32
www.dbsvickers.com ed-JS / sa- MA Industrialisation stalls Slower GDP growth leads to weak FDI and bleak outlook for industrial estates Stalled infrastructure projects, declining investment loans and regulatory risks have led to a slowdown in the sector BUY LPCK for its attractive valuation, debt-free balance sheet, strong cash generation capability and earnings profile that is gradually shifting away from industrial estate earnings Muted growth in GDP leads to weak FDI... The slow start (1Q15 GDP growth : 4.7%) is expected to continue with similar growth in 2Q15. As such, foreign investors are adopting a “wait and see” approach and holding back on direct investments into Indonesia. FDI levels have fallen y-o-y over two consecutive quarters (the first since early 2009). ...and bleak industrial estate demand outlook . As GDP growth for 2015 is expected to hover around 5.1% as per DBS current estimate, there will be no significant growth in investments into Indonesia, based on historical data. Coupled with the delay of infrastructure projects that have dampened sentiment, declining investment loans in the banking system and regulatory risks, industrialisation will continue to slow. Pessimistic on industrial outlook – BUY LPCK on valuation. Given the bleak outlook for the industrial estate sector, we prefer industrial developers with a healthy balance sheet and exposure to other business segments such as property. The sector has undergone a deep correction YTD, with valuations de-rating to - 2SD to -0.5SD of mean forward PE. The industrial sector is currently trading at a 44% discount to RNAV (significantly wider than its 4-year average of 24%). We expect developers to report flat quarterly growth in 2Q15 earnings, largely supported by marketing sales achieved in FY13 and FY14. LPCK is our only BUY in the space. Besides having a debt-free balance sheet and strong cash generation capability, LPCK’s earnings profile is gradually shifting away from industrial estate earnings. JCI : 4,906.69 Analyst Edward TANUWIJAYA +6221 3003 4932 [email protected] STOCKS Source: DBS Vickers. Note: Price is as of 22Jul2015 Bekasi Fajar Industrial Estate : BEST is the developer of MM2100 industrial estate in Bekasi area (east Jakarta suburb). The estate is the closest to Jakarta city among developments in the area, and its tenants are primarily Japanese manufacturers. Lippo Cikarang : LPCK was established since 1987 as part of conglomerate Lippo Group and began its property development business in 1995; developing c.3,500ha industrial township in Cikarang (east Jakarta suburb) Surya Semesta Internusa : Established in 1971 and listed on IDX in 1997, SSIA has three main primary businesses; namely property (including industrial estate and rental property), construction and hospitality. FDI declined y-o-y in two consecutive quarter for the first time since early 2009 -100% -50% 0% 50% 100% 150% 200% 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 Source: DBS Vickers, CEIC DBS Group Research . Equity 23 Jul 2015 Indonesia Industry Focus Indonesia Industrial Estate Refer to important disclosures at the end of this report Price Mkt Cap Target Price Performance (%) Rp US$m Rp 3 mth 12 mth Rating Bekasi Fajar 422 303 445 (30.3) (30.3) HOLD Lippo Cikarang 8,575 445 12,500 (27.6) (0.3) BUY Surya Semesta 920 323 1,050 (24.3) 8.9 HOLD

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Page 1: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

www.dbsvickers.com

ed-JS / sa- MA

Industrialisation stalls

Slower GDP growth leads to weak FDI and bleak outlook for industrial estates

Stalled infrastructure projects, declining investment loans and regulatory risks have led to a slowdown in the sector

BUY LPCK for its attractive valuation, debt-free balance sheet, strong cash generation capability and earnings profile that is gradually shifting away from industrial estate earnings

Muted growth in GDP leads to weak FDI... The slow start (1Q15 GDP growth : 4.7%) is expected to continue with similar growth in 2Q15. As such, foreign investors are adopting a “wait and see” approach and holding back on direct investments into Indonesia. FDI levels have fallen y-o-y over two consecutive quarters (the first since early 2009).

...and bleak industrial estate demand outlook . As GDP growth for 2015 is expected to hover around 5.1% as per DBS current estimate, there will be no significant growth in investments into Indonesia, based on historical data. Coupled with the delay of infrastructure projects that have dampened sentiment, declining investment loans in the banking system and regulatory risks, industrialisation will continue to slow.

Pessimistic on industrial outlook – BUY LPCK on valuation. Given the bleak outlook for the industrial estate sector, we prefer industrial developers with a healthy balance sheet and exposure to other business segments such as property. The sector has undergone a deep correction YTD, with valuations de-rating to - 2SD to -0.5SD of mean forward PE. The industrial sector is currently trading at a 44% discount to RNAV (significantly wider than its 4-year average of 24%). We expect developers to report flat quarterly growth in 2Q15 earnings, largely supported by marketing sales achieved in FY13 and FY14. LPCK is our only BUY in the space. Besides having a debt-free balance sheet and strong cash generation capability, LPCK’s earnings profile is gradually shifting away from industrial estate earnings.

JCI : 4,906.69

Analyst Edward TANUWIJAYA +6221 3003 4932 [email protected]

STOCKS

Source: DBS Vickers. Note: Price is as of 22Jul2015 Bekasi Fajar Industrial Estate : BEST is the developer of MM2100 industrial estate in Bekasi area (east Jakarta suburb). The estate is the closest to Jakarta city among developments in the area, and its tenants are primarily Japanese manufacturers.

Lippo Cikarang : LPCK was established since 1987 as part of conglomerate Lippo Group and began its property development business in 1995; developing c.3,500ha industrial township in Cikarang (east Jakarta suburb)

Surya Semesta Internusa : Established in 1971 and listed on IDX in 1997, SSIA has three main primary businesses; namely property (including industrial estate and rental property), construction and hospitality.

FDI declined y-o-y in two consecutive quarter for the first

time since early 2009

-100%

-50%

0%

50%

100%

150%

200%

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

Source: DBS Vickers, CEIC

DBS Group Research . Equity 23 Jul 2015

Indonesia Industry Focus

Indonesia Industrial Estate

Refer to important disclosures at the end of this report

Price Mkt Cap Target Price Performance (%)

Rp US$m Rp 3 mth 12 mth Rating

Bekasi Fajar 422 303 445 (30.3) (30.3) HOLD Lippo Cikarang 8,575 445 12,500 (27.6) (0.3) BUY Surya Semesta 920 323 1,050 (24.3) 8.9 HOLD

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Industry Focus

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Page 2

Weak FDI – a reflection of slow economic growth

Indonesia’s 1Q15 gross FDI declined 4.3% y-o-y to US$6.6bn, following a deeper 8.5% y-o-y drop in 4Q14. This is the first time since 2009 (aftermath of Global Financial Crisis) that quarterly FDI has recorded negative growth for 2 consecutive quarters. At this rate, gross FDI may reach c.US$25bn by the end of the year, representing a 12% decline from FY14. This will potentially be the first time since 2009 that gross FDI has declined y-o-y. FDI quarterly growth

-100%

-50%

0%

50%

100%

150%

200%

1Q

08

2Q

08

3Q

08

4Q

08

1Q

09

2Q

09

3Q

09

4Q

09

1Q

10

2Q

10

3Q

10

4Q

10

1Q

11

2Q

11

3Q

11

4Q

11

1Q

12

2Q

12

3Q

12

4Q

12

1Q

13

2Q

13

3Q

13

4Q

13

1Q

14

2Q

14

3Q

14

4Q

14

1Q

15

Source: CEIC, DBS Group Research Indonesia FDI over the last decade

8.9

6.0

10.4

14.9

10.8

16.2

19.5

24.6

28.6 28.5

6.6

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 1Q15

US$ bn

Source: CEIC, DBS Group Research The weak FDI numbers can be attributed to Indonesia’s disappointing GDP growth so far. After a slow start in 1Q15 with only 4.7% y-o-y growth, our economist Gundy Cahyadi expects 2Q15 GDP growth to hover below 5% again. This has caused foreign investors to adopt a “wait and see” approach, thus holding back direct investments into Indonesia. The sustained macro weakness has prompted international bodies such as World Bank, International Monetary Fund (IMF) to cut Indonesia’s GDP growth forecast for this year. Bank

Indonesia (BI) recently revised down its GDP growth forecast to 5.0% - 5.4% (from 5.4% - 5.8% stated early this year).

