Adi Sarana Armada Express growth lifts earnings visibility
■ Adi Sarana Armada Express
delivery arm, Anteraja, contributed 23% of revenue in FY20, up nearly six times in less than 2 years, and recorded gross profit in 4Q20.
■ Anteraja is on pace to contribute more than 50% of ASSA’s revenue by FY22F, at 34% 3Y CAGR, reaching BE and boosting ROE starting in FY21F.
■ We revise up our SOP-based TP to Rp2,600 to reflect peers’ valuations, which implies 12x FY21F EV/EBITDA. We reiterate our Add call. FY20 results beat expectations, in part thanks to low tax rate ASSA’s Mar 2019-launched express delivery service Anteraja contributed 23% to the company’s Rp3.0tr total revenue in FY20 vs. 4% contribution in FY19. This came on the back of more than 50m delivered packages in FY20 vs. c.6m packages in FY19. 4Q20 growth was boosted by the sales season, notably Harbolnas 12.12, which resulted in 550k delivered packages.
Consequently, Adi Sarana Armada Express booked NP of Rp36bn (+59% yoy, +339% qoq) in 4Q20 and Rp87bn (-21% yoy) for FY20, ahead of our projection, in part due to a low tax rate of 4%. Importantly, Anteraja posted its first quarterly gross profit of Rp38.8bn in 4Q20, narrowing the EBIT loss to Rp8.2bn from 3Q20’s -Rp34.9bn. Momentum remained at 320k packages/day in 1Q21, on track to hit its target of 500k550k packages/day by YE21.
This paves the way to breaking even in 2021F, with management’s target of Anteraja contributing 50% to total revenue in 1-2 years within reach. We project Anteraja to contribute 40% and 51% of total revenue in FY21F and FY22F, respectively.
Growth guidance is conservative With revenue up c.30% yoy in FY20, ASSA’s FY21F revenue growth guidance of 20-25% yoy on 10-15% yoy higher revenue in the car rental and auction businesses is lower than expected. It also guided for net profit to rise c.40% yoy, boosted by lower interest expense given the upcoming c.Rp200bn convertible bonds proceeds for debt repayment. Our forecasts are higher than guidance and in line with consensus
We project ASSA’s revenue to reach Rp3.8tr (+25% yoy) in FY21F, still driven by its delivery services business. With continued expansion and increased deliveries, we expect its gross margin to be unchanged at 24% in FY21-22F.
Likewise, its EBITDA margin should be sustained at 27% in FY21-22F. We expect net profit to reach Rp140bn240bn in FY21-22F. We also do not expect the company to disburse dividend in FY21F. Reiterate Add rating with higher TP of Rp2,600 We increase FY21-22F core EPS by c.1% after adjusting for Anteraja’s growth.
In our view, ASSA’s current share price factors in Anteraja’s strong revenue growth in 4Q20 and reflects news flow of peers’ valuations, such as J&T Express’s and SiCepat’s. We reiterate our Add rating with a higher SOP-based TP of Rp2,600 given peers’ valuations, implying 12x FY21F EV/EBITDA. A key catalyst is accelerated growth in Anteraja, driven by the e-commerce explosion. A downside risk is stiffer competition.
News flow of a potential IPO for J&T Express drove up ASSA’s share price in recent weeks. J&T Express’s estimated valuation of US$7.8bn as of 7 Apr 2021 by CB Insights has given a new perspective to the express delivery business in Indonesia.
Previously, Bloomberg reported that the company was considering a US IPO that could value it at c.US$5bn. In addition, co-founder and managing partner at Ideosource and Gayo Capital Edward Ismawan Chamdani recently said SiCepat could be valued at more than US$1bn.
According to various news outlets, J&T Express is estimated to have delivered 2m packages/day in FY20 and targets 4m packages/day in YE21. Meanwhile, SiCepat is reported to have delivered 1m packages/days in FY20 and targets 3m packages/day by YE21.
In comparison, Anteraja reached 300k packages/day in FY20 and is aiming to reach 500k-550k packages/day. By extrapolating the delivery growth of each company and applying a 20% discount to total deliveries, we estimate that J&T Express will likely deliver 902m packages in FY21 while SiCepat and Anteraja could deliver 610m and 119m packages, respectively.
By applying the estimated valuation and FY21 shipment figures, we arrive at market cap/shipments of 8.65x for J&T Express and 1.64x for SiCepat. Note that there may be discounts to J&T Express’s market cap/shipments given the regulatory risks faced by Chinese stocks in the United States.
Although J&T Express is an Indonesian company, the company was founded by Jet Lee and Tony Chen, respectively former CEO and current CEO of Chinese consumer electronics company Oppo. For the sake of our bull case scenario, we leave J&T Express’s valuation at 8.65x.
Our GGM-based equity value for the car rental business is Rp1.6tr (ROE assumption of 16% and 0% LTG; FY18 pre-Anteraja ROE was 13.9%) while we
set a 15x FY21F P/E target for its car rental (51% ownership) segment as cars are typically big-ticket items and we think Indonesia’s consumption will return to pre-pandemic levels only by FY22F at the soonest.
Considering ASSA’s 55% ownership in Anteraja and computing total EV from the non-delivery service businesses, we arrive at a target price of Rp3,000/share for our bull case scenario. Applying SiCepat’s valuation, we find ASSA’s target price at Rp1,025/share. Current share prices suggest the market values Anteraja higher than SiCepat.
We derive our bear case using the conventional DCF-based valuation method for Anteraja (10.4% WACC and 3% LTG). The method results in total valuation of Rp10.3tr for Anteraja, translating into a valuation of Rp5.7tr for Anteraja to ASSA. Hence, our bear case’s target price is Rp2,230/share. Averaging the bull and bear case target prices, we arrive at a target price of Rp2,600/share, representing 12.0x FY21F EV/EBITDA.
– By CIMB Bank Research