AKRA’s share price has declined by -19% over the past three months, underperforming the JCI (-12%). This underperformance, according to the company, can be attributed to delays in land sales. In addition, consensus earnings estimate for 2025F has fallen by 14% in the past three months (see Fig. 3), which we believe has largely priced in the negatives. Looking forward, we see potential growth drivers from higher land sales in 2025F and increased fuel distribution volumes, supported by possible changes in the fuel subsidy policy. We note that company insiders – including controlling shareholders and directors – have resumed share buyback, according to IDX’s disclosure, with buybacks now already reaching 6% of the AKRA’s total shares (see Fig. 1). We view this as a positive and maintain our Buy rating on AKRA.

Land sales and utilities revenue potential

Land sales: AKRA has guided for 80-100 hectares of land sales in 2025E, a significant increase from the estimated 36-37 hectares in 2024E (see Fig. 4). This growth will likely be supported by Freeport Indonesia’s (unlisted) smelters, expected to be fully operational by 3Q25E, acting as a catalyst to attract additional tenants. Utilities revenue, which began to gain traction in 3Q24, should improve further as tenant operations ramp up. We estimate utilities will contribute 4-6% to AKRA’s gross profit in 2025F, compared to zero contribution in 2024F.

Fuel distribution: benefiting from reduced subsidies

The Indonesian government is planning to reform its fuel subsidy framework, particularly in the subsidized diesel market, to reduce subsidy expense in the government budget. This shift could provide opportunities for non-subsidized diesel distributors, such as Pertamina (unlisted) and AKRA – given the subsidized diesel market at 17mn kl is roughly similar in size to the non-subsidized diesel market at 18mn kl (see Fig. 2). Both Pertamina’s and AKRA’s strong infrastructure in fuel distribution could allow AKRA to capitalize on this policy change, driving volume growth in its fuel business.

Valuation appears attractive – maintain Buy

We like AKRA's strong moat in the distribution and industrial estate businesses, which should support its growth prospects. We believe AKRA is now trading at an attractive valuation of 8.8x 2025F P/E with ROE of 21%. Our TP of IDR1,700 is derived from the SOTP methodology. We value its trading and distribution business using a target FY25F P/E of 9x. Its manufacturing and logistics and utilities business is valued using DCF, assuming a WACC of 10% and terminal growth of 1%. The industrial estate business is valued using a discount to NAV of 30%, incorporating reduced earnings visibility in JIIPE (unlisted) and coal trading – though an eventual improvement in China’s outbound direct investment (ODI) is an upside risk. Downside risks to our view include: (1) lower-than-expected volume for its trading and distribution business and (2) unfavorable dynamics, with significant oil supply and lower commodity prices.

Fig. 1: Company insiders – including controlling shareholders and directors – have started buying back AKRA stock. The buyback has now reached 6% of the company’s total shares in just four years

Fig. 2: Subsidized diesel market is as big as non-subsidized – providing growth opportunities for non-subsidized diesel players should subsidized diesel market be reduced

Fig. 3: Consensus has cut earnings by -14%, but share price has dropped -19% in the past three months

Fig. 4: AKRA historical land sales achievement

Fig. 5: AKRA PE/ROE – now trading at -1x Std Dev 3-year PE/ROE

INVESTMENT RATINGS
A rating of ‘Buy’, indicates that the analyst expects the stock to outperform the Benchmark over the next 12 months. A rating of ‘Neutral’, indicates that the analyst expects the stock to perform in line with the Benchmark over the next 12 months. A rating of ‘Reduce’, indicates that the analyst expects the stock to underperform the Benchmark over the next 12 months. A rating of ‘Suspended’, indicates that the rating, target price, and estimates have been suspended temporarily to comply with applicable regulations and/or firm policies. Securities and/or companies that are labelled as ‘Not Rated’ or ‘No Rating’ are not in regular research coverage. Benchmark is Indonesia Composite Index (‘IDX Composite’). A ‘Target Price’, if discussed, indicates the analyst’s forecast for the share price with a 12-month time horizon, reflecting in part of the analyst’s estimates for the company’s earnings, and may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market in general. 

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Jupriadi Tan (jupriadi.tan@verdhana.id)

David Tjahjadi (david.tjahjadi@verdhana.id)

Gerald Hugo (gerald.hugo@verdhana.id)