ADHI
Contact our analyst Revita
Significat upside
15th June 2020
Current price Rp 620
Target price Rp1230
15th June 2020
Current price Rp 620
Target price Rp1230
Targetting IDR35 Trillion New Contracts
ADHI is targeting new contracts in 2020 of IDR. 35 trillion with construction for infrastructure projects accounting for 85%, property 6,7%, Industry 4.7%, and Energy 3.8%. As of April 2020, IDR. 2,6 Trillion of new contracts were already booked or 7,4% of the initial target with April new contracts of IDR. 141 bn including the Covid hospital –UGM (IDR. 88 bn). In 2020, ADHI will focus on toll road projects such as Solo – Jogjakarta (in process of tender offer) and Ulujami – Jati Asih Toll road (in early development) and the Construction of a Drinking water supply sistem (SPAM) in Dumai. Large new contract projects which have been obtained up to April 2020 consist of MRT Jakarta North – South Phase 2 (IDR. 1.44 trillion), EPC early work Phase II (IDR. 556 bn), Probolinggo – Banyuwangi Toll road (IDR. 536.8 bn), Residential Gas construction (IDR. 142 bn), and the Interchange project in Sragen (IDR. 129.4 bn). We believe the corona virus outbreak may result in construction delays which will mean a more moderate growth in 2020. We estimate the total order book 2020 will reach IDR. 56 trillion or up 11% yoy.
ADHI is targeting new contracts in 2020 of IDR. 35 trillion with construction for infrastructure projects accounting for 85%, property 6,7%, Industry 4.7%, and Energy 3.8%. As of April 2020, IDR. 2,6 Trillion of new contracts were already booked or 7,4% of the initial target with April new contracts of IDR. 141 bn including the Covid hospital –UGM (IDR. 88 bn). In 2020, ADHI will focus on toll road projects such as Solo – Jogjakarta (in process of tender offer) and Ulujami – Jati Asih Toll road (in early development) and the Construction of a Drinking water supply sistem (SPAM) in Dumai. Large new contract projects which have been obtained up to April 2020 consist of MRT Jakarta North – South Phase 2 (IDR. 1.44 trillion), EPC early work Phase II (IDR. 556 bn), Probolinggo – Banyuwangi Toll road (IDR. 536.8 bn), Residential Gas construction (IDR. 142 bn), and the Interchange project in Sragen (IDR. 129.4 bn). We believe the corona virus outbreak may result in construction delays which will mean a more moderate growth in 2020. We estimate the total order book 2020 will reach IDR. 56 trillion or up 11% yoy.
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LRT JABODEBEK progress
Up to May 2020, LRT JABODEBEK progress has reached 71,2%. Out of 3 lines, Line 1 (Cawang – Cibubr) has reached 85,7%, line 2 Cawang – Kuningan – Dukuh Atas) has reached 65,9%, and line 3 (Cawang – Bekasi Timur ) has reached 64,8%. ADHI has received an LRT JABODEBEK Phase I interim payment of IDR. 8,9 trillion from 2018 - 2019 with IDR. 5,9 trillion in 2018 and IDR. 3 trillion in 2019.
Ensuring profitability
As of April 20, most new contract’s are still dominated by projects from government and SOEs that are lower risk. We therefore believe the burn rate will still be above the average 30% and this can help maintain the margin amid the current pandemic. We estimate the burn rate will be 32% in 2020 compared to 37.4% in 2019. The pandemic has affected the Share of profit from JVs which dragged down other income 69% yoy and resulted in a lower 1Q20 bottom by 81% yoy. But we still believe in 2020 that the bottom line will improve. We estimate net margin will average 3.6% in 2020-2021 compared to 4.3% in 2019.
Valuation: Significant upside
We estimate a Target price of IDR.1230/share, which is equal to a PER of 6,6x. With significant upside potential, our recommendation is BUY.
Up to May 2020, LRT JABODEBEK progress has reached 71,2%. Out of 3 lines, Line 1 (Cawang – Cibubr) has reached 85,7%, line 2 Cawang – Kuningan – Dukuh Atas) has reached 65,9%, and line 3 (Cawang – Bekasi Timur ) has reached 64,8%. ADHI has received an LRT JABODEBEK Phase I interim payment of IDR. 8,9 trillion from 2018 - 2019 with IDR. 5,9 trillion in 2018 and IDR. 3 trillion in 2019.
Ensuring profitability
As of April 20, most new contract’s are still dominated by projects from government and SOEs that are lower risk. We therefore believe the burn rate will still be above the average 30% and this can help maintain the margin amid the current pandemic. We estimate the burn rate will be 32% in 2020 compared to 37.4% in 2019. The pandemic has affected the Share of profit from JVs which dragged down other income 69% yoy and resulted in a lower 1Q20 bottom by 81% yoy. But we still believe in 2020 that the bottom line will improve. We estimate net margin will average 3.6% in 2020-2021 compared to 4.3% in 2019.
Valuation: Significant upside
We estimate a Target price of IDR.1230/share, which is equal to a PER of 6,6x. With significant upside potential, our recommendation is BUY.
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