Regional Thematic
UNDER CONSTRUCTION
UNDER CONSTRUCTION
Regional Sector Update 25 July 2016
Construction & Engineering | Construction
Overweight
Construction
Stocks Covered: Ratings (Buy/Neutral/Sell): Last 12m Earnings Revision Trend:
As Many As Stars In The Sky Although four ASEAN countries – Indonesia, Malaysia, Singapore and Thailand – are facing the threat of an economic slowdown, each is relying on different engines to stimulate their economies. All four countries (based on our survey in each capital city) still report progress in terms of construction activities from both the private and public sectors. Our RHB construction analysts maintain their positive view on the sector with Top Picks as follows: 1. Indonesia: Adhi Karya Persero; 2. Malaysia: Sunway Construction and Gadang Holdings; 3. Thailand: Sino-Thai Engineering & Construction.
Top Picks Adhi Karya Persero (ADHI IJ) – BUY Gadang Holdings (GADG MK) – BUY Sino-Thai Engineering & Construction (STEC TB) - BUY Sunway Construction (SCGB MK) - BUY
10 6/7/0 Negative Target Price IDR 3,400 MYR 3.10 THB29.00 MYR 1.86
Crane count in four ASEAN countries No. of crane
Different engines in different countries. In order to boost their economies and prevent a slowdown, Singapore and Malaysia are focusing on export growth and domestic consumption respectively, while Thailand and Indonesia are relying on investments in public infrastructure projects. In spite of the different stimulus instruments, construction activities remain abundant within a 3km radius around the centre of each capital city – we counted many cranes working actively in our surveyed area. Kuala Lumpur ranks the top among the four, with 131 cranes. Bangkok came in second with 112 cranes. Jakarta and Singapore are almost equal, with about 66 and 52 cranes respectively.
No. of project
140
60
120
50
100
40
80 30 60 20
40
10
20 0
0 Indonesia
What can be learnt from the crane survey?
Malaysia
Singapore
No. of crane
Indonesia: Jakarta, with many infrastructure projects under construction, is set to develop new projects. This is especially in terms of new skyscrapers aligned with mass rapid transit (MRT) routes. In the meantime, Indonesia’s residential property sector has been facing slow demand growth since FY15, which has led to delays of developers’ new project launches. Still, office and apartment projects under construction remain on track and are a dominant presence in Jakarta’s central business district (CBD).
No. of project
Source: RHB
Table Of Contents Why counting cranes?
2
Indonesia
3
Malaysia
Malaysia: The busiest construction activities in this country will not end soon, as the Government has assured new infrastructure projects will be implemented as planned. However, there is a likely trend for developers to slow down their launches for residential and non-residential projects due to the weak property market. Our analyst believes infrastructure spending by the Government will boost new construction projects awarded to contractors in FY16-17.
18
Thailand
28
Adhi Karya Persero (ADHI IJ)
37
Gadang Holdings (GADG MK)
40
Sino-Thai Engineering & Construction (STEC TB)
43
i. Facility expansion of long-term growth businesses such as hospitals and a university campus; Ng Sem Guan, CFA ii. The game of mixed-use projects played by Thai landlords; +603 9207 7678 iii. Initial signs that the hotel sector will expand to a new location in the CBD.
[email protected] Jarick Seet +65 6232 3891
[email protected] Price IDR2,720
Target IDR3,400
Gadang Holdings
P/E (x)
P/B (x)
Dec-17F 11.2
Dec-17F 1.5
Yield (%) Dec-17F Rating 3.4 BUY
MYR2.48
MYR3.10
6.7
1.0
2.9
BUY
Sino-Thai Engineering & ConstructionTHB25.00 PCL
THB29.00
23.9
3.4
1.7
BUY
Sunw ay Construction Group
MYR1.86
13.3
3.3
2.6
BUY
MYR1.65
Source: Company data, RHB
See important disclosures at the end of this report Powered by the EFA Platform
1
8
Singapore
Singapore: As the most developed and most congested country among the four (with a construction cycle that is getting ahead of the others), Singapore is Sunway Construction (SCGB MK) focusing on quality rather than quantity. There is a growing number of new mixed-use projects plus energy-efficient buildings. These are supported by planned construction of more transportation alternatives for a better access to Analysts the CBD area. Dony Gunawan Thailand: Bangkok’s CBD is dominated by SET-listed companies’ condominium +6221 2970 7063 projects for the mid- to high-end market. There are obvious trends in the CBD,
[email protected] including:
Com pany Nam e Adhi Karya Persero
Thailand
Chatree Srismaicharoen +66 2862 9743
[email protected]
46
Construction
Regional Sector Update
25 July 2016
Why Counting Cranes? According to RHB’s estimate, the four ASEAN countries in our survey – Indonesia, Malaysia, Singapore, and Thailand – have the potential to see their GDPs increase gradually in FY16-17. Although all four economies have faced economic challenges due to internal and external threats, their governments are focusing on different engines to boost GDP growth to a higher level. Indonesia and Thailand remain focused on public investments in infrastructure projects, while Singapore and Malaysia are relying on the export sector and domestic consumption respectively. It is interesting to note, however, that the growth of construction activities in Indonesia, Malaysia and Thailand is estimated to be far above their respective GDP growth. Meanwhile, the construction sector in Singapore is significant to some degree. Figure 1: RHB’s estimates on construction growth and as a percentage of GDP GDP Growth (%) Construction % of GDP Growth (%) Public construction % of GDP Growth (%) Private construction % of GDP Growth (%)
Indonesia FY16F FY17F 5.1 5.3
Malaysia FY16F FY17F 3.9 4.0
Singapore FY16F FY17F 1.8 2.0
FY16F 3.2
Thailand FY17F 3.5
10.5 8.2
10.5 8.5
4.5 6.0
4.5 5.3
13.2 4.6
13.3 1.1
8.7 13.5
9.0 17.3
NA NA
NA NA
NA NA
NA NA
8.8 8.4
8.6 9.1
4.7 18.6
5.1 23.6
NA NA
NA NA
NA NA
NA NA
4.4 -3.0
4.7 -3.6
4.0 7.5
3.8 10.1
Source: RHB
Crane counting is the method we have adopted to measure the construction activities in each country, in terms of quality and quantity. In addition to collating the number of cranes counted in each CBD area (within a 3km radius of the centre of the capital city), we also detail out the current situation and circumstances as well as the future construction activity trends in each country. Below is a summary of the results of our crane counting surveys. We counted a total of 361 cranes and 176 projects under construction for all four countries. Figure 2: Summary of cranes and projects in the four ASEAN countries surveyed Total Malaysia Thailand Indonesia Singapore
No. of cranes 131 112 66 52
No. of projects 48 55 19 54
Residential Malaysia Thailand Indonesia Singapore
No. of cranes 33 43 9 25
No. of projects 20 33 3 25
Office Malaysia Thailand Indonesia Singapore
No. of cranes 21 17 30 16
No. of projects 3 8 10 10
Hotel Malaysia Thailand Indonesia Singapore
No. of cranes 18 6 7
No. of projects 4 2 12
Mixed-use Malaysia Thailand Indonesia Singapore
No. of cranes 34 29 21 -
No. of projects 11 4 4 -
Other Malaysia Thailand Indonesia Singapore
No. of cranes 25 17 6 4
No. of projects 10 8 2 7
Source: RHB
We will detail our findings from the crane survey in alphabetical order of the countries, ie Indonesia first, followed by Malaysia, Singapore, and Thailand. The analysts behind each survey are listed below: Indonesia Malaysia Singapore Thailand
Dony Gunawan Ng Sem Guan Jarick Seet Chatree Srismaicharoen
See important disclosures at the end of this report
[email protected] [email protected] [email protected] [email protected]
2
Construction
Regional Sector Update
25 July 2016
Indonesia Built when Soekarno was Indonesia’s president, the Semanggi flyover is widely known as an iconic structure of Jakarta. Located in the heart of the city, the clove-shaped flyover connects its most crowded areas – including the Sudirman Central Business District (SCBD), Thamrin, Senayan and Kuningan – within a 3km radius. These areas also cover the city’s two major roads, Sudirman Road and Gatot Subroto Road, which are the centre of Jakarta’s activity, with a large number of office buildings, apartments and shopping centres located along them. Figure 3: The 3km radius, with Semanggi as the centre
Figure 4: Another view of the 3km radius of our survey, with Semanggi as the centre
Source: RHB
Source: RHB
Figure 5: Semanggi flyover in 1992
Figure 6: Semanggi flyover in 2015
Source: Tempo
Source: Jakartadulukala
Indonesia’s property sector has been facing slower demand growth since early 2015. This resulted in a decrease in supply in 2016, as developers opted to delay the construction of their projects. Our ground checks reveal that 50% of the construction projects around the Semanggi flyover are still concentrated towards Sudirman Road. We think that this is in line with the Government’s recent infrastructure development, including its MRT plan.
See important disclosures at the end of this report
3
Construction
Regional Sector Update
25 July 2016 Figure 7: Commercial property supply growth in the Jabodetabek area
Figure 8: Pipeline of apartments and office projects in Jakarta No of Buildings 60 54
% YoY 40
Title: Source:
35 50
46
30
Please fill in the values above to have them entered in your
25
40
35
23.2
20
30
26
15 10
19
20
15
6.2 5 3.1
0
3.6
13
10
-5
0 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 Of f ices
Retails
Apartments
2016
Hotels
2017 Apartment
Source: Bank of Indonesia
2018 Of f ice
Source: Colliers International Indonesia
During our ground checks, we counted 19 different projects and 66 cranes within the 3km radius of Semanggi. Most of the construction works were for office buildings (14 projects were visible). According to Colliers, Jakarta’s CBD has recorded a total supply of 5.27m sqm (+7.7% YoY) in office space as at 1Q16. The data from Colliers also indicated that 75% of the 1m sqm projected office supply in 2019 will be located in Sudirman, Kuningan and Gatot Subroto. The apartment segment came in second, with a total seven projects counted – some of them by well-known property developers including Ciputra Group [which consists of Ciputra Surya (CTRS IJ, BUY, TP: IDR5,000), Ciputra Development (CTRA IJ, BUY, TP: IDR1,530) and Ciputra Property (CTRP IJ, NR)], Astra Group (ASII IJ, BUY, TP: IDR7,350) and Lippo Group, ie Lippo Karawaci (LPKR IJ, NEUTRAL, TP: IDR1,460). We also note that there are not as many apartment projects near the CBD area, while the take-up rate for luxury apartments is low. There are two infrastructure projects, including the MRT construction and Semanggi flyover extension. During our ground checks, we counted four cranes working on the infrastructure projects alone. The Semanggi flyover extension will provide an alternative two-way connection from Sudirman to Gatot Subroto. Works on the project began recently, and it is targeted to be ready on 1 Aug 2017. The Semanggi flyover contract was won by Wijaya Karya (WIKA IJ, NEUTRAL, TP: IDR2,665) with a contract value estimated at IDR563bn. Figure 9: Current progress of Semanggi Flyover 2
Figure 10: Design of Semanggi Flyover 2
Source: RHB
Source: Ahok
See important disclosures at the end of this report
4
2019
Construction
Regional Sector Update
25 July 2016 Langham and District 8 District 8 is located at the heart of Sudirman in the CBD, and tops the list with the largest number of tower cranes (10). The superblock project is located on 4.8ha of land and will provide the CBD area with additional apartments, office space, hotel and retail area. The project, developed by Agung Sedayu Group, consists of two office towers, three apartments and two hospitality towers. The three apartments will provide additional 680 strata-title units of high-end apartments and 180 units of serviced apartments for the CBD. Moreover, the two towers of office buildings will provide an additional semi gross area (SGA) of more than 210,000 sqm. District 8 project is located in SCBD, alongside two other projects, ie Sequis Tower and Grade A at Lot 10. These three projects alone contribute 22.7%, or 15 cranes, out of the total number of cranes in the 3km radius of Semanggi. The contract for the construction of District 8 was won by Acset Indonesia (ACST IJ, BUY, TP: IDR4,550) and carries a total value of IDR800bn. The 1-stop-living project is expected to be finished in 2017. Figure 11: Langham residence and District 8
Figure 12: Langham residence
Source: RHB
Source: RHB
Anandamaya Residences and Astra Tower projects The other side of Sudirman road features two Astra projects, Anandamaya Residences and Astra Tower. Anandamaya Residences comprises three apartment towers on 1.6ha of prime land. According to our observations, the three towers’ construction site has three tower cranes in total. The apartment is developed by Astra International and Hongkong Land Ltd and will have 500 luxurious apartment units. The apartment has a project value nearing USD150m and is set to begin operations in 2017. On the other hand, Astra’s other project, Astra Tower, is located right next door to the luxury apartments. The office tower has a total of 47 floors and 80,000 sqm of SGA available for lease. Astra expects the leasing of the office space to begin in 1Q18. The total value of the office building is estimated to be around IDR3.5trn. The Astra Tower construction is done by a joint-venture (JV) between Total Bangun Persada (TOTL IJ, NR) and Shimizu Corp (Shimizu). Total Bangun Persada owns 40% of the construction project, which is valued at IDR1.1trn. On the other hand, Anandamaya Residences’ construction contract was won by a local private contractor, Tata.
See important disclosures at the end of this report
5
Construction
Regional Sector Update
25 July 2016 Figure 13: A view of construction works for Astra Tower
Figure 14: Astra Tower and Anandamaya Residences projects
Source: Indopora
Source: RHB
Figure 15: Artist impression of Anandamaya Residences and Astra Tower
Source: Company
MRT is the main catalyst We think that the main catalyst for the development along the CBD area is still the construction of the MRT network. The first phase of the MRT will span 15.7km and connect Lebak Bulus (South Jakarta) and Bundaran HI (Thamrin, Central Jakarta). On Sudirman Road, we counted at least two mobile cranes and two crawler cranes on the site. Construction started back in 2013 and is expected to start operations by early 2019. YTD, construction of the first phase of the MRT system is 43% complete, and will be ready to serve 212,000-960,000 passengers per day when operations begin. The total construction value for the MRT project is USD1.29bn. The construction project is divided into eight civil engineering projects and one for operations & maintenance (O&M) consulting. These civil projects include elevated civil works, underground works, railway systems and track works and rolling stock. Wijaya Karya is one of the many contractors for the first phase of the project. The company is responsible for Construction Package (CP) 101-102 for elevated works with Tokyu Corp (Tokyu), and CP 104-105 for underground works with Shimizu, Obayashi Corp (Obayashi) and Jaya Konstruksi.
