IPCM IJ - MNC Sekuritas Initiation Report 28 April 2021

PT Jasa Armada Indonesia Tbk (IPCM IJ)

Port Industry

The Integration Journey

One of the Largest Integrated Towage Services in Indonesia

PT Jasa Armada Indonesia Tbk (IPCM IJ), a subsidiary of Pelindo II, is an Indonesia-based shipping company primarily engages in providing marine services. IPCM has 87 vessels consist of tugboats, pilotboats and mooringboats. IPCM also provides other services, such as: 1) River transportation; 2) Canal to the nearest port; and 3) Offshore Ship-to-Ship (STS) Oil & Gas services. IPCM became only tugboat operator at a SOE-owned port that is connected to 11 ports under Pelindo II from major parts of Sumatera, Jakarta, West Java to West Kalimantan with high traffic.

Huge Potential Growth deriving from Infrastructure and Captive Market

• The government has started to build Patimban port, which is located in Subang area, West Java, connected to an industrial area. This port has capacity of 7.5 million TEU/year. The Patimban project has an investment value of IDR43.22 trillion with the aim of reducing the over capacity of Tj.Priok Port and optimizing economic potential in West Java region. IPCM has obtained a permit to carry out towage and piloting services in Patimban Port by the Ministry of Transportation in November 2020. The Car Terminal is planned to have a capacity of up to 600,000 vehicles per year in its ultimate condition, while the future container terminals are designed to accommodate up to 7 million TEUs.
•  IPCM has recently obtained contracts from PT Jawa Satu Power, PLTU Kanci I and PLTU Kanci II (Cirebon) in providing towage and piloting services. The two PLTUs are planned to start operating commercially in FY22F. Tersus PT Jawa Satu Power is one of the largest gas and steam power plants in Southeast Asia, with a capacity of 170,000m3 Floating Storage Regasification Unit (FSRU) and the largest Gas and Steam Power Plant (PLTGU) in Southeast Asia with a capacity of 1,760 Mega Watt (MW). On the other hand, most of the coal miners have transportation problems because of the difficulty in land acquisition permits makes coal miners do not own docks. IPCM controls large docks in Sumatra and Kalimantan and has the potential to take advantage of this dominance to provide an integrated maritime services across the country as well as supporting export businesses.

Will the Pelindo merger provide benefits for IPCM?

The merger scheme of Pelindo I-IV is still being studied by the Ministry of SOE. There is no valid disclosure of information on this issue. However investors are mostly showing a positive response to the companies with M&A momentum. Several examples, BRIS IJ, ANTM IJ and TINS IJ gain significant pace in the last 6 months, supported by M&A stories.

Main Business Risk

The Company acknowledges several main risks in conducting its business, including: 1) Setback in global recovery from a persistent pandemic; 2) Known & unforeseen operational risks.

Recommendation BUY for IPCM with Target Price of IDR380

We initiate BUY for IPCM IJ with a target price of IDR380, which implied PBV FY21E/FY22F at 1.66x/1.57x. Even though IPCM maintains a moderate growth, we still hope that Patimban and TUKS and Tersus (private terminals) can contribute more to IPCM's net profit, supported by the efficiency of several of IPCM's financial posts.

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