PTPP
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40% upside. BUY
22nd September 2020
Price Rp835
Target price Rp1170
22nd September 2020
Price Rp835
Target price Rp1170
Contract target revised
PTPP has a new revised contract target of IDR. 25 trillion due to the impact of the covid 19 outbreak. As of July 2020, PTPP has booked total new contracts of IDR10,059 trillion which is 40% of their revised target. Major contracts come from construction 51%, EPC 36%, and others including from its subsidiary 13%. Based on project owner in 7M20, PTPP new contracts come from SOE 45%, Private 24%, and Government 31%. Despite the revision, PTPP will continue to operate in accordance with the PUPR health and safety standards. We are optimistic PTPP’s new 2020 target is achievable since the company has historically been able to deliver on targets. The EPC business has also proven able to quickly provide new contracts. PTPP will adjust budget reallocation so that cashflow is less affected, by selectively choosing which projects will be revenue drivers in 2020 and in 2021. With the new adjustment, we estimate revenue and net income 2020 will decline by -31% and -84% yoy.
Divestments on track
PTPP will divest 4 projects with a total divestment target in the range of IDR 1.4 trn – 1.6 trn. Of the four projects, one project has been completed, one project will be completed in early September, and two more will be completed by Dec 2020. PTPP is optimistic that the divestments will lead to financial improvements and can be used for construction work that will give a better return. Included are toll road projects Semarang – Demak, Manado Toll Road – Bitung and a Drinking Water (SPAM) project which is already under construction with a capacity of 2500 liters per second. The remainder are in the Property and Energy sectors.
Valuation: 40% upside
Based on our DCF valuation, we have a target price within one year of IDR.1170/share or trading at 9,53x PER. With 40% upside from our valuation, we maintain our recommendation, BUY.
PTPP has a new revised contract target of IDR. 25 trillion due to the impact of the covid 19 outbreak. As of July 2020, PTPP has booked total new contracts of IDR10,059 trillion which is 40% of their revised target. Major contracts come from construction 51%, EPC 36%, and others including from its subsidiary 13%. Based on project owner in 7M20, PTPP new contracts come from SOE 45%, Private 24%, and Government 31%. Despite the revision, PTPP will continue to operate in accordance with the PUPR health and safety standards. We are optimistic PTPP’s new 2020 target is achievable since the company has historically been able to deliver on targets. The EPC business has also proven able to quickly provide new contracts. PTPP will adjust budget reallocation so that cashflow is less affected, by selectively choosing which projects will be revenue drivers in 2020 and in 2021. With the new adjustment, we estimate revenue and net income 2020 will decline by -31% and -84% yoy.
Divestments on track
PTPP will divest 4 projects with a total divestment target in the range of IDR 1.4 trn – 1.6 trn. Of the four projects, one project has been completed, one project will be completed in early September, and two more will be completed by Dec 2020. PTPP is optimistic that the divestments will lead to financial improvements and can be used for construction work that will give a better return. Included are toll road projects Semarang – Demak, Manado Toll Road – Bitung and a Drinking Water (SPAM) project which is already under construction with a capacity of 2500 liters per second. The remainder are in the Property and Energy sectors.
Valuation: 40% upside
Based on our DCF valuation, we have a target price within one year of IDR.1170/share or trading at 9,53x PER. With 40% upside from our valuation, we maintain our recommendation, BUY.
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