See important disclosures at the end of this report
6
Construction
Regional Sector Update
25 July 2016 Figure 16: A portion of the MRT Jakarta tunnel
Figure 17: Building the elevated track for the MRT
Source: SkyscraperCity
Source: SkyscraperCity
Outlook Currently, we see that the CBD area within a 3km radius of Semanggi is already diversified and well developed with a mix of apartments, office buildings and retail spaces. Most of the available land plots are already included in the development plan for the next three years. Future developments within the CBD will mostly centralise around the revitalisation of old buildings. Therefore, we expect to see more skyscrapers in Jakarta’s CBD in the future. On the other hand, we also note the Government’s plan to accelerate infrastructure and public transportation development, both in and out of the CBD area. This plan includes the development of the MRT and light rail transit (LRT) networks. Jakarta Propertindo (Jakpro) recently announced that it will continue the construction of the inner city LRT in September. The inner city LRT is set to connect North Jakarta and South Jakarta, as well as West Jakarta and East Jakarta. With the improvements in infrastructure and public transportation, we think the CBD area in Jakarta will not be as central as it is today, but will eventually widen to other areas. In the future, we expect to see skyscrapers projects in the outer CBD areas, including Kuningan and TB Simatupang. Our outlook on the construction sector is still robust, supported by the many infrastructure projects across the nation. Therefore, state-owned contractors such as Adhi Karya (ADHI IJ, BUY, TP: IDR3,400), Waskita Karya (WSKT IJ, NR), Pembangunan Perumahan (PTPP IJ, BUY, TP: IDR4,200) and Wijaya Karya will be the biggest beneficiaries of this development. We also think infrastructure development will also boost the demand for properties, in the future – which will also benefit construction companies. Figure 18: Crane counts survey table Project name Telkom Landmark Tower Grade A lot 10
Project type Office Building Office Building
Project owner Telekomunikasi Indonesia Hongkong Land
Location Gatot Subroto SCBD
Sequis Tower Langham & District 8 Simpang Susun Semanggi 2 Anandamaya & Astra Tower
Office Building Office & Apartment Building Road Office Building, Shopping Mall & Apartment Building Apartment Building Office Building Office Building MRT Office Building Office Building Office Building Office & Apartment Building Office Building Office & Apartment Building Apartment Building Apartment Building Office Building
Sequis Langham Government Astra & Hongkong Land
SCBD/Sudirman SCBD Sudirman Sudirman/Benhil
No of cranes 2 tower cranes 2 tower cranes and 1 crawler crane 2 tower cranes 10 tower cranes 2 crawler cranes 6 tower cranes
Kurnia Realty and Pasar Jaya Lippo Group CIMB Government Pollux Wiratara Prima Sigmatech Ciputra Group Mitra Pertala Perkasa KG Global Tan Kian Group Wilsor Group Duta Anggada Group
Sudirman Thamrin Sudirman Sudirman Sudirman Mega Kuningan Satrio Satrio Satrio Gatot Subroto Setiabudi Setiabudi Setiabudi
4 mobile cranes 1 tower crane 4 crawler cranes 2 mobile and 2 crawler cranes 2 crawler cranes 5 tower cranes 3 crawler and 3 mobile cranes 2 tower cranes 2 tower cranes 3 tower cranes 2 mobile cranes 3 tower cranes 3 tower cranes
Benhil Central Lippo Thamrin Plaza CIMB MRT Jakarta WTC 2 Menara Pertiwi Tower Chitaland Tower Ciputra World 2 Satrio Tower Mangkuluhur City South hills La Vie Apartment Icon Complex Source: RHB
See important disclosures at the end of this report
7
Construction
Regional Sector Update
25 July 2016
Malaysia The Petronas Twin Towers, the most iconic building in Kuala Lumpur's Golden Triangle, was chosen as our reference point for our 3km radius crane survey. The 88-storey twin towers, which soar to a height of 451.9 metres, were once the tallest buildings in the world – and remain the tallest twin structures to date. The 3km radius from the Petronas Twin Towers covers the entire Golden Triangle, which is known as Kuala Lumpur's commercial, shopping and entertainment hub. This is actually a large area that encompasses a number of major streets. Three major roads – Jalan Imbi, Jalan Sultan Ismail and Jalan Raja Chulan feature towering skyscrapers, shopping malls and world-class hotels. Aside from the Golden Triangle, we also sub-divided the remaining area into six districts – Titiwangsa, Datuk Keramat, Kampung Baru, Old City Centre, Ampang and Pudu/Loke Yew Figure 19: 3km radius, with the Petronas Twin Towers as the centre
Figure 20: 3km radius map feature the Petronas Twin Towers as the centre
Source: RHB
Source: RHB
Our survey showed that most of the major developments in Kuala Lumpur’s city centre are still very much concentrated within the Golden Triangle, with 19 major projects now in various stages of completion and 55 cranes (43 mobile and 12 tower cranes) currently deployed in this area. That said, the old city centre is not forgotten, as we found 12 projects currently ongoing with 32 cranes (20 mobile and 12 tower cranes) deployed at this district. The Pudu/Loke Yew area, which is situated next to the Golden Triangle and old city centre, is the third-busiest place in terms of construction, as there are seven ongoing major projects with 27 cranes (20 mobile and seven tower) deployed at this district at the moment. The rest of the four districts only have 2-3 mega projects that are currently in various stages of completion, with up to five cranes being deployed at each of these districts at the time of our survey. Figure 21: Survey results for Kuala Lumpur
Figure 22: Number of cranes by districts in Kuala Lumpur
Source: RHB
Source: RHB
See important disclosures at the end of this report
8
Construction
Regional Sector Update
25 July 2016 Figure 23: Types of cranes used
Source: RHB
Figure 24: Types of developments in Kuala Lumpur
Figure 25: Types of developments in Kuala Lumpur
Source: RHB
Source: RHB
Developments within the Kuala Lumpur city centre are currently concentrated on serviced apartments and condominiums, with 11 and nine such projects being built respectively. We also observed that mixed-use developments are currently trending, with 11 ongoing projects under construction. This type of development normally includes common areas and a cohesive design. The modern mixed-use development offers the feel of a small town in the middle of a major metropolis. Although we witnessed eight infrastructurerelated projects currently under construction, five of these were related to the construction of the underground station for the MRT network. Some MRT track works for the areas that we surveyed may be in final stages of construction, but they were not visible, given that they are situated underground. In the two days that we carried out our site survey, we also realised that there are still some pockets of prime vacant land. However, most may have been identified for various developments like residential, office or mixed-used high-rise projects. Although there was no physical work being carried out, we believe some of those may have already obtained approvals from the relevant government authorities. We believe those developers may prefer to wait for market sentiment to improve before announcing any official launches.
See important disclosures at the end of this report
9
Construction
Regional Sector Update
25 July 2016 Figure 26: Vacant land fenced off along Jalan Conlay
Figure 27: Vacant land fenced off along Jalan Kia Peng
Source: RHB
Source: RHB
The biggest plot of land that may potentially be used for future development is situated in the Kampung Baru area (please note that this area is spelt in a variety of ways). The 115year-old village, the city’s oldest Malay settlement, is located on land that was granted to the Malay community by the fourth Sultan of Selangor, Sultan Abdul Samad (1804-1898). Since the 1970s, the authorities have been trying to develop this Malay enclave, but the biggest stumbling block is the fact that the 121.9ha plot of land comprises 1,355 lots that are owned by more than 5,300 people. In spite of this hurdle, the Kampong Bharu Development Corp (PKB) is in the process of studying the detailed Kampung Baru 2020 master plan. PKB plans to transform the rustic village into a new Malay cultural centre and the city’s new economic hub, with: i. 1,900 hotel rooms; ii. 30m sq ft of office space; iii. 17,500 residential units; iv. 12% green and water feature spaces. One of the main projects identified is the Kampong Bharu City Centre (KBCC), which will become the focal point of the area. Projects under KBCC include a park called KBCC Central Park with pedestrian walkways, pocket parks and water features. This includes 12 iconic buildings with four signature towers that have a collective GDV in the billions of MYR. While there are various challenges to redevelop this piece of prime land, we are keeping a close eye on its progress. Figure 28: An aerial view of Kampung Baru
Figure 29: Artist impression of a redeveloped Kampung Baru
Source: The Star
Source: RHB
See important disclosures at the end of this report
10
Construction
Regional Sector Update
25 July 2016 We decided to feature five major projects within the survey area that are still in early stages of construction.
Merdeka PNB118 (PNB118) Merdeka PNB118 is a 118-storey tower within a 19-acre, multi-phase development. Scheduled for completion in 2020, the tower will house Permodalan Nasional’s (PNB) group of companies over 60 floors. It will also comprise 23 floors of rentable commercial space and an 18-story luxury hotel with 236 rooms, as well as multiple sky lobbies and observation decks. The first phase of the project consists of a 118-storey iconic tower and shopping mall with a development cost of MYR5bn. International consultancy firm Turner International is the project manager. The first contract for Merdeka PNB118, worth MYR74m, was won by Pintaras Jaya (PINT MK, NEUTRAL, TP: MYR3.47) for foundation and piling works back in Mar 2014. These works were completed in late 2015. Meanwhile, South Korea’s Samsung C&T Corp is partnering with local firm UEM Group to build a MYR3.4bn tower. We estimate that the construction of this project is approximately 15% completed. Figure 30: Artist impression of Merdeka PNB118
Figure 31: Site progress of Merdeka PNB118
Source: KL118
Source: RHB
Tun Razak Exchange (TRX) The TRX Master Plan includes a total of 25 buildings and over 21m sq ft of total building gross floor area (GFA) spread across office, residential, hotel, retail, food & beverage (F&B) and cultural offerings. The TRX has a development period of 15 years, and will be completed in phases. The initial Phase 1 is slated for completion in 2018. Strategically located at the southern gateway to Kuala Lumpur’s city centre, the TRX is flanked by main arterial roads. It is a natural extension to the Golden Triangle – the city’s commercial, entertainment and shopping belt. The development will offer an unrivalled connectivity to the existing city centre and the rest of the Greater Kuala Lumpur area, given its: i. Excellent accessibility and connectivity via an integrated underground MRT interchange station; ii. Direct connectivity to key roads and major highways. In Oct 2015, WCT (WCTHG MK, BUY, TP: MYR1.84) won a major infrastructure package at the TRX, valued at MYR754.8m. The 2-year contract covers: i. Underground road structures; ii. Installation of direct buried utilities; iii. At-grade and elevated roadway; iv. Associated earthworks; v. Mechanical and electrical works.
See important disclosures at the end of this report
11
Construction
Regional Sector Update
25 July 2016 A leading Indonesian property developer, Mulia Group, will develop the TRX’s landmark Signature Tower building. TRX City SB, the master developer of TRX, is currently inviting contractors to participate in a pre-qualification exercise for the proposed traffic dispersion and improvement to a part of Jalan Tun Razak (JTR), as well as the construction of the TRX Ingress and Egress. The development is less than 5% complete and construction activities are likely to stretch over a period of 15 years. Figure 32: TRX Master plan
Figure 33: Site progress of TRX
Source: TRX
Source: RHB
Bukit Bintang City Centre (BBCC) The history of the redevelopment of the old Pudu Prison site, which is now called BBCC, can be traced back some 20 years when the 19.4-acre prime land first became vacant. In Feb 2015, the Urban Development Authority (UDA) decided to partner Eco World Development Group for the redevelopment under a JV partnership with the Employees Provident Fund (EPF) via a special-purpose vehicle (SPV) BBCC Development SB (BBCCD) on a 40:40:20 basis. While construction works have yet to begin, the BBCC’s showroom, site office and car park are all ready for the first official launch of the office tower in 3Q16. BBCCD signed the head of terms agreements with Mitsui Fudosan (Asia) Pte Ltd (Mitsui Fudosan) for the development, ownership and operation of the 1.4m sq ft retail mall through the establishment of a JV company. Phase 1 of the project will consist of a 45-storey block of strata offices and two blocks of serviced residences, comprising 680 units. Apart from that, BBCCD also signed an agreement with Zepp Hall Network Inc (Zepp Hall), which will see the development of a live concert hall in BBCC that can host an audience of more than 2,000 people. Official awards are expected to be dished out in various packages as at 2H16. The actual site progress is said to begin from 3Q16 or 4Q16, according to our sources. Figure 34: Artist impression of BBCC
Figure 35: BBCC site office and car park
Source: BBCC Development (BBCCD)
Source: RHB
See important disclosures at the end of this report
12
Construction
Regional Sector Update
25 July 2016 8 Conlay Standing strategically in the heart of Kuala Lumpur’s bustling golden triangle, 8 Conlay is a mixed-use development project with an estimated GDV of MYR5.4bn. It is slated for completion by end-2020. The development comprises two branded residence towers (57and 62-storeys high respectively) whose interior design is by design and development company YOO. These two blocks will be connected via two sky bridges at Levels 26 and 44. The development is complemented by a 68-storey 5-star hotel, serviced suites and a lifestyle retail component. Europe’s oldest luxury hospitality group, Kempinski Hotels SA, will provide services for the branded residence towers as well as manage the hotel tower. Econpile Holdings (Econpile) has been tasked to undertake foundation and substructure works for the project for a contract value of MYR128.9m. We understand that works are at an advanced stage of completion (the project is presently about 10% complete overall). After this, super structure works will follow. Figure 36: Artist impression of 8 Conlay
Figure 37: Site progress of 8 Conlay
Source: yoo8.8conlay.com
Source: RHB
Klang Valley MRT (KVMRT) The KVMRT project involves the construction of a rail-based public transport network comprising three lines. The MRT system, together with the existing urban rail network, will form the backbone of the public transport system in the Greater Kuala Lumpur/Klang Valley region. The estimated cost for the entire project is MYR80bn. The first MRT line is the 51km Sungai Buloh-Kajang (SBK) Line. The line begins in Sungai Buloh, located to the north-west of Kuala Lumpur, and runs through the capital’s centre before ending in Kajang. The latter is a fast-developing town to the south-east of Kuala Lumpur. This line will cut through three districts within our survey area via the underground alignment. These areas are the: i. Golden Triangle; ii. Old city centre; iii. Pudu/Loke Yew. There are six underground MRT stations, ie Pasar Seni, Merdeka, Bukit Bintang, TRX, Cochrane and Maluri situated within our survey perimeter. Construction of the SBK Line began on 8 Jul 2011 and is now approximately 80% complete. Operations are scheduled to begin by Jul 2017.
See important disclosures at the end of this report
13
Construction
Regional Sector Update
25 July 2016 The Sungai Buloh-Serdang-Putrajaya (SSP) Line is the second line. Construction is just about to begin, and full services are scheduled to kick off in 2Q22. The SSP Line will serve a corridor with a population of around 2m people that stretches from Sungai Buloh to Putrajaya. It will include: i. Sri Damansara; ii. Kepong; iii. Batu; iv. Jalan Sultan Azlan Shah; v. Jalan Tun Razak; vi. Kuala Lumpur City Centre (KLCC); vii. TRX; viii. Kuchai Lama; ix. Seri Kembangan; x. Cyberjaya. Meanwhile, within our survey area, the SSP Line will cut through Titiwangsa, Kampung Baru and the Golden Triangle. The seven stops expected within the city are: i. Titiwangsa; ii. Hospital Kuala Lumpur; iii. Kampung Baru North; iv. Ampang Park; v. KLCC East; vi. Conlay; vii. A transiting station at the TRX. Therefore, we expect this project to keep construction activities in Kuala Lumpur buoyant for the next five years.
See important disclosures at the end of this report
14
Construction
Regional Sector Update
25 July 2016 Conclusion The construction sector emerged relatively unscathed from the recalibrated Budget 2016 tabled by Prime Minister Dato’ Sri Najib Razak in January. The focus remains on projects and programmes that are rakyat-centric, and have a high multiplier effect and low import content. Physical projects that will be prioritised include the construction of affordable houses, hospitals, schools and roads, as well as public transport and security. Dato’ Sri Najib reaffirmed the implementation of the following projects: i. Mass Rapid Transit Line 2 (MRT2); ii. Light Rail Transit 3 (LRT3); iii. The Refinery and Petrochemical Integrated Development (RAPID) project; iv. The Pan Borneo Highway; v. The Malaysian Vision Valley; vi. Cyber City Centre; vii. High-Speed Rail (HSR). These projects, according to the Prime Minister, are to be carried out as planned. Therefore, the infrastructure boom may keep local contractors busy, at least for the short to medium term, in our opinion. Meanwhile, we believe the value of projects awarded to contractors domestically in 2016 and 2017 may likely surpass that of 2015’s. This will be thanks to the Government’s spending on infrastructure. That said, we are unsure if it can exceed the record set in 2014 of MYR171.6bn. This is as developers are likely to slow down their launches for residential and non-residential projects on the back of a weak property market. Figure 38: Value of projects awarded to contractors in Malaysia
Source: CIDB Malaysia
See important disclosures at the end of this report
15
Construction
Regional Sector Update
25 July 2016 Figure 39: Crane count survey table I Project Name
No of cranes
Type
Owner
District
Mobile crane 1
GH KL
Hospital
MOH
Titiwangsa
Setia Sky Residences
Serviced apartments
SP Setia
Titiwangsa
Eko Titiwangsa
Ekovest
Titiwangsa
2
Datum Jelatek
Commercial (mixed development) Condominiums
Datum Corp International
Datuk Keramat
2
Moonlight Terrace
Condominiums (two blocks)
Faber Union SB
The Colony by Infinitum
Serviced apartments
Macly Equity SB
Mercu Zikay Residence
Condominiums
Plaza Haji Taib
Tower crane 1
Progress
1
95%
70%
5% 1
10%
Datuk Keramat
2
75%
Kampung Baru
1
10%
Zikay Group
Kampung Baru
1
70%
Retail
Kha Seng Group
Old City Centre
1
40%
UDA Holdings
Condominiums (one block)
UDA Holdings
Old City Centre
1
50%
Safuan Suites
Serviced apartments
Safuan Group
Old City Centre
Meridian 101º
YTL Corp
Old City Centre
Merdeka PNB118
Serviced apartments (two blocks) Mixed development
PNB
Old City Centre
4
MRT (Merdeka Station)
Infrastructure
MRT Corp
Old City Centre
2
70%
MRT (Pasar Seni)
Infrastructure
MRT Corp
Old City Centre
4
70%
River of Life
Infrastructure
DBKL
Old City Centre
1
70%
Daya Bumi extension
Offices & commercial space
Komplex Dayabumi SB
Old City Centre
6
10%
The Robertson Residences
Mixed development
Gamuda Land
Old City Centre
1
4
30%
n.a.
