution from 2013 carry-over. Top picks: PTPP, WIKA. Indonesia s huge infrastructure development needs. The government s Master Plan for Acceleration and Expansion of Indonesia Economic Development 2011-2025 (MP3EI) has identified investment needs of >Rp4,000tn (USD335bn) for the country to realize its full economic growth potential, of which c.usd150bn is the required spending for basic infrastructure (power, roads, railways, air/sea ports, etc). The government plans to contribute 1 of the total investments, with SOEs and private investors contributing the balance. Implementation of this plan is picking up, contributing to an uptick in infrastructure spending in the fiscal budget to 1.7% of GDP in 2011-13F, from 1.3% in 2008-10. Under this plan, total infrastructure spending in the country will rise to 5% of GDP, from c.4% prior to the MP3EI launch in 2011. Construction companies are key beneficiaries. We expect the aggregate new contracts of the five construction companies to reach Rp71tn (c.usd6bn) in 2013F, or a 3-year CAGR of 3, and the value of contracts on hand and revenues to rise to IDR125tn and IDR49tn, respectively, a doubling during the same period. With a strong pipeline of multi-year projects, carry-overs from 2013 and growth of new contracts, we forecast the aggregate construction revenues to grow at 19% p.a. in the next two years. We see limited impact from rising material costs. Rising material costs, due to inflation and weakening currency, have increased uncertainty over the sector s near-term earnings. However, we believe the inability to pass on cost increases will have only a one-off negative impact on near-term earnings, and will be limited to companies with exposure to single-year projects or private sector clients. This is reflected in our preference for companies with stronger earnings visibility arising from a more diversified revenue base (such as contribution from a property/pre-cast business), lower exposure to single-year projects or private sector clients, and larger project carry-overs from 2013. Valuation undemanding given secular growth prospects. We initiate coverage on WIKA, PTPP, ADHI, WSKT and JKON with BUY ratings. Excluding JKON, the sector trades at FY14F P/E of 14.3x (11.5x for FY15F), which is in line with the broader market. We view this valuation as undemanding given secular earnings growth prospects arising from Indonesia s huge infrastructure development needs. Our BUY call on JKON (owned by the Jakarta local government), despite its high P/E multiple, reflects potential upside from the Jakarta Six Inner Ring Toll Road project and the city s infrastructure development, which could lift its long-term earnings outlook. Our top picks: PTPP and WIKA. 1 Natalia Sutanto natalia.sutanto@ipc.co.id +62 21 5793 1168 Ticker Rec Price (Rp) Target (Rp) Upside (%) Refer to important disclosures on the last of this report P/E EPS growth FY13F FY14F FY13F FY14F ADHI IJ BUY 1,685 2,600 54.3 7.7 7.1 85.2 9.8 JKON IJ BUY 510 630 23.5 41.5 37.5 10.4 10.7 PTPP IJ BUY 1,320 1,750 32.6 15.5 12.1 32.9 28.1 WIKA IJ BUY 1,930 2,400 24.4 21.1 17.4 22.2 20.7 WSKT IJ BUY 510 570 11.8 14.4 13.8 34.2 4.2 Sector 22.9 19.9 28.6 16.3 Exclude JKON 16.9 14.3 34.4 18.2 Source: IndoPremier, Bloomberg. Closing price: 16 Jan 2014
