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Not Your Ordinary Industrial Estate

Indonesia has committed to develop the EV industry, fueled up by its abundant nickel resources. This EV battery prospect has led Indonesia to focus on the downstream of nickel products which we believe is good to the economy as it helps trade balance to remain positive.

This industrialization development has led to several foreign investments to Indonesia, and we also believe that it was just the start to a bigger future from other commodity besides nickel. We believe the rapid growth of industrial estate demand is likely to benefit several names, such as AKR Corporindo (AKRA).

AKRA strategical plan is to develop more than just an insutrial estate by generating a recurring more income from utilities service. We believe that the strategy will help AKRA to maintain a sustain strong earnings even after 3,000 hectares JIIPE land is sold.

Although the contribution from utilities business was still insignificant to the company's revenue, the potential should the landbank are sold out could generate revenue and gross profit of IDR12tn and IDR1.6tn, respectively. We expect AKRA to have better margin going forward, align with the growth of its industrial estate sales.

On 2023, AKRA managed to book 91 hectares of land sales, exceeding its 2023 target of 75 hectares, and with that, company increased its target for FY24 to 130 hectares. FY24 target in our view is very achieveable if we look at current realization has reached 67hectares, and we believe it would be easy to book another sales throughout the year as JIIPE has a deep seaport to ease the industrial logistic.

Aside from the land sales, AKRA has a steady petroleum and basic chemical distribution business. It currently contributes 70% - 80% gross profit, which grew steadily high at 10.7% CAGR for the past 10 years. Our analyst projects that AKRA's petroleum and basic chemical distribution in 2024-25F could reach IDR3.3tn and IDR3.5tn, respectively.

With a solid balance sheet, thanks to its c. IDR2.0tn net cash and IDR3.2tn of cashflow in 2023F, we believe AKRA can support its annual maintenance capex and 60% dividend payout ratio. Hence, our analyst initiated buy recommendation for AKRA with TP of IDR2,000, implying 14.2x and 8.4x 2024F PE and EV/EBITDA.


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