Hotel (one block)
MG Capital
Old City Centre
1
1
5%
The Manhattan
Condominiums
GD Capital Holdings
Old City Centre
1
5%
Dorsett Residences
Serviced apartments
Golden Triangle
1
65%
Tribeca
Mixed development
Permaju Dorsett Bukit Bintang SB Low Yat Group
1
5%
M101 Bukit Bintang
Mixed development
M101 Bukit Bintang SB
Golden Triangle
1
25%
MRT (Bukit Bintang Station) Menara Khuan Choo
Infrastructure
MRT Corp
Golden Triangle
Mixed development
Malton
Golden Triangle
1
20%
Pavilion Suites
Serviced apartments
Malton
Golden Triangle
1
30%
8 Conlay
Mixed development
KSK Land
Golden Triangle
4
Four Seasons KL
Hotel
Venus Assets SB
Golden Triangle
5
3
50%
W Hotel
Hotel
Tropicana Corp
Golden Triangle
5
1
50%
The Ritz-Carlton Residences Equatorial Plaza
Condominiums
YTL Corp
Golden Triangle
1
90%
Hotel
Hotel Equatorial (M) SB
Golden Triangle
2
30%
Bangunan MAS refurbishment Sky Suites KLCC
Offices
MAS
Golden Triangle
1
70%
Serviced apartment s (three blocks)
Timeless Realty SB
Golden Triangle
2
10%
Source: RHB
See important disclosures at the end of this report
16
1
1
Golden Triangle
5% 2
40%
2
15%
3
70%
10%
Construction
Regional Sector Update
25 July 2016 Figure 40: Crane count survey table II Project Name n.a.
No of cranes
Type
Owner
District
Mobile crane
Tower crane
Progress
Serviced apartments (two blocks) Condominiums (one block)
TA Dev / TA Global
Golden Triangle
2
10%
En. Leong Seong Cheong
Golden Triangle
1
5%
Hap Seng Consolidated
Golden Triangle
1
5%
Tun Razak Exchange
Serviced apartments (two block) Commercial
IMDB & Others
Golden Triangle
14
5%
n.a.
Serviced apartments
n.a.
Golden Triangle
1
10%
n.a.
Serviced apartments
n.a.
Golden Triangle
3
5%
Damai Residences
Condominiums (one block)
Tan & Tan
Ampang
Road Widening (Jalan Jelatek) Picasso Residences
Infrastructure
n.a.
Ampang
1
10%
Condominiums (two blocks)
Premier De Muara Sdn Bhd
Ampang
3
10%
Bukit Bintang City Central
Mixed development
Pudu/Loke Yew
2
1%
MRT (Maluri Station)
Infrastructure
Eco World & UDA Holdings & EPF MRT Corp
Pudu/Loke Yew
4
65%
MRT (Cochrane Station)
Infrastructure
MRT Corp
Pudu Loke Yew
4
70%
Tun Razak Traffic Dispersal
Infra
MOW
Pudu/Loke Yew
3
25%
MyTown Shopping Centre
Mixed development
Boustead Holdings & Ikano
Pudu/Loke Yew
3
3
70%
Sunway Velocity
Mixed development
Sunway
Pudu/Loke Yew
4
3
70%
ICC Pudu
Mixed development
Kuala Lumpur City Hall (DBKL)
Pudu/Loke Yew
1
80%
39
37%
n.a. Aria Residence
1
92 Source: RHB
See important disclosures at the end of this report
17
60%
Construction
Regional Sector Update
25 July 2016
Singapore We surveyed the CBD region of Singapore and we believe that there is long-term growth potential for the construction sector. The following are our key findings during our cranecounting exercise: i. A total of 52 cranes within the CBD region – construction progress is on track; ii. Office developments constitute the main component and are mostly within Singapore’s downtown core region; iii. Other classes of developments are well spread across the CBD region. Figure 41: 52 cranes surveyed in the CBD region in total
Source: RHB
We observed that the construction progress of the development projects within the CBD is on track for completion. In this region, we counted a total of 52 cranes. We also note that residential projects are the highest in terms of numbers, but office developments are the largest in terms of project scale. Figure 42: Zooming into the CBD region
Figure 43: Developments are mostly office space Office
Retail
Hotel
Residential
Total
Number of projects under development
10
7
12
25
54
Number of cranes
16
4
7
25
52
5,251,880
514,647
3,657
4,302
5,774,486
GFA/ units
Source: RHB
See important disclosures at the end of this report
Source: RHB
18
Construction
Regional Sector Update
25 July 2016 Figure 44: The biggest ongoing development – Marina One – has seven cranes
Figure 45: A bird’s-eye view over the Marina Residential site
Source: RHB
Source: RHB
Figure 46: Cranes spotted across the Tanjong Pagar district
Figure 47: Downtown Gallery (retail) is on track for completion in 4Q16
Source: RHB
Source: RHB
See important disclosures at the end of this report
19
Construction
Regional Sector Update
25 July 2016 Figure 48: Guoco Tower will be the tallest building in Singapore
Figure 49: Frasers Tower will be the only CBD office supply in 2018
Source: RHB
Source: RHB
The future of Singapore’s CBD The CBD region is the bloodline of Singapore’s future economy. Since the late 1980s, the Government has pushed initiatives to develop and maintain the sustainability of this region. The crucial task now is how to maintain the sustainability of the CBD, in order to keep Singapore’s economic status intact. To this end, three mega trends (strongly backed by the Government) will emerge in the CBD region: i. An increase in the number of mixed developments; ii. Development of better transport accessibility; iii. An increase in the number of energy-efficient buildings. Figure 50: Huge transformation of Marina Bay since the late 1980s
Source: Ministry of National Development (MND)
See important disclosures at the end of this report
20
Construction
Regional Sector Update
25 July 2016 We opine that heavier traffic flow will be one of the biggest issues that Singapore may face, as its population continues to expand in the future. According to Population White Paper, published by National Population and Talent Development (NPTD), the country’s population size is expected to grow further and ultimately reach 6.5-6.9m in size by 2030. Additionally, Singapore currently ranks third in the world – just ahead of Hong Kong – in terms of population density, according to statistics provided by the United Nations (UN). Thus, the future of Singapore’s CBD is well-focused on reducing congestion problems in the future. Figure 51: Singapore is one of the most densely-populated countries in the world Rank Country/terrioty
Population
Density (people/sq km)
1
Monaco
38,320
25,718.12
2
China, Macau SAR
584,420
22,477.69
3
Singapore
5,618,866
8,226.74
4
China, Hong Kong SAR
7,313,557
6,654.74
5
Gibraltar
29,354
4,892.33
6
Bahrain
1,359,726
1,959.26
7
Holy See
800
1,818.18
8
Sint Maarten (Dutch part)
46,914
1,379.82
9
Malta
431,239
1,364.68
Bermuda
65,578
1,237.32
10
Source: RHB, United Nations (UN)
In tackling its traffic flow issue, the Government is driven to decentralise commercial activities via setting up regional hubs. An example of this is the Tampines Regional Hub. It has also taken various initiatives – such as increasing the number of mixed developments and improving public transport accessibility – to reduce congestion within the CBD region. Based on our survey of this region, we see an increasing number of mixed developments being constructed, with more to come in the years ahead. This is in line with our expectations. Figure 52: The mixed development blueprint
Source: Urban Redevelopment Authority (URA)
Mixed developments will be increasingly popular. Mixed developments are nothing new globally, but there has been a resurgence for them in Singapore over the last few years. The CBD has been undergoing a transformation since the early 2000s, what with the Government’s push to encourage city living and ensure that this region remains lively in the evenings and on weekends. Historically, the CBD had been dominated by pure office buildings, together with a number of hotels and supporting retail amenities.
See important disclosures at the end of this report
21
Construction
Regional Sector Update
25 July 2016 Figure 53: Mixed developments have been the focus in recent years Projects
Main contractor
Raffles City Singapore
SsangYong Group
Suntec City
Hyundai-Ssangyong Consortium
UE Square
Kajima Overseas Asia Pte Ltd Consortium of Kajima Overseas Marina Bay Financial Centre Asia, Tiong Seng Contractors and Woh Hup Hyundai Engineering & Asia Square Construction Co. Ltd
(Expected) completion 1985
Office
Hotel
Retail
√
√
√
1994
√
1997
√
2010/12
√
2011/13
√
√
√
2015
√
√
√
√
2016
√
√
√
√
√
√
√
√
Duo
Hyuandi Engineering & Construction Co., Ltd. Obayashi Singapore Pte Ltd
Marina One
Hyundai-GS Joint Venture
2016
√
Tanjong Pagar Centre
Samsung C&T Corporation
2016
√
South Beach
√ √
√
Source: RHB, Building and Construction Authority (BCA)
The transformation efforts were initiated by the local authorities with the intention to turn the growing CBD into a vibrant district. This will also reduce traffic flow within Singapore, with residents not needing to travel elsewhere to shop or work. Figure 54: Huge potential growth of mixed developments in the future
Source: RHB, BCA
More mixed developments to come. More mixed developments will be created within the CBD area, bringing about a host of benefits such as cost savings, working convenience and accessibility. According to the Urban Redevelopment Authority of Singapore (URA), one of the longterm master plans is to improve the Marina Bay precinct, which could provide an additional 1m sqm of prime office space. Judging from all the white sites around the Marina Bay area (Figure 54), Singapore has the capacity to double its prime office space in the CBD region to more than 11m sqm, should there be a need. By creating a diverse mix of uses – including residential, hotel and retail – transportation issues around the CBD area can be mitigated. This ensures that this region will continue to play the role as a major business/financial hub. Developing current and new modes of transportation to improve accessibility to the CBD. The Government plans to further develop the current modes of transportation (eg MRT, buses and expressways) while exploring new forms of alternative transportation (eg cycling) to the CBD. The aim is to improve travelling time and traffic control around this area.
See important disclosures at the end of this report
Residential
22
√
√
√
√
Construction
Regional Sector Update
25 July 2016 Figure 55: One of the main MRT developments is to develop the Thomson East Coast Line (TEL)
Source: RHB, Land Transport Authority (LTA)
Key MRT developments within the CBD region are: i. The Thomson East Coast Line (TEL) is expected to open in 2019. It will bring about greater accessibility to the CBD area by connecting the Eastern Region Line with the Thomson Line; ii. The Downtown Line is also expected to have all stations up and ready by 2017, making it easier for more commuters to access CBD areas; iii. Circle Line Stage 6 (CCL6) is slated to be ready by 2025, which will allow commuters staying in the west of the republic to have better access to the CBD area. Other than the completion of new MRT lines, the Singapore Land Transport Authority (LTA) aims to have more than 90% of all buildings in CBD to be within 400m of the nearest MRT station by 2025. The walking routes will also be sheltered to facilitate travelling within the CBD area. Bus services towards the CBD. The Bus Service Enhancement Programme (BSEP) aims to create more bus services in the CBD area. Commuters now enjoy direct journeys to the CBD following the implementation of five new City Direct Services (CDS) in February-March, bringing the total number of CDS to 20. Expressways. The completion of the North-South Expressway (NSE) by 2020 will link areas like Bishan, Toa Payoh and Novena to the CBD. Commuters in the north-south region should see a significant 30% improvement in their travelling times. For example, with the new NSE expressway, it will take only 20-30 minutes to travel from Yishun to the CBD vs 30-35 minutes currently.
See important disclosures at the end of this report
23
Construction
Regional Sector Update
25 July 2016 Figure 56: Cycling route to the CBD
Source: URA
Cycling infrastructure. The URA plans to shift focus towards cycling as a form of alternative transport, especially towards the CBD area. One option that it is considering is redesigning Kallang Park Connector to be a north-south commuter cycling route from the central to the CBD areas. Cyclists will take an average of 30-45 minutes to travel from one end to the other. Green is the new black. Adopting cleaner energy will be a major trend within Singapore’s infrastructure sector. As a low-lying, densely-populated island in the tropics, the country is vulnerable to the impact of climate change. In view of this, it is essential for Singapore to move towards becoming a nation with “greener buildings”, which will reduce its energy intensity. As such, the Government targets to: i. Increase greenery in high-rise buildings to 50ha by 2030; ii. To have 80% of the current existing buildings achieve the Building & Construction Authority’s (BCA) Green Mark certification, at the very least. The BCA’s Green Mark scheme is a green building rating system that evaluates a building for its environmental impact and performance. The assessment criteria for the certification cover: i. Energy efficiency; ii. Water efficiency; iii. Environmental protection; iv. Indoor environment quality; v. Other green features and innovations. Therefore, we expect energy-saving infrastructure to increase, not only within the CBD region, but across Singapore as well.
See important disclosures at the end of this report
24
Construction
Regional Sector Update
25 July 2016 Figure 57: Funds have been set up to achieve a greener nation
Source: BCA
Initiative well backed by the Government. As shown in Figure 57, multiple funds have been set up by the authorities to build a more sustainable Singapore. The largest initiative is the SGD52m Green Buildings Innovation Cluster (GBIC), an integrated building energy efficiency research, development & demonstration (RD&D) hub that aims to help bolster the link between research and how it translates into public policy. Green buildings since 2000. Capital Tower (along Robinson Road) became Singapore’s first intelligent building when it was completed in 2000. It has set the trend for green buildings on the island. Figure 58: High growth of green buildings in Singapore 3,000
900.0 2,524
2,500 2,003
2,155
800.0 700.0
2,000
600.0 1,557
1,500
500.0
1,171
1,000
400.0 300.0
732
200.0
427
500 17
127
33
239
100.0
[LHS] Number of green buildings
Sep-15
Sep-14
Sep-13
Sep-12
Sep-11
Sep-10
Sep-09
Sep-08
Sep-07
Sep-06
0.0
Sep-05
0
[RHS] GFA (m sq f t)
Source: RHB, BCA
Since the BCA’s Green Mark scheme kicked off in 2005, the number of green buildings in Singapore has surged to more than 2,500 today from 17 originally. This translates into over 70m sqm of GFA, or c.29% of total GFA in the country. Interestingly, green building tenants tend to be multi-national corporations (MNCs) and large locally-listed organisations. This is because they have carbon commitments and climate policies to adhere to, according to a 19 Oct 2015 report by the Business Times.
