ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

A call with <a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ)</a> management revealed that they remain positive on the outlook for its fuel distribution business in 2020, with the recent increase in it's subsidised biodiesel (FAME) allocation providing an additional fillip. 
The company is well on track to achieve its FY20 volume target, despite COVID-19, with demand from the mining sector remaining robust despite the lower coal price, especially from larger sized customers. 
The chemical distribution business has seen some seasonal slowdown and is more price-sensitive than fuel distribution given its charging structure but expectations are for a rebound in 2H2020. 
<a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ)'</a>S JV with <a href="https://www.smartkarma.com/entities/bp-plc-1317fdd3-d03a-435f-85b8-c8d67125bc3a" target="_blank" data-smartkarma-citation="entities:27921:1" rel="noopener">BP PLC (BP US)</a> on retail fuel distribution has seen some slowdown in volumes due to PSBB measures but pump prices have not gone down meaning margins have improved. 
Expectations of land sales of 30 ha at the company's JIIPE industrial estate near Surabaya are maintained for 2020, with two large plot sales expected in 2Q or 3Q. 
<a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ)</a> remains one of our top picks in Indonesia for its relatively resilient fuel and chemical distribution and storage business, as well as increasing sales from its JIIPE Industrial Estate near Surabaya, where <a href="https://www.smartkarma.com/entities/freeport-mcmoran-inc" target="_blank" data-smartkarma-citation="entities:12491:1" rel="noopener">Freeport Mcmoran (FCX US)</a> is building its smelter. Valuations remain attractive with the company at a significant discount to historic valuations.

 A call with AKR Corporindo (AKRA IJ) management revealed that they remain positive on the outlook for its fuel distribution business in 2020, with the recent increase in it's subsidised biodiesel (FAME) allocation providing an additional fillip. 
The company is well on track to achieve its FY20 volume target, despite COVID-19, with demand from the mining sector remaining robust despite the lower coal price, especially from larger sized customers. 
The chemical distribution business has seen some seasonal slowdown and is more price-sensitive than fuel distribution given its charging structure but expectations are for a rebound in 2H2020. 
AKR Corporindo (AKRA IJ)'S JV with BP PLC (BP US) on retail fuel distribution has seen some slowdown in volumes due to PSBB measures but pump prices have not gone down meaning margins have improved. 
Expectations of land sales of 30 ha at the company's JIIPE industrial estate near Surabaya are maintained for 2020, with two large plot sales expected in 2Q or 3Q. 
AKR Corporindo (AKRA IJ) remains one of our top picks in Indonesia for its relatively resilient fuel and chemical distribution and storage business, as well as increasing sales from its JIIPE Industrial Estate near Surabaya, where Freeport Mcmoran (FCX US) is building its smelter. Valuations remain attractive with the company at a significant discount to historic valuations.

AKR Corporindo (AKRA IJ) - A Bedrock for Indonesia Industry

<a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ)</a> released a surprisingly positive set of indicative numbers for 1Q2020 underlining the strategic and defensive nature of its business. 
The company maintained strong petroleum volume growth in 1Q20, with +42% YoY growth and close to the performance in 4Q19.
The chemicals business was stable in 1Q2020 and its Jakarta storage terminal close to full capacity and the retail petroleum business with <a href="https://www.smartkarma.com/entities/bp-plc" target="_blank" data-smartkarma-citation="entities:21847:1" rel="noopener">BP PLC (BP/ LN)</a> continued to register strong growth. 
<a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ)</a> sold more land at its JIIPE Industrial Estate in 1Q2020 than all of last year, with guidance suggesting plot sales will more than triple this year.
Given the strategic nature of its business and strong track record, this should be a defensive stock in the current environment but this is not reflected in the share price. Valuations look attractive with the company trading on 8.8x FY21E PER and an FY20E PBV of less than 1x. Analyst forecasts for the dividend payout also look conservative given recent history, providing further potential support.

AKR Corporindo (AKRA IJ) released a surprisingly positive set of indicative numbers for 1Q2020 underlining the strategic and defensive nature of its business. 
The company maintained strong petroleum volume growth in 1Q20, with +42% YoY growth and close to the performance in 4Q19.
The chemicals business was stable in 1Q2020 and its Jakarta storage terminal close to full capacity and the retail petroleum business with BP PLC (BP/ LN) continued to register strong growth. 
AKR Corporindo (AKRA IJ) sold more land at its JIIPE Industrial Estate in 1Q2020 than all of last year, with guidance suggesting plot sales will more than triple this year.
Given the strategic nature of its business and strong track record, this should be a defensive stock in the current environment but this is not reflected in the share price. Valuations look attractive with the company trading on 8.8x FY21E PER and an FY20E PBV of less than 1x. Analyst forecasts for the dividend payout also look conservative given recent history, providing further potential support.