Indonesia GDP forecast from various sources

Body Initial Revised

World Bank 5.2% 4.7%

Asia Development Board 5.5% 4.8% - 5.2%

International Monetary Fund 5.2% 4.7%

Bank Indonesia 5.4% - 5.8% 5.0% - 5.4%

Government 5.7% 5.4%

Source: World Bank, Asia Development Board (ADB), International Monetary Fund (IMF), Bank Indonesia. Our economist Gundy Cahyadi sees further downside risks to our GDP growth outlook (our estimate is 5.1% currently) as stated in DBS’ 3Q15 Economics Market Strategy report published on 11Jun2015 as private consumption growth has been softening since 2012-2013. Considering the historical correlation between GDP growth and investment into Indonesia, this does not look good. The trend shows that whenever real GDP grew less than 6%, there is no significant growth in investment; represented by Gross Fixed Capital Formation (GFCF); coming into Indonesia. Real GDP vs investment growth

11.9%

8.5%

8.3%9.7%

0%

2%

4%

6%

8%

10%

12%

14%

16%

4%

5%

6%

7%

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

F

Real GDP growth (LHS) GFCF growth (RHS)

6% threshold GDP growth

Source: Worldbank data, Bloomberg Finance L.P., DBS Vickers Stalled infrastructure projects has not helped the situation either with low budget absorption YTD (i.e. indicatively only c. 6% of full year’s budget). Recall that infrastructure progress was deemed as the catalyst for GDP growth this year. Sentiment has been weak although the government recently pledged to accelerate the planned infrastructure projects after the Lebaran (i.e Moslem holiday) period. Consistent with our Indonesia Industrial Estate report titled Flexibility matters dated 3Mar2015, we still hold the view that

Page 3: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

Industry Focus

Indonesia Industrial Estate

Page 3

there is a slowdown in the industrial sector in the near term given softer domestic demand in this transformational year, declining investment loans in the banking system and regulatory risks. BI’s monthly data shows that investment loan growth has continued to decline, and it is now at its lowest level since Jan2010; this is in line with slowing loan growth in Indonesia’s banking system (10.7% as of May-15). Slowing investment loan growth

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

Dec-

10

Mar-

11

Jun

-11

Sep

-11

Dec-

11

Mar-

12

Jun

-12

Sep

-12

Dec-

12

Mar-

13

Jun

-13

Sep

-13

Dec-

13

Mar-

14

Jun

-14

Sep

-14

Dec-

14

Mar-

15

Investment loans WC loans Consumption loans Total loans

Source: Bank Indonesia, DBS Vickers Besides all the above factors, slowing domestic auto sales (expected to decline by 10% this year) has led to large 4W manufacturers to focus on ramping up their existing manufacturing facilities. Therefore, automakers, which had underpinned the stunning growth in industrial land pre-sales from 2011-2012, are not in a hurry to expand production capacity as aggregate utilisation rate is now below 60%. 4W manufacturers utilisation rate trend

83%

64%

94%

79%

89%

77%

67%

59%

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2008 2009 2010 2011 2012 2013 2014 2015F

Capacity (LHS) Production (LHS) Utilization rate (RHS)

units

Source: Indonesia 4W Association (Gaikindo), DBS Vickers, various sources.

The automotive industry’s contribution to industrial land pre-sales has declined rapidly from high 58% in 2011 to just 5% in 1Q15 as F&B and consumer goods industries take up some of the slack. Contribution to industrial land pre-sales

58% 55% 55%

23%

5%

3% 4%14%

29%

42%

2% 5%

5%28%

22%

37% 36%26%

20%31%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2011 2012 2013 2014 1Q15

Automotive F&B and consumer goods Logistics / Warehousing Others

Source: Colliers, DBS Vickers Tight supply in better locations provide some support for

modest price increases

Based on our discussion in the previous section, we continue to believe that industrial land pre-sales this year will reach similar level as last year’s achievement. Industrial land demand (peaked in 2011, with no signs

of recovery for now)

-

200

400

600

800

1,000

1,200

1,400

2008 2009 2010 2011 2012 2013 2014 1Q15

ha

Source: Colliers, DBS Vickers Supply will also remain tight (97% take-up rate) as major developers are still preparing their landbank (i.e. cut-and-fill and building the necessary infrastructure) for marketing sales.

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Indonesia Industrial Estate

Page 4

Tight supply despite slowing demand

50%

55%

60%

65%

70%

75%

80%

85%

90%

95%

100%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

2008 2009 2010 2011 2012 2013 2014 1Q15

Demand (LHS) Supply (LHS) Take-up rate (RHS)ha

Source: Colliers, DBS Vickers Considering the demand and supply situation above, we expect industrial land prices (in US$ psm terms) to rise at a modest 10% per annum in the next few years. Expect modest growth in industrial land price after

surging between 2010-2012

-

50

100

150

200

250

2008 2009 2010 2011 2012 2013 2014 1Q15

Bogor Tangerang Karawang Bekasi Serang

US$ psm

Source: Colliers, DBS Vickers Pessimistic on industrial estate outlook

Given the bleak outlook for the industrial estate sector, we prefer industrial developers with a healthy balance sheet and exposure to other business segments such as residential property development. We did an earnings sensitivity test for each developer to gauge the impact of a potential further slowdown in demand (i.e. worse than our expectations). For every 10% shortfall in FY15F marketing sales, LPCK’s FY16F earnings is the least impacted compared to BEST and SSIA.

Sensitivity analysis: Impact of 10% miss in our FY15F

marketing sales estimate on earnings

-3.4%

-2.8%

-4.2%

-3.6%

-3.1%

-1.6%

-4.5%

-4.0%

-3.5%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

SSIA BEST LPCK

FY15F FY16F

Source: DBS Vickers The sector has undergone a deep correction YTD, with valuations de-rating to between average and +1SD of mean forward PE. (Please refer to each developer ‘s PE Band in the APPENDIX). Stock performance: Share prices have correct YTD-2015

64%

91%

113%

54%

-42%

-14% -18%-7%

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

BEST SSIA LPCK KIJA*

2014 YTD

Source: DBS Vickers, Bloomberg Finance L.P., Note: KIJA is not under our coverage. The industrial sector is currently trading at a 44% discount to RNAV (wider than its 4-year average of 24%), with BEST now trading close to our estimated worst case RNAV. Our worst RNAV takes into account only the raw landbank that developers currently have and the estimated value of their other businesses. We expect developers to report flat quarterly earnings growth in 2Q15, largely supported by marketing sales achieved in FY13 and FY14.

Page 5: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

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Page 5

Industrial sector discount to RNAV trend

-40%

-20%

0%

20%

40%

60%

Ap

r-12

Jul-

12

Oct

-12

Jan

-13

Ap

r-13

Jul-

13

Oct

-13

Jan

-14

Ap

r-14

Jul-

14

Oct

-14

Jan

-15

Ap

r-15

Jul-

15

Average 24%

Source: DBS Vickers, Bloomberg Finance L.P. Developer’s discount to RNAV

29%

45%

58%

0% 10% 20% 30% 40% 50% 60% 70%

BEST

SSIA

LPCK

Disc to worst RNAV

27%

26%

2%

Source: DBS Vickers, Bloomberg Finance L.P. LPCK is our only BUY in this space for its ability to gradually shift towards residential and commercial developments in prime areas and its recent transformation into high-rise developer would help to preserve its landbank for more efficient use. LPCK has been debt free for the past three years and its strong internal cash flows should allow the company to execute its expansion plan.

Revenue and earnings revision

We revised down our FY15/FY16/FY17F marketing sales assumption significantly for all three industrial estate developers under our coverage to reflect latest YTD achievements and project launches in the pipeline. Changes in marketing sales have directly impacted FY15/16/17F revenues by between -39% and -1% and net profit by between -48% and -9%. These adjustments have also led to changes to our RNAV assumptions and TP. (Refer to Summary of revisions in the APPENDIX).

