Indonesia logistics - Analyzing FMCG logistics addressable market
We believe Indonesia’s logistics market is a potentially lucrative segment that is still underpenetrated.
Other Industies JT GH 479 15th Oct, 2024
We cut 2024F/2025F earnings by 7.2%/3.4%; slightly cut TP to IDR1,900
We trim our 2024F/2025F earnings estimates for AKRA by 7.2%/3.4% due to unfavorable general market conditions such as the drop in PMI, and the sluggish coal production due to weather-related events. Also, coal production as of 3Q24 grew only by +0.6% y-y while prices declined by -9%. We believe this could put some short-term pressure on AKRA’s trading business. However, 2025F will likely present tailwinds for the company, namely from the: 1) increase in utilities revenues as more tenants start operating plants, thus reduce earnings volatility in the future; 2) additional trading infrastructure (which could thus increase efficiency and volume); and 3) benefits from the government’s target to reduce subsidy.
Unfavorable general market and coal production conditions
Indonesia's PMI fell below 50 for three consecutive months in 3Q24, signaling short-term weakness, impacting AKRA’s main markets (transport, logistics, and general markets), which constitutes around 40-50% of its total volume, and potentially affecting margins and volume. The coal market has been constrained by heavy rains, which affected production, according to our industry survey, with production in 3Q24 growing just +0.6% y-y (vs a FY24 target of +19% y-y vs 775mt in 2023 to 920mt).
Yet, 2025F may record tailwinds from JIIPE, infrastructure improvement and regulation to reduce subsidy
We expect utilities revenue at JIIPE (Java Integrated Industrial and Port Estate, unlisted) to grow from IDR188bn in 2024F to IDR2.1tn in 2025F, with gross profit reaching IDR267bn (around 6-7% of consolidated gross profit). One of AKRA’s investments is in the tanks business – where AKRA aims to increase capacity further by +10% by 2025F, which we deem positive as this could increase volume and increase efficiency. The government’s target to reduce subsidy may also present an opportunity for AKRA to supply to the previously subsidized market.
Still in a sweet spot for long-term mining and industrial estate; maintain Buy
We believe AKRA is still in well positioned to benefit from the growth of downstream and the industrialization of Indonesia through its robust infrastructure and solid industrial estate business model. AKRA has also been consistently paying dividend, and we expect a payout of 80% in both 2024F/2025F and yield of 7.1%/7.7%. Our new TP of IDR1,900 continues to be based on SOTP methodology (see Fig. 7). The stock currently trades at 10.6x FY25F P/E.
Income statement (IDRbn) | |||||||||||||||||||
Year-end 31 Dec | FY22 | FY23 | FY24F | FY25F | FY26F | ||||||||||||||
Revenue | 47,540 | 42,087 | 40,967 | 44,770 | 47,701 | ||||||||||||||
Cost of goods sold | -43,288 | -37,613 | -36,971 | -40,311 | -42,911 | ||||||||||||||
Gross profit | 4,252 | 4,473 | 3,995 | 4,459 | 4,790 | ||||||||||||||
SG&A | -1,166 | -823 | -901 | -985 | -1,049 | ||||||||||||||
Employee share expense | |||||||||||||||||||
Operating profit | 3,087 | 3,651 | 3,094 | 3,474 | 3,741 | ||||||||||||||
EBITDA | 3,479 | 3,841 | 3,564 | 3,975 | 4,275 | ||||||||||||||
Depreciation | -393 | -190 | -470 | -501 | -535 | ||||||||||||||
Amortisation | |||||||||||||||||||
EBIT | 3,087 | 3,651 | 3,094 | 3,474 | 3,741 | ||||||||||||||
Net interest expense | -8 | 128 | 219 | 123 | 158 | ||||||||||||||
Associates & JCEs | |||||||||||||||||||
Other income | 7 | -91 | 35 | 35 | 35 | ||||||||||||||
