Company Update

27 Juni 2019

KPIG - MNC Sekuritas Equity Report - NOT RATED 270619


Property Sector


Moving to the New Edge


1Q19 Results: Positive Start for a Progressive Year

KPIG recorded a 33.89% YoY increase in revenue, rising to IDR 249.33 billion in 1Q19 (vs IDR186.22 billion in 1Q18) amid the current slowdown in property sector. The increase was attributable from its recurring income segments. In which hotels, resorts and golf segment increased by 4.79% YoY, contributing 37.88% to total revenues, while Office space rental rose by 4.73% YoY. And security and other service segment inclined upward by 225.31% YoY. Meanwhile, from the non-recurring income namely apartment and other properties declined by 13.50% YoY, due to nation wide sluggish apartment take-up. Bottom line, KPIG was still able to maintain its margins, thanks to lower selling expenses and gain on revaluation on several assets. As a result, gross profit grew by 13.30% YoY, although down to a level of 40.38% (vs 47.71% in 1Q18). Furthermore, net profit margin settled to 3.04% (vs 3.81% in 1Q18) while net profit rose by just 6.98% YoY in 1Q19, to IDR7.59 billion. KPIG is expected to book stronger recurring income, as several developments in hotel segment have been or soon to be completed.


Boosting the recurring income: Lido Lake Resort was relaunched in 10M18

Lido Lake Resort, a KPIG property, has relaunched in 10M18 after massive renovation was completed over an area of 3.3 hectare and raising Lido Lake Resort's rating to that of a five-star hotel. With a total of 101 rooms available, Lido Lake Resort can reach a 50% occupancy rate in just 5 months from its relaunch with daily rate ranging from IDR800,000-900,000/night at the start. Strategically located between three provinces densely populated (West Java, Banten and DKI Jakarta), boosted KPIG management confidence to increase the total number of rooms to 226 by FY22F, with estimated Capex of around IDR250 billion for the extension of Lido Lake Resort.


Oakwood Hotel & Residence in Surabaya

Another recently completed and launched project is Oakwood Hotel & Residence in Surabaya. This 5-star hotel with a total of 144 rooms is situated in a mixed-use building which also features One East Penthouse & Residences Luxury Collection (263 units of strata apartments) as well as lifestyle and retail area. The hotel has been opened for public since 9M18 and benefits from its prominent location in an elite area in East Surabaya as well as the quality of service and the comfort of luxury living it offers. Since its opening, the hotel was able to secure an average of ~55% occupancy rate which shows positive response and promising growth from the market.


Soon to Open: Park Hyatt Jakarta

Park Hyatt Jakarta, the first and the only Park Hyatt in Indonesia, shall start its debut to a soft opening in 4Q19. The hotel is occupied on the 20 top floors of Park Tower, situated in a 5-ha integrated mixed-use complex of MNC Center in the Kebon Sirih area. Promoted as a six-star hotel, Park Hyatt Jakarta consists of 222 rooms, international restaurants, facilities and function rooms, shall become a guarantee of luxurious services for private events, social and corporate gatherings. The hotel is expected to publish average room rate around USD400/night.


Convincing Progress Development: MNC Lido City

MNC Lido City, an iconic project located in Lido, West Java. MNC Lido City enjoys beautiful panorama of Mt. Salak and Mt. Pangrango and a very pleasant average temperature of hilly area, it shall present a new smart city concept for living, working and leisure. MNC Lido City can be reached by 1-hour drive, thanks to a newly completed Bocimi toll road that was inaugurated and opened by President Joko Widodo in 4Q18. The opening of the toll road was one of the key to ensure further developments in MNC Lido City, which also has increased the land price up to averagely IDR2 million/sqm. As part of the 1st phase development KPIG is developing Trump International Resort, Golf Club and Residences Lido which includes 120 suites and villas, an international 18-hole golf championship course designed by Ernie Els, lifestyle country club as well as luxury villas and condominium units. All these luxury developments will be managed by Trump Hotel Collection and become the first resort in Asia bearing the prestigious Trump brand name. By the end of 1Q19 KPIG has completed the construction of main roadspan over 3,500 meters, that shall become the main access inside MNC Lido City, connecting from the new completed Bocimi toll road to the national road.


Valuation: Lagging for a Reason

Company data showed 1Q19 RNAV of IDR594 per share, translated to 77.78% discount of the stock price to RNAV and trailing PBV as of 5M19 by 0.77x, near-1 STD of PBV. We also acknowledge thin liquidity in the market. Though it is understandable for a company which has many developments and incured extensive capex, KPIG has consistently accomplished what is targeted over the time. As MNCS is affiliated to the Company, it does not offer any recommendation related to company prospects. Recommendation: NOT RATED.


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