Summary of changes to TP and recommendation

Company New TP Previous TP Changes New Rec Previous Rec

BEST 445 730 -39% Hold Hold

LPCK 12,500 13,900 -10% Buy Buy

SSIA 1,050 1,400 -25% Hold Buy

Source: DBS Vickers

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Page 6

APPENDIX

Our estimated YTD marketing sales performance for each developer

Developer

Estimated marketing sales YTD

(Rpbn)

YTD achievement

(as % of FY15

company guidance)

YTD achievement

(as % of DBS FY15F)

FY15 marketing

sales guidance

(Rpbn)

DBS FY15F

marketing sales

(Rpbn)

DBS FY15F

forecast implied y-o-y

growth (%)

Marketing sales FY14

(Rpbn)

Difference between our estimate to company guidance

Remarks

BEST 208 37% 50% 567 420 -56% 945 -26% Revised down its marketing

sales by 60% on 10Jun2015

LPCK 1,500 60% 61% 2,500 2,464 33% 1,858 -1%

Strong pre-sales achievement YTD

(supported mostly by apartment launches in

Orange County Business District)

SSIA 107 9% 18% 1,215 604 58% 382 -50% Will likely to revise its FY target after 2Q15 results

Total 1,815 42% 52% 4,282 3,488 10% 3,185 -19%

Source: DBS Vickers, Companies RNAV breakdown by industrial developer

20%

65%

15%

96%51%

11%

4%

33%

4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

BEST SSIA LPCK

Landed residential Apartment Office Hotel Industrial Others

Source: DBS Vickers

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Page 7

Summary of revisions

BEST LPCK SSIA

FY15F FY16F FY17F FY15F FY16F FY17F FY15F FY16F FY17F

Mktg. Sales Now 420 644 869 2,464 1,860 1,809 604 653 1,168

in Rpbn Prev 1,056 1,162 1,406 2,768 2,306 2,300 806 870 1,168

Chg (%) -60% -45% -38% -11% -19% -21% -25% -25% 0%

Revenue Now 776 743 857 1,736 2,395 2,753 4,643 4,970 5,535

in Rpbn Prev 1,016 1,161 1,407 1,979 2,737 3,186 4,699 5,032 5,549

Chg (%) -24% -36% -39% -12% -13% -14% -1% -1% 0%

Net profit Now 339 278 417 842 971 1,160 442 412 457

in Rpbn Prev 474 538 777 1,019 1,259 1,273 492 470 455

Chg (%) -28% -48% -46% -17% -23% -9% -10% -12% 0%

RNAV Now 602 20,252 1,705

in Rp/sh Prev 897 22,081 1,845

Chg (%) -33% -8% -8%

TP Now 445 12,500 1,050

in Rp/sh Prev 730 13,900 1,400

Chg (%) -39% -10% -25%

Rec Now Hold Buy Hold

Prev Hold Buy Buy

Source: DBS Vickers.

Page 8: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

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Page 8

Indonesian Industrial Estate Developers: Valuation summary

Company Bekasi Fajar Industrial Estate Surya Semesta Internusa Lippo Cikarang

Ticker BEST IJ SSIA IJ LPCK IJ Market cap (US$m) 304 323 445 Share price 422 920 8,575 RNAV 602 1,705 20,252 Disc to RNAV 30% 46% 58%

Rec Hold Hold Buy TP 445 1,050 12,500 Upside 5% 14% 46%

PE (x) 2012 8.4 6.1 14.7 2013 5.5 6.3 10.1 2014 10.4 10.4 7.1 FY15F 12.0 10.8 7.1 FY16F 14.6 11.6 6.1 PB (x) 2012 2.2 2.7 4.9 2013 1.6 1.9 3.3 2014 1.4 1.6 2.2 FY15F 1.3 1.3 1.7 FY16F 1.2 1.2 1.3 Revenue 2012 965.1 3,564.6 1,013.1 (Rpbn) 2013 1,323.9 4,582.7 1,327.9 2014 839.6 4,464.4 1,792.4 FY15F 775.7 4,642.9 1,736.2 FY16F 742.9 4,969.8 2,394.7 Net profit 2012 470.4 707.3 407.0 (Rpbn) 2013 743.6 691.1 590.6 2014 391.0 415.2 844.1 FY15F 339.1 442.0 842.4 FY16F 277.9 411.6 971.1 Net profit growth 2013 58% -2% 45% (%) 2014 -47% -40% 43% FY15F -13% 6% 0% FY16F -18% -7% 15% EBIT margin (%) 2012 55% 26% 43% 2013 67% 19% 48% 2014 56% 12% 51% FY15F 57% 14% 45% FY16F 59% 13% 40% Net gearing (%) 2012 CASH CASH CASH 2013 CASH CASH CASH 2014 5% 3% CASH FY15F 24% 16% CASH FY16F 30% 26% CASH ROE (%) 2012 35% 52% 40% 2013 35% 35% 39% 2014 15% 17% 38% FY15F 11% 14% 27% FY16F 9% 11% 24% Interest coverage 2012 22.8 15.3 106.9 (x) 2013 26.0 7.5 968.3 2014 13.0 6.1 1,622.4 FY15F 5.7 3.5 2,488.4 FY16F 3.3 2.5 3,123.9 EBITDA margin (%) 2012 55% 28% 44% 2013 67% 22% 48% 2014 57% 18% 52% FY15F 58% 17% 46% FY16F 60% 17% 42%

Source: DBS Vickers. Note: Price is as of 22Jul2015

Page 9: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

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Page 9

BEST: discount to RNAV trend BEST: PE Band

-40%

-20%

0%

20%

40%

60%

Ap

r-12

Au

g-1

2

Dec-

12

Ap

r-13

Au

g-1

3

Dec-

13

Ap

r-14

Au

g-1

4

Dec-

14

Ap

r-15

Average 19%

Avg: 12.8x

+1sd: 16.7x

+2sd: 20.6x

-1sd: 9x

-2sd: 5.1x

2.6

7.6

12.6

17.6

22.6

Apr-12 Apr-13 Apr-14 Apr-15

(x)

SSIA: discount to RNAV trend SSIA: PE Band

-40%

-20%

0%

20%

40%

60%

80%

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

Average 27%

Avg: 8.7x

+1sd: 11.7x

+2sd: 14.7x

-1sd: 5.7x

-2sd: 2.6x2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

(x)

LPCK: discount to RNAV trend LPCK: PE Band

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

Average 46%

Avg: 5.7x

+1sd: 7.6x

+2sd: 9.5x

-1sd: 3.8x

-2sd: 1.8x1.6

3.6

5.6

7.6

9.6

11.6

Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

(x)

Source: DBS Vickers. Bloomberg Finance L.P.

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Industry Focus

Indonesia Industrial Estate

Page 10

Stock Profiles

Page 11: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

www.ed: JS

HLaPr PoWpe AnEdEd

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Page 12: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

ASIAN INSIGHTS VICKERS SECURITIES Page 12

Company Guide

Bekasi Fajar Industrial Estate

CRITICAL DATA POINTS TO WATCH

Earnings Drivers:

No growth from industrial marketing sales BEST recognises marketing sales from the previous 1-2 years as revenue. We expect industrial land sales revenue to stay flat over FY15-17F given the weak demand for industrial land over the past 2 years. BEST is a pure industrial play as industrial land sales account for most of its consolidated earnings. Hence, Compared to peers, BEST’s marketing sales is very highly correlated to upturn and downswing of the industrial cycle. Growing recurring income may address earnings concern BEST’s venture into standard factory buildings (SFB) and warehousing rental facilities should see its recurring revenue tripling between 2013 and 2017F. Coupled with slowing industrial land sales, the portion of recurring revenue is expected to rise to c.20% from less than 10% currently. Possible spike in selling expenses may negatively affect margins Selling expenses in 4Q14 ballooned due to commision fees payable for industrial land sold together with its Japanese JV partner, Marubeni Corp. Controlling SG&A expenses (back to historical levels) will be crucial for BEST to maintain its profitability going forward.

Marketing sales

Sales Trend

Profitability Trend

Margins Trend

Disc to RNAV trend

Source: Company, DBS Vickers

1,527

1,258

945

420

644

0

200

400

600

800

1,000

1,200

1,400

2012A 2013A 2014A 2015F 2016F

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40.0%

60.0%

80.0%

100.0%

120.0%

0

200

400

600

800

1,000

1,200

1,400

2012A 2013A 2014A 2015F 2016F

Rp bn

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277

377

477

577

677

777

877

2012A 2013A 2014A 2015F 2016F

Rp bn

Operating EBIT Pre tax Profit Net Profit

35.0%

40.0%

45.0%

50.0%

55.0%

60.0%

65.0%

70.0%

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Ap

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Page 13: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

ASIAN INSIGHTS VICKERS SECURITIES Page 13

Company Guide

Bekasi Fajar Industrial Estate

Balance Sheet:

Gearing up for more investment properties project BEST secured US$130m in syndicated loan facilities in early March 2015 for expansion capex. Net gearing will increase significantly in the next few years given the slower cash generation from industrial land sales. Exposure to USD debt With the above US$ synidicated loan facilities, BEST’s balance sheet is exposed to USD/IDR volatility. Capex to ramp up in this year As more investment properties such as SFBs, warehouses and hotels are under construction, we expect capex to ramp up from this year onwards.

Share Price Drivers:

Marketing sales Marketing sales is a good indicator for all industrial estate developers as it gives revenue visibility for the next 1-2 years. FDI into Indonesia Commitment from foreign companies to invest in businesses in Indonesia will be followed by demand for industrial land (starting with the large manufacturers, followed by other players along the relevant supply chains).