Earnings before tax | 3,086 | 3,687 | 3,347 | 3,631 | 3,933 | ||||||||||||||
Income tax | -545 | -589 | -502 | -545 | -590 | ||||||||||||||
Net profit after tax | 2,541 | 3,098 | 2,845 | 3,086 | 3,343 | ||||||||||||||
Minority interests | -76 | -298 | -167 | -182 | -197 | ||||||||||||||
Other items | |||||||||||||||||||
Preferred dividends | |||||||||||||||||||
Normalised NPAT | 2,465 | 2,800 | 2,678 | 2,905 | 3,147 | ||||||||||||||
Extraordinary items | |||||||||||||||||||
Reported NPAT | 2,465 | 2,800 | 2,678 | 2,905 | 3,147 | ||||||||||||||
Dividends | -829 | -2,467 | -2,142 | -2,324 | -2,517 | ||||||||||||||
Transfer to reserves | 1,636 | 333 | 536 | 581 | 629 | ||||||||||||||
Valuations and ratios | |||||||||||||||||||
Reported P/E (x) | 12.5 | 10.8 | 11.3 | 10.4 | 9.6 | ||||||||||||||
Normalised P/E (x) | 12.5 | 10.8 | 11.3 | 10.4 | 9.6 | ||||||||||||||
FD normalised P/E (x) | 12.7 | 11.0 | 11.5 | 10.6 | 9.6 | ||||||||||||||
Dividend yield (%) | 2.7 | 8.1 | 7.1 | 7.7 | 8.2 | ||||||||||||||
Price/cashflow (x) | 11.9 | 8.8 | 7.5 | 7.4 | 6.7 | ||||||||||||||
Price/book (x) | 2.8 | 2.7 | 2.6 | 2.4 | 2.4 | ||||||||||||||
EV/EBITDA (x) | 9.1 | 8.2 | 8.4 | 7.2 | 6.3 | ||||||||||||||
EV/EBIT (x) | 10.2 | 8.7 | 9.7 | 8.2 | 7.2 | ||||||||||||||
Gross margin (%) | 8.9 | 10.6 | 9.8 | 10.0 | 10.0 | ||||||||||||||
EBITDA margin (%) | 7.3 | 9.1 | 8.7 | 8.9 | 9.0 | ||||||||||||||
EBIT margin (%) | 6.5 | 8.7 | 7.6 | 7.8 | 7.8 | ||||||||||||||
Net margin (%) | 5.2 | 6.7 | 6.5 | 6.5 | 6.6 | ||||||||||||||
Effective tax rate (%) | 17.7 | 16.0 | 15.0 | 15.0 | 15.0 | ||||||||||||||
Dividend payout (%) | 33.6 | 88.1 | 80.0 | 80.0 | 80.0 | ||||||||||||||
ROE (%) | 24.3 | 25.2 | 23.2 | 24.0 | 24.8 | ||||||||||||||
ROA (pretax %) | 14.1 | 15.7 | 13.0 | 14.2 | 14.5 | ||||||||||||||
Growth (%) | |||||||||||||||||||
Revenue | 84.9 | -11.5 | -2.7 | 9.3 | 6.5 | ||||||||||||||
EBITDA | 97.9 | 10.4 | -7.2 | 11.5 | 7.6 | ||||||||||||||
Normalised EPS | 113.5 | 15.1 | -4.4 | 8.5 | 8.3 | ||||||||||||||
Normalised FDEPS | 110.7 | 15.1 | -4.4 | 8.5 | 10.2 | ||||||||||||||
Source: Company data, Verdhana estimates |
Cashflow statement (IDRbn) | |||||||||||||||||||
Year-end 31 Dec | FY22 | FY23 | FY24F | FY25F | FY26F | ||||||||||||||
EBITDA | 3,479 | 3,841 | 3,564 | 3,975 | 4,275 | ||||||||||||||
Change in working capital | -158 | 633 | 986 | 753 | 857 | ||||||||||||||
Other operating cashflow | -692 | -971 | -417 | -569 | -594 | ||||||||||||||
Cashflow from operations | 2,629 | 3,502 | 4,133 | 4,158 | 4,538 | ||||||||||||||
Capital expenditure | -411 | -660 | -331 | -435 | -472 | ||||||||||||||
Free cashflow | 2,218 | 2,842 | 3,802 | 3,723 | 4,066 | ||||||||||||||
Reduction in investments | -16 | -29 | 0 | 0 | 0 | ||||||||||||||
Net acquisitions | |||||||||||||||||||
Dec in other LT assets | |||||||||||||||||||
Inc in other LT liabilities | |||||||||||||||||||
Adjustments | 409 | 33 | 0 | 0 | 0 | ||||||||||||||
CF after investing acts | 2,611 | 2,846 | 3,802 | 3,723 | 4,066 | ||||||||||||||
Cash dividends | -829 | -2,467 | -2,142 | -2,324 | -2,517 | ||||||||||||||
Equity issue | |||||||||||||||||||
Debt issue | -9 | 1,584 | 0 | 0 | 0 | ||||||||||||||
Convertible debt issue | |||||||||||||||||||
Others | -36 | 235 | -257 | 214 | 228 | ||||||||||||||
CF from financial acts | -873 | -648 | -2,399 | -2,110 | -2,290 | ||||||||||||||
Net cashflow | 1,737 | 2,198 | 1,403 | 1,613 | 1,776 | ||||||||||||||
Beginning cash | 2,600 | 4,338 | 6,536 | 7,939 | 9,552 | ||||||||||||||
Ending cash | 4,338 | 6,536 | 7,939 | 9,552 | 11,329 | ||||||||||||||
