Citigroup Kawasan Industri Jababeka - Analyzed Non-Rated Snapshot

 Takeaways — Jababeka participated in the Citi Asia Pacific Property Conference 2010. Below we highlight takeaways from management. Jababeka is a fullyintegrated township developer with a focus on industrial estates. The industrial estates are located in Cikarang and Cilegon. It is also developing residential estates in Cikarang. In bids to boost its recurring revenue, the company has made forays into power plants and dry port operations.

 Dry port — The company will soft-launch the operation of its dry port area by the end of this month in Kota Jababeka, one of the three spokes in Greater Jakarta that the government has designated to alleviate the chronic congestion at Tanjung Priok port. The initial capacity of the dry port is 150k TEUs, rising to 500k TEUs by 2012 and 2m TEUs by 2018. Jababeka also plans to develop supporting facilities to transform the dry port into a logistics hub. The company has allocated a total of 200 hectares of land to be developed as the logistic hub.

 Power plant — In order to resolve the shortage in electricity supply in the industrial estate, Jababeka is building a 130MW gas-fired power plant. The entire construction is expected to be completed in 3Q10. The company is awaiting the issuance of an operational area permit from the Ministry of Energy so it can operate and manage the plant. Currently, the company is supplying 37MW to PLN, a state-owned electricity company, under a temporary contract. However, due to prolonged delays in securing the permit, the company has signed a conditional sale and purchase agreement to sell its entire stake in the power plant so it would be able to repay the power plant’s loans.

 Industrial estate — The company’s presales of industrial lots more than doubled YoY in 1Q10 to Rp45bn. While a low-base comparison was one of the main reasons, higher demand for industrial land from existing tenants’ expansion also ontributed. Unilever Indonesia is seeking to acquire 15 hectares of land to build a super-warehouse.

 Residential estate — As mortgage availability improves and mortgage rates dip to record lows, Jababeka’s residential presales have surged. Presales more than quadrupled YoY in 1Q10 to Rp40b. As land prices in the estate’s vicinity have reached Rp2.5m/sqm vs. just Rp1m/sqm in the company’s estate, there is plenty of room for the company to increase its selling prices.