Quick Comparisons PTPP booked the highest new contracts in 2012-2014F... and most project carry-overs to support revenue visibility in 2014F Rp tn Rp tn 25.0 20.0 15.0 10.0 5.0 20.0 15.0 10.0 5.0 5.2 3.0 11.3 10.1 12.0 12.1 17.5 13.2 19.6 14.8 - JKON ADHI WSKT WIKA PTPP 2012 2013F 2014F - JKON ADHI WSKT WIKA PTPP 2014F Carry-over 2014F Revenue Source: Companies, IndoPremier Source: Companies, IndoPremier WIKA has diversified revenue in 2014F and balanced GP* contribution from precast/property division 7% 2% 15.9 5.7 0.2 36% 64% 64% 36% 93% 98% 62.6 37.4 50.5 49.5 84.1 94.3 99.8 WIKA JKON ADHI PTPP WSKT Construction, EPC, ME Precast/Property JKON WIKA ADHI PTPP WSKT Construction, EPC, ME Precast/Property Source: IndoPremier Source: IndoPremier * GP: Gross profit Debt to equity, 2012-14F Source of contracts, 2013F 20 1 1 1 1 JKON WIKA WSKT ADHI PTPP 13 20 25 40 55 43 30 45 30 9 25 34 35 23 30 25 6 7 6 ADHI JKON WSKT WIKA PTPP Govt Single year Govt Multi-year SOE Private 2012 2013F 2014F Source: Companies, IndoPremier Source: Companies, IndoPremier 2
Indonesia has huge infrastructure development needs The government s Masterplan for Acceleration and Expansion of Indonesia Economic Development 2011-2025 (MP3EI) identifies investment needs totaling more than Rp4,000tn (USD335bn) for Indonesia to realize its full economic growth potential, of which c.usd150bn is the required spending for basic infrastructure (power, roads, railways, air/sea ports, etc). Of this amount, the government will contribute 1 of total investments, with SOEs and private investors contributing the balance. Implementation of this plan is slowly picking up, contributing to an uptick in infrastructure spending in the fiscal budget to c.1.7% of GDP in 2011-13F, from an average of 1.3% in 2008-10. Under this plan, total infrastructure spending in the country will rise to 5% of GDP, from c.4% prior to the MP3EI launch in 2011. Exhibit 1. Six corridors of economic development 6 corridors of economic development Based on competitive and strategic advantages F ood produc tion and proc es s ing c entre, National B arn Mining produc tion and proc es s ing c entre, National B arn F arming, Ag ric ulture and F is hery produc tion and proc es s ing c entre, National Nickel mining Indus try s upport and national s ervices F ood, fis hery, energ y and mining national development The g ate of touris m and s upport national food s upply Source: Bappenas Exhibit 2. Infrastructure captures 44% of the total MP3EI budget Source: MP3EI Exhibit 3. Govt infrastructure spending/allocation (2005-14F) Exhibit 4. Indonesia infrastructure spending to GDP Rptn 8 7.8 170 167 165 7 150 143 130 6 130 5.0 5 110 4.1 3.8 3.9 4 90 78 75 68 3 70 46 51 2 50 30 24 1 10 0 1994-1997 1998-202 2003-2006 2007-2009 2011-2025F (10) 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 % Source: APBN *2012-14F are budget allocation Source: Bappenas, MP3EI 3