AKR Corporindo (AKRA IJ)- Fill up the Tank

<a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ)</a> has been punished with the rest of the Indonesian market but saw some respite after publishing FY19 earnings numbers which revealed some very strong operational performance numbers.  Management remains optimistic for this year given the strategic nature of the products it distributes. 
Net profit was flat for FY19 due to a provision taken for last year's debacle on subsidised fuel pricing, which has since been reversed. Operational results were strong, with growth of +17% YoY in operating profit and +22% in gross profit. 4Q19 saw the company book the strongest operational number of the year and the highest gross profit in the company's history. 
This year will be challenging but the company should be defensive given the strategically important nature of its fuel and chemical storage &amp; distribution assets. Management continues to stick with some quite optimistic guidance for 2020 and suggests benefits from falling oil price.
<a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ)'</a>s share price has fallen -67% from its 12-month high and is now at a 10-year low in PBV terms on 0.72x FY20E. This year's forecasts look vulnerable given Covid19 but it should be relatively resilient given the strategic nature of the products it distributes. It also recently announced a IDR500bn buy-back program for up to 4.3% of its issued capital.

AKR Corporindo (AKRA IJ) has been punished with the rest of the Indonesian market but saw some respite after publishing FY19 earnings numbers which revealed some very strong operational performance numbers.  Management remains optimistic for this year given the strategic nature of the products it distributes. 
Net profit was flat for FY19 due to a provision taken for last year's debacle on subsidised fuel pricing, which has since been reversed. Operational results were strong, with growth of +17% YoY in operating profit and +22% in gross profit. 4Q19 saw the company book the strongest operational number of the year and the highest gross profit in the company's history. 
This year will be challenging but the company should be defensive given the strategically important nature of its fuel and chemical storage &amp; distribution assets. Management continues to stick with some quite optimistic guidance for 2020 and suggests benefits from falling oil price.
AKR Corporindo (AKRA IJ)'s share price has fallen -67% from its 12-month high and is now at a 10-year low in PBV terms on 0.72x FY20E. This year's forecasts look vulnerable given Covid19 but it should be relatively resilient given the strategic nature of the products it distributes. It also recently announced a IDR500bn buy-back program for up to 4.3% of its issued capital. 

AKR Corporindo (AKRA IJ) - Industrial Proxy with Strong Credentials

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

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 <img src='https://api2.sgx.com/sites/default/files/2020-03/CSE%20Global%20CEO.png' alt='CSE Global Ceo' />
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 <div class='content-caption'>CSE Global Ceo</div>
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Systematic and detail-oriented by nature, Lim Boon Kheng appears to have found his calling in building enterprises. 
"My passion has always been to take a home-grown business and develop it into a multi-national company of decent size, with diversified revenues and good cashflows - one that can be sustained for many years," the Chief Executive Officer of SGX-listed IT systems integrator CSE Global Ltd said with a smile. 
"CSE started as a Singapore company. Our goal is to continue growing as a global organisation with predominantly non-Singapore revenue streams," Lim added. 
"I'm the third CEO of this organisation, and after me, there will be a fourth, fifth, or sixth. What's important is to lay the right foundation during my time so that my successors can take the business to the next stage." 
Lim, a Bachelor of Accountancy graduate from the National University of Singapore, joined CSE in 1999 as Group Financial Controller, after holding accounting positions with two other organisations. He was promoted to CSE's Group Managing Director and CEO in 2014. 
CSE began operations in 1985 as the engineering projects division of Chartered Electronics Industries, the electronics arm of the Singapore Technologies (ST) Group. It started building a regional footprint between 1992 and 1995, before undergoing a management buy-out in 1997, and was renamed CSE Systems &amp; Engineering Pte Ltd. 
In 1999, CSE Global made its trading debut on the then-Sesdaq second board. A year later, the Group embarked on its international expansion, acquiring companies in US, UK, Australia and Singapore, before transferring to SGX Mainboard. 
Today, the Group has more than 1,500 employees worldwide, with a network of 41 offices spanning the globe, and generates over 85% of its revenues outside the domestic market. 
It focuses on providing and installing a variety of control systems, as well as turnkey telecommunication network and security solutions, for the Oil &amp; Gas, Infrastructure and Mining industries.

