Total Bangun Persada Result note - Under pressure - by Liliana Bambang
(TOTL IJ / TOTL.JK, NEUTRAL - Upgraded, Rp93 - Tgt. Rp100, Construction and Materials)
TOTL's FY08 earnings was down by 67.6% yoy to Rp17.4bn, below ours and consensus by 69%. Reasons for below are (1) lower EBITDA margin of 3.5% vs. ours 4.3%, largely due to cost pressure from building materials cost, and larger projects which commanded lower gross margin; 2) Rp13bn of investment loss in CY08 vs. Rp6bn of gain in CY07; 3) higher tax rate of 67% vs. estimated 37% due to one-off write down of deferred tax assets of Rp17bn, to be in line with new tax law. The company remained debt free with abundant cash, which currently exceeding market cap by some 123%. Our new target price of Rp100 (from previously Rp67) is based on attaching 7.5x CY10 earnings (from 5x), inline with regional peers. As share sell-down has subsided coupled with ample cash on hand, we upgrade to NEUTRAL from Underperform.
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