Construction companies are key beneficiaries We expect aggregate new contracts of the five construction companies under coverage to reach Rp71tn (c.usd6bn) in 2013F, or 3 CAGR in the past three years, in turn doubling the value of contracts on hand and construction revenues to Rp125tn and Rp49tn, respectively. With a strong pipeline of multi-year projects, carry-overs from 2013 and our expectation of sustained growth of new contracts, we forecast construction revenues for the five companies to grow at around 19% p.a. in the next two years. Exhibit 5. Total new contracts, 2009-15F Exhibit 6. Total contracts on hand, 2009-15F Rp tn Rp tn 110.0 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 95.8 81.4 71.2 58.4 44.8 32.4 27.7 2009 2010 2011 2012 2013F 2014F 2015F 190.0 170.0 150.0 130.0 110.0 90.0 70.0 50.0 30.0 181.9 151.6 125.7 98.4 73.7 56.0 49.8 2009 2010 2011 2012 2013F 2014F 2015F Source: Companies, Indopremier Source: Companies, Indopremier We see limited impact from rising material costs Rising material costs, due to weakening currency and rising inflation, have increased uncertainty over the near-term earnings outlook of the construction sector. However, we believe the inability to pass on cost increases will only have a one-off negative impact on near-term earnings, and will be limited to companies with exposure to single-year projects or private sector clients. As such, we prefer construction companies with better earnings visibility arising from more diversified revenues (due to contribution of property/pre-cast businesses), lower exposure to single-year projects and/or private sector clients and larger carry-overs from 2013. Exhibit 7. Source of contracts, 2013F 13 20 25 40 55 43 30 45 30 9 25 34 35 23 30 25 6 7 6 ADHI JKON WSKT WIKA PTPP Govt Single year Govt Multi-year SOE Private Source: Companies, Indopremier 4
Valuation undemanding given secular growth prospect We initiate coverage on five construction stocks (WIKA, PTPP, ADHI, WSKT and JKON) with BUY ratings. Excluding JKON, the sector trades at FY14F P/E of 14.3x (11.5x in FY15F), which is in line with the broader market. We view this valuation as undemanding given secular earnings growth potential from Indonesia s huge infrastructure development needs. Our BUY call on JKON (owned by the local government of Jakarta), despite its high P/E multiple, reflects the potential upside from the Jakarta Six Inner Ring Toll Road project and the city s infrastructure development, which could significantly boost its long-term earnings outlook. Our top picks: PTPP and WIKA. Peer comparison, 2014F WIKA PTPP WSKT ADHI JKON Sector Recommendation BUY BUY BUY BUY BUY Target Price (Rp) 2,400 1,750 570 2,600 630 Current Price (Rp) 1,930 1,320 510 1,685 510 Upside (%) 24.4 32.6 11.8 54.3 23.5 Market cap (Rptn) 11.9 6.4 4.9 3.0 8.3 34.5 Avg daily turnover (RpBn) 34.5 28.5 26.0 39.6 0.1 Market cap (USDMn) 977 527 405 250 686 2,846 Avg daily turnover (USDMn) 2.8 2.4 2.1 3.3 0.0 Float (%) 34.6% 42.8% 32. 49. 21.6% Majority shareholder Govt of Indonesia (65.2%) Govt of Indonesia (51%) Govt of Indonesia (68%) Govt of Indonesia (51%) Pembangunan Jaya (61%) PE (FY14F) at TP (x) 21.7 16.1 15.5 10.9 46.4 24.8* PE (FY14F) at CP (x) 17.4 12.1 13.8 7.1 37.5 19.9** ROE (%) 17.6 22.2 13.8 23.7 12.9 17.3 GPM after JO (%) 12.1 11.7 9.3 12.9 13.1 11.6 OPM (%) 9.1 10.1 6.0 10.3 6.5 8.3 NPM (%) 4.8 3.6 2.9 3.6 4.3 4.1 Debt to equity (%) 45.5 138.4 64.7 97.5 30.2 66.3 Interest coverage (x) 23.3 4.0 3.2 9.2 6.9 11.7 Earnings growth (%) 20.7 28.1 4.2 9.8 10.7 16.3 Source: IndoPremier, Bloomberg. *Excluding JKON: 17.9x ** Excluding JKON: 14.3x Closing price: 16 January 2014 5
