Maintain BUY with higher TP of IDR3,000
Maybank Kimeng – We maintain our BUY rating on ADHI with higher TP of IDR3,000 (previously IDR2,700), stemming from an 8% increase in our earnings forecast, as we fully factored in contribution from the LRT. The recent Presidential Decree said ADHI will construct a total of 80km. On a separate note, management’s recent 2016 earnings guidance of IDR750b (+87% YoY) provides further upside to our forecast.
Clarification on “higher” investment value for LRT
Recent news of a higher LRT project value (IDR34t from IDR24t) is misleading. This is because the new IDR34t estimate includes Cibubur – Bogor in Phase 2, whereas the previous IDR24t estimate did not. The recent Presidential Decree said ADHI will construct a total 80km in Phases 1 and 2 combined, but the actual investment to be awarded on those lines has not changed. We expect official job awards to unfold in 1H16 after the Ministry of Public Transport receives the appraisal value from the 3rd party consultant.
Stronger order book imminent
Management recently guided IDR25.6t (+83% YoY) of new contract awards in 2016, with contribution likely to come from government projects (37%), the private segment (37%), and SOEs (26%). Focus will remain on the construction projects with upside likely to come from early tender implementation by the governmen.
Plenty of upside to our 2016 forecast
While we have raised our 2016 earnings forecast by 8% to IDR596b (+49 YoY), on the back of gradual contribution from the LRT projects, the recent IDR750b net profit guidance suggests upside to our projection. Discrepancy in 2016 net profit could come from 1) our assumptions on
LRT project delivery schedule and 2) higher contribution from non-LRT projects. We take a conservative approach and believe that significant contribution will only unfold in 2017F onwards.
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