Pembangunan Perumahan Building on Solid Growth

Company Profile
PTPP provides civil engineering and building construction services. It has recently expanded into EPC developments and industrial concrete manufacturing, as well as property developments.

Highlights
The port projects specialist
PTPP’s orderbook, which is expected to reach ~IDR35trn by end-FY13, is bolstered by its expertise in port development, as well as its strong working relationship with the Indonesian Port Corporation Pelindo. It was the sole winner of the first stage of Jakarta’s New Priok mega-port development, landing an IDR8.3trn contract that is slated for completion in 2015.

Historically, the Company has been involved in the early development of the country’s other main harbours, such as: i) Semarang’s Tanjung Mas, ii) Surabaya’s Tanjung Perak, and iii) Bali’s Nusa Penida. Currently, PTPP commands a 70% success rate across all port projects within the Government’s Indonesia Economic Masterplan 2011-2025 (MP3EI) initiative – where plans are in place for USD12.3bn in port projects within this time frame.

Expanding into property development
PTPP is set to launch its first large development project in Surabaya’s Sungkono area in 1Q14. The Company recently tested the market by selling shophouses and office spaces near the area to great success, adding IDR180bn to its FY13E revenue. The entire IDR15trn project will consist of multi-use properties spread across 7ha, which are projected to contribute IDR470bn to its FY14E revenue.

This effectively quadruples the current amount of sales bookings from the Group’s property division. As property businesses generally offer gross margins that are around 100bps-220bps higher than those experienced by firms involved in the construction sector, a larger proportion of contributions to revenue from PTPP’s property division will imply that its margins are set to expand as a result.

Cost of funds improved via 1Q13 bond issuance
PTPP received the green light from the relevant authorities to undertake a five-year IDR1trn bond issuance for working capital purposes this year. As at end-1Q13, IDR700bn’s worth has already been issued. As the Company locked its coupons during Indonesia’s lowest interest rate environment, it effectively reduced its cost of funds by 200bps-300bps from 12.8% as at end-FY12. Rating agency PT Pemeringkat Efek Indonesia (Pefindo) currently rates PTPP at idA-.