An interesting journey in Jakarta by Bluebird, by foot, and eventually by Ojek (motorcycle taxi) took me to a breakfast meeting with Kawasan Industri Jababeka Tbk Pt (KIJA IJ) , Indonesia's'oldest and best-established industrial estate and township developer. The company has a slow start to the year but has seen a significant pick up in its sales for 3Q, with better sales at its main Cikarang estate but also with a spike in sales from its new estate in Kendal (near Semarang and a JV with Sembcorp Industries Ltd (SCI SP) ) starting to kick in. The company has also started to sell some plots at its 1,500 ha Tanjung Lasung tourism development (West Java, opposite Krakatao) , with the construction of a new toll road there to begin in 2017. The issue with a boiler in its 130MW Cikarang estate power plant in August has been remedied but there will be some penalties due to reduced capacity. It recently completed a road show for its US$260m bond restructuring. Its current bond (US$186m) will be exchanged at a lower rate (coupon 6.5% versus 7.5%) . It has also put some currency hedging in place, notably on its principal. Jababeka is an interesting way to get exposure to the pick up in FDI growth, as well as the relocation of industries such as textiles, furniture, and food to Central Java, where labor is half the cost. It will be a long-term beneficiary of ongoing improvements in Indonesia's infrastructure. Jababeka provides quality exposure to the key industry growth drivers for Indonesia over the next few years, with the cushion of recurrent earnings from its US$ utility earnings. Valuations do not look challenging, with the company trading on 12x FY17E PER, with projected 3 yr CAGR (FY16E-FY18E) in EPS of 17%. Consensus has no growth in 2018, which looks unlikely, given positive indications from management.
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