Corporate Result Flash Adhi Karya - Bahana

2Q11 performance
§ Despite robust growth of 675% q-q, ADHI booked unexciting 2Q11 net profit of IDR19b, bringing 1H11 net profit to just IDR22b (-6.3% y-y). Although 1H11 earnings accounted for only 11.3% of our and consensus FY11 estimates, it was in line with expectation due to the cyclicality of the industry. Likewise, ADHI’s 1H10 earnings accounted for 12% of FY10 earnings. We believe that ADHI is likely to post better results in the subsequent quarters.
§ On a positive note, 2Q11 operating profit jumped 113.8% q-q to IDR70b, translating 1H11 earnings of IDR103b (+36.4% y-y), in line with our and consensus estimates. Higher operating profit in 2Q11 stemmed from accelerated project delivery and higher operating efficiency, leading to improvement in margins to 5.8% from 5.2% in 1Q11.
§ On the top line, 2Q11 revenue of 1.2t (+92% y-y) remained insufficient to propel 1H11 revenue, booking IDR1.8t (-1.9% y-y).

Outlook
While 2Q11 earnings were far from stellar, we expect acceleration on the realization book orders to support improvement in the following quarters. Nevertheless, we plan to revisit our numbers to account for possible slower than expected projects completion. It is worth highlighting that while downward revision on ADHI’s 2011 revenue may unfold.

Valuation and recommendation
While we roll over our valuation to 2012, we maintain our TP of ADHI at IDR970, translating to an implied P/E of 7.8x, 51% discount to the regional PE of 15.9x. Despite unexciting earnings performance, ADHI’s undemanding valuation has encouraged us to retain our BUY rating on the counter.