Puradelta Lestari (DMAS IJ)
Data Center Growth Proxy Amid its Cikarang Location
- DMAS differentiation lies in its Cikarang location and infrastructure maturity to house global-scale data center providers.
- We expect lower dividend payout from FY24F earnings to be directed towards landbank replenishment capex.
- We reinitiate with Buy rating and RNAV-based TP of Rp190; expect FY24-26F EPS growth at a stable 7% CAGR, driven by data center growth.
Cikarang Continues to Offer Critical Differentiation for Industrial Estate
We believe DMAS’s differentiation lies in its Cikarang location, which meets three critical factors for industrial estate land selection: 1) Product Market Orientation (positioned to support the demand from Greater Jakarta's population), 2) Transportation Infrastructure (the only estate with three direct toll-road accesses), and 3) Skilled Labor Availability. DMAS also stands out as the only estate in the country that houses 15 tier-IV data center (DC) providers, reflecting its infrastructure maturity and ability to attract global DC players. The rise of AI and structural growth in internet usage penetration in Indonesia (exh.9), which we believe will sustain DC demand, will stimulate land sales for DMAS, as one of the most prepared zones.
Expect Lower Dividend Payout from FY24F Net Profit
Observing the lower dividend payout ratio from FY23 net profit (48% vs. avg. historical at 95-100%), we view that the policy will be directed towards landbank replenishment capex. Thus, we conservatively forecast FY24F payout to be at a similar level of 50% of earnings, implying a potential 9% yield. This could give additional support of ~Rp700bn cash to DMAS’ balance sheet, on top of the ~Rp650bn cash savings from the lower FY23 payout.
Remain a Proxy of Data Center, Reinitiate with a Buy and TP of Rp190
We reinitiate DMAS with a Buy rating and TP of Rp190, based on a 72% (+0.5SD to historical mean) disc. to our revised RNAV as we view DMAS’ story as a proxy for data center demand to remain intact, with relatively low competition as it possesses infrastructure completeness, proven by its ability to serve tier-IV providers. We believe any future landbank replenishment could also offer upside to its valuation, considering Cikarang area land scarcity with the value-add of the data center ecosystem. Key risks: 1) potential lower pre-sales from sluggish data center demand, 2) slow FDI/corporate capex impeding industrial land demand, and 3) current space for DC only at 50-60 ha out of 198 ha industrial landbank.
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