CLSA KIJA reported a weaker than expected result for 1H10

• KIJA reported a weaker than expected result for 1H10 (if stripping out forex gain), with net profit for 1H10 at 31% of our expectation. Excluding forex gain, the result was in-line (54% of our FY10 expectation).

• 2Q10 revenue increased 9% QoQ. GP margin expanded to 45% in 2Q10 from 37% in 1Q10.

• Sales of industrial land plots boosted marketing sales. KIJA said there was an industrial land plot sales of 17ha in 2Q10 at of ~Rp650,000 psm. This resulted in a surge in marketing sales by 150% YoY in 1H10 to Rp289bn.

We had expected only Rp300bn sales for FY10. The company said 9ha is sold to a foreign electronic company, 2ha to a biscuit company.
• Power plant status – still not resolved

• KIJA said it had obtained all required licenses for the power plant operational.
However, whether the divestment will go through or not, it is pending on three things which are in progress:
o Full drawdown of loan syndication so project can be completed (by Apr2011)
o Possible extension of US$35m bridging loan facility (originally due in Apr2010)
o Negotiations with PLN for KSO (long-term joint operations).
This will take some time, so current emergency power purchase from PLN will end this month. Whether it can be converted into another interim contract is unknown.

• The closing date of the CSPA is Sep 13, 2010. condition precedents are: lenders approval and corporate approval (there are 7 lenders in the loan syndication)

• Dry Port: KIJA said pilot phase of 10ha to be operation in August. KIJA confirmed some shipping lines to set sites there. Given the high uncertainty at this moment regarding the fate of the power plant, our view and current forecasted numbers might change substantially in the future.