Indo industrial estate, Shimmering industrialization, CLSA

No sign of demand slowing down in sight for industrial land, as industrial
estate developers posted sterling performance in FY11. Given robust
demand and land scarcity, the industrial land price upward momentum
picked up where they left off at the end of 2011. The resurgence of
manufacturing sector, especially automotive and related sector, serves as
another catalyst for industrial land. We expect the trend to continue for
the next few years. Despite strong performance, industrial estate
developers are still trading at average 53% disc. to NAV. Positive view for
industrial estate plays.


Land buying spree continues
 Strong FDI flow, upgrade of Indonesia sovereign debt to investment grade and
possible relocation of foreign manufacturing base are the main catalysts.
 Sudden demand surge and limited industrial land bank sent industrial land price
skywards.
 Cikarang (Bekasi) and Karawang industrial area grew the most and still has the
potential to grow more with its available industrial land area.

Manufacturing sector revival
 Expect positive trend in manufacturing growth to continue for foreseeable future
and drive more industrial land demand.
 Automotive and related sector takes lion share with 45% of industrial land demand.

Expect strong FY11 performance for industrial players to continue
 Aggregate revenue went up 25.5% cagr since 2008.
 EBIT margin expanded for additional 8~10% in average as compared to 2008.
 Jababeka (KIJA IJ) posted the largest increase in net profit with 425% growth YoY.

Positive view for industrial estate plays
 Industrial estate developers disc. to NAV remains high at average 53% level, as
compared to that of property developers at 35%. LPCK has the largest disc. to NAV
with 60%.
 The developers are gearing towards securing more land banks to keep up with
demand surge. The potential land bank addition to their portfolios provides deeper
valuation to their NAVs.
 Surya Semesta (SSIA IJ) and Lippo Cikarang (LPCK IJ) have outperformed JCI for
the past 1.5 years by wide margin, while KIJA performed in-line with JCI.

Download file : Indo Industrial report final 3