Key Risks:

Regulatory changes: reversal of business-friendly policies Constant changes to regulations could deter investments in Indonesia. Additionally, the new government has recently shown that they will not hesitate to intervene and regulate businesses when needed. The risk of being perceived as a populist government may discourage potential investors. Lingering risks of labour protests The annual labour and minimum wage talks have seen rising vocal protests over the years, and had even disrupted manufacturing activities. These suggest tha labour unions have increasingly stronger bargaining power during these annual talks. Competition from the ASEAN Economic Community (AEC) The AEC could see Indonesia losing some of its advantages and competitive edge over neighbouring countries. COMPANY BACKGROUND

BEST is the developer of MM2100 industrial estate in Bekasi area (east Jakarta suburb). The estate is the closest to Jakarta city among developments in the area, and its tenants are primarily Japanese manufacturers.

Leverage & Asset Turnover (x)

Capital Expenditure

ROE (%)

Forward PE Band (x)

PB Band (x)

Source: Company, DBS Vickers

0.1

0.2

0.2

0.3

0.3

0.4

0.4

0.5

0.5

0.00

0.10

0.20

0.30

0.40

0.50

0.60

2012A 2013A 2014A 2015F 2016F

Gross Debt to Equity (LHS) Asset Turnover (RHS)

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

1,000.0

2012A 2013A 2014A 2015F 2016F

Capital Expenditure (-)

Rp

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

2012A 2013A 2014A 2015F 2016F

Avg: 12.8x

+1sd: 16.7x

+2sd: 20.6x

-1sd: 9x

-2sd: 5.1x

2.6

7.6

12.6

17.6

22.6

Apr-12 Apr-13 Apr-14 Apr-15

(x)

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+1sd: 3.61x

+2sd: 4.55x

-1sd: 1.72x

-2sd: 0.78x0.6

1.1

1.6

2.1

2.6

3.1

3.6

4.1

4.6

5.1

Apr-12 Apr-13 Apr-14 Apr-15

(x)

Page 14: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

ASIAN INSIGHTS VICKERS SECURITIES Page 14

Company Guide

Bekasi Fajar Industrial Estate

BEST: RNAV summary

Portfolio Adjusted Value (Rpbn)

Stakes Full Value (Rpbn) % of total Landbank (ha)

Industrial estate

MM2100 (Bekasi) 6,692 100% 6,692 93% 658

Semarang (Central Java) 276 100% 276 4% 184

Investment properties

MM2100 (Bekasi) 265 51% 519 4%

Net Debt (Cash) 1,430 RNAV 5,802

No. of outstanding shares (bn) 9.6 RNAV/share 602

Source: DBS Vickers

Page 15: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

ASIAN INSIGHTS VICKERS SECURITIES Page 15

Company Guide

Bekasi Fajar Industrial Estate

Key Assumptions

FY Dec 2012A 2013A 2014A 2015F 2016F Marketing sales 1,526 1,257 945 420 643 Segmental Breakdown

FY Dec 2012A 2013A 2014A 2015F 2016F Revenues (Rp bn) Land plots 933 1,278 766 688 594 Standard factory 0 0 0 0 44 Maintenance fee 15 24 35 42 50 Others 17 22 38 46 55 Total 965 1,324 840 776 743 Gross Profit (Rp bn) Land plots 555 924 547 495 439 Standard factory 0 0 0 0 35 Maintenance fee 12 13 15 24 28 Others 8 9 18 18 21 Total 575 946 580 537 524 Gross Profit Margins Land plots 59.5 72.3 71.4 72.0 74.0 Standard factory 80.0 Maintenance fee 79.5 56.3 42.8 56.3 56.3 Others 44.9 38.8 45.6 38.8 38.8 Total 59.6 71.4 69.1 69.2 70.5 Income Statement (Rp bn)

FY Dec 2012A 2013A 2014A 2015F 2016F Revenue 965 1,324 840 776 743 Cost of Goods Sold (390) (378) (260) (239) (219) Gross Profit 575 946 580 537 524 Other Opng (Exp)/Inc (48) (63) (108) (93) (89) Operating Profit 527 883 472 444 435 Other Non Opg (Exp)/Inc 10 (41) (5) 13 13 Associates & JV Inc 0 0 0 0 0 Net Interest (Exp)/Inc (19) (30) (34) (78) (132) Exceptional Gain/(Loss) 0 0 0 0 0 Pre-tax Profit 518 812 433 379 316 Tax (47) (67) (42) (39) (37) Minority Interest 0 (1) 0 (1) (1) Preference Dividend 0 0 0 0 0 Net Profit 470 744 391 339 278 Net Profit before Except. 470 744 391 339 278 EBITDA 530 888 476 452 445 Growth Revenue Gth (%) 102.8 37.2 (36.6) (7.6) (4.2) EBITDA Gth (%) 199.7 67.5 (46.4) (5.1) (1.5) Opg Profit Gth (%) 234.1 67.5 (46.5) (6.0) (2.0) Net Profit Gth (%) 293.4 58.1 (47.4) (13.3) (18.0) Margins & Ratio Gross Margins (%) 59.6 71.4 69.1 69.2 70.5 Opg Profit Margin (%) 54.6 66.7 56.2 57.2 58.5 Net Profit Margin (%) 48.7 56.2 46.6 43.7 37.4 ROAE (%) 35.3 35.0 14.7 11.4 8.6 ROA (%) 23.9 26.3 11.1 7.7 5.2 ROCE (%) 30.5 32.3 13.5 9.6 7.5 Div Payout Ratio (%) N/A N/A N/A N/A N/A Net Interest Cover (x) 27.5 29.5 14.0 5.7 3.3

Source: Company, DBS Vickers

Landplot sales remain significant going forward

High and improving margins for all business segments

Page 16: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

ASIAN INSIGHTS VICKERS SECURITIES Page 16

Company Guide

Bekasi Fajar Industrial Estate

Quarterly / Interim Income Statement (Rp bn)

FY Dec 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 Revenue 157 86 253 343 178 Cost of Goods Sold (52) (22) (52) (133) (48) Gross Profit 105 64 200 211 130 Other Oper. (Exp)/Inc (18) (15) (21) (55) (20) Operating Profit 87 49 180 156 110 Other Non Opg (Exp)/Inc 19 (4) (4) (16) (18) Associates & JV Inc 0 0 0 0 0 Net Interest (Exp)/Inc (8) (7) (7) (12) (9) Exceptional Gain/(Loss) 0 0 0 0 0 Pre-tax Profit 98 38 169 128 84 Tax (7) (4) (15) (15) (8) Minority Interest 0 0 0 0 0 Net Profit 90 34 154 113 75 Net profit bef Except. 90 34 154 113 75 EBITDA 87 49 180 156 110 Growth Revenue Gth (%) (71.0) (45.0) 192.2 35.8 (48.1) EBITDA Gth (%) (73.6) (43.7) 266.2 (13.2) (29.6) Opg Profit Gth (%) (73.6) (43.7) 266.2 (13.2) (29.6) Net Profit Gth (%) (66.1) (62.0) 348.0 (26.5) (33.1) Margins Gross Margins (%) 66.8 74.0 79.3 61.4 73.0 Opg Margins (%) 55.5 56.7 71.1 45.5 61.6 Net Profit Margins (%) 57.5 39.6 60.8 32.9 42.3 Balance Sheet (Rp bn)

FY Dec 2012A 2013A 2014A 2015F 2016F Net Fixed Assets 76 77 162 866 1,025 Invts in Associates & JVs 0 0 0 0 0 Invt & Devt Properties 76 77 77 216 269 Other LT Assets (76) (71) 45 (212) (265) Cash & ST Invts 583 548 318 841 487 Dev Props held for sale 0 0 86 649 756 Inventory 1,545 2,400 2,493 2,905 3,370 Debtors 9 80 36 26 25 Other Current Assets 1,627 2,730 2,965 2,826 3,206 Total Assets 2,286 3,360 3,653 5,187 5,479 ST Debt 68 149 233 147 155 Creditor 5 71 47 24 22 Other Current Liab 269 255 272 205 201 LT Debt 160 393 234 1,682 1,762 Other LT Liabilities 15 16 18 18 18 Shareholder’s Equity 1,770 2,475 2,848 3,109 3,319 Minority Interests 0 1 2 2 3 Total Cap. & Liab. 2,286 3,360 3,653 5,187 5,479 Non-Cash Wkg. Capital 1,353 2,405 2,731 3,246 3,740 Net Cash/(Debt) 355 6 (148) (988) (1,430) Debtors Turn (avg days) 3.5 12.3 25.2 14.6 12.5 Creditors Turn (avg days) 29.2 37.1 84.4 56.4 40.2 Inventory Turn (avg days) 1,410.4 1,926.9 3,493.5 4,270.9 5,487.4 Asset Turnover (x) 0.5 0.5 0.2 0.2 0.1 Current Ratio (x) 6.5 6.9 6.1 11.5 11.8 Quick Ratio (x) 1.7 1.3 0.6 2.3 1.4 Net Debt/Equity (X) CASH CASH 0.1 0.3 0.4 Net Debt/Equity ex MI (X) CASH CASH 0.1 0.3 0.4 Capex to Debt (%) 43.9 158.9 21.2 30.5 27.5 Z-Score (X) NA 5.3 5.0 3.1 3.2