Reaping the Rewards 
The Group services large, independent oil majors like BP, Shell, Exxon and Chevron, as well as national oil corporations such as Indonesia's Pertamina and Malaysia's Petronas. It derives more than 65% of revenues from the O&amp;G segment, with more than 90% of customers coming from the US. On the infrastructure side, clients include government agencies, utilities, ports, railways and airports. 
Over the last few years, CSE Global has extensively restructured its O&amp;G operations to focus on the Americas, jettisoning projects in the Middle East, Africa and Southeast Asia, which were plagued by severe price competition. 
"Although we're a small player, we were able to build good relationships with our O&amp;G customers over the years," Lim noted. 
"Previously, when oil prices were depressed and the industry was facing mounting challenges, any supplier that was prepared to invest time and effort to service clients - like we did - reaped the benefits," he added. "As a result, we were able to pick up market share." 
The industry's downturn and subsequent consolidation then also provided CSE with opportunities. "Through selective acquisitions, and by bringing in new talent from established operators and suppliers that downsized, our skillsets are much wider now than before," he noted. 
Those strategies are still relevant now, with crude prices hovering at four-year lows below US$30 a barrel. Global fuel demand has been hammered as many governments lock down their economies in a bid to curb the COVID-19 pandemic. 
"With the current decline in oil price, we now expect a lower order intake in the coming months as compared to the start of the year. Nonetheless, we intend to expand our market share over the next two to three years - especially in the US," Lim said. 
"Yes, there's gloom and doom in the O&amp;G sector, but we remain pretty optimistic about the medium-term outlook." 
CSE Global's infrastructure division - which accounts for more than 25% of overall sales - is witnessing a steady flow of orders for the next three to five years in Australia and Singapore. 
"There are constant requirements by these two governments to improve their infrastructure, whether for ports, railways, airports, power grids, or in Singapore's case - Smart Nation digital transformation initiatives," Lim said. 
"As a result, our infrastructure division will help to diversify the Group's revenue sources." 
Its Mining division, however, continues to face slower sales, as the sector remains in the doldrums amidst a protracted recovery. 
"Cyclical upgrades still need to be done - after all, systems do wear out and break down, while technologies and software have to be upgraded," he noted. 
"For some mining companies, capex and opex have been delayed for the past 24 to 36 months to the point where these upgrades are now inevitable. Hence, we expect some return to normalcy in terms of spending by clients in this sector." 
Order book-wise, CSE Global now has the highest order backlog in five years - standing at S$307.3 million as at 31 December 2019, up 70.5% year-on-year, supplemented in part by recent earnings-accretive acquisitions.

Strategy U-Turn 
So far, the coronavirus outbreak has not dealt a huge blow to the Group's operations, Lim said. 
"As more travel bans come into play and business continuity plans are activated on a large scale, it may affect our productivity and ability to service projects across jurisdictions," he added. 
"But the Group's business model of maintaining local teams in our markets will mitigate this issue to a large extent." 
Meanwhile, CSE Global will continue to beef up its geographical presence and technology offerings through acquisitions. In 2019, the Group spent more than S$60 million to buy four companies that boosted its service capabilities in the energy and mining industries. 
"We want to acquire companies with complementary solutions and services that will extend our range of offerings in the value chain and strengthen our local presence in those markets," Lim noted. 
"The target business usually needs to be earnings-accretive and generate good cashflows. Each year, we're looking to close between two and three acquisitions, depending on opportunities." 
Looking back, Lim attributes CSE Global's stronger fundamentals to a reversal of direction he implemented five years ago after taking the helm. 
"When the O&amp;G and mining industries were in their boom years, CSE Global became very focused on large projects at the expense of smaller ones. But I wanted a combination of both, and when I took over, we changed course and started to take on more small projects," Lim recalled. 
That decision delivered handsome rewards - 2019 revenue hit an all-time high of S$451.8 million, up 21% year-on-year, while full-year net profit jumped 19.6% to S$24.1 million. "If we had concentrated only on large projects, it might have had disastrous results," he admitted. 
"It was our small projects that saved the day - they boosted our cashflows, were faster to turn around and easier to manage. That's why it's critical that we do not just depend on any single engine of growth." 
Cash is always king, and even more so now with prevailing challenges in the industry. The Group ended 2019 with cash and bank balances of S$58.6 million. 
"Cashflows are the lifeblood of our organisation, which is why our strategies are focused on cash-generation and cost controls," he added. 
And when the 54-year-old is not strategising for the Group, he is spending time with his two sons and two daughters, aged five to 18. Family activities include eating, discussions over homework, and playing chauffeur to the kids. 
"I always impress upon my children the value of discipline and hard work," Lim noted. 
"In this life, nothing is given to you - you must work for what you want. Although that doesn't necessarily guarantee success, you still need to work hard, and then leave the rest to God."

