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| AKR Corporindo - On Track To End FY15 On a Positive Note |
Maintain BUY, with a
TP of IDR7,000 (20% upside) premised on 20x FY16 P/E. AKR’s 3Q15 earnings were
in line, meeting 73-75% of our/street estimates. Its 9M15 net profit surged 46%
YoY to IDR845bn, while its petroleum distribution volume rose 20.6% to 1.637
million litres (ML). Its 3Q15 gross margin stayed at 10.3% (same as 2Q15),
while the performance of other segments – logistics services, manufacturing and
industrial estates – remained stable.
¨ Lower performance on
a quarterly basis.
On a QoQ basis, AKR Corporindo’s (AKR) revenue and net profit declined by 13%
and 22% respectively, mainly due to a lower petroleum distribution volume of
538ML in 3Q15 (2Q15: 594ML) and foreign exchange losses of IDR33bn. Overall,
AKR is on track to meet its FY15 earnings target of IDR1.1trn (76.8% achieved)
and petroleum distribution volume of 2,200ML (74.4% achieved). The performance
of other units – logistics services, manufacturing and industrial estates –
remained stable.
¨ Share price is
stable; waiting for new catalyst. We believe the overall picture of AKR’s
margin expansion and higher volumes is intact but has been fully priced in, as
evidenced by its stable share price at this juncture. Going forward, some of
the catalysts to propel the stock to a higher level would be: i) better 1Q16
results, driven by higher volume while its distribution margin remains intact,
and ii) the crystallisation of land sales to Freeport-McMoRan (FCX US, NR).
¨ Key downside risks: i) sharp rally of
crude oil prices, ii) bad debts from its coal mining segment, iii) weakening of
petroleum demand, and iv)
regulatory risks, whereby the subsidised fuel quota is determined and reviewed
by BPH Migas every year.
¨ Maintain BUY, with a
IDR7,000 TP based on 20x FY16 P/E or +1SD from AKR’s 3-year historical P/E
band. This is premised on structurally improved financial metrics, if we
compare it against previous years, ie: i) strong
earnings and higher margins could be sustained in FY15F-17F, driven by its
petroleum distribution segment, ii) a higher ROAE of 19.9% in FY15. The stock
is currently trading at 20x FY15 P/E. (Norman
Choong)
Source : RHB OSK Indonesia
Research Institute
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