See important disclosures at the end of this report
25
Title: Source:
Please fill in the values above to h
Construction
Regional Sector Update
25 July 2016 Figure 59: Projects under construction I Project Name
Project type
Project Owner
District
Marina One
Office
M+S Pte Ltd
Marina Bay
7
Construction progress (%) 83%
SBF Centre (strata titled)
Office
FEO
Shenton Way
1
83%
EON Shenton (strata titled)
Office
70 Shenton Pte Ltd
Shenton Way
0
83%
GSH Plaza (strata titled)
Office
Plaza Venture Pte Ltd
Raffles Place
1
83%
Duo
Office
M+S Pte Ltd
Beach Rd/ City Hall
1
89%
Guoco Tower Redevelopment of International Factors Building and Robinson Towers 5 Shenton Way
Office
GuocoLand
Tanjong Pagar
1
97%
Office
Tuan Sing
Robinson Road
1
50%
Office
UIC Land
Shenton Way
1
75%
Oxley Tower (strata titled)
Office
Oxley Holdings
Robinson Road
1
73%
Frasers Tower
Office
Shenton Way
2
31%
Havelock II
Retail
Frasers Centrepoint Horizon Value Investments SP3 Pte Ltd (Gutherie GTS Limited)
Havelock Road
0
97%
Retail
122 Middle Investment Pte Ltd
122 Middle Road
0
97%
Hotel Development at Middle Road (Former Midlink Plaza) Duo Galleria
# of cranes
Retail
Ophir-Rochor Commercial Pte Ltd
Fraser Street
0
83%
Refurbishment of Gallery Hotel
Retail
RB Corp Pte Ltd
Nanson Road
1
83%
Downtown Gallery
Retail
OUE
Shenton Way
1
75%
City Gate Office/shopping development (Former Tower Fifteen, Sky Tower) Mercure Singapore Middle Road
Retail
Bayfront Ventures Pte Ltd
Beach Road
1
22%
Retail
Fragrance Grandeur Pte Ltd
Hoe Chiang Road
1
0%
Hotel
Accor
Middle Road
0
97%
M Social
Hotel
Robertson Quay
0
97%
Premier Inn Singapore
Hotel
Millennium Hotels Master Contract Services Pte Ltd/ Fine Grain Property Consortium
Beach Road
0
97%
Hotel
Frasers Hospitality Trust
Havelock Road
0
83%
Hotel
Accor
Merchant Road
0
83%
Novotel Singapore on Stevens Somerset Grand Cairnhill Singapore Redevelopment Murray House
Hotel
Oxley Gem Pte Ltd
Stevens Road
1
33%
Hotel
CapitaLand
Cairnhill Road
1
33%
Hotel
China Classic Pte Ltd
Maxwell Road
1
33%
Ibis Singapore on Stevens
Hotel
Oxley Gem Pte Ltd
Stevens Road
1
33%
YOTEL Orchard Road
Hotel
Yat Yuen Hong Co
Orchard Road
1
33%
The Biltmore
Hotel
Granmil Holdings Pte Ltd
Cuscaden Road
1
0%
Frasers @ China Street
Hotel
Frasers Centrepoint
China Street
1
0%
InterContinental Singapore Robertson Quay (formerly Gallery Hotel) Swissôtel Merchant Court
Source: RHB
See important disclosures at the end of this report
26
Construction
Regional Sector Update
25 July 2016 Figure 60: Projects under construction II Project Name
Project type
Project Owner
District
# of cranes
Orchard Boulevard
1
Construction progress (%) 58%
Cairnhill Road
1
58%
Fraser Street
1
50%
Shenton Way
1
13%
Leonie Hill
1
17%
3 Orchard By-The-Park
Residential
YTL Westwood Properties Pte Ltd
Cairnhill Nine
Residential
DUO Residences
Residential
CH Commercial Pte Ltd/CH Residential Pte Ltd Ophir-Rochor Commercial Pte Ltd/Ophir-
Eon Shenton
Residential
Rochor Hotel Pte Ltd/Ophir-Rochor 70 Shenton Pte Ltd
Ferra
Residential
Goodwood Grand
Residential
Far East Lighthouse Pte Ltd/Orchard Landmark Pte Ltd Feature (Balmoral) Pte Ltd
Balmoral Road
1
17%
Gramercy Park
Residential
Aston Properties Pte Ltd
Grange Road
1
83%
Liv On Sophia
Residential
RH Mount Sophia Pte Ltd
Adis Road
1
0%
Liv on Wilkie
Residential
RH Rochor Pte Ltd
Wilkie Terrace
1
0%
Lloyd Sixtyfive
Residential
TG (2010) Pte Ltd
Lloyd Road
1
83%
New Futura
Residential
City Sunshine Holdings Pte Ltd
Leonie Hill Road
1
0%
One Balmoral
Residential
Hong Leong Holdings Ltd
Balmoral Road
1
58%
Oxley Edge
Residential
Oxley Mosaic Pte Ltd
River Valley Road
1
83%
Residential apartments
Residential
Yow Cheong Pte Ltd
Balmoral Road
1
58%
Residential apartments
Residential
Celestial Fortune Pte Ltd
Draycott Park
1
58%
Robinson Suites
Residential
50 Robinson Pte Ltd
Robinson Road
1
83%
Service apartments in OUE Downtown 1
Residential
Alkas Realty Pte Ltd
Shenton Way
1
83%
Sophia Hills
Residential
Hoi Hup Sunway Mount Sophia Pte Ltd
Mount Sophia
1
28%
Strata housing development
Residential
Peirce Road
1
28%
The Met @ 18
Residential
Far East Land And Housing Development Co Pte Ltd Newfort Realty Pte Ltd
Mount Elizabeth
1
28%
The Rise @ Oxley - Residences
Residential
Oxley Rise Pte Ltd
Oxley Rise
1
13%
The Scotts Tower
Residential
Scotts Road
1
33%
The Siena
Residential
Far East Success Development Pte Ltd/Whitewater Properties Pte Ltd Far East SOHO Pte Ltd
Tan Kim Cheng Road
1
50%
Valley House
Residential
Kwan Im Thong Hood Cho Temple
River Valley Road
1
50%
Wallich Residence at Tanjong Pagar Centre
Residential
Belmeth Pte Ltd/Guston Pte Ltd/Perfect Eagle Pte Ltd
Wallich Street
1
83%
Source: RHB
See important disclosures at the end of this report
27
Construction
Regional Sector Update
25 July 2016
Thailand For Bangkok, which is also known as the City of Angels, we made the 304m tall Baiyoke Tower II the centre of our survey area. This is because this 85-storey building has been the tallest structure in the city since 1997. However, there are two new skyscrapers in the pipeline that will be taller than this building: i. The MahaNakhon project, located next to RHB Securities’ (Thailand) head office, will be 10m higher than Baiyoke Tower II and is expected to be fully completed within 4Q16. However, Baiyoke Tower II’s location – at the centre of the CBD – seems more superior and the radius around the building covers many types of construction projects, ie residential, commercial, government centres, etc; ii. The 615m-high Super Tower will be almost double the height of the MahaNakhon. The project, which has not begun construction yet, is set to be the tallest structure in Bangkok by FY19 at the earliest. However, the Super Tower will be located outside of the CBD. We choose Baiyoke Tower II as the centre of our survey area, due to the following factors: i. It is located in Bangkok’s CBD and is the tallest structure within a 3km radius. The survey area covers two districts fully and eight districts partially (out of a total of 50 districts in Bangkok). Note that these 10 districts are significant to the city in terms of economic contributions, ie more than 50% of Bangkok’s tax revenue comes from these areas; ii. With its location, we are able to cover diversified economic activities that are found in different areas. There are several well-known commercial projects towards the south, such as Siam Paragon, Central World and Silom Road. Towards the north lie a hub of government agencies and a military base. Eastwards, there are new-generation residential projects that are popular, especially mid- to high-end condominiums, in Asoke, Ploenchit, Nana, Rama IX and Ratchadapisek amongst others. Meanwhile, towards the west, communities in the old part of Central Bangkok have been living there for a long time. Figure 61: Baiyoke Tower II is the centre of our survey area
Figure 62: Condominium projects dominate the CBD area
Source: RHB
Source: RHB
See important disclosures at the end of this report
28
Construction
Regional Sector Update
25 July 2016 Figure 63: Crane-counting results by project type
Figure 64: Crane-counting results by district
Source: RHB
Source: RHB
We found 112 cranes within our survey area, which is surprising when compared to our pre-survey estimate. As expected, the majority (43 cranes) could be found at the construction sites of condominium projects, ie residential projects within the CBD area that feature units that will be affordable and see strong demand from homebuyers. About 55% of condominium sites under construction are located in the east, ie a popular location for both real and investment demand. This is because this area is the prime spot for properties that fetch the highest prices in Thailand. Prices range from THB150,000 per sqm to THB500,000 per sqm. This is beyond what is affordable for a mid-level salary earner. The projects are also close to Bangkok Mass Transit System (BTS Skytrain) routes and the underground MRT network that is currently in use. We found that construction activities are in full swing, and the projects have an average presales rate of over 50%. One of the most noteworthy condominium projects is Rhythm Rangnam, developed by AP (Thailand) (AP TB, BUY, TP: THB8.50), which booked 100% in presales within the first day of its grand opening due to the limited supply of condominium projects within the Ratchathewi district. As the high price of land in the surveyed area seems to be an entry barrier for small- to medium-sized developers, 79% of new condominium projects are developed by SET-listed companies with strong reputations in the high-end market. We did note the case of the AQ Aria Asoke project, which was being developed by AQ Estate (AQ TB, NR), a company whose financial position is not too upbeat. In a recent filing on the SET, medium-sized developer Chewathai (CHEWA TB, NR), which was listed in April, announced the acquisition of AQ Aria Asoke from AQ Estate. It plans to rename the project as Chewathai Residence Asoke. This implies that most developers, both SET-listed and non-listed, will likely develop projects in this area if the opportunity arises. Figure 65: Examples of condominium projects developed by SET-listed companies with a dominant presence in the CBD
Source: RHB
See important disclosures at the end of this report
29
Construction
Regional Sector Update
25 July 2016 Figure 66: There are only a few condominium projects developed by non-listed companies in the CBD, due to the high prices of land, which are a barrier to entry
Source: RHB
In addition to the actual number of cranes exceeding our expectation, we were also surprised to find some industries in expansion mode. These include: i. Healthcare sector. There are nine cranes (or 8% of the total crane count) actively involved in works for companies within this sector. Many are public and private hospitals that have strong reputations locally. We found three leading public healthcare institutions – Rajavithi Hospital, Phramongkutklao Hospital and the Thai Red Cross College of Nursing – under the process of new construction activities. The highlight development in this sector is the new 25-storey medical centre under Rajavithi Hospital. The latter has been providing medical services for 65 years now and its new building is designed to provide medical services. This is essential as Bangkok’s low-income segment is dependent on public hospitals, which normally recruit highly-experienced doctors but charge much lower rates vis-à-vis private hospitals. Currently, low-income patients spend half a day on average while waiting to see a doctor. The factors behind the expansion of public hospitals (as well as private hospitals) in Bangkok and nationwide are: a.
The rising proportion of the aging population in Thailand is anticipated to constitute 20% of the total population in FY25;
b.
The low number of doctors to the total population should be rising to be on par with other ASEAN member states;
c.
The urbanisation trend.
Figure 67: Proportion of aging population to reach 20% within FY25 Year 2010 2015 2020F 2025F
Total population (million) 67.0 69.1 70.8 72.3
Age: 0-14 years 21.2 20.2 19.0 18.0
% of total population Age: 15-59 years 67.1 66.0 64.2 62.0
Source: Office of The National Economic and Social Development Board
See important disclosures at the end of this report
30
Age: 60 years and above 11.7 13.8 16.8 20.0
Construction
Regional Sector Update
25 July 2016 Figure 68: Rajavithi Hospital is constructing a new – and its largest building – in the healthcare sector
Source: RHB
Figure 69: New research centre being built for Phramongkutklao Hospital
Figure 70: Thai Red Cross College is constructing a new building to expand its capacity to educate new nursing students
Source: RHB
Source: RHB
ii. Education sector. Although the crane count for projections under construction for the education sector stood at four only (or 3.5% of the total crane count), this indicated that schools are keen to capture the strong demand for higher-level education. Such education will be needed for Thailand’s “Generation Z”, ie those born in 1997 and thereafter will complete Bachelor degree from university in the next few years. Education is a long-term business, as a more educated Generation Y enters parenthood. We think this generation will tend to have a bigger budget to spare for the education of their children and siblings. We discovered three construction sites for university campuses. Two of these are new faculty buildings, while the third is a car park facility for Master of Business Administration (MBA) students.
See important disclosures at the end of this report
31
Construction
Regional Sector Update
25 July 2016 Figure 71: Construction works for the educational centre for environmental studies under Chulalongkorn University’s faculty of architecture
Figure 72: Construction site of the operations centre for Chulalongkorn University’s health science department
Source: RHB
Source: RHB
Figure 73: New car parking building for students at the University of the Thai Chamber of Commerce (UTCC) campus
Source: RHB
iii. Hotel sector to expand to new locations. Normally, 4-5 star hotels in Bangkok are concentrated in the central area of the CBD. However, we found one mixed-use project in the northern part of this district, which currently has offices and condominiums only. This 34-floor project combines a 180-room hotel with office spaces. The hotel opens up a new option for hospitality facilities to be located with easy access to the BTS Skytrain network – especially since land prices in the CBD have surged in the past few years. This may give hotel developers ideas on alternative locations to expand new projects.
See important disclosures at the end of this report
32
Construction
Regional Sector Update
25 July 2016 Figure 74: Ari Hill, a mixed-use building comprising offices and a hotel
Figure 75: Ari Hill project’s progress
Source: Urban Capital
Source: RHB
The game of landlords Within the 28.3 sq km surveyed area, we also discovered what seems to be a classic game of Monopoly being played by the city’s landlords. Currently, there are three big land plots in Bangkok’s CBD with high potential for large-scale projects – and each plot is owned by a different entity. Chulalongkorn University owns the first plot, which is located close to its campus and near Siam Square. The latter is a trendy shopping area for Thai teenagers. The second plot is owned under a leasehold concession by the Sirivadhanabhakdi family, which owns Chang Beer and the TCC Group. It is located in a prime area, at the Wireless Road intersection near the Japanese embassy and the beginning of Sathorn Road. However, these two entities are historically slow movers by nature and we expect no significant construction activities at this moment. Construction is active at the third plot of land called Langsuan Village. Spanning 56 rai (or about 9ha), it is owned by Siam Sindhorn Co Ltd, which, in turn, is under the auspices of the Crown Property Bureau. Langsuan Village is located in a peaceful and green part of the CBD. It offers a view of Lumpini Park, the most popular recreational area for employees after working hours. Our ground checks show that Langsuan Village currently has 17 cranes (15% of the total crane count). This is the highest number of cranes in our surveyed areas. Construction is at an early stage, with foundation works done by SEAFCO Pcl (SEAFCO TB, NR). As the plot of land is large, the project is a mixed-use development comprising: i. Four leasehold condominium buildings; ii. Three serviced apartment blocks; iii. A hotel; iv. A health centre; v. An art museum. Some construction works in the project will be completed from FY19 onwards, and this project is set to transform the area from being a quiet place during the weekends to a busy area every day. However, the slow movement of two land plots mentioned above can be seen as a positive factor that will not lead to an oversupplied situation within the area. This is because the three areas are located within a 10 minute drive from each another. Therefore, there is a pipeline of mix-used projects and construction in this prime CBD area, which will continue to be active for the next five years.
See important disclosures at the end of this report
33
Construction
Regional Sector Update
25 July 2016 Figure 76: The master plan of the Langsuan Village project
Source: www.langsuanvillage.com
The fourth large land plot, which housed the former quarters of the Japanese Embassy, is currently owned by Singha Estate (S TB, NR). The latter is majority-owned by the family that owns Singha Beer. The Singha Complex project spans 8.8 rai (1.4ha) and is currently under construction, ie at the early stage of foundation works. It is planned as a mixed-use project comprising 50,000 sqm of office space and 6,000 sqm of retail space in the Asoke area. This project will not affect the three land plots that we mentioned earlier, as it is not close to them. Moreover, the project owner will also relocate its headquarters to this project and lease 20% of its total office space. However, this project should be another landmark for this specific location that will attract other developers to launch more new projects – especially condominiums – in the vicinity. Figure 77: Master plan of the Singha Complex project
Figure 78: Singha Complex project’s progress
Source: Singha Estate
Source: RHB
Conclusion Based on the availability of the expressway network, and BTS Skytrain and MRT underground routes within Bangkok’s CBD, SET-listed companies’ condominium projects for mid- to high-end customers dominate the market. There are obvious trends, however: i. The expansion of the facilities of long-term growth businesses such as hospitals and university campuses; ii. The game of mixed-use projects being played by Thai landlords; iii. Fresh signs that the hospitality sector may expand to a new location in the CBD. According to the Government’s infrastructure investment plan for FY15-22, all projects will be focused in non-CBD areas. However, some projects to be launched for bidding in the near future - including the Orange Line, Yellow Line and Pink Line MRT works – are aimed at transporting people into two key route networks in the CBD area. Therefore, the trend of new projects (especially for the services sector) is inevitable. This should keep the construction of high-rise projects in the CBD active for at least the next five years.