CSE Global Ltd

Listed on Singapore Exchange since 1999, CSE Global is a global technologies company with an international presence spanning the Americas, Asia Pacific, Europe, Middle East and Africa. The Group has now more than 1,500 employees worldwide, and operates a network of 41 offices across the globe, generating more than 85% of its revenues outside its home market. The CSE Group of companies has been very successful in offering cost-effective, totally integrated solutions to industries in the Oil &amp; Gas, Infrastructure and Mining sectors. 
The company website is: <a href="http://edm.sgx.com/a/hBedCOmB86%24MfB91dB5AAAAAAcA/link7">www.cse-global.com</a>.

Click <a href="http://edm.sgx.com/a/hBedCOmB86%24MfB91dB5AAAAAAcA/link8">here</a> for the company's StockFacts page.

For the three months ended 31 December 2019 financial results, click <a href="http://edm.sgx.com/a/hBedCOmB86%24MfB91dB5AAAAAAcA/link9">here</a>
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    CSE Global Ceo


Systematic and detail-oriented by nature, Lim Boon Kheng appears to have found his calling in building enterprises.  
"My passion has always been to take a home-grown business and develop it into a multi-national company of decent size, with diversified revenues and good cashflows - one that can be sustained for many years," the Chief Executive Officer of SGX-listed IT systems integrator CSE Global Ltd said with a smile.  
"CSE started as a Singapore company. Our goal is to continue growing as a global organisation with predominantly non-Singapore revenue streams," Lim added.  
"I'm the third CEO of this organisation, and after me, there will be a fourth, fifth, or sixth. What's important is to lay the right foundation during my time so that my successors can take the business to the next stage."  
Lim, a Bachelor of Accountancy graduate from the National University of Singapore, joined CSE in 1999 as Group Financial Controller, after holding accounting positions with two other organisations. He was promoted to CSE's Group Managing Director and CEO in 2014.  
CSE began operations in 1985 as the engineering projects division of Chartered Electronics Industries, the electronics arm of the Singapore Technologies (ST) Group. It started building a regional footprint between 1992 and 1995, before undergoing a management buy-out in 1997, and was renamed CSE Systems &amp; Engineering Pte Ltd.  
In 1999, CSE Global made its trading debut on the then-Sesdaq second board. A year later, the Group embarked on its international expansion, acquiring companies in US, UK, Australia and Singapore, before transferring to SGX Mainboard.  
Today, the Group has more than 1,500 employees worldwide, with a network of 41 offices spanning the globe, and generates over 85% of its revenues outside the domestic market.  
It focuses on providing and installing a variety of control systems, as well as turnkey telecommunication network and security solutions, for the Oil &amp; Gas, Infrastructure and Mining industries.

Reaping the Rewards  
The Group services large, independent oil majors like BP, Shell, Exxon and Chevron, as well as national oil corporations such as Indonesia's Pertamina and Malaysia's Petronas. It derives more than 65% of revenues from the O&amp;G segment, with more than 90% of customers coming from the US. On the infrastructure side, clients include government agencies, utilities, ports, railways and airports.  
Over the last few years, CSE Global has extensively restructured its O&amp;G operations to focus on the Americas, jettisoning projects in the Middle East, Africa and Southeast Asia, which were plagued by severe price competition.  
"Although we're a small player, we were able to build good relationships with our O&amp;G customers over the years," Lim noted.  
"Previously, when oil prices were depressed and the industry was facing mounting challenges, any supplier that was prepared to invest time and effort to service clients - like we did - reaped the benefits," he added. "As a result, we were able to pick up market share."  
The industry's downturn and subsequent consolidation then also provided CSE with opportunities. "Through selective acquisitions, and by bringing in new talent from established operators and suppliers that downsized, our skillsets are much wider now than before," he noted.  
Those strategies are still relevant now, with crude prices hovering at four-year lows below US$30 a barrel. Global fuel demand has been hammered as many governments lock down their economies in a bid to curb the COVID-19 pandemic.  
"With the current decline in oil price, we now expect a lower order intake in the coming months as compared to the start of the year. Nonetheless, we intend to expand our market share over the next two to three years - especially in the US," Lim said.  
"Yes, there's gloom and doom in the O&amp;G sector, but we remain pretty optimistic about the medium-term outlook."  
CSE Global's infrastructure division - which accounts for more than 25% of overall sales - is witnessing a steady flow of orders for the next three to five years in Australia and Singapore.  
"There are constant requirements by these two governments to improve their infrastructure, whether for ports, railways, airports, power grids, or in Singapore's case - Smart Nation digital transformation initiatives," Lim said.  
"As a result, our infrastructure division will help to diversify the Group's revenue sources."  
Its Mining division, however, continues to face slower sales, as the sector remains in the doldrums amidst a protracted recovery.  
"Cyclical upgrades still need to be done - after all, systems do wear out and break down, while technologies and software have to be upgraded," he noted.  
"For some mining companies, capex and opex have been delayed for the past 24 to 36 months to the point where these upgrades are now inevitable. Hence, we expect some return to normalcy in terms of spending by clients in this sector."  
Order book-wise, CSE Global now has the highest order backlog in five years - standing at S$307.3 million as at 31 December 2019, up 70.5% year-on-year, supplemented in part by recent earnings-accretive acquisitions.

