PWON - Continuous mid-term growth

KBVS Update
Friday, 16 Feb 2024

PWON- Continuous mid-term growth

Robust recurring income growth outlook. Since 2020, PWON has strategically expanded its portfolio with three additional recurring assets: Pakuwon Mall Surabaya, Pakuwon Mall Solo Baru, and Four Points by Sheraton Bali (Kuta). Anticipating robust growth, the company projects a 34% increase in retail mall Net Leasable Area (NLA) from 2023 to 2029, a 7% growth in office space from 2023 to 2027, and a substantial 75% increase in hotel room capacity from 2023 to 2030.

Key projects in the next 2 years. Over the next 2 years, key projects such as the Batam and IKN projects rollout in 2024, Kota Kasablanka extension in 2024, various product launches in the 2H24, as well as project rollouts in Semarang and Gandaria extensions in 2025 are expected to fuel its mid-term growth story.

Expect earnings to grow by at least 7.2% CAGR from 2023-28. Based on a conservative assumption of a 5.3% CAGR in marketing sales from 2023 to 2028, coupled with the incorporation of a few recurring income streams such as Pakuwon Mall Surabaya, Four Points Bekasi, Fairfield Bekasi, and Aloft hotel (Surabaya) our projection indicates that PWON has the potential to achieve a moderate earnings growth of at least 7.2% over the period from 2023-28.

Undemanding valuation. Reinitiate BUY with TP of IDR605; using DCF-based TP (WACC: 11.2%; LTG: 3%), which implies to 1.2x ‘24F PBV and 47.6% discount to ‘24F RNAV (-0.58 SD of its 5 years historical mean). We like PWON due to 1) our expectation on a robust recurring income outlook until 2030; 2) undemanding valuation, and 3) strong cash position.

Regards,
Benyamin Mikael - KBVS Research Team