See important disclosures at the end of this report
34
Construction
Regional Sector Update
25 July 2016 Figure 79: Projects under construction I Project name
Project type
Project owner
District
Mobile crane
Tower crane
Total cranes
Construction progress
The Esse Asoke
Condominium
Singha Estate
Wattana
2
0
2
5%
Noble Recole Sukhumvit 19
Condominium
Noble Development
Wattana
2
0
2
10%
The Lofts Asoke
Condominium
Raimon Land
Wattana
0
0
0
0%
Singha Complex
Office + Convention Hall + Retail
Singha Estate
Huaykhwang
7
0
7
3%
Condominium
AP (Thailand)
Huaykhwang
0
1
1
83%
Dindaeng
0
1
1
80%
Huaykhwang
4
0
4
7%
Rhythm Asoke
JV between AP (Thailand) and Mitsubishi Estate Group JV between AP (Thailand) and Mitsubishi Estate Group
Rhythm Asoke 2
Condominium
Life Asoke
Condominium
AQ Aria Asoke
Condominium
AQ Estate
Dindaeng
0
1
1
25%
Noble Revolve Ratchada 2
Condominium
Noble Development
Huaykhwang
2
0
2
5%
G Tower
Office
Grand Canal Land
Huaykhwang
5
2
7
70%
Super Tower
Office
Grand Canal Land
Huaykhwang
0
0
0
0%
New Rungrojthanakul Building
Office
Rungrojthanakul
Huaykhwang
0
1
1
50%
Rosewood
Hotel
Rende Development
Pathumwan
2
1
3
20%
Office
Bank of Ayudhya family
Pathumwan
0
2
2
20%
Krungsri Building 98 Wireless
Condominium
Sansiri
Pathumwan
0
2
2
60%
Q Sukhumvit
Condominium
Quality House
Khlongtoei
0
3
3
15%
Circle Sukhumvit 11
Condominium
Fragrant Group
Wattana
0
1
1
35%
Grande Asset Hotels & Property
Wattana
0
3
3
70%
Hyatt Regency Bangkok Sukhumvit
Hotel
Edge Sukhumvit 23
Condominium
Sansiri
Wattana
0
1
1
50%
Ashton Asoke
Condominium
Ananda Development
Wattana
0
3
3
5%
Ari Hill
Office + Hotel
Urban Capital
Phayathai
3
0
3
3%
SC Asset
Phayathai
0
1
1
55%
Ratchathewi
0
1
1
10%
Shinnawatra Tower IV
Office
Rhythm Rangnam
Condominium
JV between AP (Thailand) and Mitsubishi Estate Group
Supalai Elite Phayathai
Condominium
Supalai
Ratchathewi
1
1
2
30%
The Victory Height
Condominium
Home Quick
Ratchathewi
0
1
1
35%
Supalai Elite Surawongse
Condominium
Supalai
Bangrak
0
0
0
0%
Nimit Langsuan
Condominium
Pace Development
Pathumwan
0
0
0
0%
The Monument
Condominium
Sansiri
Phayathai
0
1
1
25%
The Line Rachathewi
Condominium
JV between Sansiri and BTS Holding
Ratchathewi
0
1
1
10%
Wish Signature Midtown Siam
Condominium
Siamnuwat
Ratchathewi
0
1
1
10%
Condominium
Magnolia Finest Corporation
Pathumwan
0
1
1
85%
Magnolias Rachadamri Boulevard Source: RHB
See important disclosures at the end of this report
35
Construction
Regional Sector Update
25 July 2016 Figure 80: Projects under construction II Project name
Project type
Project owner
District
Mobile crane
Tower crane
Total cranes
Construction progress
Saladaeng One
Condominium
SC Asset
Bangrak
1
0
1
5%
Ideo Q Siam-Ratchathewi
Condominium
Ananda Development
Ratchathewi
0
2
2
10%
Ideo Q Chula-Samyan
Condominium
Ananda Development
Bangrak
0
1
1
98%
Ashton Chula-Silom
Condominium
Ananda Development
Bangrak
0
0
0
0%
Q Chidlom
Condominium
Ananda Development
Pathumwan
1
1
2
3%
Maestro 14
Condominium
Major Development
Ratchathewi
0
0
0
0%
Metro Luxe
Condominium
Property Perfect
Phayathai
0
0
0
0%
Phayathai
0
3
3
65%
Dindaeng
0
1
1
25%
Pearl Bangkok
Car Parking building
Office
Car Parking building
TCT (owned by Thongma Vijitphongpun) University of the Thai Chamber of Commerce
Metro Luxe Phahol-Suthisarn
Condominium
Property Perfect
Phayathai
0
1
1
70%
New Medical Center Building
Hospital
Rajavithi Hospital
Ratchathewi
0
2
2
75%
Hospital
Phramongkutklao Hospital
Ratchathewi
0
3
3
20%
New Research Center Building Operation Center for Health Science Department
Multi-purpose Building
Chulalongkorn University
Pathumwan
0
2
2
70%
Educational Center for Environment
Multi-purpose Building
Chulalongkorn University
Pathumwan
0
1
1
10%
Smile Square
Shopping Center + Office + Retail + Condominium + Hotel
Asia Thaiyuan Construction & Development
Ratchathewi
0
2
2
20%
Office
Thavorn Tractor Engineering
Pathumwan
0
1
1
20%
Sync Nature @ Siam
Condominium
Saichol Patana
Pathumwan
0
1
1
60%
Gaysorn Office Tower
Office
Gaysorn Property
Pathumwan
0
2
2
35%
Government Office
Ministry of Finance
Phayathai
1
1
2
15%
Chulalongkorn Hospital
Pathumwan
4
0
4
3%
Metropolitan Electricity Authority
Khlongtoei
2
0
2
5%
Thavorn Tractor Building
Budget Bureau (New building) Thai Red Cross College of Nursing (New building) New Khlongtoei branch office
Hospital State Agency Office
Sindhorn Midtown
Condominium
Siam Sindhorn
Pathumwan
3
0
3
3%
Sindhorn Residence
Condominium
Siam Sindhorn
Pathumwan
0
1
1
75%
Mixed-use
Siam Sindhorn
Pathumwan
17
0
17
5%
Langsuan Village Source: RHB
See important disclosures at the end of this report
36
Indonesia Company Update Construction & Engineering | Construction
25 July 2016
Buy (Maintained)
Adhi Karya Persero
Target Price: Price: Market Cap: Bloomberg Ticker:
Ready To Run
1m (3.6) (10.5)
76.8 1.9 1.2
3m (4.7) (11.1)
6m 11.2 (7.0)
Adhi Karya (ADHI IJ) Price Close
Relative to Jakarta Composite Index (RHS)
2,800
124
2,300
107
1,800
91
1,300 140
74
120 100 80 60 40
May-16
Jan-16
Mar-16
20
Key risks to our call are: Source: Bloomberg
i. A delay in the LRT project; ii. A shortfall in tax revenue, which will have a negative impact on the infrastructure spending budget. We maintain our BUY recommendation with an unchanged TP of IDR3,400, which implies 18x FY16F P/E. Currently, the company is trading at 14.4x FY16F P/E, making it the cheapest state owned contractor in the market.
Core rolling P/E (x) 22 17 12
7 2 Jan-12
Jan-13
Jan-14
Source: Bloomberg Forecasts and Valuations
Dec-13
Dec-14
Dec-15F
Dec-16F
Dec-17F
9,800
8,654
9,390
16,865
21,640
Reported net profit (IDRb)
406
324
464
670
867
Recurring net profit (IDRb)
542
352
429
672
867
49.5
(35.1)
21.8
56.8
28.9
Total turnover (IDRb)
Recurring net profit growth (%) Recurring EPS (IDR) DPS (IDR) Recurring P/E (x) P/B (x)
301
195
120
189
243
23.5
67.6
48.9
70.7
91.5
9.0
13.9
22.6
14.4
11.2
3.38
3.00
1.88
1.69
1.51
P/CF (x)
4.0
Dividend Yield (%)
0.9
EV/EBITDA (x) Return on average equity (%) Net debt to equity (%)
na
64.5
na
1.8
4.6
9.1
12.6
6.2
6.4
30.9
21.0
13.7
12.3
14.3
net cash
15.5
62.1
(61.7)
(53.1)
(39.5)
net cash
88.8
Our vs consensus EPS (adjusted) (%)
2.6
Source: Company data, RHB
See important disclosures at the end of this report Powered by the EFA Platform
na
2.5
37
12m 17.4 10.3
Source: Bloomberg
Nov-15
Decent new contract collection. New contracts grew 14.5% YoY in 5M16, accounting for 21.5% of the company’s FY16 target. The new contracts were mainly from state owned enterprise (SOE) projects. We remain positive on Adhi Karya as we expect its new contracts to surge in 2H16 given that the Greater Jakarta LRT contract will be signed in 2H16.
Share Performance (%) YTD Absolute 27.1 Relative 13.5
Sep-15
Accelerating infrastructure spending. The Government has shown its determination in boosting infrastructure development in the country with no cuts in infrastructure spending budget in the revised FY16 State Budget. In terms of realisation, 6M16 capital spending reached IDR44trn, up 65.3% YoY and represents 22.2% of full-year target, which we deem to be an impressive achievement. As a state owned contractor, we believe Adhi Karya will be the direct beneficiary since it is mainly involved in infrastructure projects.
49,161m/3.70m 1,464 - 2,870 49 3,561 25%
Shareholders (%) Republic of Indonesia Dimensional Fund Advisors LP Schroder Investment Management
Jul-15
The light rail transit (LRT) project is set to improve Adhi Karya Persero’s (Adhi Karya) earnings visibility until 2019 due to its huge value. The company’s GPM will also likely improve on higher contributions from its precast business, which is needed to build this project. Following the agreement between the Governor of Jakarta and the Minister of Transportation regarding the track gauge last month, we think the Government will accelerate the construction process in order to support the Asian Games 2018. This year, it expects to book LRT Greater Jakarta as a new contract in 2H16, and will receive IDR4trn payment from the project by the end of this year.
Share Data Avg Daily Turnover (IDR/USD) 52-wk Price low/high (IDR) Free Float (%) Shares outstanding (m) Estimated Return
Vol m
We continue to like Adhi Karya given its position as the cheapest stateowned contractor in the market and its strong earnings visibility, backed by the Greater Jakarta LRT project. We expect the company to book a strong new contract collection of IDR41.5trn (including the LRT project) in FY16, up 197.1% YoY. The Government’s continued focus on infrastructure spending should benefit the company directly. Maintain BUY with an unchanged IDR3,400 TP (25% upside), which implies 18x FY16F P/E.
IDR3,400 IDR2,720 USD739m ADHI IJ
3.4
Analyst Dony Gunawan +6221 2970 7063
[email protected]
Jan-15F
Jan-16F
Adhi Karya Persero
Indonesia Company Update Construction & Engineering | Construction
Financial Exhibits 2016-02-28 Asia Indonesia Construction & Engineering Adhi Karya Persero Bloomberg ADHI IJ Buy
Financial summary Recurring EPS (IDR) EPS (IDR) DPS (IDR) BVPS (IDR) Weighted avg adjusted shares (m)
Dec-13 301 225 23.5 805 1,801
Dec-14 195 180 67.6 907 1,801
Dec-15F 120 130 48.9 1,447 3,561
Dec-16F 189 188 70.7 1,605 3,561
Dec-17F 243 243 91.5 1,807 3,561
Valuation basis
Valuation metrics Recurring P/E (x) P/E (x) P/B (x) FCF Yield (%) Dividend Yield (%) EV/EBITDA (x) EV/EBIT (x)
Dec-13 9.0 12.1 3.38 23.0 0.9 4.6 4.6
Dec-14 13.9 15.1 3.00 (30.9) 2.5 9.1 8.9
Dec-15F 22.6 20.9 1.88 (5.0) 1.8 12.6 13.5
Dec-16F 14.4 14.4 1.69 (10.3) 2.6 6.2 6.8
Dec-17F 11.2 11.2 1.51 (24.7) 3.4 6.4 7.0
Income statement (IDRb) Total turnover Gross profit EBITDA Depreciation and amortisation Operating profit Net interest Income from associates & JVs Pre-tax profit Taxation Minority interests Recurring net profit
Dec-13 9,800 1,193 874 (10) 864 (75) 54 714 (306) (2) 542
Dec-14 8,654 998 622 15 637 (103) 11 595 (268) (3) 352
Dec-15F 9,390 975 620 (41) 579 (86) 32 746 (281) (1) 429
Dec-16F 16,865 2,017 1,439 (132) 1,307 (92) 16 1,227 (552) (5) 672
Dec-17F 21,640 2,564 1,813 (160) 1,652 (94) 28 1,587 (714) (6) 867
Cash flow (IDRb) Change in working capital Cash flow from operations Capex Cash flow from investing activities Proceeds from issue of shares Dividends paid Cash flow from financing activities
Dec-13 162 1,220 (94) (921) (87) (42) 635
Dec-14 (1,584) (1,313) (201) (426) (19) (122) 415
Dec-15F (258) 150 (634) (1,123) 0 (65) 3,908
Dec-16F (1,731) (589) (405) (1,468) 0 (93) 1,846
Dec-17F (3,291) (2,065) (330) (793) 0 (134) 156
Balance sheet (IDRb) Total cash and equivalents Tangible fixed assets Total investments Total other assets Total assets Short-term debt Other liabilities Total liabilities Shareholders' equity Minority interests Total equity Net debt Total liabilities & equity
Dec-13 1,940 271 671 101 9,721 206 222 8,261 1,451 9 1,460 (231) 9,721
Dec-14 811 496 720 77 10,459 658 166 8,818 1,634 7 1,641 1,458 10,459
Dec-15F 4,317 1,099 698 273 16,761 1,115 181 11,599 5,154 8 5,162 (1,199) 16,761
Dec-16F 4,170 1,402 1,711 451 24,479 1,000 387 18,733 5,717 15 5,746 889 24,479
Dec-17F 1,340 1,609 2,136 566 27,521 1,100 347 21,048 6,435 19 6,473 4,019 27,521
Key metrics Revenue growth (%) Recurrent EPS growth (%) Gross margin (%) Operating EBITDA margin (%) Net profit margin (%) Dividend payout ratio (%) Capex/sales (%) Interest cover (x)
Dec-13 28.5 49.5 12.2 8.9 4.1 10.4 1.0 8.01
Dec-14 (11.7) (35.1) 11.5 7.2 3.7 37.6 2.3 4.67
Dec-15F 8.5 (38.4) 10.4 6.6 4.9 37.6 6.8 4.24
Dec-16F 79.6 56.8 12.0 8.5 4.0 37.6 2.4 8.83
Dec-17F 28.3 28.9 11.8 8.4 4.0 37.6 1.5 10.64
We value the company based on 18x FY16F P/E, (+1SD from its 4-year mean). Key drivers Our call is based on the following: i. The Greater Jakarta LRT project will boost Adhi Karya’s earnings visibility given its significant value as well as increase the company’s GPM, coming from precast products; ii. Adhi Karya is the cheapest contractor in the market with more than 30% discount to the sector. Key risks Key risks include: i. A delay in the LRT project; ii. Infrastructure spending cut. Company Profile Adhi Karya is Indonesia’s fourth largest state-owned enterprise (SOE) construction player by revenue and market capitalisation. The company engages in general construction, engineering, procurement & construction (EPC), as well as property development.
Source: Company data, RHB
38
Adhi Karya Persero
Indonesia Company Update Construction & Engineering | Construction
SWOT Analysis One of the most experienced companies in the construction industry
Delay in the LRT project
As an SOE, it is easier for the company to obtain government projects
Late disbursement of infrastructure spending from the Government Being the LRT’s operator could harm its cash flow
The Government plans to ramp up the infrastructure sector The inevitable need for public transportation in Indonesia
Dependent on government projects
Recommendation Chart Date
Recommendation
Target Price
Price
2016-02-29
Buy
3,400
2,610
2016-02-15
Buy
3,430
2,730
2015-11-10
Buy
2,740
2,225
2014-12-17
Neutral
3,240
2,452
2014-11-18
Neutral
2,720
2,282
2,084
2014-11-04
Neutral
2,720
2,248
1,584
2014-09-03
Buy
3,745
2,647
2013-07-25
Buy
4,200
2,630
1,084
2013-05-20
Buy
3,200
2,736
584
2013-04-11
Buy
3,200
2,524
Price Close
2,584
Buy 84 Jul-11
Neutral
Nov-12
Sell
Trading Buy
Feb-14
Take Prof it
3,400 3,430
2,740
2,720 3,240
3,745
4,200
2,300
3,000 3,200
Recommendations & Target Price
640
3,084
950
3,584
Not Rated
May-15
Source: RHB, Bloomberg
39
Source: RHB, Bloomberg
Malaysia Company Update Construction & Engineering | Engineering & Construction
25 July 2016
Buy (Maintained)
Gadang Holdings
Target Price: Price: Market Cap: Bloomberg Ticker:
Awaiting a Re-Rating Catalyst
Forecasts and risks. We maintain our earnings forecasts at this juncture. Key risks include: i. An inability to replenish its construction orderbook; ii. A significant slowdown in local property sector; iii. A hike in input costs. Maintain BUY. We derive a TP of MYR3.10 (25% upside) based on SOP valuation. This implies 8.3x 2017F P/E, which is below our benchmark 1-year forward target P/E for small- and mid-cap construction stocks. We reiterate our BUY call on Gadang – our small-cap Top Pick for the construction sector, given its undemanding valuations and good earnings visibility.