Strategy U-Turn  
So far, the coronavirus outbreak has not dealt a huge blow to the Group's operations, Lim said.  
"As more travel bans come into play and business continuity plans are activated on a large scale, it may affect our productivity and ability to service projects across jurisdictions," he added.  
"But the Group's business model of maintaining local teams in our markets will mitigate this issue to a large extent."  
Meanwhile, CSE Global will continue to beef up its geographical presence and technology offerings through acquisitions. In 2019, the Group spent more than S$60 million to buy four companies that boosted its service capabilities in the energy and mining industries.  
"We want to acquire companies with complementary solutions and services that will extend our range of offerings in the value chain and strengthen our local presence in those markets," Lim noted.  
"The target business usually needs to be earnings-accretive and generate good cashflows. Each year, we're looking to close between two and three acquisitions, depending on opportunities."  
Looking back, Lim attributes CSE Global's stronger fundamentals to a reversal of direction he implemented five years ago after taking the helm.  
"When the O&amp;G and mining industries were in their boom years, CSE Global became very focused on large projects at the expense of smaller ones. But I wanted a combination of both, and when I took over, we changed course and started to take on more small projects," Lim recalled.  
That decision delivered handsome rewards - 2019 revenue hit an all-time high of S$451.8 million, up 21% year-on-year, while full-year net profit jumped 19.6% to S$24.1 million. "If we had concentrated only on large projects, it might have had disastrous results," he admitted.  
"It was our small projects that saved the day - they boosted our cashflows, were faster to turn around and easier to manage. That's why it's critical that we do not just depend on any single engine of growth."  
Cash is always king, and even more so now with prevailing challenges in the industry. The Group ended 2019 with cash and bank balances of S$58.6 million.  
"Cashflows are the lifeblood of our organisation, which is why our strategies are focused on cash-generation and cost controls," he added.  
And when the 54-year-old is not strategising for the Group, he is spending time with his two sons and two daughters, aged five to 18. Family activities include eating, discussions over homework, and playing chauffeur to the kids.  
"I always impress upon my children the value of discipline and hard work," Lim noted.  
"In this life, nothing is given to you - you must work for what you want. Although that doesn't necessarily guarantee success, you still need to work hard, and then leave the rest to God."

CSE Global Ltd

Listed on Singapore Exchange since 1999, CSE Global is a global technologies company with an international presence spanning the Americas, Asia Pacific, Europe, Middle East and Africa. The Group has now more than 1,500 employees worldwide, and operates a network of 41 offices across the globe, generating more than 85% of its revenues outside its home market. The CSE Group of companies has been very successful in offering cost-effective, totally integrated solutions to industries in the Oil &amp; Gas, Infrastructure and Mining sectors. 
The company website is: www.cse-global.com.

Click here for the company's StockFacts page.

