Shinhan (AH) – IPO Summary – July 7, 2022

PT Saraswanti Indoland Development Tbk (SWID)

Ride the Next Wave of Growth

Company in brief. PT Saraswanti Indoland Development Tbk is a company engaged in the property and real estate business, especially in the development of High Rise Buildings, Apartments, Condo hotels (condotel), and Convention Halls. The Company has succeeded in developing a mixed-used flagship area located in the city of Yogyakarta, namely The Mataram City. In that area, there are two apartment towers, which is Sadewa, and Yudhistira. There are also Nakula towers that operated as a 4-star hotel managed by PT Archipelago International Indonesia namely The Alana Yogyakarta Hotel. The hotel also provides one conventional Hall namely Mataram City International Convention Center (MICC) which is the biggest grand ballroom in Yogyakarta and Central Java. Besides that, The Company also has The Graha Indoland as a 4-star hotel operated by PT SOL Melia Indonesia under the name Innside by Melia Yogyakarta. The hotel provides the best access to the city center (Malioboro) as well as to major tourist attractions such as Prambanan Temple, Borobudur Temple, beaches in Gunung Kidul, and near Adi Sucipto Airport.

The company’s bottom line was still corrected. In FY21, the company reported revenue of IDR 127.28 billion, a 16.89% YoY decrease due to lower revenue from the sale of apartments and condotels of IDR 72.83 billion (-37.12% YoY). The company only sold 147 units in Yudhistira towers, compared to 234 units in FY20. Meanwhile, the company said that the remaining 92 units will be claimed as revenue in FY22 with an estimated value of around IDR 45.58 billion. Moreover, hotel services revenue has increased to IDR 54.45 billion (+45.92% YoY) supported by improvement in hotel operations mainly in 4Q21. In line with the lower top-line performance, the company’s cost of revenue also decreased by 2.65% YoY, bringing the company’s gross profit to IDR 64.69 billion (-27.19% YoY), or implied GPM at 50.8% (Vs 58% in FY20). Furthermore, the company’s net profit contracted by 53.85% YoY to IDR 20.44 billion from the previous IDR 44.28 billion. 

All proceeds from the issuance of shares will be used for working capital. In the initial public offering, the company issued 340 million ordinary shares or 6.31% of the company’s issued and paid-up capital. The company’s share price is offered at IDR 180 – IDR 200 per share. Thus, the estimated funds raised are around IDR 61.2 – IDR 68.0 billion. The company will use all of the funds for working capital. The working capital is related to payments for maintenance costs for MICC and hotels, purchases of raw materials for food and beverages, purchases of hotel supplies, payments for labor and utilities, working capital for payments to suppliers and contractors for the construction of the Arjuna and Bima apartment projects and also for the development of the Banyu Bening project.

Industry Overview. In 2021, there were about 1.56 million international visitor arrivals in Indonesia, the number significantly decreased in comparison to the previous year before the pandemic in 2019 of 16.11 million due to the COVID-19 travel restrictions. Given that, the tourism and hospitality sectors are among the hardest hit by the pandemic as a result of lockdowns and mobility restrictions. Moving towards 2022, there was a lot of progress that has been made especially with the vaccination rate (dose 1 95.65%, dose 2:79.54%) in Indonesia which continue to increase and leads to the easing of restrictions. The room occupancy rate for star hotels also started to show an increase in early 2022 even though it is yet to recover to 2019 levels. Currently, the government made the initial step in the transition to the endemic phase by lifting the mask-wearing mandate in open spaces that are not crowded with people. Aside from the mask-wearing mandate, the government has also lifted the obligation for fully vaccinated travelers, both domestic and international, to show a COVID-19 test result before traveling. Therefore, we see that the relaxation will be a fortune for the hospitality sector which can boost the occupancy rate and increase hospitality performance. 

Valuation. Based on our calculation, The IPO price of IDR 180-200 reflects 25.11x – 27.72x EV/EBITDA in FY21, which is higher than the industry’s weighted average EV/EBITDA of 15.44x – 15.59x. The higher EV/EBITDA is justified by the company’s strong profitability, with an ROE of 16.6% in FY21, significantly higher than the industry weighted average ROE of 6.24% – 6.28%. Going forward, we expect the company to maintain its ROE at the high level on the back of a new revenue stream from Arjuna and Bima’s towers. Moreover, both towers are located in a strategic area potentially attracting a high demand for the apartment which has already been proven from the Sadewa and Yudisthira towers that have been sold out. Due to the implementation of PSAK 72 regarding revenue recognition, the company’s ROE will be around at 7.0% level in FY22E, which is still higher than the industry weighted average of 6.24%-6.28%. 

Best regards,

Research Team

PT Shinhan Sekuritas Indonesia


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