Pembangunan Perumahan Strongest earnings growth High 2013F carry-over, 2014F new contracts to support revenue visibility Strong 2013-15F earnings CAGR of 32% Diversification into property and precast ahead for margin improvement Initiate BUY with TP Rp1,750, implying 2014F PE of 16.1x PTPP IJ BUY Target Price Rp 1,750 Current Price Rp 1,320 Upside (downside) 32% Share Performance 3 M 6 M 12 M Absolute (%) 13.8-10.8 50.0 Relative to JCI (%) 15.0-6.1 49.0 52-WK range (Rp) 830 1,780 Price Chart 220 200 180 160 140 120 100 80 16-Jan 16-Apr 16-Jul 16-Oct 16-Jan JCI PTPP Source: Bloomberg Share Data Out shares (m) 4,842 Market Cap (US$ m) 527.2 6 M avg. daily (US$) 3,115,799 Shareholder information Government of Indonesia 51. Employees Cooperative 6.1% Free float 42.9% PTPP has greater revenue visibility than its peers, given its high level of 2013F carry-over and 2014F new contracts. Increasing projects from private, SOEs and government as well as the realization of MP3EI projects should bring its 2014 new contracts to Rp23tn, +15% yoy, translating to a robust 2013-15F earnings CAGR of 32%. Further diversification into property projects and precast plants should also pave the way for margin improvement going forward. Initiate with BUY and TP of Rp1,750/share. Highest revenue visibility For 10M13, PTPP reported new contracts worth Rp13.9tn, with major contributions from buildings (64%), roads & bridges (15%), and EPCs (15%), respectively. This should support our 2013 new contracts target for PTPP of Rp20tn. Our 2014 top-line estimate of Rp12tn, on the other hand, should be helped by the estimated 2013 carry-over of a high Rp19.6tn. Combined with our 2014 new contracts estimate of Rp23tn, we believe PTPP has the highest 2014F revenue visibility among its peers. 2013-15F earnings CAGR of 32% Strong 2012-13F new contracts should support continued significant earnings growth, translating to 32% CAGR in 2013-15F. We estimate PTPP will book 2014 top line of Rp14.7tn, +23% yoy, with major contribution from construction service and EPC (97.6%), and the remainder from property/realty. At the bottom line, we estimate PTPP will Rp527bn in 2014F, +28% yoy, translating into an improved net margin of 3.6% (2013F: 3.4%). Diversification to support margin improvement ahead Supported by a strong track record in high-rise/residential development, PTPP plans to venture further into the property business. In 2014-15, PTPP will launch several property projects, with the aim of booking Rp1tn marketing sales, double the 2012 level. For the pre-cast division, PTPP will consolidate revenue from the pre-cast plant (located in Bojonegara, Banten, with estimated annual revenue of Rp500bn,) to its 2014 top line, following the recent acquisition of an affiliated company, PTPP Dirganeka. The property and pre-cast divisions generate higher gross margins (at 17-3 and 10-15%, respectively), and thus should support the company s margin improvement story going forward. Strongest 2014F earnings growth; initiate with BUY We expect PTPP to book the strongest 2014F earnings growth (28%) in the sector (16.3%), given sustainable growth through contract acquisition. We initiate coverage with a BUY rating and a TP of Rp1,750/share, translating to 2014F PE of 16.1x, a 1 discount to the sector s (excluding JKON) 17.9x. Key Financial 2012 2013F 2014F 2015F Revenue and sales (Rp bn) 8,004 12,020 14,752 18,052 Gross Profit (Rp bn) 855 1,208 1,511 1,852 Operating Profit (Rp bn) 853 1,174 1,483 1,843 Net Income (Rp bn) 310 412 527 712 EPS (Rp) 64 85 109 147 EPS Growth 29% 33% 28% 35% P/E (x) 20.6 15.5 12.1 9.0 P/BV (x) 3.9 3.2 2.7 2.2 EV/EBITDA (x) 5.2 9.1 7.2 5.7 ROE (%) 19% 21% 22% 24%, IndoPremier 21
