Total Bangun Persada Timid Growth
TOTL’s 1H13 revenue and net profit were in line, accounting for 56.6%/47.4% of its estimates and 54.9%/45.6% of ours. Its real estate business contributed 12.4% to revenue, boosting gross margin by 60bps y-o-y. Nonetheless, earnings growth was muted, growing by a mere 18.5% y-o-y as Management remains ultra conservative and severely risk averse. Maintain NEUTRAL and IDR1,060 TP.
1H13 results in line
Total Bangun Persada (TOTL)’s IDR1.2trn revenue (up 38.8% y-o-y) and IDR99.6bn net profit (up 18.5% y-o-y) were within expectations, accounting for 54.9% and 45.6% of our FY13F estimates, and 56.6% and 47.4% of its own FY13F targets.
Opex growth pressures margin
The slower bottomline growth was attributed to the dip in operating margin, which fell to 12.2% from 13.3% a year prior on the back of a 28.5% growth in general & administrative expenses and declining contribution from securities investments.
Conservative management impedes growth potential
TOTL’s balance sheet remains rock solid, with IDR522.9bn in net cash at a mere 0.1x D/E ratio. We note that TOTL’s subsidiary, PT Total Persada Industri, has yet to receive the license to bid for engineering, procurement and construction (EPC) projects. Contributions from its Tanjung Benoa condotel and GKM Tower in South Jakarta, on track to collectively account for 15% of its topline by end-FY13, are still relatively small compared to contributions from construction services.
Management has allocated IDR50bn for capex this year, which is just a fraction of its cash reserves. As TOTL hoards cash and conservatively selects its construction projects, its earnings growth has underperformed its peers, which grew by 60%-130% y-o-y in 1H13.
Maintain NEUTRAL, with IDR1,060 TP
We maintain our NEUTRAL stance on the stock, with a TP of IDR1,060 given the lack of any fundamental catalysts. We derive this TP based on a target 15.0x P/E over its FY14F EPS. TOTL is trading at 15.9x and 13.2x its FY3 and FY14F P/Es respectively, which is +1.5-SD against its historical average.
