TOTL 1Q13 Results Review: Little Insight Into Strategic Plans
TOTL booked IDR584bn in revenue and IDR53.5bn in net profit for 1Q13, up 69.7%/47.8% y-o-y and 27%/22% of our FY13 estimates respectively. We continue to be wary over its management’s vague strategic plans, as it hoarded for cash despite minimal capex disbursements. We maintain our NEUTRAL call and TP of IDR1,060, as its valuation reached a historic peak in the absence of any fundamental catalysts.
Results in line with estimates. Total Bangun Persada (TOTL) booked IDR 584bn revenue in 1Q13, up 69.7% y-o-y. Net profit arrived at IDR53.5bn, up 47.8% y-o-y. Its top- and bottom-line made up 27% and 22% of our FY13 estimates respectively – IN LINE. Joint Operations (JO) profits jumped fivefold, mainly contributed by the Australian Embassy JO project with Leighton Contractors.
No serious progress in expansion plans. TOTL’s management has allocated IDR50bn for capex this year, a small proportion to its cash reserves of IDR768.4bn as at end-1Q13. We have yet to see any tender progress in its engineering, procurement and construction (EPC) subsidiary Total Persada Industri as well. Meanwhile, realty subsidiary PT Total Persada Development’s first and latest project remains the condotel development in Tanjung Benoa, Bali.
No longer a dividend play despite minimum capex. The company will be paying out 56.9% of its FY12 net profits in dividends in May. As the company’s share price rose by three-fold over the past year, we saw TOTL’s dividend yield fall to 2.7% at announcement date, way below last year’s 7.8% yield at announcement date. As the company hoards cash despite having minimal capex, we continue to be puzzled over it management’s strategic plans for the foreseeable future.
Maintain NEUTRAL, TP of IDR1,060. TOTL is now priced at 16.7x of its 2013E earnings, which is on par with the industry average but a historical peak. We maintain our NEUTRAL stance on the stock, with a TP of IDR1,060 on the back of a historic high valuation in the absence of any fundamental catalysts.
Results in line with estimates but concerns over expansion plans linger
In line
TOTL booked a revenue of IDR584bn (excluding Joint Operations) in 1Q13, up 69.7% y-o-y. Its net profit for the quarter was at IDR53.5bn, up 47.8% y-o-y. The top- and bottom-line comprised 27% and 22% of our FY13 estimates respectively. Meanwhile, its JO profits jumped fivefold, mainly contributed by the Australian Embassy project in which the company was the main contractor in a consortium with Leighton Contractors. The IDR2.3trn high-profile project, in which TOTL has a 30% stake, commenced late last year. It is expected to complete in 2015.
Stable outlook for the next two years
As per our last discussion with the company, TOTL has officially signed new contracts YTD worth IDR350bn or 17% of its FY13 target. We anticipate it to successfully win at least half of its current IDR3.6trn tender bids. This confidence implies that the company will hit its target of IDR2.1trn in new contracts this year, and accumulate IDR4.5trn in its order book (a 7% growth to its total order book in FY12) which will ensure its sustainability for the next two years assuming a 20% revenue growth y-o-y.
No serious progress in expansion
One of the market’s main worries about TOTL’s operations is its ability to expand beyond commercial and high rise building construction. This year, its management has continued fleshing out its conservative expansion plan, allocating only IDR50bn for capex this year – a small proportion to TOTL’s IDR768.4bn of cash reserves as at end-1Q13.
Half of the capex would be allocated to expand its EPC subsidiary PT Total Persada Indonesia and the rest is for the maintenance and refurbishment of equipment. We have yet to see any additional expansion plan for its realtor subsidiary PT Total Persada Development, which has only one project so far – a condotel in Tanjung Benoa, Bali developed in collaboration with the Ramada hotel chain.
Foreseeable growth priced in while dividends decrease
No longer a dividend play despite minimal capex
TOTL stunned the market late last year when it announced a 120.2% payout rate for investors, a 16% dividend yield to the average full-year market price or a 8% yield at its announcement date. This year, the company has kept its promise to keep a 50% payout rate for a minimum net income of IDR200bn and 40% for earnings below that level.
As the company’s share price tripled over the past year, we saw TOTL’s dividend yield fall to 2.7% at the announcement date. As the company hoards for cash despite limited capital expenditure, we continue to be puzzled about its management’s strategic plans for the future.
Valuation at historical peak despite an absence of catalysts
TOTL is trading at 16.7x of its 2013E earnings, which is on par with the industry average but at its historical peak. We maintain our NEUTRAL stance on the stock at a IDR1,060 TP on the back of its historic high valuation achieved in the absence of any fundamental catalysts. We continue to be wary over its management’s apparent lack of an expansion plan and vague direction for the future.