Significant 10M13 new contracts of Rp13.9tn For 10M13, PTPP reported new contracts of Rp13.9tn, with major contributions from buildings (64%), roads & bridges (15%), and EPCs (15%), respectively. We believe PTPP will achieve our FY13 new contracts target of Rp20tn. This also means that PTPP should carry over Rp19.6tn worth of projects, thereby supporting 2014 revenue visibility. In 9M13, the company booked bigger contribution from the private sector, which accounted for 52% of total new contracts (FY12: 25%). Among the big projects that PTPP won in 2013 are EPC projects in Tanjung Uncang, Muara Tawar, and Bangkanai totaling Rp2tn; apartment/high-rise buildings in Surabaya, Makassar, Jakarta, Bali and Serpong totaling to Rp1.5tn; road projects in Java island and Timor Leste (Rp718bn); and airports (Rp641bn). We believe the company will maintain earnings growth over 2014-15 following its policy to lock in several key raw material requirements over a six-month period. Exhibit 1. New contracts, 2010-13F Exhibit 2. Source of contracts, FY10 9M13 Rptn 25.0 20.0 15.0 10.0 7.8 10.5 19.5 13.9 20.4 9 7 5 3 1 32% 68% 24% 76% 38% 62% 32% 68% 25% 75% 52% 48% 5.0 2008 2009 2010 2011 2012 9M 2013-2010 2011 2012 10M13 2013F SOE and Government Private, IndoPremier Exhibit 3. Revenue vs previous year carry-over, 2010-15F Exhibit 4. Big projects obtained in 2013 Rptn 25.0 20.0 15.0 10.0 5.0-2010 2011 2012 2013F 2014F 2015F Carry over - previous year Revenue Rp bn Tanjung Uncang - EPC 1,106 CNG Muara Tawar - EPC 462 Gas Turbine Power Plant 160 MW - Bangkanai (EPC) 461 Vida view apartment - Makassar 349 GTU Izzara apartment - Simatupang 345 Intermark apartments - Serpong 325 Pakuwon Supermall - Surabaya 247 Uluwatu Resort Hotel 267 Cikampek toll road 454 Gleno road - Tibar Timor Leste 264 Soekarno Hatta Airport Terminal 3 - Ultimate 641, IndoPremier 22
2013-15F earnings CAGR of 32% Strong 2012-13F new contracts should support continued significant earnings growth, translating to 32% CAGR in 2013-15F. We estimate PTPP will book 2014 new contracts of Rp23tn, +15% yoy, as well as Rp19.6tn in carry-over projects. This should help the company book 2014F top line of Rp14.7tn, +23% yoy. Construction should remain the major contributor to PTPP s 2014-15F revenue, making up of total revenue; EPC should contribute 17%. While property/realty contribution revenue should remain low in to 2014-15F, the company is targeting to launch several property projects during this period to bring revenue contribution to 19% by 2018. The strong 2014 revenue growth should spill over into the company s bottom line, which we estimate will reach Rp527bn, +28% yoy, translating into an improved net margin of 3.6%. Exhibit 5. Revenue breakdown, 2010 2015F Exhibit 6. Revenue & net margin 2011 15F 9 7 5 3 1 9% 17% 17% 17% 17% 97% 89% 82% 81% 2010 2011 2012 2013F 2014F 2015F Rp tn 20 18 16 14 12 10 8 6 4 2 0 3.9% 3.9% 3.9% 3.6% 3.4% 2011 2012 2013F 2014F 2015F Revenues Net Profit Margin 4.5% 4. 3.5% 3. 