Equity Research Company Update
Cardig Aero Services Soekarno Hatta developments set for 2018
BUY
We recently visited the CAS Cargo manager and Angkasa Pura 2’s business development VP to inquire on ongoing developments and future plans around Soekarno-Hatta Soekarno airport.
East cross taxiway to provide further capacity in 2018
Current price Price target Upside Upside/Downside
Rp 980 Rp1,750 +78.57%
Current capacity with two runways and one taxiway is 72 aircrafts/hour. aircrafts/hour With the addition taxiway, this is expected to provide up to 86 aircrafts/hour. We expect this will boost CASS’s ground handling revenues. 10 May 2016
Runway 3 hopefully expected to be completed by 2018 As the Asian games will happen in August 2018, the urgency of this t situation will most likely see the government push for the creation of runway 3 as the largest capacity issue stems from limited aircraft movement. Current land acquisition stands at 30-40% 30 and remains the largest issue. After completion, the runway is expected to add 30-36 aircrafts/hour bringing the total including the new taxiway to 122 aircrafts/hour.
INDONESIA
Cargo village in planning and consulting phase
LOGISTICS
The cargo village is expected to triple the current warehouse space. As CASS’s problem is with capacity,, additional space can boost revenue from cargo handling by up to three times. With land fully acquired, we believe the project will finish on time around 2018/19 once a final schedule is set.
Stock Data
Terminal 3 Ultimate soft opening expected by June 2016 T3U is expected xpected to open in late May or early June and will start serving Garuda Indonesia’s domestic flights. The full terminal is supposed to be completed and in operation by early 2017. This terminal is created to address the issue of overcapacity not add passengers.
Train infrastructure targeted to complete by 2018/19
Bloomberg Ticker Outs. Share (bn) Mkt Cap (Rp bn) 52 Week Range (Rp) ( 6M Avg Vol Vo (Rp mn) YTD Returns (%) Beta (x)
CASS IJ Equity 2,086.9 2,066.1 990-1350 12.4 -12.4 0.5
Share Price Performance
The train leading to the airport from the city and the “people mover” expected to carry passengers between terminals is expected to be complete by 2018/19 to e ease current problem of traffic in airport.
Stable 1Q16 results Revenue for 1Q16 was up by 9% to Rp433bn and EBIT by 3% to Rp105bn but net income dropped by 21% to Rp65bn on the back of forex loss and higher interest expenses. Excluding the forex loss, net income grew by 3% YoY.
Key investment metrics 2014 Revenue (Rp bn) 1,520 EBIT (Rp bn) 345 Minority (Rp bn) 159 Net Profit (Rp bn) 110 EPS (Rp) 53 EPS Growth (%) 0.6 OPM (%) 22.7 NPM (%) 17.7 ROE (%) 29.8 ROA (%) 24.9 ROIC (%) 58.8 P/E (x) 22.7 P/B (x) 6.8 Source: Company, Sucorinvest estimates
2015 1,632 414 175 119 57 7.9 25.4 18.0 26.7 22.9 58.7 21.0 5.6
2016F 1,847 493 194 156 75 31.2 26.7 19.0 28.9 23.6 70.6 16.0 4.6
2017F 2,100 588 229 201 96 28.8 28.0 20.5 30.5 26.2 72.0 12.5 3.8
2018F 2,389 692 263 250 120 24.1 29.0 21.5 30.8 27.8 74.9 10.0 3.1
Share Performance (%) Month Absolute Relative 3m -20.8 -21.3 6m -17.5 -22.9 12m -16.1 -10.2
Alexander Budiman
[email protected]
+62 21 8067 3134 313
Cardig Aero Services 03 May 2016
New runway and cargo village to rocket revenue From our discussion with the VP of AP2 business development, we find that the aircraft movements per hour can increase up to 122 in the next five years from the current 72. If utilization of aircraft movements per hour is maximized, then we can see an increase of up to 70% more flights.
Figure 2: Comparison of cargo and handling (Rp bn) 2017F 2018F Base case 2100 2389 Middle case 2100 2389 Best case 2100 2506 % Middle/Base 0 0 % Best/Base 0 5 Source: Company, AP2, Sucorinvest estimates
2019F 2774 3266 3963 18 43
2020F 3209 4314 5073 34 58
2021F 3756 5064 5818 35 55
The increase can be found from two sources; the first one by the East Cross Taxiway which is expected to increase movement by 14 and the runway which is expected to increase movement by 36. This will increase revenue from the ground handling side significantly. The cargo village will be expected to triple in capacity, increasing potential revenues for cargo handling by three times assuming the same proportion of current internationaldomestic cargo.