1m 18.7 17.5
May-15
May-16
May-17F
May-18F
May-19F
587
676
671
784
692
Reported net profit (MYRm)
60
94
96
96
113
Recurring net profit (MYRm)
60
94
96
96
113
Recurring net profit growth (%)
37.9
58.0
2.3
(0.3)
17.5
Recurring EPS (MYR)
0.29
0.40
0.37
0.37
0.58
DPS (MYR)
0.05
0.07
0.07
0.08
0.08
Recurring P/E (x)
8.59
6.25
6.65
6.67
4.26
P/B (x)
1.41
1.21
1.06
0.94
0.41
2.0
6.3
13.1
Total turnover (MYRm)
P/CF (x)
6.0
Dividend Yield (%)
2.0
2.8
2.8
3.0
3.2
4.19
3.36
1.98
1.52
(0.39)
EV/EBITDA (x) Return on average equity (%) Net debt to equity
17.5 net cash
na
20.7 net cash
Our vs consensus EPS (adjusted) (%)
17.0 net cash 18.1
14.9 net cash 11.6
Source: Company data, RHB
See important disclosures at the end of this report Powered by the EFA Platform
40
15.4 net cash 54.4
6m 10.7 8.7
12m 72.2 76.4
Gadang Holdings (GADG MK) Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
144
1.5
110
1.0 16 14 12 10 8 6 4 2
77
Jan-16
Jun-16
177
2.0
Mar-16
2.5
Source: Bloomberg Core rolling P/E (x)
9.3 8.3 7.3
6.3 5.3 4.3
3.3 Jan-14
Jan-15
Source: Bloomberg Forecasts and Valuations
3m 15.9 19.4
Source: Bloomberg
Nov-15
Property segment remains cautiously positive. Despite the weak property market conditions, we believe Gadang’s earnings visibility for its property division over the next 12-18 months remains intact. This is underpinned by its unbilled property sales of ~MYR233.7m as at May. Additionally, we view Gadang’s focus on the affordable housing segment as a positive due to this sector’s resilient demand.
13.5 12.6 5.1
Share Performance (%) YTD Absolute 17.0 Relative 19.1
Sep-15
Beyond RAPID. About 80% of Gadang’s outstanding orderbook is derived from RAPID. The company has been actively tendering jobs beyond this project. As at mid-June, its tenderbook stood at ~MYR5.5bn, comprising mostly highway construction works. Gadang is considered one of those in the running for a viaduct job for the Mass Rapid Transit (MRT) Line 2 (MRT2) project, given that it is one of the main contractors for MRT Line 1 (MRT1) alignment. In the past, it was able to secure jobs worth MYR300-500m pa. As such, we consider our MYR300m pa orderbook replenishment rate assumption to be reasonably conservative.
2.56m/0.52m 1.16 - 2.54 56 259 25%
Shareholders (%) Meloria SB Sumber Raswira SB Franklin Resources Inc.
Jul-15
Strong presence in the Refinery And Petrochemical Integrated Development (RAPID) project. Gadang has established itself as a niche player in large-scale earthworks contracts, particularly in the RAPID project. In addition, it has progressed in tandem with RAPID, by securing two packages of infrastructure and civil works totalling ~MYR560m in FY16. As at May, its outstanding construction orderbook stood at ~MYR656.7m, which will be recognised progressively over the next two years.
Share Data Avg Daily Turnover (MYR/USD) 52-wk Price low/high (MYR) Free Float (%) Shares outstanding (m) Estimated Return
Vol m
Gadang is awaiting a re-rating catalyst to boost its valuations. Nevertheless, we opine that the stock valuation remains undemanding, given its strong earnings visibility. It currently trades at about 4-6x forward P/Es for FY17-19, below our benchmark 1-year forward target P/E for small- and mid-cap construction stocks. Based on the firm’s track record, we believe it is likely to benefit from the rise in infrastructure spending locally. Maintain BUY with an unchanged SOP-derived TP of MYR3.10 (25% upside).
MYR3.10 MYR2.48 USD159m GADG MK
Analyst Ng Suk Yee +603 9207 7604
[email protected]
Jan-16
Gadang Holdings
Malaysia Company Update Construction & Engineering | Engineering & Construction
Financial Exhibits 2016-07-22. Asia Malaysia Construction & Engineering Gadang Holdings Bloomberg GADG MK Buy
Financial summary Recurring EPS (MYR) EPS (MYR) DPS (MYR) BVPS (MYR) Weighted avg adjusted shares (m)
May-15 0.29 0.29 0.05 1.76 207
May-16 0.40 0.40 0.07 2.04 237
May-17F 0.37 0.37 0.07 2.35 259
May-18F 0.37 0.37 0.08 2.65 259
May-19F 0.58 0.58 0.08 6.02 194
Valuation basis
Valuation metrics Recurring P/E (x) P/E (x) P/B (x) FCF Yield (%) Dividend Yield (%) EV/EBITDA (x) EV/EBIT (x)
May-15 8.59 8.59 1.41 10.3 2.0 4.19 5.30
May-16 6.25 6.25 1.21 (3.9) 2.8 3.36 4.05
May-17F 6.65 6.65 1.06 40.3 2.8 1.98 2.44
May-18F 6.67 6.67 0.94 9.7 3.0 1.52 1.96
May-19F 4.26 4.26 0.41 (0.7) 3.2 (0.39) (0.50)
Income statement (MYRm) Total turnover Gross profit EBITDA Depreciation and amortisation Operating profit Net interest Pre-tax profit Taxation Minority interests Recurring net profit
May-15 587 126 110 (23) 87 (3) 85 (24) (1) 60
May-16 676 156 153 (26) 127 (3) 124 (29) (0) 94
May-17F 671 165 163 (31) 132 (3) 129 (32) (0) 96
May-18F 784 164 173 (39) 134 (4) 130 (32) (1) 96
May-19F 692 183 206 (47) 159 (4) 154 (39) (3) 113
Cash flow (MYRm) Change in working capital Cash flow from operations Capex Cash flow from investing activities Proceeds from issue of shares Dividends paid Cash flow from financing activities
May-15 8.9 85.8 (32.9) (43.4) 32.4 (8.7) 52.1
May-16 (119.0) (6.1) (16.8) (112.5) 61.7 (11.8) 74.8
May-17F 198.0 328.2 (70.0) (64.9) 0.0 (18.1) 45.8
May-18F (17.5) 102.5 (40.0) (23.1) 0.0 (18.1) 21.9
May-19F (105.5) 36.8 (40.0) (19.3) 0.0 (19.4) 20.6
Balance sheet (MYRm) Total cash and equivalents Tangible fixed assets Intangible assets Total investments Total other assets Total assets Short-term debt Other liabilities Total liabilities Shareholders' equity Minority interests Total equity Net debt Total liabilities & equity
May-15 233 93 29 19 51 826 101 3 438 381 7 388 (40) 826
May-16 294 80 30 17 81 1,230 57 132 693 529 8 536 (73) 1,230
May-17F 603 122 31 15 79 1,270 131 132 655 607 8 615 (312) 1,270
May-18F 704 128 31 15 75 1,393 166 132 699 685 9 694 (373) 1,393
May-19F 743 128 32 15 67 1,492 186 132 702 779 12 791 (371) 1,492
Key metrics Revenue growth (%) Recurrent EPS growth (%) Gross margin (%) Operating EBITDA margin (%) Net profit margin (%) Dividend payout ratio (%) Capex/sales (%) Interest cover (x)
May-15 7.8 31.4 21.5 18.8 10.1 14.5 5.6 34.8
May-16 15.1 37.4 23.0 22.6 13.9 12.5 2.5 49.4
May-17F (0.8) (6.0) 24.6 24.3 14.4 18.8 10.4 41.2
May-18F 16.9 (0.3) 20.9 22.1 12.3 18.8 5.1 34.4
May-19F (11.7) 56.7 26.5 29.8 16.3 17.2 5.8 36.1
We use SOP valuation for its different segments. We also benchmark our implied target P/E against the peer average multiple. Key drivers Our TP is susceptible to a change in : i) Construction orderbook replenishment; ii) Discount to RNAV of property segment; iii) Take-up rate of new property launches. Key risks i) ii) iii)
Inability to replenish construction orderbook; A significant slowdown in local property sector; Hike in input costs.
Company Profile Gadang is involved in civil engineering and construction, property development, water supply, mechanical and electrical engineering services and oil palm plantation. business.
Source: Company data, RHB
41
Gadang Holdings
Malaysia Company Update Construction & Engineering | Engineering & Construction
SWOT Analysis Strong presence in the construction sector’s niche large-scale earthworks segment
Lack of scale while competing with other larger-scale construction players in mega infrastructure projects
Potential beneficiary of selected infrastructure projects slated for implementation th under the 11 Malaysia Plan (11MP) Ventures into the renewable energy sector via greenfield mini hydropower plant projects in Indonesia
Highly dependent on public infrastructure spending and private development projects
Recommendation Chart Price Close 3.10
2.73 2.83
2.85
Recommendations & Target Price
na
2.8
Date
Recommendation
Target Price
Price
2016-04-29
Buy
2.85
2.08
2016-01-22
Buy
2.83
2.24
2015-12-16
Buy
2.73
2.16
2.3 Source: RHB, Bloomberg
1.8 1.3
0.8 Buy 0.3 Jul-11
Neutral
Nov-12
Sell
Trading Buy
Feb-14
Take Profit
Not Rated
May-15
Source: RHB, Bloomberg
42
Thailand Company Update Construction & Engineering | Construction
25 July 2016
Sino-Thai Engineering & Construction PCL
Buy (Maintained) Target Price: Price: Market Cap: Bloomberg Ticker:
Solid In Both Public And Private Projects
11.3 7.7 7.7
1m 11.6 6.1
3m 9.2 2.7
6m 14.7 (3.8)
Sino Thai Engineering & Construction Plc (STEC TB) Price Close
Relative to Stock Exchange of Thailand Index (RHS)
28 26 24 22 20 18 16 70
124 117 109 102 94 87 79
60 50 40 30 20
Jun-16
Jan-16
Mar-16
10
Source: Bloomberg Core rolling P/E (x)
35
Maintain BUY. Sino-Thai is Thailand’s largest pure-play construction company that stands to benefit from the upcoming infrastructure bidding as well as the expansion of the private sector. Key strengths include: i. Its strong cash position which should help the company secure new orders; ii. Potential earnings growth supported by infrastructure projects in the bidding pipeline. Our TP is based on 29x FY16F P/E, which is +1.5SD above its 8-year mean. Forecasts and Valuations
Dec-14
Dec-15
Dec-16F
Dec-17F
Dec-18F
Total turnover (THBm)
21,652
18,331
21,875
24,542
27,854
Reported net profit (THBm)
1,521
1,527
1,511
1,596
1,705
Recurring net profit (THBm)
1,521
1,156
1,511
1,596
1,705
1.4
(24.0)
30.7
5.6
6.8
Recurring EPS (THB)
1.00
0.76
0.99
1.05
1.12
DPS (THB)
0.40
0.40
0.40
0.42
0.45
Recurring P/E (x)
25.1
33.0
25.2
23.9
22.4
P/B (x)
4.55
4.10
3.74
3.41
3.11
16.8
18.9
20.8
Recurring net profit growth (%)
P/CF (x) Dividend Yield (%) EV/EBITDA (x) Return on average equity (%) Net debt to equity
na
na
1.6
1.6
1.6
1.7
1.8
14.5
18.4
14.6
13.5
12.0
19.0 net cash
17.3 net cash
Our vs consensus EPS (adjusted) (%)
15.5 net cash 20.2
14.9
net cash
8.7
(6.8)
Source: Company data, RHB
See important disclosures at the end of this report Powered by the EFA Platform
14.6
net cash
43
12m 8.2 4.4
Source: Bloomberg
Nov-15
Earnings growth to resume. We maintain our forecast for FY16 core profit to surge 31% YoY to THB1.51bn, given that: i. Revenue momentum will likely improve from 2H16 onwards based on new projects awarded late last year such as the double-track railway project and additional works in small power plants (SPPs); ii. GPMs should return to a higher level of 9.7% in FY16 vs 9.4% in FY15.
Share Performance (%) YTD Absolute 0.0 Relative (16.7)
Sep-15
Benefitting from new mass rapid transit (MRT) routes. The recent clear-cut bidding time frame for the three MRT routes (Pink, Yellow and Orange) should be a positive for new public and private projects located outside Bangkok’s central business district (CBD). In addition to Sino-Thai’s direct bidding in these three MRT projects, the company will likely secure construction projects for the expansion of government authorities’ offices in Bangkok’s outskirts as well as new hospital branches to meet the needs of the growing ageing population, given its extensive experience in these specific areas. We expect its orderbook to grow 24% YoY by year-end.
167m/4.71m 17.5 - 26.3 71 1,525 16%
Shareholders (%) Thai NVDR Mr Seranee Chanwirakul Ms Naiphak Chanwirakul
Jul-15
Exposure to high-rise construction. Sino-Thai is a pure play in the construction business with some exposure to the construction of high-rise buildings. We found a high-rise public project – the new Budget Bureau office constructed by Sino-Thai within our surveyed area. The company has gained a long-time outstanding reputation in both private and public sectors in the construction of high-rise buildings. This has benefitted the company especially when the Government’s new infrastructure projects are delayed. Apart from the new Budget Bureau office, Sino-Thai is also constructing other high-rise buildings outside our surveyed area such as the new Parliament building on the Chao Phraya river bank, Supreme Court near the Grand Palace in Bangkok, and the head office of CAT Telecom. Note that Sino-Thai’s construction work of high-rise buildings represents 25% of its total current orderbook.
Share Data Avg Daily Turnover (THB/USD) 52-wk Price low/high (THB) Free Float (%) Shares outstanding (m) Estimated Return
Vol m
We maintain our BUY rating on Sino-Thai Engineering & Construction (Sino-Thai) with an unchanged TP of THB29.00 (16% upside), given: 1. The three new MRT projects that will be tendered within 4Q16 bode well for Sino-Thai’s construction business in high-rise building; 2. An opportunity for Sino-Thai to invest in public–private partnership (PPP) in MRT projects.
