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Kawasan Industri Jababeka

There are at least two listed property companies in the Eastern Region of Jakarta, precisely in the District and City of Bekasi: Lippo Cikarang (LPCK), and Kawasan Industri Jababeka (KIJA). If LPCK more focus on residential properties, KIJA is selling the land plots of industrial estate to build factory, etc. And now, the company we are going to discuss here is KIJA. Okay, here we go.

The history of KIJA began in 1989, when the Provincial Government of West Java give permission to a consortium to manage a vacant lot in the area of ​​Bekasi, to be used as an industrial area. The consortium was led by two entrepreneurs named Setyono Djuandi Darmono and Hadi Rahardja, who became the founder of a company that is established later, Kawasan Industri Jababeka (KIJA). The word 'Jababeka' is a short for 'Jawa Barat Bekasi', which probably because the company obtained its permit from the Government of West Java (Jawa Barat) Province, while the land is in the area of ​​District of Bekasi. While 'Kawasan Industri' means 'Industrial Estate'.

In its early years, KIJA had successfully sold its land of industrial estate to two major companies, the Unilever Indonesia and United Tractors. At the time, the ​​land area belonged to the company was only 500 hectares. As the time goes by, KIJA continues to develop the area and picked up new customers such as L'Oreal, San Miguel Packaging, Samsung, Yamaha and others, all of which built factories in the industrial area covering a total of 1,500 acres (based on data as of March 2012). This figure has made KIJA to be the biggest industrial area company in Bekasi, also bigger than Bekasi Fajar Industrial Estate (BEST). Well, but that was the data for a year ago, the recent figure may be different.

Later, other than developing the industrial area, KIJA is also developing the supporting area of the industrial area itself, such as housing, public infrastructure, and others. As a result, the whole area then grew into a small town called Kota Jababeka (Jababeka City). Kota Jababeka is an integrated industrial township area of ​​3,806 hectares (as of April 2012) which is a place of industrial estates, residential, shop complexes, business district, public transport links, shopping centers, golf courses, university (The President University), entertainment and leisure fasilities, until the industrial infrastructure such as ports, power plants, and water management facilities.

Currently the township have been mature and well-developed, but still could be developed further. Of the total land area of ​​3,806 hectares which mentioned earlier, about 1,000 hectares are the land banks, aka vacant land that ready to be developed at any time. Currently KIJA have two major construction projects which will be completed in the near future, namely 'Indonesia Movieland', and 'Medical City'. And yep, those are movie theater and hospital facilites.

In addition to Kota Jababeka, KIJA also has two other assets, namely Cilegon Industrial Estate (CIE) and Tanjung Lesung. CIE, as the name implies, is an industrial area in Cilegon, Banten, located strategically about 85 kilometers from Jakarta, which is connected to the Jakarta - Merak toll road and railway lines. Until today, the CIE is purely an industrial area, but of course it could be developed into a township such as Kota Jababeka.

While Tanjung Lesung is a leisure and tourism area which is located on the beach of Pandeglang, Banten, about 200 kilometers from Jakarta. From the latest development, the area of ​​Tanjung Dimples has two resorts and villas, a hotel and several cottages. And going forward, KIJA has a great vision to turn Tanjung Lesung from an ordinary beach into an international tourist destination, where there will be built:

  1. At least 26 units of hotels, resorts, and condos
  2. An international golf courses, including bungalows, apartments, and villas
  3. A city center, Venetian style, and
  4. Health and education facilities.
An Outdoor Cafe at the Tanjung Lesung Beach, Banten

The beach of Tanjung Lesung itself has been known as one of the tourist destinations in Banten, along with Anyer or Carita Beach, another destinations in Banten. But when compared to Anyer or Carita, the area of ​​Tanjung Lesung has not been developed. So, the potential is then captured by KIJA, where in 2011 they acquired some land worth of Rp1.5 trillion (about US$ 150 million) in Tanjung Lesung, with the funds obtained from the right issue in the same year.

So, when viewed from its long-term projects, KIJA looks very attractive. With the company's good track record in developing Kota Jababeka, KIJA is also likely to achieve the same success in Cilegon, which may continue to Tanjung Lesung. When talking about land bank reserves, as of April 2012, KIJA has a total 3,200 hectares of land bank, or nearly half of the total land area owned by the company. Meaning? KIJA is still have a wide space to grow.