Figure 3: Base case scenario (current) (Rp bn) 2017F 2018F Revenue 2100 2389 Cargo + Ground 1518 1711 Cargo handling 789 876 Ground handling 729 834 Cargo village ('000 tons) 515 520 Aircraft movements/hour 77 82 Source: Company, AP2, Sucorinvest estimates
2019F 2774 1956 974 982 525 88
2020F 3209 2280 1124 1156 552 94
2021F 3756 2721 1361 1361 607 101
In our middle case scenario, we predict that by the latest the cargo village will be completed by 2020. We do not expect the cargo to triple in capacity the first year of operations but gradually. As for our aircraft movements, we expect that land clearing issues may stall the runway creation until 2019. From then, we expect flights to gradually increase.
Figure 4: Middle case scenario (Rp bn) 2017F 2018F Revenue 2100 2389 Cargo + Ground 1518 1710 Cargo handling 789 876 Ground handling 729 834 Cargo village ('000 tons) 515 520 Aircraft movements/hour 77 82 East-cross taxiway 0 7 Runway 3 0 0 Source: Company, AP2, Sucorinvest estimates
2019F 3266 2448 1390 1058 750 95 11 12
2020F 4314 3386 2038 1347 1000 110 14 24
2021F 5064 4029 2466 1563 1100 116 14 30
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Cardig Aero Services 03 May 2016 In our best case scenario, we expect that the cargo is finished by end of 2018 and in full operation by 2019. Also, we expect that the runway 3 be finished before the Asian games and flights will increase dramatically afterwards.
Figure 5: Best case scenario (Rp bn) 2017F 2018F Revenue 2100 2506 Cargo + Ground 1518 1827 Cargo handling 789 876 Ground handling 729 951 Cargo village ('000 tons) 515 520 Aircraft movements/hour 77 94 East-cross taxiway 5 10 Runway 3 0 12 Source: Company, AP2, Sucorinvest estimates
2019F 3963 3145 1853 1292 1000 116 14 30
2020F 5073 4144 2650 1494 1300 122 14 36
2021F 5818 4783 3139 1644 1400 122 14 36
1Q16 Results: Forex loss and higher interest decreasing bottomline Revenue increased by 10% and EBIT by 3% but net profit decreased by 24% on the back of higher financial expenses and forex loss. Excluding forex, clean net profit increased by 4% YoY.
Figure 6: 1Q16 Results (Rp bn) 1Q16 Revenue 433 EBIT 106 NPAT to Parents 25 Source: Company, Sucorinvest estimates
1Q15 397 103 32
% YoY 9 3 (24)
2016F 1,847 493 160
% to FY 23 21 15
Going forward, we expect revenue to increase by double digits and clean net income to keep growing at a stable single digit. We are confident in CASS’s abilities as a company to provide excellent services and due to their strong position in the industry, a massive growth potential exists for them.
