Equity Research

Industrial Estate

Monday,24 May 2021

OVERWEIGHT Industrial Estate

<Maintain> Cheap and prospective
BEST relative to JCI Index We reiterate our Overweight call on the industrial estate sector as valuations
xxxx have become more attractive at -1SD of the five-year average discount to
NAV. We remain positive on the outlook for industrial land absorption in FY21
and maintain our view on skewed sales toward 2H21. Our top pick in the
sector is SSIA which we expect will book its first marketing sales in Subang in
4Q21.

Cheap valuation at -1SD of its five-year average. We like the industrial estate
sector not only for its bright prospects but also its cheap valuation. The recent
share price falls put the sector at 78% or at -1SD of its five-year average.
Compared to the 5-year historically low valuation at -3SD in 2Q20 due to the
COVID-19 outbreak, the current valuation is still much higher due to more
certainty regarding economic recovery and expansion which will lead to higher
industrial land absorption.
DMAS relative to JCI Index
xxxx
Positive industrial land sales outlook despite a slow start in 1Q21. We believe
industrial land sales will grow this year on the back of the brighter economic
outlook, more certainty on COVID-19 pandemic recovery, and new industrial
estates in Subang. The bulk of industrial land absorption will materialize in
2H21, we believe. In the first quarter, industrial land sales for companies under
our coverage reached 11 ha. This is 40% of the industry land absorption which
is below its 5-year average of 56%. As such, we believe industrial land
absorption will ramp up in the following quarters for the companies under our
coverage.

Source : Bloomberg
Industrial land sales to synergize with higher direct investment in the
manufacturing sector. Both Foreign Direct Investment (FDI) and Domestic
Direct Investment (DDI) in the manufacturing sector remain on an uptrend
(reaching IDR86tn in 1Q21) which marks the highest figure in the past four
years. As we believe the higher direct investment will translate into higher
industrial land absorption, industrial land sales absorption should grow in
subsequent quarters.

Record high PMI. The Purchasing Managers` Index (PMI) rose to 54.6 in April,
up from 53.2 in March. This is the highest PMI ever recorded and an indication
of recovery in business activity and a surge in demand.

x Victor Stefano
(62-21) 5091 4100 ext.
victor.stefano@danareksa.co.id
Maintain Overweight on the sector. Given the cheap valuations and rosy
prospects for higher industrial land absorption going forward, we maintain our
Overweight call on the sector with SSIA as our top pick. We have BUY calls on
BEST, DMAS, and SSIA as we believe all the names provide upside potential to
their fair valuation.

Target Market
Price Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (Rp) (RpBn) 2021F 2022F 2021F 2022F 2022F
Bekasi Fajar BEST IJ BUY 230 1,215.6 6.7 65.6 0.3 0.3 0.4
Puradelta Lestari DMAS IJ BUY 250 11,856.7 10.2 10.5 2.1 2.1 20.2
Surya Semesta SSIA IJ BUY 800 2,108.0 n/m n/m 0.6 0.6 (3.0)

www.danareksa.com See important disclosure at the back of this report

 Exhibit 1: Industrial estate sector discount to NAV band (5-year average)

Source: Bloomberg, BRI Danareksa Sekuritas

Exhibit 2: Industrial land sales absorption (ha)

Source: Companies, Colliers, BRI Danareksa Sekuritas

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 Exhibit 3: Direct investment in manufacturing sector vs industrial land sales
absorption

Source: Companies, BKPM, BRI Danareksa Sekuritas

Exhibit 4: Industrial estates heatmap

Sector vs
BEST DMAS SSIA Sector JCI JCI
YTD -33% -5% -31% -23% -8% -15%
Last 3yr -43% 117% -9% 22% 1% 21%
Last 5yr -38% 81% -21% 7% 23% -16%
2019 7% 116% 33% 52% 2% 50%
2018 -14% -3% 1% -5% -3% -3%
2017 0% -18% 20% 1% 20% -19%
2016 -13% 13% -38% -13% 15% -28%
2015 -59% 3% -32% -29% -12% -17%
2014 65% 0% 99% 55% 22% 32%
2013 -34% 0% -47% -27% -1% -26%
2012 139% 0% 51% 63% 13% 50%
2011 0% 0% 213% 71% 3% 68%

Source: Bloomberg, BRI Danareksa Sekuritas

www.danareksa.com See important disclosure at the back of this report 3