NEW COVERAGE: Pakuwon Jati’s $400M 4.875% Senior Unsecured Notes Indicated in Mid-90s on Spillover From Sell-Off in HY China Property Notes; Net Revenue for 9M’21 Up 24.3% to IDR 3.8T; Cash and Cash Equivalent at IDR 5.9T, Up From IDR 3.8T

Relevant Documents:
9M’21 Financial Statements
Q3’21 Results Presentation
2020 Annual Report
USD Notes Disclosure
Offering Memorandum
Tap Issue Offering Memorandum

IDX-listed Indonesian property company PT Pakuwon Jati Tbk posted net revenue for the nine-month period ended Sept. 30, 2021 up 24.4% year over year to IDR 3.788 trillion ($263.6 million), with cash and cash equivalents at IDR 5.927 trillion, up from IDR 3.84 trillion a year earlier, against IDR 99.882 billion of long-term bank loans coming due in the next 12 months, the financials show. According to the accompanying press release, the company's performance was largely due to a 60.4% surge to IDR 2.1 trillion in development revenue over the first nine months of 2021.

Despite solid fundamentals, the company’s $400 million guaranteed 4.875% due 2028 senior unsecured notes are currently in the mid-90s having been above par in early February, as investors sold off Chinese property high-yield notes, leading to a wider sell-off including Indonesian high-yield notes, two buyside sources said. Pakuwon’s due 2028 senior notes were indicated flat at 95.5/97.5 today, April 1, according to two buyside sources.

The notes have gained around three points since March 17 when they were indicated at 92.635, according to information on cbonds.

The sources also pointed out that the decline in most high-yield bonds across the region, even for credits with good fundamentals, is largely technical and not related to financials. But given the notes still trade in the mid- to high 90s area, there would be no surprise if Pakuwon Jati’s notes sold off first if there is further outflow, one of the sources said.

Financials

For the nine-month period ended Sept. 30, 2021, Pakuwon’s net revenue surged 24.4% year over year to IDR 3.8 trillion from IDR 3.05 trillion in the same period a year earlier. Profit rose 20.2% year over year from IDR 600.696 billion to IDR 721.974 billion. Pakuwon recorded IDR 1.526 trillion of net cash from its operating activities, 83.5% up from the IDR 831.202 billion recorded a year earlier. The increase was largely lifted by a 71.8% year-over-year increase in cash generated from operations to IDR 1.587 trillion, along with lower interest and bank charges paid of IDR 153.385 billion, down 34.9% from a year earlier.

Over the same period, the company generated IDR 1.719 trillion in net cash from its financing activities, largely driven by the proceeds of its bonds, which came in at IDR 5.787 trillion, and offset by the IDR 3.578 trillion it had used to redeem its $250 million 5% senior notes due 2024.

As at end-September 2021, cash and cash equivalents of Pakuwon stood at IDR 5.935 trillion, up from IDR 3.84 trillion a year earlier. In comparison, the company had IDR 99.882 billion long-term bank loans coming due in the next 12 months, the financials show.

Operations

The property developer owns and operates integrated mixed-use retail shopping malls, offices, condominiums and hotels. In Jakarta its portfolio includes Superblock Gandaria City, Kota Kasablanka Superblock, Somerset Berlian and Blok M Plaza, while in Surabaya in East Java the portfolio includes Tunjungan City Superblock. In Central Java, Pakuwon Jati has the Hartono Mall Solo and Hartono Mall and Marriott Hotel.

The latter three properties mentioned above were acquired by Pakuwon Jati through its 67.1% subsidiary - PT Pakuwon Permai - from PT Delta Merlin Dunia Properti (DMDP), a property arm of Duniatex for IDR 1.36 trillion ($96.9 million) on Nov. 25, 2021. Pakuwon used internal cash to fund the acquisition, as reported.

Corporate Structure

According to the offering memorandum (OM) for the $400 million due 2028 notes, the company’s corporate structure as of the date of the OM is as follows:
 

The OM states that as of Dec. 31, 2020, PT Pakuwon Arthaniaga is the controlling shareholder of Pakuwon Jati, holding 68.68% of its issued and outstanding shares, and is controlled directly and indirectly by the founding family. Pakuwon Jati’s founder and president commissioner is Alexander Tedja, according to the OM. Tedja is listed on Forbes’ 50 Indonesia’s richest list as of 2021 with a total net worth of $1.2 billion.

Principal shareholders, from the due 2028 notes OM, are given below:
 

Bonds, Loans

On April 29, 2021, the company issued $300 million bonds, following up on May 17, 2021 with a tap issue of $100 million. The additional bonds have been consolidated and form a single series with the initial note, to form the $400 million 4.875% notes, which mature on April 29, 2028. The notes are listed on the Singapore Stock Exchange with Bank of New York London Branch as trustee, according to the company’s financials.

UBS Singapore was sole global coordinator for the $300 million notes, while Goldman Sachs and UBS Singapore were joint bookrunners. UBS Singapore was also the sole global coordinator for the company’s $100 million notes issuance tap, according to the bond’s offering memorandum.

Proceeds were to repay existing $250 million 5% due 2024 notes, issued in 2017 and for general corporate purposes. The due 2024s were for payment of earlier $200 million 7.125% notes due due 2019, which were issued in 2014, according to the company’s financial results.

The $400 million due 2024s are unconditionally and irrevocably guaranteed by subsidiary guarantors PT Artisan Wahyu, PT Elite Prima Hutama, PT Grama Pramesi Siddhi, PT Pakuwon Permai, PT Pakuwon Sentosa Abadi, PT Permata Berlian Realty and PT Dwijaya Manunggal, the OM states.

On June 10, 2016, PT Elite Prima Hutama (EPH), which is 99.9% owned by Pakuwon, obtained a credit facility for a total amount of the higher of secured a total of f (i) IDR 700 billion, or (ii) a maximum of 28% of project costs related to the apartments and the office tower of Superblock Kota Kasablanka Phase 2, from Bank Mandiri, CIMB Niaga and Bank Syariah Mandiri, in two tranches, according to the OM.

Tranche A: IDR 600 billion conventional syndication credit facility from Bank Mandiri and CIMB Niaga, with maturity date six years from the signing date and grace period of 2.5 years, and
Tranche B: IDR100 billion syariah credit facility from Bank Syariah Mandiri, with maturity date six years from the signing date and a grace period of 2.5 years.

2022 Targets

Pakuwon Jati is targeting IDR 1.8 trillion in marketing sales this year, a 28.5% increase from the year prior at IDR 1.4 trillion on the back of property launches in Surabaya in East Java and Jakarta, Kontan reported on Jan. 20, 2022, citing Pakuwon Jati director Minarto Basuki.

The company’s IDR 2.9 trillion capital expenditure budget will be used for construction of the Pakuwon Mall Bekasi project, the expansion of Pakuwon City Mall, the repair of two malls in Yogyakarta and Solo, as well as plans to purchase land and acquire other operating assets. The company has been developing a superblock commercial shopping center named Pakuwon Bekasi slated to complete in 2024, Basuki told Detiknews in an article published on Dec. 10, 2021.

Pakuwon Jati’s capital structure is below:
 
–Sarah Yuniarni