Nov 18, 2010

Look at the sister, Lippo Cikarang!

After drawning in long sleep, Lippo Group is back into the stock market. Lippo Group is inundating the stock market with massive press statements.
They massively promote the largest market capitalization property developer PT Lippo Karawaci Tbk (LPKR) and giant retailer PT Matahari Putra Prima Tbk (MPPA).
Lippo Karawaci on October14 announced Rp4.51 trillion proceed from 4.1 billion shares placement to 30 global investors worth Rp2.25 trillion and capital enlargement of Rp2.25 trillion.
Lippo Karawaci mandated 4 investment banks such as Bank of America-Merrill Lynch, CLSA Asia-Pacific Markets, Danareksa Sekuritas, and Mandiri Sekuritas during the shares placement.
For the rights issue. Ciptadana Securities underwrote Lippo Karawaci. Nowadays, Lippo Group has used its property flag carrier Lippo Karawaci to snap up US$100 million from bonds issuance in the global debt market.
In the last 2 months, Lippo Karawaci distributed more than 10 press statements to Indonesia Stock Exchange and medias.
To draw appetite from investors, Lippo Karawaci announced to distribute Rp2.88 per share dividend to its shareholders.
Track record   
Lippo Karawaci became publicly listed company on June 28 1996, a year before Asia crisis devastated Indonesia’s economy and the stock market. Lippo Karawaci was sold at Rp3,250 per share during the IPO. Post IPO, LPKR continually fell.
In the last 10 years, Lippo Karawaci had recorded the highest at Rp920 per share. When LPKR closed at Rp680 per share, it would provide only 35.29% gain.
As of September 2010, LPKR posted a 13.78% increase in sales, 13.77% rise in operating profit, and 13.32% rise in net profit compared to the same period last year. However, Lippo Karawaci was flat at 20%.
Regarding to the shares valuation, LPKR’s book value reached Rp304.05 per share as of September 2010. Considering the market price on Friday last week, price to book value (PBV) of LPKR is 2.24x.
Lippo Cikarang is cheaper
Forget about Lippo Karawaci and look at the sister company PT Lippo Cikarang Tbk (LPCK).
It seems Lippo Group hasn’t unlocked the value of Lippo Cikarang. Lippo is frenzy to tap money from the stock market using Lippo Karawaci.
Lippo Cikarang is the small cap stock, but it is beautiful. Despite lower market cap, Lippo Cikarang, listed on July 24 1997 at the level of Rp925/share, reflected a robust fundamental performance, better than Lippo Karawaci. 
As of September 2010, Lippo Cikarang posted a 25.92% rise in revenue, 14.78% growth in operating income, and 37.74% jump in net income compared to the same period last year.
Despite lower operating margin to 27% in the first 9 months ended September 30 2010, Lippo Cikarang proved a better margin than Lippo Karawaci.
On last Friday, Lippo Cikarang was closed at Rp415 per share. With annualized EPS at Rp94.39 per share, Lippo Cikarang’s PER is 4.39x by the end of 2010, which is far cheaper than Lippo Karawaci which is traded at 25.31x EPS by the end of 2010.
As of September 2010, Lippo Cikarang’s book value was Rp786.97 per share, nearly 2 folds higher than the market price. It means Lippo Cikarang is now undervalued, reflecting price to book value (PBV) of 0.5x.
With annualized EPS of Rp26.87 by the end of 2010, Lippo Karawaci’s price to earning ratio (PER) is 25.31x, while Lippo Cikarang’s PER is 4.39x by the end of 2010.
It means Lippo Cikarang is much cheaper than Lippo Karawaci. Could Lippo Cikarang performance equal to Lippo Karawaci?

Disclosure: No position at the stock mentioned above. 

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