Cardig Aero Services (CASS IJ, BUY, TP IDR1,100) Results Review: Cruising Smoothly Ahead

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Cardig Aero Services (CASS IJ, BUY, TP IDR1,100) Results Review: Cruising Smoothly Ahead

Cardig’s 1Q14 results were in line, with revenue of IDR356.9bn (+0.5% q-o-q) and a core profit of IDR34.5bn (+36.9% q-o-q) making up 22% and 27% of FY14F revenue and core profit respectively.  It will continue strengthening its core business in aviation support and food solutions as well as expanding its new facility management arm. Our forecasts and TP of IDR1,100 (15x FY14 P/E) remain unchanged. BUY.

       A consistent performance. Cardig Aero Services (Cardig) booked revenue of IDR356.9bn (+0.5% q-o-q) and a core profit of IDR34.5bn (+36.9% q-o-q) in 1Q14. During the period, the aviation support services provider managed to perform well despite the low season for airlines. Its EBIT margin dipped to 22% from 23.5% due to additional depreciation costs, while its net margin improved to 9.7% in 1Q14 from 7.1% in 4Q13 from lower interest expenses.

       Continuously strengthening and expanding. Cardig is continuously strengthening its core business in aviation support services, ahead of the Asean open skies policy, which is expected to be implemented in 2015.. The company recently established Kulinair, an in-flight catering subsidiary based in Bali which will provide catering services for clients such as AirAsia X (AIRA MK, SELL, TP: MYR0.70), which is setting up a flight hub in Bali. In addition, it is also expanding its facility management unit to include cleaning and parking management services. Current clients are including Novotel, Holcim (SMCB IJ, NR), Siloam Hospital (SILO IJ, NR) and Agung Sedayu Group.

       Maintain BUY with a TP of IDR1,100. We believe the outlook for Cardig will remain robust in the future, in light of the implementation of the Asean open sky policy by 2015. We maintain our forecasts and BUY call on the stock. Our unchanged TP of IDR1,100 reflects a 15x FY14 P/E.

Best regards,

RHB OSK Indonesia Research Institute

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