Presales of Surya Semesta Internusa's industrial estate only stood at 1.1 hectares in the first half of 2016, down 84 percent (y/y) from 6.9 hectares in the same period last year, due to the sluggishly recovering Indonesian economy. Meanwhile, its subsidiary Nusa Raya Cipta (a construction firm) only booked IDR 1.19 trillion in new contracts, down 47.4 percent from the same period one year earlier.

Furthermore, of the four hotels that are owned by Surya Semesta Internusa only Melia Bali Hotel saw its occupancy rate rise so far in 2016.

Lastly, total net profit was affected by the weak financial performance of its subsidiary Lintas Marga Sedaya, the company that operates the Cikopo-Palimanan (Cipali) toll road in West Java, which is part of the grand Trans-Java toll road. This USD $1 billion Cipali section was opened in June 2015. Lintas Marga Sedaya posted a net loss of IDR 57 billion in the January-June 2016 period, while there are no signs yet that the company will see its figures turn green soon.

Earnings collected through the Cipali toll road have been disappointing. This is partly explained by fewer-than-expected commercial vehicles that pass through the toll road. Initially, the company expected that 45 percent of total traffic would consist of commercial vehicles (these vehicles are required to pay a higher tariff). However, only about 15 percent of traffic at the toll road constitute commercial vehicles. Per June 2016, the daily average number of vehicles that use the Cipali toll road stands at 25,875.

Johannes Suriadjaja, President Director of Surya Semesta Internusa, said the net loss of Lintas Marga Sedaya had been expected as the 116 kilometers-long toll road was only opened to the public in mid-2015. This is partly reason behind why he expects to see Surya Semesta Internusa's net profit fall to IDR 265 billion (approx. USD $20.2 million) in full-year 2016, down from IDR 302 billion in 2015.

Suriadjaja informed that he remains optimistic that marketing sales of industrial land should rise strongly in the remainder of 2016 supported by the launch of the government's economic stimulus packages (which include easier investment procedures) as well as the tax amnesty program (that should boost the real sector, including property and industrial estates). In full-year 2016, Surya Semesta Internusa targets to sell 30 hectares of industrial estate.

Data from property consultant Colliers International Indonesia show that overall industrial land sales in the Greater Jakarta area only stood at 48.4 hectares in the first half of 2016, down 79 percent (y/y). This decline is attributed to Indonesia's bleak economic growth. However, with GDP growth having expanded better-than-forecast in Q2-2016, investors' interest in industrial land in Indonesia should grow accordingly.

However, Mandiri Sekuritas sees limited upside growth for stocks of Surya Semesta Internusa. The securities firm set its target for the company's shares at IDR 700 a piece. On Tuesday (16/08) shares of Surya Semesta Internusa rose 0.78 percent to IDR 650 per share. So far this year, its shares have fallen 9.09 percent.

Stock Quote Surya Semesta Internusa - SSIA:

Similarly, securities firm DBS Vickers sees few room for improvement of Surya Semesta Internusa's corporate earnings in the remainder of the year, given that investors' appetite for industrial estate in Indonesia is yet to pick up. On the longer term, DBS Vickers sees Surya Semesta Internusa's earnings rising, particularly on infrastructure development. For the moment, however, DBS Vickers sees shares of Surya Semesta Internusa hovering around IDR 650 a piece.

Surya Semesta Internusa controls concessions for 2,000 hectares of industrial land Subang (West Java). Not far from this site, the Indonesian government will construct the Patimban seaport, a priority project of the government. The Patimban seaport is envisaged to become an international seaport with a 7.5 million twenty-foot equivalent units (TEU) capacity, hence relieving busy traffic at Jakarta's Tanjung Priok port. With the Patimban seaport closely located to industrial land controlled by Surya Semesta Internusa (some 40 - 50 kilometers apart), the company will benefit as investors should be pleased seeing improved infrastructure (while the Cipali toll road can expect to see more traffic). Development of industrial estate in Subang is one of the priorities of Surya Semesta Internusa for the foreseeable future.

Surya Semesta Internusa's Financial Highlights:

     2015   2016F   2017F   2018F
Revenues  4,868.0  4,600.0  4,738.0  5,252.0
EBITDA   710.0   793.0   871.0  1,021.0
Net Income   302.0   222.0   257.0   352.0
P/E Ratio (x)
    11     15     13     9.5
P/BV (x)     1.1     1.1     1.0     0.9
EPS¹     64     47     55     75

in billion IDR rupiah unless otherwise stated
¹ in IDR rupiah
Source: Mandiri Sekuritas (16/08/2016)