THB29.00 THB25.00 USD1,089m STEC TB
30
25 20 15
10 Jan-13
Jan-14
Source: Bloomberg
Analyst Chatree Srismaicharoen +66 2862 9743
[email protected]
Jan-15
Jan-16F
Sino-Thai Engineering & Construction PCL
Thailand Company Update Construction & Engineering | Construction
Financial Exhibits 2016-07-05. Asia Thailand Construction & Engineering Sino-Thai Engineering & Construction PCL Bloomberg STEC TB Buy
Financial summary Recurring EPS (THB) EPS (THB) DPS (THB) BVPS (THB) Weighted avg adjusted shares (m)
Dec-14 1.00 1.00 0.40 5.49 1,525
Dec-15 0.76 1.00 0.40 6.09 1,525
Dec-16F 0.99 0.99 0.40 6.68 1,525
Dec-17F 1.05 1.05 0.42 7.33 1,525
Dec-18F 1.12 1.12 0.45 8.03 1,525
Valuation basis
Valuation metrics Recurring P/E (x) P/E (x) P/B (x) FCF Yield (%) Dividend Yield (%) EV/EBITDA (x) EV/EBIT (x)
Dec-14 25.1 25.1 4.55 (6.9) 1.6 14.5 18.2
Dec-15 33.0 25.0 4.10 (9.2) 1.6 18.4 25.5
Dec-16F 25.2 25.2 3.74 3.9 1.6 14.6 19.3
Dec-17F 23.9 23.9 3.41 3.1 1.7 13.5 17.8
Dec-18F 22.4 22.4 3.11 1.5 1.8 12.0 15.7
Income statement (THBm) Total turnover Gross profit EBITDA Depreciation and amortisation Operating profit Net interest Income from associates & JVs Pre-tax profit Taxation Minority interests Recurring net profit
Dec-14 21,652 2,217 2,061 (427) 1,634 220 11 1,919 (389) (10) 1,521
Dec-15 18,331 1,731 1,777 (494) 1,283 59 17 1,866 (321) (18) 1,156
Dec-16F 21,875 2,112 2,181 (534) 1,647 102 18 1,872 (357) (4) 1,511
Dec-17F 24,542 2,263 2,313 (561) 1,752 103 25 2,001 (395) (9) 1,596
Dec-18F 27,854 2,542 2,573 (602) 1,971 67 30 2,168 (452) (12) 1,705
Cash flow (THBm) Change in working capital Cash flow from operations Capex Cash flow from investing activities Dividends paid Cash flow from financing activities
Dec-14 (2,546) (940) (1,676) 1,625 (763) (892)
Dec-15 (3,781) (2,363) (1,151) 1,980 (610) (712)
Dec-16F 5 2,264 (793) (1,382) (610) (432)
Dec-17F (254) 2,022 (853) (1,149) (610) (572)
Dec-18F (519) 1,834 (1,270) (1,326) (641) (593)
Balance sheet (THBm) Total cash and equivalents Tangible fixed assets Total investments Total other assets Total assets Short-term debt Other liabilities Total liabilities Shareholders' equity Minority interests Total equity Net debt Total liabilities & equity
Dec-14 5,565 3,166 3,216 60 25,004 160 146 16,454 8,377 198 8,549 (5,304) 25,004
Dec-15 2,065 3,197 3,854 39 22,661 152 161 13,153 9,293 216 9,508 (1,831) 22,661
Dec-16F 3,049 3,409 3,949 21 26,919 187 213 16,514 10,194 221 10,404 (2,637) 26,919
Dec-17F 3,630 3,603 4,063 25 29,197 200 239 17,802 11,181 230 11,395 (3,179) 29,197
Dec-18F 3,585 4,000 4,347 30 31,937 223 249 19,467 12,245 242 12,470 (3,087) 31,937
Key metrics Revenue growth (%) Recurrent EPS growth (%) Gross margin (%) Operating EBITDA margin (%) Net profit margin (%) Dividend payout ratio (%) Capex/sales (%) Interest cover (x)
Dec-14 (2.9) (9.9) 10.2 9.5 7.0 50.2 7.7 89.6
Dec-15 (15.3) (24.0) 9.4 9.7 8.3 40.0 6.3 95.3
Dec-16F 19.3 30.7 9.7 10.0 6.9 40.4 3.6 106.3
Dec-17F 12.2 5.6 9.2 9.4 6.5 38.2 3.5 62.2
Dec-18F 13.5 6.8 9.1 9.2 6.1 37.6 4.6 60.6
P/E compared to the company's historical average Key drivers i. Upcoming infrastructure bidding in Thailand; ii. Opportunity to upgrade its track records to be on par with that of the two largest players . Key risks i. An increase in major construction material prices; ii. Shortage of unskilled workers; iii. Delay in the bidding of new project. Company Profile Sino-Thai Engineering & Construction (Sino-Thai) is one of the leading engineers and contractors in the country, with over 40 years of experience in private and public projects. Its competitive advantage lies in its extensive experience in the construction of power and petrochemical plants.
Source: Company data, RHB
44
Sino-Thai Engineering & Construction PCL
Thailand Company Update Construction & Engineering | Construction
SWOT Analysis One of the three largest construction companies in Thailand with expertise in building the MRT system, power plants and steel structures Strong financial position, with net cash since 2Q09
Competition from overseas companies that have new technology know-how, especially for construction jobs Cost overruns due to fluctuations in construction material prices
Upcoming infrastructure projects to be launched by the Government Entering into new businesses such as real estate
Low diversification of income sources
Recommendation Chart Price Close 25.5 25.5 29.0
25.5
27.5 31.5
24.5
20.0
32.0
30.8 33.0
36.6
27.3
29
16.5
Recommendations & Target Price
na
34
24 19 14
9 Buy 4 Jul-11
Neutral
Nov-12
Sell
Trading Buy
Feb-14
Take Profit
Not Rated
May-15
Source: RHB, Bloomberg
45
Date
Recommendation
Target Price
Price
2016-05-17
Buy
29.0
21.7
2016-02-22
Buy
29.0
19.6
2015-11-12
Buy
29.0
24.9
2015-08-26
Buy
29.0
24.8
2015-08-11
Buy
25.5
22.2
2015-07-21
Neutral
25.5
22.9
2015-06-05
Buy
25.5
22.9
2015-05-15
Buy
31.5
20.1
2015-02-16
Buy
31.5
25.5
2014-09-11
Buy
31.5
25.8
Source: RHB, Bloomberg
Malaysia Company Update Construction & Engineering | Engineering & Construction
Buy (Maintained)
Sunway Construction Group
Target Price: Price: Market Cap: Bloomberg Ticker:
Riding On Infrastructure Spending In Malaysia
Forecast and risks. We make no changes to our estimates. Key risks include: i. New job wins falling short of our expectations; ii. Weaker-than-expected margins on possible cost overruns. Reiterate BUY. With its strong outstanding orderbook and a decent pipeline of projects up for tender, we believe the stock is still attractive. As most of its earnings are likely to materialise in 2017, we value the company based on 15x FY17 P/E to derive a TP of MYR1.86. The target P/E is at a higher range of the benchmark upcycle 1-year forward target P/E of mid-cap construction stocks, which we believe is justifiable given Sunway Construction’s relatively higher ROE (~2x the average of its local peers). Maintain BUY.
55.8 7.4
Share Performance (%) YTD Absolute 17.9 Relative 20.0
1m 5.8 4.6
Dec-14
Dec-15
Dec-16F
Dec-17F
Dec-18F
1,881
1,917
1,948
2,158
2,466
Reported net profit (MYRm)
125
127
146
161
179
Recurring net profit (MYRm)
114
127
146
161
179
Recurring net profit growth (%)
20.8
11.4
14.9
10.0
11.1
Recurring EPS (MYR)
0.09
0.10
0.11
0.12
0.14
0.04
0.04
0.05
Total turnover (MYRm)
DPS (MYR)
na
na
Recurring P/E (x)
18.7
16.8
14.6
13.3
11.9
P/B (x)
6.40
4.73
3.91
3.28
2.78
P/CF (x)
11.6
26.8
27.3
10.3
9.3
2.4
2.6
2.9
8.2
7.0
5.9
Dividend Yield (%) EV/EBITDA (x) Return on average equity (%) Net debt to equity
na 12.9 26.3 net cash
na 10.6 32.4 net cash
Our vs consensus EPS (adjusted) (%)
29.3 net cash 6.6
26.9 net cash 5.4
Source: Company data, RHB
See important disclosures at the end of this report Powered by the EFA Platform
46
25.2 net cash 6.3
6m 19.6 17.6
12m
Sunway Construction Group (SCGB MK) Price Close
Relative to FTSE Bursa Malaysia KLCI Index (RHS)
127
1.3
114
1.1
100
0.9 180 160 140 120 100 80 60 40 20
87
Jan-16
May-16
140
1.5
Mar-16
1.7
Source: Bloomberg Core rolling P/E (x)
17.0 16.0 15.0
14.0 13.0 12.0
11.0 Jan-13
Jan-14
Jan-15
Source: Bloomberg Forecasts and Valuations
3m 0.6 4.1
Source: Bloomberg
Nov-15
Robust orderbook. The company’s solid earnings visibility is backed by: i. Outstanding order backlog of MYR5bn, of which >90% is from construction. The rest is from precast concrete products that may keep the firm busy for the next 3-4 years; ii. Recurring orders from its parent Sunway (SWB MK, BUY, TP: MYR3.40) and key blue-chip clients comprising KLCC/Petronas, Khazanah, Putrajaya Holdings, MRT Corporation and Prasarana, which are engaged in massive long-term projects such as developing townships, mass public transport systems, a new economic zone and an administrative centre; iii. A highly-profitable precast operation in Singapore. Besides its recently-won MYR1.21bn viaduct work package for Mass Rail Transit 2 (MRT2), there are still a slew of infrastructure projects in Malaysia that are set to be awarded in the coming months. This certainly bode well for Sunway Construction.
4.56m/1.13m 1.02 - 1.67 35 1,293 13%
Shareholders (%) Sunway Bhd Tan Sri Jeffrey Cheah
Jul-15
A seasoned contractor. Sunway Construction is one of the largest contractors in Malaysia by construction revenue. Apart from the bread-and-butter building and civil & infrastructure construction services, the company also provides the more specialised: i. Foundation & geotechnical engineering; ii. Mechanical, electrical & plumbing (MEP) services. In addition, it runs a highly profitable precast concrete products manufacturing operation in Singapore.
MYR1.86 MYR1.65 USD525m SCGB MK
Share Data Avg Daily Turnover (MYR/USD) 52-wk Price low/high (MYR) Free Float (%) Shares outstanding (m) Estimated Return
Vol m
We like Sunway Construction for its excellent track record of completing high-profile projects and earnings visibility, backed by a MYR4.6bn construction order backlog and recurring jobs from its parent and key blue-chip clients. The company is also set to benefit from a slew of infrastructure projects in Malaysia, which are set to be awarded in the coming months. We also expect its precast concrete business to continue delivering attractive margins. BUY, with a MYR1.86 TP (13% upside) derived from 14x FY17F EPS.
Sep-15
25 July 2016
Analyst Ng Sem Guan, CFA +603 9207 7678
[email protected]
Jan-16F
Sunway Construction Group
Malaysia Company Update Construction & Engineering | Engineering & Construction
Financial Exhibits 2016-07-04. Asia Malaysia Construction & Engineering Sunway Construction Group Bloomberg SCGB MK Buy
Financial summary Recurring EPS (MYR) EPS (MYR) DPS (MYR) BVPS (MYR) Weighted avg adjusted shares (m)
Dec-14 0.09 0.10 0.00 0.26 1,293
Dec-15 0.10 0.10 0.00 0.35 1,293
Dec-16F 0.11 0.11 0.04 0.42 1,293
Dec-17F 0.12 0.12 0.04 0.50 1,293
Dec-18F 0.14 0.14 0.05 0.59 1,293
Valuation basis
Valuation metrics Recurring P/E (x) P/E (x) P/B (x) FCF Yield (%) Dividend Yield (%) EV/EBITDA (x) EV/EBIT (x)
Dec-14 18.7 17.1 6.40 6.5 0.0 12.9 17.8
Dec-15 16.8 16.8 4.73 1.9 0.0 10.6 13.8
Dec-16F 14.6 14.6 3.91 2.3 2.4 8.2 10.3
Dec-17F 13.3 13.3 3.28 8.3 2.6 7.0 8.8
Dec-18F 11.9 11.9 2.78 9.4 2.9 5.9 7.3
Income statement (MYRm) Total turnover Gross profit EBITDA Depreciation and amortisation Operating profit Net interest Income from associates & JVs Exceptional income - net Pre-tax profit Taxation Minority interests Recurring net profit
Dec-14 1,881 385 151 (42) 110 1 30 11 151 (26) 0 114
Dec-15 1,917 399 177 (41) 136 5 (0) 0 141 (13) (1) 127
Dec-16F 1,948 469 230 (48) 182 0 0 0 183 (37) 0 146
Dec-17F 2,158 517 251 (52) 200 1 0 0 201 (40) 0 161
Dec-18F 2,466 584 277 (55) 221 2 0 0 223 (45) 0 179
Cash flow (MYRm) Change in working capital Cash flow from operations Capex Cash flow from investing activities Proceeds from issue of shares Dividends paid Cash flow from financing activities
Dec-14 184 184 (46) 349 0 (429) (382)
Dec-15 28 79 (39) (65) 0 (70) (68)
Dec-16F (116) 78 (30) (30) 0 (51) (71)
Dec-17F (4) 207 (30) (30) 0 (56) (75)
Dec-18F (2) 230 (30) (30) 0 (63) (81)
Balance sheet (MYRm) Total cash and equivalents Tangible fixed assets Intangible assets Total investments Total other assets Total assets Short-term debt Total liabilities Shareholders' equity Minority interests Total equity Net debt Total liabilities & equity
Dec-14 292 179 4 24 7 1,272 135 944 333 (5) 328 (156) 1,272
Dec-15 390 163 4 0 14 1,515 137 1,063 451 1 452 (254) 1,515
Dec-16F 368 145 4 0 14 1,562 117 1,015 546 1 547 (251) 1,562
Dec-17F 470 123 4 0 14 1,744 97 1,093 650 1 651 (373) 1,744
Dec-18F 590 98 4 0 14 1,987 77 1,220 767 1 767 (513) 1,987
Key metrics Revenue growth (%) Recurrent EPS growth (%) Gross margin (%) Operating EBITDA margin (%) Net profit margin (%) Dividend payout ratio (%) Capex/sales (%) Interest cover (x)
Dec-14 2.2 20.8 20.5 8.0 6.6 0.0 2.4 32.8
Dec-15 1.9 11.4 20.8 9.2 6.6 0.0 2.0 38.9
Dec-16F 1.6 14.9 24.1 11.8 7.5 35.0 1.5 47.9
Dec-17F 10.8 10.0 24.0 11.6 7.4 35.0 1.4 62.3
Dec-18F 14.3 11.1 23.7 11.2 7.2 35.0 1.2 85.0
We value the company based on 14x FY17F EPS, in line with our benchmark upcycle 1-year forward target P/E of 14x for mid-cap construction stocks. Key drivers Sunway Construction’s is strongly backed by: i. An outstanding order backlog of ~MYR5bn, of which ~90% is from construction that may keep the firm busy for next three to four years, ii. Recurring orders from its parent Sunway (SWB MK, BUY, TP: MYR3.60) and key blue-chip clients comprising KLCC/Petronas, Khazanah, Putrajaya Holdings, MRT Corp and Prasarana, iii. A highly profitable precast operation in Singapore. Key risks Key risks include new job wins falling short and weaker-than-expected profit margins on cost overrun. Company Profile Sunway Construction is one of the largest construction companies in Malaysia. Apart from the bread and butter building and civil & infrastructure construction services, the company also provides the more specialised: i) foundation & geotechnical engineering services, and ii) mechanical, electrical & plumbing (MEP) services. In addition, it runs a highly profitable precast concrete products manufacturing operation in Malaysia and Singapore. Aside from fulfilling local requirement, hose concrete products are supplying largely to Housing & Development Board (HDB) projects in the island republic.
.