2.5% 2. Construction EPC Realty Property, IndoPremier, IndoPremier Property and pre-cast to support margin improvement PTTP has a track record in high-rise/residential development, and hopes to venture further into this business going forward. The property/real estate division comprising office, hotels, retail malls, and housing/apartments - currently contributes around 2% to 2013F revenue. Over 2014-15, PTPP will launch several property projects, with the aim of booking Rp1tn marketing sales, double the 2012 level. As for the pre-cast division, PTPP recently acquired affiliated PTPP Dirganeka, and will start consolidating revenue from the pre-cast plant (located in Bojonegara, Banten, with an estimated annual revenue of Rp500bn) to its 2014F top line. With their higher gross margins of 17-3 and 10-15%, the property and pre-cast divisions should help support the company s margin improvement story. Exhibit 7. Gross profit contribution, 2010-15F 95% 9% 4% 4% 5% 6% 6% 9 85% 14% 14% 14% 75% 91% 96% 7 65% 77% 81% 2010 2011 2012 2013F 2014F 2015F Construction EPC Realty/property, IndoPremier 23
VALUATION We value PTPP at Rp1,750/share. We derive our valuation using 10-year DCF with 4% terminal growth rate, 25% tax rate, and 13.5% WACC (12% kd and 15.7% ke). DCF Valuation 2014F 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F Rp mn 1 2 3 4 5 6 7 8 9 10 EBITDA 1,482,683 1,842,841 2,180,945 2,577,250 3,041,950 3,525,167 4,046,108 4,640,046 5,024,204 5,434,589 Tax (401,298) (542,260) (653,324) (778,755) (959,008) (1,115,394) (1,280,207) (1,468,178) (1,586,959) (1,713,468) NOPLAT 1,081,385 1,300,581 1,527,620 1,798,495 2,082,942 2,409,773 2,765,901 3,171,867 3,437,245 3,721,121 Depreciation 24,296 30,322 36,348 42,374 48,401 54,427 60,453 66,479 72,505 78,532 Changes in working capital (208,682) (312,176) (48,933) (831,911) (1,005,512) (977,684) (1,091,807) (1,241,745) (846,838) (908,681) Gross investments 896,998 1,018,728 1,515,035 1,008,958 1,125,831 1,486,516 1,734,547 1,996,602 2,662,913 2,890,972 Capex (261,458) (261,230) (261,241) (261,501) (261,818) (262,036) (262,281) (262,554) (262,861) (263,204) FCFF 635,540 757,498 1,253,794 747,456 864,013 1,224,480 1,472,267 1,734,047 2,400,052 2,627,768 Discount factor 0.881 0.777 0.685 0.604 0.532 0.469 0.413 0.364 0.321 0.283 PV 560,174 588,493 858,551 451,134 459,642 574,157 608,479 631,684 770,618 743,679 PV of terminal value 8,180,873 Total PV 11,098,866 Net Debt 2,640,039 Equity value 8,458,827 Number of shares 4,842 Fair value per share 1,750 Source: IndoPremier Key assumptions Our revenue growth rate assumptions are derived from the multiplier of nominal GDP growth, which we estimate at 3x 5x in 2014-15, 3-4x in the next three years, and then decline to around 1.5x 3x until 2023. Taking this into account, we estimate new contracts to grow by around 15% in 2014 and in 2015F, and then decrease by around 1 in 2023. Forecast assumption 2014F 2015F 2016F 2017F 2018F 2019F 2020F 2021F 2022F 2023F GDP Growth 5.3 5.3 5.5 5.5 5.5 5.5 5.5 5.5 5.5 5.5 Inflation 5.5 4.5 4.5 4.5 4.5 4.5 4.5 4.0 4.0 3.0 Growth multiplier (x nom GDP growth) Construction 4.00 4.00 3.00 3.00 3.00 2.50 2.50 2.50 1.50 1.50 EPC 4.00 4.00 3.00 3.00 3.00 2.50 2.50 2.50 1.50 1.50 Realty 5.00 5.00 3.00 3.00 3.00 2.50 2.50 2.50 1.50 1.50 Property 8.28 5.97 3.45 3.56 3.53 2.94 2.94 2.84 1.70 1.64 Gross profit margin Construction 10.2% 10.2% 10.2% 10.2% 10.2% 10.3% 10.3% 10.3% 10.3% 10.3% EPC 8.5% 8.5% 8.5% 8.5% 8.5% 8.7% 8.7% 8.7% 8.7% 8.7% Realty 35. 35. 35. 35. 35. 