Imminent acquisition
ASRI has agreed to acquire PT Garuda Adhimatra Indonesia ("GAIN"), the owner and operator of the 60.7 hectare Garuda Wisnu Kencana Cultural Park in Bali. ASRI will take an 82% stake in GAIN from PT Multi Matra Indonesia for an investment cost of Rp738 bn. The acquisition is expected to be done in the third quarter of 2012, subject to approval from the authorities and GAIN's shareholder in addition to other customary closing conditions. Through this acquisition, ASRI hopes to expand the geographical scope of its projects and also contribute to the development of Indonesia's tourism sector. Furthermore, ASRI also hopes this project can raise the proportion of its recurring income in the future since it currently stands at a relatively low level (2% of total revenues in 1Q12).
Still upbeat on marketing sales
Total marketing sales in the year to May 2012 have reached Rp2,095 bn. This is already 60% of the company's full year estimate and 62% of our full year estimate - a strong number indeed. In this period, the vast majority of the marketing sales (98%) still originated from the Serpong project. For May alone, marketing sales for the Serpong project reached Rp307 bn, of which 77% were for Sutera Sitara Orlanda, the newest sub-cluster launched by ASRI. Looking ahead, ASRI plans to launch another 1-2 clusters for the Serpong project and 2-3 clusters in Pasar Kemis. Given the strong marketing sales so far, we slightly raise our full year target to Rp3.4 T from Rp3.2 T previously. The company, however, maintains its marketing sales forecast at Rp3.5 T.
Major capex plans
In our previous report, we mentioned that ASRI plans to spend around Rp2-3 Tn on capital expenditure this year. However, with the acquisition of GAIN, this number has now been bumped up to around Rp3.5-4 tn. A breakdown of the planned capex reveals that Rp1.4 tn is for project acquisition and development; Rp1.4-1.8 tn is for continued land acquisition in Serpong and Pasar Kemis; and the remaining Rp700 bn is for construction. This sizeable amount of planned capex will be funded from internal cash (the company is flush with cash after issuing US$150 mn of senior notes in March 2012). However, for funding the acquisition of GAIN, ASRI will use bank loans that are currently in the process of being arranged. Note that we have not incorporated the GAIN acquisition into our calculations but we still believe it is okay for ASRI to use debt financing since the company remained in a net cash position up to 1Q12.
TP raised to Rp760
Adjusting the land price to reflect the current conditions directly lifts the total marketing sales and the company's total NAV for 2012. There is no significant impact on our net profits estimate, however. This is because we have to take into account the issuance of USD$150 mn of senior notes which push up the company's interest expenses. Using a 25% discount to the new total NAV of Rp19,877 bn, we arrive at a new Target Price of Rp760, offering 41% potential upside from the current share price. This TP implies 14.8-11.5x FY12-13F P/E. BUY.
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