Surya Semesta More Catalysts In The Pipeline

Company Profile
Surya Semesta Intermusa (SSIA) was established in 1971 as an investment company and went public in 1997. Through its units, the Company is involved in property development (industrial estates, commercial offices and shopping malls), construction and hospitality (hotels and resorts). It has a strong relationship with the Astra Group (NEUTRAL, ASII: IJ, TP: IDR7,600) as they share a common founder in the Soeryadjaya family.

Highlights
Further unlocking value. The Company recently listed its construction arm, Nusa Raya Cipta (NR, NRCA: IJ, TP: IDR1,280), raising around IDR395bn including the pre-IPO offering of a 7% stake to one of the most influential private equity groups in Indonesia, Saratoga Capital. The proceeds will be used to support its expansion into the infrastructure construction sector, with the biggest project in the pipeline being the 116km Cikampek-Palimanan toll road.

We continue to see upside potential for NRCA as the Cikampek-Palimanan project will push the company’s FY13 net profit from the construction business to IDR160bn from ~IDR90bn last year. SSIA is also targeting IDR2.9trn worth of new contracts this year, 20% higher y-o-y from 2012’s IDR2.5trn. As at end-April, NRCA had achieved IDR1.6trn, or 53.3%, of its new contracts target.

Growing recurring income
Apart from expanding into the budget hotel business and developing commercial properties in its industrial estates, the Company also plans to demolish and rebuild its office tower in Kuningan. The new development should generate more income as SSIA will be able to charge higher rental rates of as much as five times the current IDR100,000 per sq m monthly rate. The Company will invite third-party investors to jointly fund the construction of the new tower.

Snapping up new land
SSIA plans to acquire a total of 3,000ha of new land in two locations, ie. 1,000ha in Karawang and 2,000ha in Bekasi. The Company is still awaiting administrative approval of the 1,000ha in Karawang, and we expect the deal to go through by year-end. Meanwhile, SSIA has four years to complete the acquisition of the 2,000ha in Bekasi. So far, it has bought up to 400ha at an acquisition cost of below IDR50,000/sq m, which is still below its projected cost of IDR75,000/sq m.