Ending net debt | -1,374 | -1,987 | -3,390 | -5,004 | -6,780 | ||||||||||||||
Balance sheet (IDRbn) | |||||||||||||||||||
As at 31 Dec | FY22 | FY23 | FY24F | FY25F | FY26F | ||||||||||||||
Cash & equivalents | 4,338 | 6,536 | 7,939 | 9,552 | 11,329 | ||||||||||||||
Marketable securities | |||||||||||||||||||
Accounts receivable | 6,020 | 6,460 | 6,698 | 7,767 | 8,753 | ||||||||||||||
Inventories | 5,221 | 4,754 | 4,673 | 5,095 | 5,424 | ||||||||||||||
Other current assets | 262 | 371 | 371 | 371 | 371 | ||||||||||||||
Total current assets | 15,841 | 18,121 | 19,680 | 22,785 | 25,876 | ||||||||||||||
LT investments | 417 | 446 | 446 | 446 | 446 | ||||||||||||||
Fixed assets | 4,997 | 5,466 | 5,329 | 5,264 | 5,202 | ||||||||||||||
Goodwill | |||||||||||||||||||
Other intangible assets | |||||||||||||||||||
Other LT assets | 5,932 | 6,221 | 6,221 | 6,221 | 6,221 | ||||||||||||||
Total assets | 27,188 | 30,255 | 31,676 | 34,716 | 37,745 | ||||||||||||||
Short-term debt | 556 | 1,094 | 1,094 | 1,094 | 1,094 | ||||||||||||||
Accounts payable | 9,662 | 10,319 | 11,461 | 13,706 | 15,877 | ||||||||||||||
Other current liabilities | 1,062 | 1,120 | 1,120 | 1,120 | 1,120 | ||||||||||||||
Total current liabilities | 11,280 | 12,533 | 13,676 | 15,920 | 18,092 | ||||||||||||||
Long-term debt | 2,408 | 3,454 | 3,454 | 3,454 | 3,454 | ||||||||||||||
Convertible debt | |||||||||||||||||||
Other LT liabilities | 344 | 224 | 224 | 224 | 224 | ||||||||||||||
Total liabilities | 14,033 | 16,212 | 17,354 | 19,599 | 21,770 | ||||||||||||||
Minority interest | 2,186 | 2,780 | 2,524 | 2,738 | 2,966 | ||||||||||||||
Preferred stock | |||||||||||||||||||
Common stock | 1,689 | 1,689 | 1,689 | 1,689 | 1,689 | ||||||||||||||
Retained earnings | 9,094 | 9,397 | 9,932 | 10,513 | 11,142 | ||||||||||||||
Proposed dividends | |||||||||||||||||||
Other equity and reserves | 186 | 177 | 177 | 177 | 177 | ||||||||||||||
Total shareholders' equity | 10,969 | 11,263 | 11,798 | 12,379 | 13,009 | ||||||||||||||
Total equity & liabilities | 27,188 | 30,255 | 31,676 | 34,716 | 37,744 | ||||||||||||||
Liquidity (x) | |||||||||||||||||||
Current ratio | 1.40 | 1.45 | 1.44 | 1.43 | 1.43 | ||||||||||||||
Interest cover | 379.3 | – | – | – | – | ||||||||||||||
Leverage | |||||||||||||||||||
Net debt/EBITDA (x) | net cash | net cash | net cash | net cash | net cash | ||||||||||||||
Net debt/equity (%) | net cash | net cash | net cash | net cash | net cash | ||||||||||||||
Per share | |||||||||||||||||||
Reported EPS (IDR) | 123.23 | 141.87 | 135.67 | 147.18 | 159.42 | ||||||||||||||
Norm EPS (IDR) | 123.23 | 141.87 | 135.67 | 147.18 | 159.42 | ||||||||||||||
FD norm EPS (IDR) | 121.20 | 139.50 | 133.40 | 144.72 | 159.42 | ||||||||||||||
BVPS (IDR) | 555.75 | 570.63 | 597.76 | 627.20 | 648.05 | ||||||||||||||
DPS (IDR) | 42.00 | 125.00 | 108.54 | 117.74 | 125.40 | ||||||||||||||
Activity (days) | |||||||||||||||||||
Days receivable | 40.4 | 54.1 | 58.8 | 59.0 | 63.2 | ||||||||||||||
Days inventory | 41.0 | 48.4 | 46.7 | 44.2 | 44.7 | ||||||||||||||
Days payable | 74.6 | 96.9 | 107.8 | 113.9 | 125.8 | ||||||||||||||
Cash cycle | 6.8 | 5.6 | -2.4 | -10.7 | -17.9 | ||||||||||||||
Source: Company data, Verdhana estimates |
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.
GENERAL DISCLOSURE/DISCLAIMER
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Rating Remains | Buy |
Target price Reduced from IDR 2,100 | IDR 1,900 |
Closing price 14 October 2024 | IDR 1,535 |
Implied upside | +23.8% |
Market Cap (USD mn) | 1,980.9 |
ADT (USD mn) | 2.9 |
Source: LSEG, Verdhana
Jupriadi Tan (jupriadi.tan@verdhana.id)
Gerald Hugo (gerald.hugo@verdhana.id)