SSIA increased ownership on its subsidiary, Suryalaya Anindita International (own Melia Jakarta, Meli Bali, and Banyan Tree Ungasan Resort), to 86.78% from 53.75%. SSIA allocated USD25mn for the addition, which is funded from internal cash and loan from Melia Hotel International. We believe this is a positive catalyst as SAI’s hotel business has wide GPM of 66% and contributes around 24% in SSIA’s gross proﬁ t in 3Q12. However, please note that 3Q12 hotel revenue slipped 1% YoY, underperforming our expectation (only 66% from our FY12 hotel revenue), as Melia Jakarta still under renovation since Jun’11.
Attaining bigger exposure to infrastructure
SSIA decided to have a broader reach on infrastructure business by purchasing 20.5% stake on PT Lintas Marga Sedaya (LMS), who own Cikampek-Palimanan toll road concession (116km long with total project value of Rp7.7tr). The total investment for ownership in LMS is around USD12mn. While for the toll-road construction project funding, SSIA has received approval from shareholders to inject capital of Rp167bn and issue mezzanine loan as much as Rp516bn (with 16% interest rate). The mezzanine loan also carries an option to convert the loan into LMS’ shares upon maturity.
Revisiting our forecast to reﬂ ect strong result
We revised our model to reﬂ ect SSIA’s strong 3Q12 result, which formed 104% of our FY12 result. SSIA booked faster recognition in 3Q12, reaching Rp785bn or 98% of our FY12 industrial land sales expectation. Thus, we increase our recognition assumption that upgrades our industrial land sales to Rp998bn (+17% from our previous assumption, +25% YoY) in FY12, Rp1.06tr in FY13 (+7% YoY), and Rp1.15tr in FY14 (+8% YoY). We also include the additional Cikampek-Palimanan toll-road project, which will generate Rp7.7tr for the next 30 months.
Despite the positive catalysts, we maintain our HOLD recommendation due to limited upside potential (+2.5%) from our target price of Rp1,200/share (reﬂecting 30% discount to our NAV). Please note that our SSIA’s NAV is assuming: 1) USD120/sqm for the existing 280ha land in Karawang, 2) Successful 350ha land acquisition in Bekasi area, and 3) We have not take into account the 1,000ha potential land addition in Karawang, until we receive more conﬁ rmation on the execution.