And if the above assets are not enough, then KIJA still have some other assets, although in a smaller scale. They are:

  1. A standard golf course in Magelang, Central Java
  2. An office space of nearly 6,000 square meters in Menara Batavia, and office space of ​​14,000 square meters in the City Center Tower, Central Jakarta.
  3. Landbank of 500 hectares in Kendal, Central Java, which can be expanded to a total of 2,700 hectares. This land will be developed into a residential area, but the company has not had any development plan.
However, beyond the above projects, there are still a few more things to consider if you want to invest in this company. First, In July 2012, KIJA issuing notes worth US$ 175 million in Singapore, of which approximately US$ 123 million would be used to refinance a bank debt of one of its subsidiaries in the field of powerplant. As mentioned above, KIJA has a unit of powerplant as one of the supporting facilities for Kota Jababeka. But in the full year 2012, the power plant had not successfully make a profit, instead suffered a loss of Rp52 billion. When viewed from the purpose of the issuance of the notes, which is to pay the previous debt for the purpose of lowering interest rates (because the interest rate of the notes was 11.75%, which is certainly lower than the interest rate of bank), it seems that KIJA is not very successful with its power plant project, as they hasn’t been able to pay the debt in installment.

Similarly, the dry port project, still in Kota Jababeka area, also suffered a loss. The bottom line, though KIJA hoping to obtain additional sources of revenue from its infrastructure business, but until now they have not been able to do so. Related to its power plant projects, this reminds me to Exploitasi Energi Indonesia (CNKO), a company that has pioneered the power plant business since 2003, but until now have not succeeded at all (of the three powerplants, they could only made one). Perhaps, to build power plant is not that easy.

And by the way, KIJA’s business unit of Tanjung Lesung Leisure Area is also suffered a loss. But this one is understandable, considering KIJA still have not done any development there.

Two, and this is most important thing: As already mentioned above, the ultimate shareholders of KIJA are Mr. Darmono, and Mr. Hadi Rahardja. Both of these entrepreneurs, along with their families and affiliates, hold a 53.2% stake of the company as of April 30, 2012. However, you would not find that information in the financial statements of the company. In its latest financial statements as of December 31, 2012, the composition of KIJA’ shareholders was 17.5% of Meadowood Capital, while the rest belonged to public. Meadowood is an investment vehicle belonging to Mr. Hadi Rahardja, which was established in the country of Mauritius. While Mr. Darmono and Mr. Hadi Rahardja, along with their families and affiliates, either direct or indirectly holding the shares of KIJA with possession of less than 5% respectively, so that in the company's financial statements, they were recorded as public shareholders.

And based on my experience, if the majority shareholder of a company is recorded as a public shareholder, then it was just another trick, typically for financial engineering or such, so you as the real public investor just cannot trust them.

Outside the two points above, KIJA is also less attractive in terms of valuation, with a PER of 15.6 times at the price of 300. Okay, that high valuation might reasonable if we consider the wide landbanks belonging to the company, especially in Tanjung Lesung. But if we also consider that KIJA hasn’t had track record in tourism business, then  the risk of failure is still quite large. And frankly, as an investor, I don’t know nothing about tourism.

So, the only real prospects of KIJA are the development of Kota Jababeka, plus development in Cilegon Industrial Estate. Based on the company's latest public expose materials on May 4, 2012, KIJA seems to try its luck in the power plant and dry port projects, and also Tanjung Lesung. Perhaps, the management considers that the projects of Kota Jababeka and Cilegon Industrial Estate are quite safe, so they could try new ventures in inrastructure (powerplants and dry port) and tourism. Incidentally, there is also a possibility that the area of ​​Tanjung Lesung could be very strategic, as the government has a plan to set up the South Banten Airport in a nearby location.

Final conclusion? Well, I think I have submitted all the important information, so the conclusion is up to you.

PT. Kawasan Industri Jababeka, Tbk
Rating of Performance in Full Year 2012: A
Rating of Shares at 300: BBB

Original article was written at April 22, 2013

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