Source: Company, DBS Vickers

Additional US$130m syndicated loan facilities

Page 17: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

ASIAN INSIGHTS VICKERS SECURITIES Page 17

Company Guide

Bekasi Fajar Industrial Estate

Cash Flow Statement (Rp bn)

FY Dec 2012A 2013A 2014A 2015F 2016F Pre-Tax Profit 518 812 433 379 316 Dep. & Amort. 3 5 4 8 10 Tax Paid (47) (67) (42) (39) (37) Assoc. & JV Inc/(loss) 0 0 0 0 0 Chg in Wkg.Cap. (233) (196) (233) (103) (29) Other Operating CF 0 (1) 0 (1) (1) Net Operating CF 240 552 162 245 259 Capital Exp.(net) (100) (860) (99) (558) (528) Other Invts.(net) 0 0 0 0 0 Invts in Assoc. & JV 0 0 0 0 0 Div from Assoc & JV 0 0 0 0 0 Other Investing CF 2 (4) (201) (446) (107) Net Investing CF (98) (864) (299) (1,005) (635) Div Paid 0 (92) (22) (78) (68) Chg in Gross Debt (24) 314 (75) 1,362 89 Capital Issues 405 53 3 0 0 Other Financing CF 0 0 0 0 0 Net Financing CF 381 276 (94) 1,284 21 Currency Adjustments 0 0 0 0 0 Chg in Cash 523 (36) (232) 524 (354) Opg CFPS (Rp) 51 78 41 36 30 Free CFPS (Rp) 15 (32) 7 (33) (28)

Source: Company, DBS Vickers

Target Price & Ratings History

Source: DBS Vickers

S.No. Da teClos ing

Pri c eTa rge t Pric e

Ra ting

1: 03 Mar 15 690 730 Hold 2: 01 Apr 15 575 730 Hold 3: 04 May 15 580 730 Hold 4: 05 May 15 570 730 Hold

Note : Share price and Target price are adjusted for corporate actions.

1

2

3

4

352

402

452

502

552

602

652

702

752

802

Jul-14 Nov-14 Mar-15 Jul-15

Rp

Increase in net operating cash flow going forward

Page 18: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

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889

1089

Jul-15

Relative Index

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395 395

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Page 19: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

ASIAN INSIGHTS VICKERS SECURITIES Page 19

Company Guide

Lippo Cikarang

CRITICAL DATA POINTS TO WATCH

Earnings Drivers:

Transformation to a high-rise developer.... LPCK’s gradual shift towards residential and commercial developments since 2012 will see its future revenue driven more by sales of apartments and high-rise units. .... will see more contribution from apartments.... We forecast revenue from apartments and residential segment to grow at 24% CAGR between 2014-17F, while revenue from industrial land to decline at 8% CAGR in the same timeframe. With this assumption, revenue from apartments and residential projects will exceed industrial land in 2015. ...but lower margins from the shift in product mix Shifts in product mix to be more focused on high-rise developments will slowly decrease LPCK’s overall margins going forward, as industrial land segment generally churns more than 15ppts higher GP margins than high-rise developments. We forecast overall GP margins to decrease to the 50% level in 2017F from the peak of c. 59% in 2014. Slower marketing sales Real estate estate developers recognise non-recurring revenue from marketing sales from earlier years (i.e. 3-4 years for high-rise developments and 1-2 years for industrial estates). We expect property sales (non-recurring revenue) to grow at 9% CAGR over 2014-17F supported by 13% CAGR in marketing sales between 2011-2014. Growing recurring revenue for sustainability Rental revenue from the Japanese SMEs Center development will be a growth driver for recurring revenue going forward. We expect FY17F recurring revenue to triple from FY13’s level and contribute c.20% of consolidated revenue from current 11% level. Good control of operating costs LPCK has been able to keep SG&A expenses (as % of revenue) under control since 2011. This is crucial for LPCK to maintain operating margins going forward. COMPANY BACKGROUND

LPCK was established in 1987 as part of conglomerate Lippo Group, and started developing property in 1995. They developed the 3,500ha industrial township in Cikarang (east Jakarta suburb).

Marketing sales

Sales Trend

Profitability Trend

Margins Trend

Disc to RNAV Trend

Source: Company, DBS Vickers

2,061

1,6981,858

2,464

1,860

0

300

600

900

1,200

1,500

1,800

2,100

2,400

2012A 2013A 2014A 2015F 2016F

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

0

500

1,000

1,500

2,000

2012A 2013A 2014A 2015F 2016F

Rp bn

Total Revenue Revenue Growth (%) (YoY)

407

507

607

707

807

907

1,007

1,107

2012A 2013A 2014A 2015F 2016F

Rp bn

Operating EBIT Pre tax Profit Net Profit

38.0%

40.0%

42.0%

44.0%

46.0%

48.0%

50.0%

52.0%

54.0%

2012A 2013A 2014A 2015F 2016F

Operating Margin % Net Income Margin %

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

Average 46%

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ASIAN INSIGHTS VICKERS SECURITIES Page 20

Company Guide

Lippo Cikarang

Balance Sheet:

Healthy balance sheet. The company has been debt-free the past three years, and its strong internal cash generation should allow LPCK to execute its expansion plan. Capex to ramp up in 2015F and subside in subsequent years Given few apartment launches from its Orange County Business District (OCBD) last year, we expect capex to surge in 2015F and subside thereafter, unless LPCK plans to speed up its tower launches aggressively. Share Price Drivers:

Marketing sales Marketing sales is a good indicator for all industrial estate developers as it gives revenue visibility for the next 1-2 years. FDI into Indonesia Commitment from foreign companies to invest in businesses in Indonesia will be followed by demand for industrial land (starting with the large manufacturers, followed by other players along the relevant supply chains). Key Risks:

Regulatory changes: reversal of business-friendly policies Constant changes to regulations could deter investments in Indonesia. Additionally, the new government has recently shown that they will not hesitate to intervene and regulate businesses when needed. The risk of being perceived as a populist government may discourage potential investors. Lingering risks of labour protests The annual labour and minimum wage talks have seen rising vocal protests over the years, and had even disrupted manufacturing activities. These suggest tha labour unions have increasingly stronger bargaining power during these annual talks. Competition from the ASEAN Economic Community (AEC) The AEC could see Indonesia losing some of its advantages and competitive edge over neighbouring countries. Stricter regulations for high-rise developments. Plot ratio approval and balanced ratio rules, when strictly implemented, could potentially slow property demand. Liquidity tightening could slow demand further. Potential interest rate hike. Property demand is sensitive to and is negatively correlated to interest rate movements

Leverage & Asset Turnover (x)

Capital Expenditure

ROE (%)

Forward PE Band (x)

PB Band (x)

Source: Company, DBS Vickers

0.3

0.3

0.3

0.4

0.4

0.4

0.4

0.4

0.5

0.5

0.5

0.00

0.01

0.01

0.02

0.02

0.03

0.03

0.04

0.04

0.05

0.05

2012A 2013A 2014A 2015F 2016F

Gross Debt to Equity (LHS) Asset Turnover (RHS)

0.0

200.0

400.0

600.0

800.0

1,000.0

1,200.0

2012A 2013A 2014A 2015F 2016F

Capital Expenditure (-)

Rp

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

2012A 2013A 2014A 2015F 2016F

Avg: 5.7x

+1sd: 7.6x

+2sd: 9.5x

-1sd: 3.8x

-2sd: 1.8x1.6

3.6

5.6

7.6

9.6

11.6

Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

(x)

Avg: 2.35x

+1sd: 2.94x

+2sd: 3.53x

-1sd: 1.76x

-2sd: 1.17x0.8

1.3

1.8

2.3

2.8

3.3

3.8

4.3

4.8

5.3

Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

(x)

Page 21: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

ASIAN INSIGHTS VICKERS SECURITIES Page 21

Company Guide

Lippo Cikarang

Key Assumptions

FY Dec 2012A 2013A 2014A 2015F 2016F Marketing sales 2,060 1,697 1,857 2,464 1,859 Segmental Breakdown

FY Dec 2012A 2013A 2014A 2015F 2016F Revenues (Rp bn) Industrial land and 619 808 815 601 493 Apartment, residential 268 359 781 812 1,422 Town management 108 141 170 296 452 Others 19 19 25 27 28 Total 1,013 1,328 1,792 1,736 2,395 Gross Profit (Rp bn) Industrial land and 336 484 534 413 339 Apartment, residential 112 168 417 345 604 Town management 55 73 87 148 226 Others 18 18 19 24 26 Total 520 743 1,057 931 1,194 Gross Profit Margins Industrial land and 54.3 59.9 65.5 68.7 68.8 Apartment, residential 41.8 46.7 53.4 42.5 42.5 Town management 50.8 51.7 50.9 50.0 50.0 Others 94.0 91.4 75.2 91.4 91.4 Total 51.4 55.9 59.0 53.6 49.9 Income Statement (Rp bn)

