Indonesian Industrial Estate Companies in Focus: Puradelta Lestari
One of Indonesia's leading industrial estate developers, Puradelta Lestari, could see its sales rise on the back of Indonesia's tax amnesty program and the improving domestic economy. According to CIMB Securities, the company has three strengths that will enable it to see higher sales and profit in the years ahead: (1) the strategic location of its industrial estate Kota Deltamas, (2) having the biggest land banks at its disposal, and (3) strong internal cash reserves.
Kota Deltamas, located some 40 kilometers away from Indonesia's capital city of Jakarta, is an integrated industrial city on a total area of 3,000 hectares. Some 431 hectares are for sale on the market. Moreover, the surroundings of this estate are supported by a well-developed infrastructure network and located strategically near the Tanjung Priok port (more strategically compared to other industrial estates in West Java). CIMB Securities adds that a new toll road is being constructed in the area that will improve connectivity further.
Total internal cash reserves of Puradelta Lestari are estimated at IDR 1.1 trillion (approx. USD $84 million), while the company has no debt. This makes it much easier for the company to obtain fresh funds (for example bank loans) for further business expansion.
Another positive factor for Puradelta Lestari is expectation that various businesses will need to relocate from North Jakarta as their hak guna bangunan (HGB) - or the right to construct buildings on land that is not owned by the person or entity constructing such buildings - will expire. It is estimated that some 690 hectares of industrial HGB land is to expire soon. Furthermore, based on Regional Regulation No. 1/2014 on Detailed Spatial Planning and Zoning Regulations, all local industries in Jakarta have to be (re)located to designated industrial zones - for example Kota Deltamas - before 1 January 2017. However, Jakarta Governor Basuki Tjahaja Purnama (Ahok) is expected to extend the deadline to the end of 2019. Still, it would mean that various companies will leave Jakarta and need to relocate to a nearby industrial estate in the foreseeable future.
Expectation of improving macroeconomic growth in Indonesia is also a positive matter as this will attract new investors who require industrial land. Indonesia, with its growing middle class and abundant natural resources remains an attractive investment destination, particularly if economic growth starts to accelerate again and the government's efforts to enhance the investment climate bear fruit. Indonesia's GDP growth is expected to recover modestly to 5.1 percent (y/y) in 2016 from 4.8 percent (y/y) in 2015 (which constituted a six-year low growth pace).
CIMB Securities advises traders to invest in Puradelta Lestari. The securities company set its target price for Puradelta Lestari shares at 300 a piece. On Thursday's trading day (21/07) shares of the company did not change, remaining at IDR 252 per share. So far this year, shares of Puradelta Lestari have climbed 17.21 percent.
Stock Quote Puradelta Lestari - DMAS:
In the first half of 2016 Puradelta Lestari sold 10.4 hectares of industrial land, implying it is not on track to meet the target of selling 50 hectares of land in full-year 2016. However, the company is currently in negotiations with several automotive players regarding the expansion of these automotive players' industrial land. It involves some 37 hectares and if negotiations are completed successfully, then Puradelta Lestari would be back on track in terms of its 2016 industrial land sales target.
Earlier, Hongky Jeffry, President Director of Puradelta Lestari, said the company has been engaged in negotiations with five foreign investors for the sale of industrial estate at Puradelta Lestari's Greenland International Industrial Center in Kota Deltamas. Negotiations with two of these investors - both related to the automotive industry - are approaching the final phase. Jeffry stated that if all negotiations are completed successfully, then the company will surpass its sales target this year.
Puradelta Lestari is the largest industrial estate developer that is listed on the Indonesia Stock Exchange. It conducted an initial public offering (IPO) in the first half of 2015.
Future Forecast Puradelta Lestari's Financial Highlights:
| 2014 | 2015 | 2016F | 2017F | 2018F | |
| Revenues | 1,538.0 | 2,286.0 | 1,764.0 | 1,931.0 | 2,234.0 |
| Net Income | 1,020.0 | 1,342.0 | 1,060.0 | 1,157.0 | 1,336.0 |
| P/E Ratio (x) |
10.25 | 7.65 | 11.33 | 10.08 | 8.62 |
| P/BV (x) | 1.55 | 1.54 | 1.45 | 1.31 | 1.18 |
| ROE | 16.30 | 20.20 | 13.20 | 13.60 | 14.40 |
in billion IDR rupiah unless otherwise stated
Source: CIMB Securities (21/07/2016)