Indonesian Companies in Focus: AKR Corporindo's Industrial Estate
AKR Corporindo, one of Indonesia's leading providers of integrated supply chain solutions and particularly known for being a petroleum and basic chemicals trader, can take advantage of a recent government decision that allows the company to construct power plants to supply energy to its tenants at its Java Integrated Industrial and Port Estate (JIIPE) in Gresik (East Java), one of the larger industrial estates in the archipelago. Through these future energy sales, AKR Corporindo is to generate additional income.
Being allowed to deliver electricity to its tenants is what makes the Java Integrated Industrial and Port Estate (JIIPE) rather unique in Indonesia (other examples are the industrial estates in Cikarang and Kawasan Industri Jababeka operated by competitors of AKR Corporindo). Previously, distribution of electricity was monopolized by Indonesia's state-owned enterprise Perusahaan Listrik Negara (PLN). However, the company fails to supply enough electricity to the people and businesses in Indonesia. One of issues that forms a concern to (foreign) investors is the shortage of electricity (evidenced by frequent blackouts). However, if the energy is generated by the operator of the industrial estate - in this case AKR Corporindo - then it may become more attractive for (potential) investors to locate their business at JIIPE. AKR Corporindo plans to build a gas-fired power plant with a capacity of 23 MW.
AKR Corporindo also teamed up with state-owned port operator Pelabuhan Indonesia III (Pelindo III) for the construction of a deep sea port at JIIPE, creating a fully integrated industrial estate. The port will also generate additional revenue in the future (moreover it causes prices of the existing land at JIIPE to rise). Freeport Indonesia is one of the companies that considers to buy land in JIIPE for the development of its copper concentrate smelter.
Another positive matter is that the Indonesian government has appointed JIIPE as the pilot project for its program that aims to ramp up of foreign investment in Indonesia. New investors in this industrial estate that fulfill certain requirements can enjoy a tax holiday and will not have to wait long for the completion of the permitting process.
Future Forecast AKR Corporindo's Financial Highlights:
| 2014 | 2015 | 2016F | 2017F | |
| Revenues | 22,468.3 | 19,764.8 | 18,501.0 | 22,948.0 |
| Operational Profit | 1,732.0 | 2,216.0 | 2,303.0 | 2,372.0 |
| Net Income | 810.1 | 1,033.6 | 1,255.0 | 1,409.0 |
| Earnings per Share¹ | 208 | 263 | 319 | 358 |
| P/E Ratio (x) | 29.5 | 16.3 | 14.1 | 10.8 |
in billion IDR rupiah unless otherwise stated
¹ in IDR rupiah
Source: Bahana Securities (14/07/2016)
Regarding the trading and distribution of fuel, AKR Corporindo is expected to sell 2.38 million tons of fuel in 2016, up from the realization of 2.19 million tons that were sold one year earlier. Meanwhile, the average selling price is estimated to fall to IDR 5,884.7 per liter, down from IDR 6,666 per liter last year as global crude prices have fallen over the past year. The lower price causes a lower profit margin for the company and this should also impact negatively on the company's net profit. However, the company is expected to sell more fuel this year because it expanded its network of fuel stations while it has also diversified the types of fuel on offer, adding RON92 to its catalogue. In 2016, AKR Corporindo targets to add up to 20 fuel stations.
Although Bahana Securities cut its price target for shares of AKR Corporindo from IDR 9,000 to IDR 8,000 a piece, it advises investors to buy the company's shares, particularly those investors that are focused on the longer term. On Thursday (14/07), AKR Corporindo's shares fell 0.38 percent to IDR 6,525 per share. So far this year, the company's shares have fallen 9.06 percent.
Stock Quote AKR Corporindo - AKRA: