Jasuindo Tiga Perkasa (JTPE IJ; NOT RATED)

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Jasuindo Tiga Perkasa (JTPE IJ; NOT RATED): Company Visit Note - Providing The Nation's Printing Needs

A security printings company. JTPE main businesses involve in security printings (76%), general printings, consumer goods related products, and document management outsourcing services (24% for total non security). In definition, security printing activities includes document printings which needs special permits from Botasupal ( coordinating body for counterfeit money extermination ), including cheque book, insurance paper, atm card, credit card and others .JTPE main customers are the government (~50%), banks (~20%, main customer such as Bank Central Asia, Bank Permata and Bank Danamon), manufacturers (~22%), airlines (~5%), and others. Based on the description above, potential demand growth may come from i) increasing population, ii) increasing economic activities in general and iii) increasing trend of smart card usage.

· Leader in industry. While market share data isn’t available, we could say JTPE is among industry leaders as it is usually within the top three printings company that obtains the government tender along with Wahyu and Pura Barutama. It is worth noting, JTPE is a member of Global Printing Network (formed by Standard Register) which only accepts one company for each nation. The membership has been proven to be useful in knowledge transfer and marketing cooperation.

· Job order in nature. The two main implications being mainly job order businesses in nature for JTPE are i) selling price is set per order basis which in some extent enables JTPE to pass trough raw material price risk. Raw material (mainly paper and plastics) consists of 85% of production cost. ii) JTPE gross margin is more likely to be determined by the complexities of the projects.

· Focus in high margin business. JTPE is emphasizing its strategy on growing its high margin security printings and reducing its exposure on high competition- low margin general printings. With the strong trend towards smart card usage (credit card, e-payment, toll card, etc), JTPE is also currently undergoing its second phase of expansion on its smart card segment division capacity by IDR50bn in this year. The near term upside potential is coming from E-KTP (smart ID card) project which may bring additional annual revenue of ~IDR500bn for two years, starting in near term.

·Valuation. Based on management guidance of FY11 revenue at IDR500bn (+12% y-o-y) and FY11 earnings at IDR90bn (+18% y-o-y), the stock is currently traded at 6.9x FY11 PE. Note that the guidance does not include the E-KTP potential revenue yet. JTPE plans to distribute 50% dividend payout ratio based on FY10 earnings which translates to a 6.1% dividend yield. Also notes that JTPE revenue is heavily seasonal with 1Q as the lowest.

source: OSK dated 5 May 2011