33.5% 33.5% 33.5% 33.5% 33.5% Property 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% 17.5% Source: IndoPremier Sensitivity analysis Every 1% change in our WACC assumptions results in a 18-22% change in our fair value for the company. For terminal growth, every 1% change in our terminal growth assumption impacts our fair value by 10-12%. WACC sensitivity Terminal growth 12.5% 13.5% 14.5% 3% 4% 4% Fair value 2,137 1,750 1,442 1,571 1,750 1,965 PE 2014F 19.6 16.1 13.2 14.4 16.1 18.0 PE 2015F 14.5 11.9 9.8 10.7 11.9 13.4 Source: IndoPremier 24
Risks Risks to our valuation include: (i) slower-than-expected revenue realization from new contracts and carried-over projects; (ii) increasing impairment allowance, which would curb earnings growth; (iii) worsening macro-economic conditions, and (iv) increasing competition, which would lead to lower profitability. Exhibit 8. EPC projects Exhibit 9. EPC projects Exhibit 10. Kalibaru Port, a big project obtained in 2012 Exhibit 11. Airport projects obtained by PTPP Rpbn Kualanamu airport - Medan 283 Sultan Taha airport - Jambi 96 Sepinggan airport - Balikpapan 335 Pontianak airport 47 Ngurah Rai airport - Bali 391 Juata Tarakan - Samarinda 22 Exhibit 12. Property projects Exhibit 13. Property project 25
Financial Summary Profit and Loss Balance Sheet Year to 31 Dec (Rp bn) 2012A 2013F 2014F 2015F Year to 31 Dec (Rp bn) 2012A 2013F 2014F 2015F Revenue and sales 8,004 12,020 14,752 18,052 Cash 1,303 923 723 799 COGS 7,149 10,812 13,241 16,199 Receivables 4,323 7,064 8,265 9,620 Gross profit 855 1,208 1,511 1,852 Inventories 1,566 2,368 2,539 2,885 Operating income 853 1,174 1,483 1,843 Investments 223 308 327 346 Interest expense -214-260 -362-354 Fixed assets 273 655 880 1,100 Impairment expense -91-176 -174-203 Other 863 1,151 1,436 1,835 EBT 545 725 929 1,255 Total assets 8,551 12,469 14,171 16,585 Tax -236-313 -401-542 Payables 4,527 6,071 7,445 9,141 EAT 310 412 527 712 Bank loans 1,116 2,093 2,062 2,519 Non-controlling interest 0 0 0 0 MTN 680 770 530 - Net profit 310 412 527 712 Shareholders' equity 1,656 1,975 2,378 2,933 Non-controlling interest 0 0 0 0 Other 573 860 1,056 1,292 Total liabilities & equity 8,551 11,769 13,471 15,885 Cash Flow Key Metrics Year to 31 Dec (Rp bn) 2012A 2013F 2014F 2015F Year to 31 Dec 2012A 2013F 2014F 2015F Net income 310 412 527 712 Profitability Depreciation 7 18 24 30 EBITDA margin 10.7 9.9 10. 10. Non-cash adjustments 0 0 0 0 Pre-tax margin 6. 6.0 6.3 7.0 Net interest effect 195 247 347 343 Net margin 3.9 3. 3. 3.9 Changes in net working capital -641-2,198-209 -312 ROA 3. 3.3 3.7 4.3 CFO -128-1,522 690 773 ROE 18.7 20. 22. 24.3 Capex -72-450 -260-260 Change in non-current assets 0-3 -1-1 Interest income 18 13 15 11 Growth CFI -54-440 -246-250 Revenue and sales 28. 50. 22.7 22. Debts 402 1,068-271 -73 EBITDA 29. 38. 26. 24.3 Equity issuance -7 - - - Pre-tax profit 30.3 32.9 28.1 35.1 Interest expenses -214-260 -362-354 Net profit 28.9 32.9 28.1 35.1 Dividends -72-93 -123-158 EPS 28.9 32.9 28.1 35.1 Other 71 867 114 137 CFF 180 1,581-643 -448 Leverage Cash flow -3-380 -200 75 Debt to asset 21.0 28. 23. 19. Beginning cash balance 1,306 1,303 923 723 Debt to equity 108. 180.5 138. 109. Ending cash balance 1,303 923 723 799 Net debt/(cash) to equity 29.7 133.7 108.0 82.5 Interest cover (x) 4 4.6 4.2 5.3, IndoPremier 26