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Background

PT PP (Persero) Tbk (PTPP), established in 1961, is an Indonesian state-owned enterprise mainly operating in five segments: Construction; EPC; Property; Precast and Equipment. The company also invests in power plants and infrastructure but saw no revenue from such enterprises in 2016.

Indonesian State-Owned Contractor

Business Description

The main revenue contributor is public construction services building high-rise buildings, roads and bridges, dams and irrigation and power plants. Growth in this segment should be stimulated by the government’s infrastructure spending policies.

About 80% of PTPP’s projects in 2016 and planned in 2017 are for the government or other state-owned enterprises.

Indonesian State-Owned Contractor

EPC projects for public and private customers focus on power plants, oil & gas, and mining.

Its property development subsidiary, PT PP Properti Tbk (PPRO IJ), focuses on mid-priced high-rise buildings in suburban areas and was listed in May 2015. Rights issue was finalized in April 2017 and PTPP fully subscribed at a relatively rich valuation of PPRO’s shares.

PTPP also has three subsidiaries engaged in precast concrete manufacturing, construction equipment and power plant construction. The company plans IPOs for two or three of the above subsidiaries in 2H17 offering 20-35% of shares to the public, which could unlock some value.

Leadership

Andi Gani Nena Wea is the independent President Commissioner of PT PP (Persero) Tbk. He assumed this position on 21 May 2015 and graduated with a law degree.

Indonesian State-Owned Contractor

Ir. Tumiyana began his career at PTPP in 1985 and was the company’s Finance Director before he became President Director in May 2015. He earned his Bachelor’s degree in Civil Engineering from University of Borobudur and a Magister in Management from IPWI in Jakarta.

World Class Benchmarking

In the past 12 months, Profitable Growth returned to the average rank among 1,420 large Industrials companies worldwide.

Profitability has been stable at #5 since 2013 and Growth improved one step to #4 in the past 12 months.

Indonesian State-Owned Contractor

Asset utilization improved one step in the past 12 months but is still poor while Profit margin has been above average since 2014.

Sales growth and Margin change were both ranked #3 in the past 12 months.

Article by Dr. Andrew Stotz, Become A Better Investor