Tunas Ridean Walking along with the Kings

We believe TURI is a direct beneficiary of Indonesian automotive sector growth because of its main double business engines: 1) Its position as the second biggest Astra brands dealer with significant market share and close relationship with Astra International and 2) Having 49% ownership in Tunas Mandiri Finance which is backed by strong presence of its major owner, Bank Mandiri. In addition, TURI also has 4W rental division.

Business Overview
TURI main business consists of 1) Automotive dealer, 2) Automotive financing, and 3) Car rental. Below are the contribution breakdowns of each segment in top line and profit before tax level with brands in detail for automotive business.

Automotive dealer segment: growing along Indonesian automotive leader
TURI’s dealing business have been growing along with automotive sector as it mainly focus on Astra brands, the industry’s major player. Historically we may see that TURI is successfully keeps its market share within Astra brands and in market level. Worthy to note TURI is 43.8% owned by Jardine Cycle and Carriage, owner of Astra International.

The company 4W dealing business is still focusing in Jakarta and West Java area with minor presence outside Java. Management plans to expand 2-3 branches to add up to 42 current branches with the target to grow along the industry growth. While for 2W, TURI has a very strong presence in Lampung as the main dealer. With aggressive expansion of 13 branches in following year (from currently 47 branches), management expect a higher than industry growth.

Automotive financing segment: aggressive expansion backed by Indonesian largest bank
TURI is also enjoying the sweet taste of financing industry profit that supports the automotive sector by owning 49% of Mandiri Tunas Finance (MTF). Since Bank Mandiri acquired 51% of the ownership in 2009, MTF have been aggressively expanding. However as MTF still adding up provision, the top line growth still hasn’t contributed to the bottom line. In the bright side, management expects that the provision will be sufficient by the end of this year, thus will allow next year additional revenue to push the profit higher. Management expects ~20% growth in this segment.

Valuation.
The counter is currently trading at 10.7X four quarters trailing PE, higher/ lower than industry average at 26.5x, while having higher profitability and lower leverage.