Prominent High-End Builder
Persistent 1Q17 Performance Results: Still Inline with MNCS Expectation
Total Bangun Persada Tbk (TOTL) booked revenue of IDR 648.50 bn, increased by 1.85% YoY in 1Q17, as construction service contributed 99.48% to total consolidated revenue. 1Q17 revenue is still inline within MNCS estimate, representing 22.71% of MNCS projection. Meanwhile, new contracts in 1Q17 increased significantly, by 158.09% YoY, to IDR 813 bn, compared to the number recorded for the same period last year. Inspite of slower revenue growth, TOTL consistently stretched its costs prudently. TOTL was able to maintain its GPM at 18.08% in 1Q17, which was higher than 17.66% in FY16. As for the results, net income of TOTL rose slightly by 2.97% YoY to IDR 63.75 bn in 1Q17. It accounted for 25.48% of MNCS estimates.
Key Growth Catalysts in 2017/2018
We believe that the trend toward better profitability can still potentially extend through this year, supported by: 1) Focus on high-rise buildings and quality of product; 2) Continuing to maintain EBITDA margin of about 11.81% in FY17E; 3) Dividend play stock with Dividend Payout Ratio (DPR) - more than 60%; 4) Healthy balance sheet with almost zero Debt-to-Equity Ratio (DER) and prudent cash management; 5) Attractive valuation, as one of the cheapest in the sector. We estimate TOTL revenue will potentially grow by 20.13%/9.86% YoY to IDR 2,857.81bn/ IDR 3,139.72 bn in FY17E/FY18F, while net profit is estimated to increase by 14.42%/10.46%YoY to IDR 251.15bn/ IDR 277.43 bn in FY17E/FY18F.
Valuation and Recommendation: Buy with TP IDR 975
We believe the strategic decision of TOTL to implement cost efficiency will yield a positive impact on financial performance. Recommendation: BUY with target price (TP) of IDR 975 per share for next 12 months, indicating 33.56% potential upside from current share price at Rp 730 (as of July 7th 2017). The calculation of TP is based on DCF model by using 12% of WACC, 1.26 of Beta and 4.5% of risk premium. Our valuation implies 13.24x/11.98x of PE17E/PE18F.