FY Dec 2012A 2013A 2014A 2015F 2016F Revenue 1,013 1,328 1,792 1,736 2,395 Cost of Goods Sold (493) (585) (735) (806) (1,200) Gross Profit 520 743 1,057 931 1,194 Other Opng (Exp)/Inc (83) (109) (143) (156) (228) Operating Profit 437 634 914 774 967 Other Non Opg (Exp)/Inc 10 4 11 0 0 Associates & JV Inc 6 5 5 159 126 Net Interest (Exp)/Inc 4 22 12 8 14 Exceptional Gain/(Loss) 0 0 0 0 0 Pre-tax Profit 458 666 942 941 1,106 Tax (51) (75) (98) (98) (135) Minority Interest 0 0 0 0 0 Preference Dividend 0 0 0 0 0 Net Profit 407 591 844 842 971 Net Profit before Except. 407 591 844 842 971 EBITDA 442 643 925 796 999 Growth Revenue Gth (%) 12.3 31.1 35.0 (3.1) 37.9 EBITDA Gth (%) 41.7 45.3 43.8 (14.0) 25.5 Opg Profit Gth (%) 43.5 45.1 44.2 (15.3) 24.9 Net Profit Gth (%) 58.0 45.1 42.9 (0.2) 15.3 Margins & Ratio Gross Margins (%) 51.4 55.9 59.0 53.6 49.9 Opg Profit Margin (%) 43.1 47.7 51.0 44.6 40.4 Net Profit Margin (%) 40.2 44.5 47.1 48.5 40.6 ROAE (%) 39.7 38.8 37.7 27.3 24.3 ROA (%) 16.7 17.7 20.7 17.7 16.7 ROCE (%) 35.5 36.9 36.5 22.4 21.2 Div Payout Ratio (%) - - - - - Net Interest Cover (x) NM NM NM NM NM

Source: Company, DBS Vickers

Highest portion of revenue will come from apartment and residential projects starting in 2015

Lower margins due to product shift to more apartments and residential projects

Significant increase due to JV for developing Delta Silicon 8

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Company Guide

Lippo Cikarang

Quarterly / Interim Income Statement (Rp bn)

FY Dec 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 Revenue 473 378 470 472 518 Cost of Goods Sold (191) (151) (153) (239) (217) Gross Profit 281 226 317 233 301 Other Oper. (Exp)/Inc (28) (32) (32) (51) (38) Operating Profit 253 195 284 182 263 Other Non Opg (Exp)/Inc (4) 3 8 5 35 Associates & JV Inc 0 0 3 3 2 Net Interest (Exp)/Inc 3 3 3 3 3 Exceptional Gain/(Loss) 0 0 0 0 0 Pre-tax Profit 252 201 298 192 303 Tax (24) (25) (21) (28) (28) Minority Interest 0 0 0 0 0 Net Profit 228 176 277 164 275 Net profit bef Except. 228 176 277 164 275 EBITDA 253 195 284 182 263 Growth Revenue Gth (%) 0.7 (20.1) 24.5 0.4 9.8 EBITDA Gth (%) 30.8 (23.1) 46.0 (36.0) 44.5 Opg Profit Gth (%) 30.8 (23.1) 46.0 (36.0) 44.5 Net Profit Gth (%) 35.4 (22.7) 57.4 (40.8) 67.8 Margins Gross Margins (%) 59.5 60.0 67.4 49.3 58.1 Opg Margins (%) 53.5 51.6 60.5 38.5 50.7 Net Profit Margins (%) 48.1 46.6 58.9 34.7 53.1 Balance Sheet (Rp bn)

FY Dec 2012A 2013A 2014A 2015F 2016F Net Fixed Assets 381 589 538 719 802 Invts in Associates & JVs 15 28 14 28 28 Invt & Devt Properties 79 98 118 366 484 Other LT Assets (14) (19) (21) (259) (367) Cash & ST Invts 310 308 246 71 696 Dev Props held for sale 302 491 420 354 318 Inventory 1,940 2,510 2,882 3,726 4,166 Debtors 54 60 66 75 103 Other Current Assets 1,759 2,359 2,996 3,940 4,470 Total Assets 2,832 3,854 4,310 5,218 6,431 ST Debt 0 0 0 0 0 Creditor 0 0 40 40 40 Other Current Liab 1,559 1,978 1,553 1,619 1,861 LT Debt 0 0 0 0 0 Other LT Liabilities 45 57 45 45 45 Shareholder’s Equity 1,228 1,819 2,663 3,506 4,477 Minority Interests 0 0 8 8 8 Total Cap. & Liab. 2,832 3,854 4,310 5,218 6,431 Non-Cash Wkg. Capital 502 872 1,822 2,634 2,887 Net Cash/(Debt) 310 308 246 71 696 Debtors Turn (avg days) 22.8 15.7 12.8 14.7 13.5 Creditors Turn (avg days) 76.1 0.0 10.2 18.8 12.6 Inventory Turn (avg days) 1,235.6 1,409.3 1,358.0 1,537.6 1,232.7 Asset Turnover (x) 0.4 0.4 0.4 0.4 0.4 Current Ratio (x) 1.5 1.6 2.3 2.6 2.9 Quick Ratio (x) 0.2 0.2 0.2 0.1 0.4 Net Debt/Equity (X) CASH CASH CASH CASH CASH Net Debt/Equity ex MI (X) CASH CASH CASH CASH CASH Capex to Debt (%) N/A N/A N/A N/A N/A Z-Score (X) NA 3.7 4.9 4.1 4.5

Source: Company, DBS Vickers

Debt free since 2012

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Company Guide

Lippo Cikarang

Cash Flow Statement (Rp bn)

FY Dec 2012A 2013A 2014A 2015F 2016F Pre-Tax Profit 458 666 942 941 1,106 Dep. & Amort. 6 9 11 21 32 Tax Paid (51) (75) (98) (98) (135) Assoc. & JV Inc/(loss) 0 0 0 0 0 Chg in Wkg.Cap. 490 200 (578) 32 187 Other Operating CF 0 0 0 0 0 Net Operating CF 903 800 277 896 1,190 Capital Exp.(net) (476) (786) (334) (1,045) (555) Other Invts.(net) 6 (13) 14 (14) 0 Invts in Assoc. & JV 0 0 8 0 0 Div from Assoc & JV 0 0 0 0 0 Other Investing CF (19) (2) (30) (10) (10) Net Investing CF (490) (802) (341) (1,069) (565) Div Paid 0 0 0 0 0 Chg in Gross Debt (140) 0 0 0 0 Capital Issues 0 0 0 0 0 Other Financing CF 0 0 0 0 0 Net Financing CF (140) 0 0 0 0 Currency Adjustments 0 0 0 0 0 Chg in Cash 273 (2) (64) (173) 625 Opg CFPS (Rp) 593 862 1,228 1,241 1,441 Free CFPS (Rp) 613 19 (82) (214) 912

Source: Company, DBS Vickers

Target Price & Ratings History

Source: DBS Vickers

S.No. Da teClos ing

Pri c eTa rge t Pric e

Ra ting

1: 03 Mar 15 11800 13900 Buy2: 30 Mar 15 11500 13900 Buy3: 30 Apr 15 11975 13900 Buy

Note : Share price and Target price are adjusted for corporate actions.

1

23

6816

7816

8816

9816

10816

11816

12816

Jul-14 Nov-14 Mar-15 Jul-15

Rp

High capex mostly from apartments project in OCBD

Page 24: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

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Page 25: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

ASIAN INSIGHTS VICKERS SECURITIES Page 25

Company Guide

Surya Semesta Internusa

CRITICAL DATA POINTS TO WATCH

Earnings Drivers:

Steady construction segment Construction, done through SSIA’s listed subsidiary Nusa Raya Cipta (NRCA), will remain an important revenue driver for SSIA despite much lower margins than the highly cyclical industrial estate segment. A staggering 31% CAGR growth over 2009 – 2014 from new construction contracts provides the backbone for revenue in the next 1-2 years. We estimate that construction segment will contribute c.70% of consolidated revenue in the next 3 years. Flat growth from industrial estate marketing sales Industrial estate developers recognise non-recurring revenue from marketing sales from the previous 1-2 years. We expect industrial land sales revenue to stay flat over 2015-16F given the weak demand for industrial land over the past 2 years. Higher revenue from industrial estate sales may flow in after 2017F if Subang development proceeds as expected and the demand cycle for industrial estate returns. More toll road investments would be positive SSIA’s investment (effectively 24.8%) in the 116km Cikampek –Palimanan (Cipali) toll road project since 4Q12 has had a positive impact given its potential value and additional boost from contracts to its construction arm. Further investments in toll roads would be a plus. Hospitality business undergoing expansion The hospitality segment currently generates c.11% of SSIA’s revenue (mostly from its 5-star hotels and resorts). The on-going expansion of 3-star hotels (started since 2013) under the Batiqa hotel chain will support the hospitality segment in the long-run. Good control of operating costs SSIA has been able to keep SG&A expenses (as % of revenue) under control. This is crucial for SSIA to maintain operating margins going forward. COMPANY BACKGROUND

Established in 1971 and listed on the IDX in 1997, SSIA has three main primary businesses: property (including industrial estate and rental property), construction and hospitality.