For the three months ended 31 December 2019 financial results, click here



<div class="content-highlight">
A meeting with <a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ) </a>management in Jakarta last week, confirmed that despite last year's issues over subsidised fuel pricing, the company is set up for strong growth going forward driven by a number of factors. These include strong growth in non-subsidized fuel distribution, and a marked pick-up in land sales at its JIIPE Surabaya Industrial estate, as well as longer-term a number of JV projects with <a href="https://www.smartkarma.com/entities/bp-plc" target="_blank" data-smartkarma-citation="entities:21847:1" rel="noopener">BP PLC (BP/ LN)</a> including retail petroleum distribution and aviation fuel distribution to begin with, and it is exploring the possibility of LNG storage and distribution. <a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ)</a> should be a defensive stock in this environment and the recent correction is a buying opportunity.
</div>
The company ceased to distribute subsidized diesel in May 2019 due to a change in the pricing formula which made it uneconomic to do so. The change in pricing was to be applied retrospectively, which the company is challenging. The company is making a provision for the charge for this in 2019, on the advice of its auditors. <a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ)</a> will resume subsidized fuel distribution this year as the new Minister reversed the pricing change, making it more economical to cover costs and assure a decent margin. 
<a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ)</a> has been growing sales of non-subsidized fuel, which generates twice the margin as that of subsidized fuel, which is going some way to offset the decline in Subsidized fuel. Despite the potential charge, management has confirmed that FY19 Net profit will not be lower than the recurrent profit in 2018 of IDR712bn, which should be taken positively.
The company is moving forward with <a href="https://www.smartkarma.com/entities/freeport-mcmoran-inc" target="_blank" data-smartkarma-citation="entities:12491:1" rel="noopener">Freeport Mcmoran (FCX US)</a> 's new smelter at the company's JIIPE industrial estate (100 ha plot), which will bring with it leasing revenues, revenues from utilities, and demand for land plots from supporting industries. <a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ)</a> secured a deal with the local government to supply power directly to its customers on its estate and will build a 515MW power plant there. The pipeline in demand at JIIPE could see a further boost with a Taiwanese steelmaker conducting a feasibility study for a 200 ha plot in 2020. 
<a href="https://www.smartkarma.com/entities/akr-corporindo-tbk-pt" target="_blank" data-smartkarma-citation="entities:13338:1" rel="noopener">AKR Corporindo (AKRA IJ)</a> is trading at close to a 3-year low and its valuations are also approaching very attractive levels, with the stock trading on 11.5x FY20E PER plus it pays a good dividend, with an FY20E yield of 3.5%.


A meeting with AKR Corporindo (AKRA IJ) management in Jakarta last week, confirmed that despite last year's issues over subsidised fuel pricing, the company is set up for strong growth going forward driven by a number of factors. These include strong growth in non-subsidized fuel distribution, and a marked pick-up in land sales at its JIIPE Surabaya Industrial estate, as well as longer-term a number of JV projects with BP PLC (BP/ LN) including retail petroleum distribution and aviation fuel distribution to begin with, and it is exploring the possibility of LNG storage and distribution. AKR Corporindo (AKRA IJ) should be a defensive stock in this environment and the recent correction is a buying opportunity.

The company ceased to distribute subsidized diesel in May 2019 due to a change in the pricing formula which made it uneconomic to do so. The change in pricing was to be applied retrospectively, which the company is challenging. The company is making a provision for the charge for this in 2019, on the advice of its auditors. AKR Corporindo (AKRA IJ) will resume subsidized fuel distribution this year as the new Minister reversed the pricing change, making it more economical to cover costs and assure a decent margin. 
AKR Corporindo (AKRA IJ) has been growing sales of non-subsidized fuel, which generates twice the margin as that of subsidized fuel, which is going some way to offset the decline in Subsidized fuel. Despite the potential charge, management has confirmed that FY19 Net profit will not be lower than the recurrent profit in 2018 of IDR712bn, which should be taken positively.
The company is moving forward with Freeport Mcmoran (FCX US) 's new smelter at the company's JIIPE industrial estate (100 ha plot), which will bring with it leasing revenues, revenues from utilities, and demand for land plots from supporting industries. AKR Corporindo (AKRA IJ) secured a deal with the local government to supply power directly to its customers on its estate and will build a 515MW power plant there. The pipeline in demand at JIIPE could see a further boost with a Taiwanese steelmaker conducting a feasibility study for a 200 ha plot in 2020. 
AKR Corporindo (AKRA IJ) is trading at close to a 3-year low and its valuations are also approaching very attractive levels, with the stock trading on 11.5x FY20E PER plus it pays a good dividend, with an FY20E yield of 3.5%. 

AKR Corporindo (AKRA IJ) - Time to Fill-Up the Tank?

United Kingdom

BP p.l.c. is a British multinational integrated energy company. It engages in oil and gas exploration, production, refining, distribution, and marketing, as well as renewable energy activities including solar, wind, and hydrogen businesses. The company was founded in 1908 and is headquartered in London, the United Kingdom.

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