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:
- At least 26 units of hotels, resorts, and
condos
- An international golf courses, including
bungalows, apartments, and villas
- A city center, Venetian style, and
- Health and education facilities.
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| 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:
- A standard golf course in Magelang, Central
Java
- 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.
- 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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