Marketing sales

Sales Trend

Profitability Trend

Margins Trend

Disc to RNAV trend

Source: Company, DBS Vickers

1,091

664

382

604653

0

100

200

300

400

500

600

700

800

900

1,000

1,100

2012A 2013A 2014A 2015F 2016F

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

2012A 2013A 2014A 2015F 2016F

Rp bn

Total Revenue Revenue Growth (%) (YoY)

411

511

611

711

811

911

2012A 2013A 2014A 2015F 2016F

Rp bn

Operating EBIT Pre tax Profit Net Profit

7.0%

12.0%

17.0%

22.0%

27.0%

2012A 2013A 2014A 2015F 2016F

Operating Margin % Net Income Margin %

-40%

-20%

0%

20%

40%

60%

80%

Jan

-11

Jul-

11

Jan

-12

Jul-

12

Jan

-13

Jul-

13

Jan

-14

Jul-

14

Jan

-15

Jul-

15

Average 27%

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ASIAN INSIGHTS VICKERS SECURITIES Page 26

Company Guide

Surya Semesta Internusa

Balance Sheet:

Geared up for growth SSIA has recently secured shareholders’ approval for two corporate actions: 1) US$ bond issuance, and 2) 2-year option window for exercising 10% rights issue. SSIA was in net cash position from 2011 to 2013 during the industrial cycle boom. The slowdown in industrial estate and aggressive capex for expansion resulted in net gearing ratio of 4% in 2014 and we expect this to head higher in the next few years. Exposure to USD debt With planned US$ bond issuance, SSIA’s balance sheet has exposure to USD/IDR volatility. Capex to ramp up in 2015F and then subside Given the current expansion plan (i.e. more investment properties), we expect capex to hit a peak in 2015F and subside after, unless there is an opportunity for large investments (i.e. toll road projects or stake acquisitions). Share Price Drivers:

Marketing sales The level of marketing sales is a good indicator for all industrial estate developers as it gives revenue visibility for the next 1-2 years FDI into Indonesia Commitment from foreign companies to invest in businesses in Indonesia will be followed by demand for industrial land (starting with the large manufacturers, followed by other players along the relevant supply chains). Key Risks:

Regulatory changes: reversal of business-friendly policies Constant changes to regulations could deter investments in Indonesia. Additionally, the new government has recently shown that they will not hesitate to intervene and regulate businesses when needed. The risk of being perceived as a populist government may discourage potential investors. Lingering risks of labour protests The annual labour and minimum wage talks have seen rising vocal protests over the years, and had even disrupted manufacturing activities. These suggest tha labour unions have increasingly stronger bargaining power during these annual talks. Competition from the ASEAN Economic Community (AEC) The AEC could see Indonesia losing some of its advantages and competitive edge over neighbouring countries.

Leverage & Asset Turnover (x)

Capital Expenditure

ROE (%)

Forward PE Band (x)

PB Band (x)

Source: Company, DBS Vickers

0.4

0.5

0.6

0.7

0.8

0.9

1.0

0.00

0.20

0.40

0.60

0.80

1.00

2012A 2013A 2014A 2015F 2016F

Gross Debt to Equity (LHS) Asset Turnover (RHS)

0.0

500.0

1,000.0

1,500.0

2,000.0

2,500.0

3,000.0

2012A 2013A 2014A 2015F 2016F

Capital Expenditure (-)

Rp

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

2012A 2013A 2014A 2015F 2016F

Avg: 8.7x

+1sd: 11.7x

+2sd: 14.7x

-1sd: 5.7x

-2sd: 2.6x2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

(x)

Avg: 2.41x

+1sd: 3.49x

+2sd: 4.57x

-1sd: 1.33x

-2sd: 0.25x0.2

0.7

1.2

1.7

2.2

2.7

3.2

3.7

4.2

4.7

Jul-11 Jul-12 Jul-13 Jul-14 Jul-15

(x)

Page 27: Indonesia Industry Focus Indonesia Industrial Estate - DBS Industry Focus Indonesia Industrial Estate Page 3 there is a slowdown in the industrial sector in the near term given softer

ASIAN INSIGHTS VICKERS SECURITIES Page 27

Company Guide

Surya Semesta Internusa

SSIA: RNAV summary

Current portfolio Adjusted Value (Rpbn)

Stakes Full Value (Rpbn) % of total Landbank (ha)

Industrial estate

Surya Cipta (Karawang) 955 100.0% 955 5% 128.1

Subang (West Java) 3,957 100.0% 3,957 22% 1,200

North Bekasi (West Java) 444 100.0% 444 2% 370

Investment properties

SuryaCipta Technopark 253 50% 506 1%

Construction 1,147 60.6% 1,893 6%

Hospitalities

Luxury hotels & resorts 1,205 86.8% 1,389 7%

Batiqa hotels 359 100.0% 359 2%

Investment in Cikampek - Palimanan toll road 2,043 24.8% 8,249 11%

Office in Kuningan (Jakarta CBD area) 58 100.0% 58 0%

Net Debt (Cash) 1,596

RNAV 8,825 No. of outstanding shares (bn) 5.2

RNAV/share 1,705

Source: DBS Vickers

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Company Guide

Surya Semesta Internusa

Key Assumptions

FY Dec 2012A 2013A 2014A 2015F 2016F Marketing sales 1,091 663 382 604 652 Segmental Breakdown

FY Dec 2012A 2013A 2014A 2015F 2016F Revenues (Rp bn) Industrial land 1,089 991 420 596 550 Construction 1,870 2,843 3,243 3,304 3,605 Hotel 473 580 626 525 542 Rental & Maintenance 126 152 175 217 272 Others 8 16 1 1 1 Total 3,565 4,583 4,464 4,643 4,970 Gross Profit (Rp bn) Industrial land 762 660 308 477 440 Construction 188 244 302 297 324 Hotel 321 390 421 353 364 Rental & Maintenance 20 16 24 33 41 Others 4 10 1 0 0 Total 1,296 1,320 1,054 1,160 1,170 Gross Profit Margins Industrial land 70.0 66.5 73.3 80.0 80.0 Construction 10.0 8.6 9.3 9.0 9.0 Hotel 67.8 67.2 67.2 67.2 67.2 Rental & Maintenance 16.2 10.6 13.4 15.0 15.0 Others 58.0 65.1 96.3 90.0 90.0 Total 36.3 28.8 23.6 25.0 23.5 Income Statement (Rp bn)

FY Dec 2012A 2013A 2014A 2015F 2016F Revenue 3,565 4,583 4,464 4,643 4,970 Cost of Goods Sold (2,269) (3,263) (3,410) (3,483) (3,800) Gross Profit 1,296 1,320 1,054 1,160 1,170 Other Opng (Exp)/Inc (378) (448) (519) (511) (547) Operating Profit 918 872 535 649 623 Other Non Opg (Exp)/Inc 2 31 (26) 0 0 Associates & JV Inc 5 65 226 230 245 Net Interest (Exp)/Inc (47) (61) (64) (166) (178) Exceptional Gain/(Loss) 0 0 0 0 0 Pre-tax Profit 878 907 671 713 691 Tax (139) (160) (158) (164) (176) Minority Interest (31) (55) (98) (107) (104) Preference Dividend 0 0 0 0 0 Net Profit 707 691 415 442 412 Net Profit before Except. 707 691 415 442 412 EBITDA 1,011 988 790 794 832 Growth Revenue Gth (%) 23.8 28.6 (2.6) 4.0 7.0 EBITDA Gth (%) 90.2 (2.3) (20.1) 0.6 4.7 Opg Profit Gth (%) 102.7 (5.0) (38.7) 21.4 (4.0) Net Profit Gth (%) 174.7 (2.3) (39.9) 6.5 (6.9) Margins & Ratio Gross Margins (%) 36.3 28.8 23.6 25.0 23.5 Opg Profit Margin (%) 25.8 19.0 12.0 14.0 12.5 Net Profit Margin (%) 19.8 15.1 9.3 9.5 8.3 ROAE (%) 52.4 35.3 16.7 14.2 11.1 ROA (%) 18.2 13.0 7.0 5.5 3.9 ROCE (%) 33.2 20.9 10.0 8.1 5.7 Div Payout Ratio (%) - - - - - Net Interest Cover (x) 19.6 14.3 8.4 3.9 3.5