Source: Company data, RHB
47
Sunway Construction Group
Malaysia Company Update Construction & Engineering | Engineering & Construction
SWOT Analysis A wide range of capabilities - building construction, civil & infrastructure, foundation & geotechnical engineering, and mechanical, electrical & plumbing
Intense competition in general contracting services
A strong external client base comprising Putrajaya Holdings, KLCC Group, Prasarana, MRT Corp and Khazanah
Volatility in construction material costs
Well-positioned to capitalise on spending on MRT developments in Malaysia Recurring construction jobs from parent
Reliance on construction jobs in Malaysia Vulnerable to a prolonged slowdown in the local property market Substantial head office costs
Recommendation Chart Date
Recommendation
Target Price
Price
2016-03-29
Buy
1.86
1.67
2016-02-26
Buy
1.58
1.40
2015-11-25
Buy
1.53
1.37
1.6
2015-09-17
Buy
1.40
1.16
1.5
Source: RHB, Bloomberg
Price Close 1.86
1.58
1.53
1.40
1.7
Recommendations & Target Price
na
1.8
1.4 1.3 1.2 1.1 Buy 1.0 Jul-15
Neutral
Sell
Nov-15
Trading Buy
Feb-16
Take Profit
Not Rated
May-16
Source: RHB, Bloomberg
48
Construction
Regional Sector Update
RHB Guide to Investment Ratings Buy: Share price may exceed 10% over the next 12 months Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain Neutral: Share price may fall within the range of +/- 10% over the next 12 months Take Profit: Target price has been attained. Look to accumulate at lower levels Sell: Share price may fall by more than 10% over the next 12 months Not Rated: Stock is not within regular research coverage
Investment Research Disclaimers RHB has issued this report for information purposes only. This report is intended for circulation amongst RHB and its affiliates’ clients generally or such persons as may be deemed eligible by RHB to receive this report and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. This report is not intended, and should not under any circumstances be construed as, an offer or a solicitation of an offer to buy or sell the securities referred to herein or any related financial instruments. This report may further consist of, whether in whole or in part, summaries, research, compilations, extracts or analysis that has been prepared by RHB’s strategic, joint venture and/or business partners. No representation or warranty (express or implied) is given as to the accuracy or completeness of such information and accordingly investors should make their own informed decisions before relying on the same. This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to the applicable laws or regulations. By accepting this report, the recipient hereof (i) represents and warrants that it is lawfully able to receive this document under the laws and regulations of the jurisdiction in which it is located or other applicable laws and (ii) acknowledges and agrees to be bound by the limitations contained herein. Any failure to comply with these limitations may constitute a violation of applicable laws. All the information contained herein is based upon publicly available information and has been obtained from sources that RHB believes to be reliable and correct at the time of issue of this report. However, such sources have not been independently verified by RHB and/or its affiliates and this report does not purport to contain all information that a prospective investor may require. The opinions expressed herein are RHB’s present opinions only and are subject to change without prior notice. RHB is not under any obligation to update or keep current the information and opinions expressed herein or to provide the recipient with access to any additional information. Consequently, RHB does not guarantee, represent or warrant, expressly or impliedly, as to the adequacy, accuracy, reliability, fairness or completeness of the information and opinion contained in this report. Neither RHB (including its officers, directors, associates, connected parties, and/or employees) nor does any of its agents accept any liability for any direct, indirect or consequential losses, loss of profits and/or damages that may arise from the use or reliance of this research report and/or further communications given in relation to this report. Any such responsibility or liability is hereby expressly disclaimed. Whilst every effort is made to ensure that statement of facts made in this report are accurate, all estimates, projections, forecasts, expressions of opinion and other subjective judgments contained in this report are based on assumptions considered to be reasonable and must not be construed as a representation that the matters referred to therein will occur. Different assumptions by RHB or any other source may yield substantially different results and recommendations contained on one type of research product may differ from recommendations contained in other types of research. The performance of currencies may affect the value of, or income from, the securities or any other financial instruments referenced in this report. Holders of depositary receipts backed by the securities discussed in this report assume currency risk. Past performance is not a guide to future performance. Income from investments may fluctuate. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. This report does not purport to be comprehensive or to contain all the information that a prospective investor may need in order to make an investment decision. The recipient of this report is making its own independent assessment and decisions regarding any securities or financial instruments referenced herein. Any investment discussed or recommended in this report may be unsuitable for an investor depending on the investor’s specific investment objectives and financial position. The material in this report is general information intended for recipients who understand the risks of investing in financial instruments. This report does not take into account whether an investment or course of action and any associated risks are suitable for the recipient. Any recommendations contained in this report must therefore not be relied upon as investment advice based on the recipient's personal circumstances. Investors should make their own independent evaluation of the information contained herein, consider their own investment objective, financial situation and particular needs and seek their own financial, business, legal, tax and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. This report may contain forward-looking statements which are often but not always identified by the use of words such as “believe”, “estimate”, “intend” and “expect” and statements that an event or result “may”, “will” or “might” occur or be achieved and other similar expressions. Such forward-looking statements are based on assumptions made and information currently available to RHB and are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement to be materially different from any future results, performance or achievement, expressed or implied by such forward-looking statements. Caution should be taken with respect to such statements and recipients of this
49
Construction
Regional Sector Update
report should not place undue reliance on any such forward-looking statements. RHB expressly disclaims any obligation to update or revise any forwardlooking statements, whether as a result of new information, future events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events. The use of any website to access this report electronically is done at the recipient’s own risk, and it is the recipient’s sole responsibility to take precautions to ensure that it is free from viruses or other items of a destructive nature. This report may also provide the addresses of, or contain hyperlinks to, websites. RHB takes no responsibility for the content contained therein. Such addresses or hyperlinks (including addresses or hyperlinks to RHB own website material) are provided solely for the recipient’s convenience. The information and the content of the linked site do not in any way form part of this report. Accessing such website or following such link through the report or RHB website shall be at the recipient’s own risk. This report may contain information obtained from third parties. Third party content providers do not guarantee the accuracy, completeness, timeliness or availability of any information and are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, or for the results obtained from the use of such content. Third party content providers give no express or implied warranties, including, but not limited to, any warranties of merchantability or fitness for a particular purpose or use. Third party content providers shall not be liable for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including lost income or profits and opportunity costs) in connection with any use of their content. The research analysts responsible for the production of this report hereby certifies that the views expressed herein accurately and exclusively reflect his or her personal views and opinions about any and all of the issuers or securities analysed in this report and were prepared independently and autonomously. The research analysts that authored this report are precluded by RHB in all circumstances from trading in the securities or other financial instruments referenced in the report, or from having an interest in the company(ies) that they cover. RHB and/or its affiliates and/or their directors, officers, associates, connected parties and/or employees, may have, or have had, interests in the securities or qualified holdings, in subject company(ies) mentioned in this report or any securities related thereto and may from time to time add to or dispose of, or may be materially interested in, any such securities. Further, RHB and/or its affiliates may have, or have had, business relationships with the subject company(ies) mentioned in this report and may from time to time seek to provide investment banking or other services to the subject company(ies) referred to in this research report. As a result, investors should be aware that a conflict of interest may exist. The contents of this report is strictly confidential and may not be copied, reproduced, published, distributed, transmitted or passed, in whole or in part, to any other person without the prior express written consent of RHB and/or its affiliates. This report has been delivered to RHB and its affiliates’ clients for information purposes only and upon the express understanding that such parties will use it only for the purposes set forth above. By electing to view or accepting a copy of this report, the recipients have agreed that they will not print, copy, videotape, record, hyperlink, download, or otherwise attempt to reproduce or re-transmit (in any form including hard copy or electronic distribution format) the contents of this report. RHB and/or its affiliates accepts no liability whatsoever for the actions of third parties in this respect. The contents of this report are subject to copyright. Please refer to Restrictions on Distribution below for information regarding the distributors of this report. Recipients must not reproduce or disseminate any content or findings of this report without the express permission of RHB and the distributors. The securities mentioned in this publication may not be eligible for sale in some states or countries or certain categories of investors. The recipient of this report should have regard to the laws of the recipient’s place of domicile when contemplating transactions in the securities or other financial instruments referred to herein. The securities discussed in this report may not have been registered in such jurisdiction. Without prejudice to the foregoing, the recipient is to note that additional disclaimers, warnings or qualifications may apply based on geographical location of the person or entity receiving this report.
RESTRICTIONS ON DISTRIBUTION Malaysia This report is issued and distributed in Malaysia by RHB Research Institute Sdn Bhd. The views and opinions in this report are our own as of the date hereof and is subject to change. If the Financial Services and Markets Act of the United Kingdom or the rules of the Financial Conduct Authority apply to a recipient, our obligations owed to such recipient therein are unaffected. RHB Research Institute Sdn Bhd has no obligation to update its opinion or the information in this report. Thailand This report is issued and distributed in the Kingdom of Thailand by RHB Securities (Thailand) PCL, a licensed securities company that is authorised by the Ministry of Finance, regulated by the Securities and Exchange Commission of Thailand and is a member of the Stock Exchange of Thailand. The Thai Institute of Directors Association has disclosed the Corporate Governance Report of Thai Listed Companies made pursuant to the policy of the Securities and Exchange Commission of Thailand. RHB Securities (Thailand) PCL does not endorse, confirm nor certify the result of the Corporate Governance Report of Thai Listed Companies.
50
Construction
Regional Sector Update
Indonesia This report is issued and distributed in Indonesia by PT RHB Securities Indonesia. This research does not constitute an offering document and it should not be construed as an offer of securities in Indonesia. Any securities offered or sold, directly or indirectly, in Indonesia or to any Indonesian citizen or corporation (wherever located) or to any Indonesian resident in a manner which constitutes a public offering under Indonesian laws and regulations must comply with the prevailing Indonesian laws and regulations. Singapore This report is issued and distributed in Singapore by RHB Research Institute Singapore Pte Ltd and it may only be distributed in Singapore to accredited investors, expert investors and institutional investors as defined in the Financial Advisers Regulations and the Securities and Futures Act (Chapter 289), as amended from time to time. By virtue of distribution to these categories of investors, RHB Research Institute Singapore Pte Ltd and its representatives are not required to comply with Section 36 of the Financial Advisers Act (Chapter 110) (Section 36 relates to disclosure of RHB Research Institute Singapore Pte Ltd ’s interest and/or its representative's interest in securities). Recipients of this report in Singapore may contact RHB Research Institute Singapore Pte Ltd in respect of any matter arising from or in connection with the report. Hong Kong This report is issued and distributed in Hong Kong by RHB Securities Hong Kong Limited (興業金融證券有限公司) (CE No.: ADU220) (“RHBSHK”) which is licensed in Hong Kong by the Securities and Futures Commission for Type 1 (dealing in securities) and Type 4 (advising on securities) regulated activities. Any investors wishing to purchase or otherwise deal in the securities covered in this report should contact RHB Securities Hong Kong Limited. United States This report was prepared by RHB and is being distributed solely and directly to “major” U.S. institutional investors as defined under, and pursuant to, the requirements of Rule 15a-6 under the U.S. Securities and Exchange Act of 1934, as amended (the “Exchange Act”). RHB is not registered as a brokerdealer in the United States and does not offer brokerage services to U.S. persons. Any order for the purchase or sale of the securities discussed herein that are listed on Bursa Malaysia Securities Berhad must be placed with and through Auerbach Grayson (“AG”). Any order for the purchase or sale of all other securities discussed herein must be placed with and through such other registered U.S. broker-dealer as appointed by RHB from time to time as required by the Exchange Act Rule 15a-6. This report is confidential and not intended for distribution to, or use by, persons other than the recipient and its employees, agents and advisors, as applicable. Additionally, where research is distributed via Electronic Service Provider, the analysts whose names appear in this report are not registered or qualified as research analysts in the United States and are not associated persons of Auerbach Grayson AG or such other registered U.S. broker-dealer as appointed by RHB from time to time and therefore may not be subject to any applicable restrictions under Financial Industry Regulatory Authority (“FINRA”) rules on communications with a subject company, public appearances and personal trading. Investing in any non-U.S. securities or related financial instruments discussed in this research report may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the U.S. Securities and Exchange Commission. Information on non-U.S. securities or related financial instruments may be limited. Foreign companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in the United States. The financial instruments discussed in this report may not be suitable for all investors. Transactions in foreign markets may be subject to regulations that differ from or offer less protection than those in the United States.
OWNERSHIP AND MATERIAL CONFLICTS OF INTEREST Malaysia RHB does not have qualified shareholding (1% or more) in the subject company (ies) covered in this report except for: a) RHB and/or its subsidiaries are not liquidity providers or market makers for the subject company (ies) covered in this report except for: a) RHB and/or its subsidiaries have not participated as a syndicate member in share offerings and/or bond issues in securities covered in this report in the last 12 months except for: a) RHB has not provided investment banking services to the company/companies covered in this report in the last 12 months except for: a) -
51
Construction
Regional Sector Update
Thailand RHB Securities (Thailand) PCL and/or its directors, officers, associates, connected parties and/or employees, may have, or have had, interests and/or commitments in the securities in subject company(ies) mentioned in this report or any securities related thereto. Further, RHB Securities (Thailand) PCL may have, or have had, business relationships with the subject company(ies) mentioned in this report. As a result, investors should exercise their own judgment carefully before making any investment decisions. Indonesia PT RHB Securities Indonesia is not affiliated with the subject company(ies) covered in this report both directly or indirectly as per the definitions of affiliation above. Pursuant to the Capital Market Law (Law Number 8 Year 1995) and the supporting regulations thereof, what constitutes as affiliated parties are as follows: 1.
Familial relationship due to marriage or blood up to the second degree, both horizontally or vertically;
2.
Affiliation between parties to the employees, Directors or Commissioners of the parties concerned;
3.
Affiliation between 2 companies whereby one or more member of the Board of Directors or the Commissioners are the same;
4.
Affiliation between the Company and the parties, both directly or indirectly, controlling or being controlled by the Company;
5.
Affiliation between 2 companies which are controlled, directly or indirectly, by the same party; or
6.
Affiliation between the Company and the main Shareholders.
PT RHB Securities Indonesia is not an insider as defined in the Capital Market Law and the information contained in this report is not considered as insider information prohibited by law. Insider means: a. a commissioner, director or employee of an Issuer or Public Company; b.
a substantial shareholder of an Issuer or Public Company;
c.
an individual, who because of his position or profession, or because of a business relationship with an Issuer or Public Company, has access to inside information; and
d.
an individual who within the last six months was a Person defined in letters a, b or c, above.
Singapore RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or associated companies do not make a market in any securities covered in this report, except for: (a) The staff of RHB Research Institute Singapore Pte Ltd and its subsidiaries and/or its associated companies do not serve on any board or trustee positions of any issuer whose securities are covered in this report, except for: (a) RHB Research Institute Singapore Pte Ltd and/or its subsidiaries and/or its associated companies do not have and have not within the last 12 months had any corporate finance advisory relationship with the issuer of the securities covered in this report or any other relationship (including a shareholding of 1% or more in the securities covered in this report) that may create a potential conflict of interest, except for: (a) Hong Kong RHBSHK or any of its group companies may have financial interests in in relation to an issuer or a new listing applicant (as the case may be) the securities in respect of which are reviewed in the report, and such interests aggregate to an amount equal to or more than (a) 1% of the subject company’s market capitalization (in the case of an issuer as defined under paragraph 16 of the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (the “Code of Conduct”); and/or (b) an amount equal to or more than 1% of the subject company’s issued share capital, or issued units, as applicable (in the case of a new listing applicant as defined in the Code of Conduct). Further, the analysts named in this report or their associates may have financial interests in relation to an issuer or a new listing applicant (as the case may be) in the securities which are reviewed in the report.
52
Construction
Regional Sector Update
RHBSHK or any of its group companies may make a market in the securities covered by this report. RHBSHK or any of its group companies may have analysts or their associates, individual(s) employed by or associated with RHBSHK or any of its group companies serving as an officer of the company or any of the companies covered by this report. RHBSHK or any of its group companies may have received compensation or a mandate for investment banking services to the company or any of the companies covered by this report within the past 12 months. Note: The reference to “group companies” above refers to a group company of RHBSHK that carries on a business in Hong Kong in (a) investment banking; (b) proprietary trading or market making; or (c) agency broking, in relation to securities listed or traded on The Stock Exchange of Hong Kong Limited.
Kuala Lumpur
Hong Kong
Singapore
RHB Research Institute Sdn Bhd Level 11, Tower One, RHB Centre Jalan Tun Razak Kuala Lumpur Malaysia Tel : +(60) 3 9280 2185 Fax : +(60) 3 9284 8693
RHB Securities Hong Kong Ltd. th 12 Floor World-Wide House 19 Des Voeux Road Central, Hong Kong Tel : +(852) 2525 1118 Fax : +(852) 2810 0908
RHB Research Institute Singapore Pte Ltd. 10 Collyer Quay #09-08 Ocean Financial Centre Singapore 049315 Tel : +(65) 6533 1818 Fax : +(65) 6532 6211
Jakarta
Shanghai
Bangkok
PT RHB Securities Indonesia Wisma Mulia, 20th Floor Jl. Jenderal Gatot Subroto No. 42 Jakarta 12710, Indonesia Tel : +(6221) 2783 0888 Fax : +(6221) 2783 0777
RHB (China) Investment Advisory Co. Ltd. Suite 4005, CITIC Square 1168 Nanjing West Road Shanghai 20041 China Tel : +(8621) 6288 9611 Fax : +(8621) 6288 9633
RHB Securities (Thailand) PCL 10th Floor, Sathorn Square Office Tower 98, North Sathorn Road, Silom Bangrak, Bangkok 10500 Thailand Tel: +(66) 2 862 9999 Fax : +(66) 2 862 9799
53