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Cardig Aero Services 03 May 2016
Financial Summary Figure 7: Income statement highlights (Rp bn) 2014 Revenues 1,520 Operating expenses 1,175 EBIT 345 DA 53 EBITDA 398 Pre-tax Income 375 Income tax exp 105 Minority Interest 159 Net Profit 110 Source: Company, Sucorinvest estimates
Figure 8: Balance sheet (Rp bn) Cash Accounts receivable Inventories Prepaids and advances Total Current Assets Loans to a related party PP&E - net Goodwill - net Others Total Non-Current Assets Total Assets
2014 152 331 17 90 590
2015 1,632 1,218 414 56 469 414 121 175 119
2016F 1,847 1,354 493 68 561 486 136 190 160
2017F 2,100 1,511 588 76 664 598 167 229 201
2018F 2,389 1,697 692 85 777 712 199 263 250
2015 155 387 17 172 730
2016F 381 415 20 202 1,019
2017F 533 489 20 230 1,272
2018F 602 556 22 262 1,442
181 236 17 61 496 1,085
202 247 17 83 549 1,280
111 261 17 80 468 1,487
277 17 80 374 1,646
297 17 88 402 1,844
Accounts payable Accrued expenses Other current liabilities Current maturities Total Current Liabilities
81 92 86 94 353
73 157 93 95 417
111 202 100 100 514
124 230 100 75 529
139 262 100 50 551
Long-term loan Others Total Non-Current Liabilities Total Liabilities
157 86 244 597
212 91 304 721
200 100 300 814
200 100 300 829
200 100 300 851
74 112 372 558
74 131 468 673
74 154 589 817
74 181 739 993
Common Shares 74 Minority Interest 118 Retained Earnings 298 Others (1) Shareholders' equity 489 Source: Company, Sucorinvest estimates
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Cardig Aero Services 03 May 2016
Figure 9: Statement of cash flows (Rp bn)
2014
2015
2016F
2017F
2018F
Cash Flows from Operating Activities Net Income 110 Depreciation Expense 53 NWC 69 Total 94
119 56 75 100
160 68 (30) 257
201 76 61 216
250 85 54 280
Cash Flows from Investing Activities Capex (111) Others (3) Total (115)
(66) (43) (109)
(82) 95 13
(92) 111 18
(105) (8) (113)
34
175
124
175
1 (44) (0) 5 1 55 (6) 11
(64) 9 5 (12) 19 (43)
(80) (25) 23 (83)
(100) (25) 26 (98)
152 3 155
155 226 381
381 152 533
533 69 602
2015 25.4 18.0 58.7 26.7 32.6
2016F 26.7 19.0 70.6 29.5 (14.5)
2017F 28.0 20.5 72.0 30.4 (38.8)
2018F 29.0 21.5 74.9 30.7 (45.3)
FCF
(18)
Cash Flows from Financing Activities Change in Equity 1 Dividend (44) Adjustment (0) Change in Long-Term Liabilities 16 Change in Short-Term Debt 31 Change in Long-Term Debt 35 Change in minority interest 12 Total 52 Beginning Cash 121 Change in Cash 31 Ending Cash 152 Source: Company, Sucorinvest estimates
Figure 10: Key Ratios (%) 2014 Operating Profit Margin 22.7 Net Profit Margin 17.7 ROIC 58.8 ROE 29.8 Net Debt/EBITDA 25.0 * 2016 above CASS is net cash Source: Company, Sucorinvest estimates
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Cardig Aero Services 03 May 2016
Sucorinvest rating definition, analysts’ certification, and important disclosure
Ratings for Sectors Overweight Neutral Underweight
: We expect the industry to perform better than the primary market index (JCI) over the next 12 months. : We expect the industry to perform in line with the primary market index (JCI) over the next 12 months. : We expect the industry to underperform the primary market index (JCI) over the next 12 months
Ratings for Stocks Buy Hold Sell
: We expect this stock to give return (excluding dividend) of above 10% over the next 12 months. : We expect this stock to give return of between -10% and 10% over the next 12 months. : We expect this stock to give return of -10% or lower over the next 12 months
Analyst Certification The research analyst(s) primarily responsible for the preparation of this research report hereby certi20 that all of the views expressed in this research report accurately reflect their personal views about any and all of the subject securities or issuers. The research analyst(s) also certi20 that no part of their compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.
Disclaimers This document has been prepared for general circulation based on information obtained from sources believed to be reliable but we do not make any representations as to its accuracy or completeness. PT Sucorinvest Central Gani accepts no liability whatsoever for any direct or consequential loss arising from any use of this document or any solicitations of an offer to buy or sell any securities. PT Sucorinvest Central Gani and its directors, officials and/or employees may have positions in, and may affect transactions in securities mentioned herein from time to time in the open market or otherwise, and may receive brokerage fees or act as principal or agent in dealings with respect to these companies. PT Sucorinvest Central Gani may also seek investment banking business with companies covered in its research reports. As a result investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in making their investment decision.
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Cardig Aero Services 03 May 2016
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Research 1. Inav Haria Chandra 2. Alexander Budiman 3. Sharon Anastasia Tjahjadi 4. Felicia Putri 5. Sandy Ham 6. Adityo Mahendra Yogiswara 7. Emily Bonosusatya 8. Ahmad Hapiz
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