<b>Kim Eng - AKRA: Beneficiary of oil price hike</b>
Stronger FY11 result has been anticipated. AKR reported strong core net profit growth of 97% YoY to Rp611b, and revenue growth of 82% YoY to Rp18,806b. Both numbers were in line with our expectations. Higher revenue was supported by all division units, particularly petroleum distribution, which recorded 99.6% YoY revenue growth to Rp14.9t, and chemical distribution, where revenues were up 36.9% YoY to Rp2.65t. Sales volumes of both divisions grew by 50% YoY and 9% YoY to 2m KL and 1.24m MT respectively.
<b>Eyeing better petroleum distribution sales amid higher oil prices.</b>
We foresee that revenues at the petroleum distribution unit will be better this year amid higher oil prices. Up to end-March 2012, the average price of crude oil was US$103 per barrel or 10% above the average price in FY11 of US$95 per barrel. High crude oil prices (to the end of this year) would support AKR’s petroleum distribution sales. Based on our calculation, if crude oil prices (NYMEX) increase by 10%, sales and net profit will each increase by 7%.
<b>Revising ASP of petroleum distribution in anticipation of higher oil prices this year.</b>
We upgrade our revenue assumptions by 6% to Rp24.1t in FY12 and by 12% to Rp28.1t in FY13 as we raise the ASPs of the petroleum distribution to Rp7,500 per litre in FY12 and FY13 (from Rp7,000 per litre in FY12, and from Rp6,500 per litre in FY13), amid anticipated higher oil prices. Our assumptions for the petroleum distribution prices are based on a crude oil price of US$98 per barrel, below the 3M12 average of US$103 per barrel. Meanwhile, we maintain our sales volume growth assumptions of 26% for petroleum distribution to 2.5m KL this year, and 15% to 2.95m KL in FY13.
<b>Raising TP to Rp3,825, maintain HOLD.</b>
We raise our TP to Rp3,825 (from Rp3,600) in anticipation of higher oil prices. With the share price up 42% ytd, we believe the market has been too optimistic about AKR’s prospects. We are waiting for new catalysts to boost AKR’s earnings growth. Maintain HOLD.
<b>Kim Eng - WIKA: Applause for results breakthrough</b>
<b>Robust showing</b>. Wijaya Karya (WIKA) reported a 24% YoY increase in FY11 net profit to Rp354b on the back of a 29% YoY growth in revenue and robust 4Q11 results. While the top line was in line with our forecast, the bottom line beat our estimate by 7% and the consensus by 8%. Operating profit grew by 37% YoY to Rp654b, 15% above our estimate, due to higher-than-expected income from joint operation (JO).
<b>Bottom line surged 88%QoQ</b>. On a quarterly basis, net profit jumped 88% QoQ to Rp139b from Rp74b in 3Q11. Margins were up by 3-4ppts QoQ, thanks to 8% growth in revenue and just a 1ppt increase in COGS. The recovery of other income, from negative Rp44b to almost positive value, also supported the bottom line.
<b>Higher contribution from ME projects.</b> WIKA booked a new mechanical electrical (ME) project valued at Rp1.5t in FY11, surged by 381% YoY from previous year’s value of Rp312b. The distribution of ME projects to total order book also rose by 12ppts YoY in FY11. We expect a slower distribution growth of ME projects in the next two years, as the company turns its focus to vie for property projects that have seen a rise in number, thereby boosting its realty distribution to total order book.
<b>Margins maintained.</b> WIKA successfully kept its FY11 operating and net margins at the same level as last year’s – 8% and 5%, respectively. Nevertheless, we expect net margin to slip by 1ppt to 4% this year on account of higher-than-expected costs. In the past decade or so, Indonesian construction companies have found it difficult to raise their margins, typically booking a single-digit figure.
<b>Limited upside, downgrade to HOLD.</b> We adjust our assumptions and raise our FY12F-13F earnings by 5-9% to factor in the better-thanexpected FY11 results. Our TP thus goes up to Rp980 (from Rp820 previously), pegged at FY12F PER of 14.1x and EV/EBITDA of 5.6x. The new TP suggests an only 7.7% upside from the current level, thus we downgrade our call to HOLD on the counter.
- ► 2014 (7)
- ► 2013 (18)
- ▼ 2012 (80)
- ► 2011 (3338)