Source: Company, DBS Vickers

Construction segment to remain as largest contributor to revenue

Industrial land has and should generate significantly higher GP margins compared to other segments

Significant downcycle in the industrial estate segment

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Company Guide

Surya Semesta Internusa

Quarterly / Interim Income Statement (Rp bn)

FY Dec 1Q2014 2Q2014 3Q2014 4Q2014 1Q2015 Revenue 918 1,262 1,074 1,210 1,317 Cost of Goods Sold (714) (925) (851) (921) (939) Gross Profit 204 338 223 290 378 Other Oper. (Exp)/Inc (108) (126) (136) (149) (124) Operating Profit 96 212 86 141 254 Other Non Opg (Exp)/Inc (57) 3 (7) 36 21 Associates & JV Inc 33 50 35 108 21 Net Interest (Exp)/Inc (11) (12) (17) (23) (19) Exceptional Gain/(Loss) 0 0 0 0 0 Pre-tax Profit 61 252 98 261 277 Tax (28) (44) (37) (49) (50) Minority Interest (20) (32) (22) (25) (24) Net Profit 13 177 39 187 204 Net profit bef Except. 13 177 39 187 204 EBITDA 96 212 86 141 254 Growth Revenue Gth (%) (25.5) 37.5 (15.0) 12.7 8.8 EBITDA Gth (%) (38.6) 120.9 (59.2) 62.9 80.4 Opg Profit Gth (%) (38.6) 120.9 (59.2) 62.9 80.4 Net Profit Gth (%) (93.8) 1,296.0 (78.0) 379.6 9.2 Margins Gross Margins (%) 22.3 26.7 20.7 23.9 28.7 Opg Margins (%) 10.4 16.8 8.0 11.6 19.3 Net Profit Margins (%) 1.4 14.0 3.6 15.4 15.5 Balance Sheet (Rp bn)

FY Dec 2012A 2013A 2014A 2015F 2016F Net Fixed Assets 1,329 1,531 2,024 3,149 3,740 Invts in Associates & JVs 0 0 0 0 0 Invt & Devt Properties 1,137 1,483 1,688 2,813 3,403 Other LT Assets (686) (918) (620) (1,555) (2,125) Cash & ST Invts 1,890 1,692 1,173 3,147 2,300 Dev Props held for sale 192 49 336 336 336 Inventory 164 459 351 1,213 1,985 Debtors 277 699 470 494 529 Other Current Assets 992 1,978 1,392 2,300 3,129 Total Assets 4,855 5,814 5,993 10,190 10,784 ST Debt 78 80 248 121 105 Creditor 156 346 356 268 292 Other Current Liab 1,549 1,428 1,123 1,762 1,917 LT Debt 1,238 1,199 1,031 3,785 3,791 Other LT Liabilities 165 150 196 196 196 Shareholder’s Equity 1,599 2,320 2,649 3,561 3,882 Minority Interests 71 291 390 497 601 Total Cap. & Liab. 4,855 5,814 5,993 10,190 10,784 Non-Cash Wkg. Capital (520) 252 249 606 1,256 Net Cash/(Debt) 575 414 (106) (760) (1,596) Debtors Turn (avg days) 28.5 38.9 47.8 37.9 37.6 Creditors Turn (avg days) 31.5 29.1 40.6 34.1 28.5 Inventory Turn (avg days) 14.4 36.1 46.8 85.5 162.5 Asset Turnover (x) 0.9 0.9 0.8 0.6 0.5 Current Ratio (x) 1.7 2.0 1.7 2.7 2.5 Quick Ratio (x) 1.2 1.3 1.0 1.7 1.2 Net Debt/Equity (X) CASH CASH 0.0 0.2 0.4 Net Debt/Equity ex MI (X) CASH CASH 0.0 0.2 0.4 Capex to Debt (%) 13.9 48.0 29.2 61.4 40.3 Z-Score (X) NA 2.9 2.7 1.9 1.9

Source: Company, DBS Vickers

Net gearing to increase due to aggresive expansion into investment properties

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Company Guide

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Cash Flow Statement (Rp bn)

FY Dec 2012A 2013A 2014A 2015F 2016F Pre-Tax Profit 878 907 671 713 691 Dep. & Amort. 93 116 255 145 209 Tax Paid (139) (160) (158) (164) (176) Assoc. & JV Inc/(loss) 0 0 0 0 0 Chg in Wkg.Cap. 462 (477) (105) 505 122 Other Operating CF (31) (55) (98) (107) (104) Net Operating CF 1,262 330 565 1,092 743 Capital Exp.(net) (182) (613) (374) (2,397) (1,572) Other Invts.(net) (9) (465) (500) (190) (21) Invts in Assoc. & JV (30) 221 99 107 104 Div from Assoc & JV 0 0 0 0 0 Other Investing CF (376) 336 43 0 0 Net Investing CF (598) (521) (733) (2,481) (1,489) Div Paid (31) (141) (140) (85) (90) Chg in Gross Debt 849 (37) 1 2,627 (10) Capital Issues 0 (26) 0 555 0 Other Financing CF (178) 198 53 0 0 Net Financing CF 641 (7) (86) 3,098 (101) Currency Adjustments 0 0 0 0 0 Chg in Cash 1,305 (198) (254) 1,709 (847) Opg CFPS (Rp) 170 172 142 113 120 Free CFPS (Rp) 230 (60) 41 (252) (160)

Source: Company, DBS Vickers

Target Price & Ratings History

Source: DBS Vickers

S.No. Da teClos ing

Pri c eTa rge t Pric e

Ra ting

1: 03 Mar 15 1300 1600 Buy2: 01 Apr 15 1130 1600 Buy3: 20 May 15 1160 1400 Buy4: 03 Jun 15 1135 1400 Buy

Note : Share price and Target price are adjusted for corporate actions.

1

2

3

4

627

727

827

927

1027

1127

1227

1327

Jul-14 Nov-14 Mar-15 Jul-15

Rp

Aggressive capex this year

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Company Guide

Surya Semesta Internusa

DBSV recommendations are based an Absolute Total Return* Rating system, defined as follows:

STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)

BUY (>15% total return over the next 12 months for small caps, >10% for large caps)

HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)

FULLY VALUED (negative total return i.e. > -10% over the next 12 months)

SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)

* Share price appreciation + dividends

GENERAL DISCLOSURE/DISCLAIMER This report is prepared by PT. DBS Vickers Securities Indonesia ("DBSVI"), a direct wholly-owned subsidiary of DBS Vickers Securities Holdings Pte Ltd ("DBSVH"). This report is intended for clients of DBSV Group only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVI. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBSVI and/or DBSVH) do not make any representation or warranty as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgment by addressees, who should obtain separate independent legal or financial advice. DBSVI accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. DBSVH is a wholly-owned subsidiary of DBS Bank Ltd. DBS Bank Ltd along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. DBSVI, DBS Bank Ltd and their associates, their directors, and/or employees may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed and it may not contain all material information concerning the company (or companies) referred to in this report. The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by DBSVI and/or DBSVH (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk

assessments stated therein. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBS Vickers Securities (USA) Inc ("DBSVUSA")"), a U.S.-registered broker-dealer, does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. ANALYST CERTIFICATION The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report. As of the date the report is published, the analyst and his/her spouse and/or relatives who are financially dependent on the analyst, do not hold interests in the securities recommended in this report (“interest” includes direct or indirect ownership of securities). COMPANY-SPECIFIC / REGULATORY DISCLOSURES

1. PT. DBS Vickers Securities Indonesia ("DBSVI") has no proprietary position in the mentioned company recommended in this report as of 22 July 2015

2. DBSVI, DBSVS, DBS Bank Ltd and/or other affiliates of DBS Vickers Securities (USA) Inc ("DBSVUSA"), a U.S.-registered broker-dealer, may beneficially own a total of 1% or more of any class of common equity securities of as of 23 July 2015.

3. Compensation for investment banking services: DBSVI, DBSVS, DBS Bank Ltd and/or other affiliates of DBSVUSA may have received compensation, within the past 12 months, and within the next 3 months may receive or intends to seek compensation for investment banking services from the subject companies.

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DBSVUSA does not have its own investment banking or research department, nor has it participated in any investment banking transaction as a manager or co-manager in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.

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