Bareksa.com - 1Q Top line and bottom line within expectations. Earnings came in at Rp21bn (-2.4% YoY) in 1Q, represent 20% and 21% of our and consensus’ FY14 estimates. 1Q revenue grew +12% YoY to Rp268bn, represent 21% and 22% of our and consensus FY14 forecast. Gross margin was at 23%, vs. 22.6% in FY13. Net margin fell to 7.8%, yet in line with our estimate.
A decent growth of car rental segment. Car rental revenue grew +19% YoY to Rp184bn, contributing 68% of 1Q revenue, within our expecta-tion. Gross margin has been stable at ~42%, while operating margin (adjusted for interest charge) expanded to 8%, up from 7% in the prior 2 quarters. ASSA has grown the fleet size to 13,394 units as at end March 2014, still on track to achieve the target of 15,100 units by end of 2014.

Lower sales and margin contraction on used car. Used car revenue fell –20% YoY to Rp42bn, contributing 16% of 1Q revenue, vs. 22% in 1Q13, represent only 15% of our FY14 forecast. The company has disposed 404 units in 1Q, lower vs. 479 units in 1Q13, with more 4x4 vehicles (57 units) and premium cars which have lower prices and marginal gain. Used car sales only contributed ~3% of 1Q gross profit, down from 15% in 1Q13 as gross margin contracted to 7%, vs. 21% in FY13. Going forward, we expect increased gain on disposal and normalized margin in subsequent quarters due to higher disposal volume from low MPV type.

Strong growth of logistics, ahead of our expectation. Logistics revenue grew strongly +30% YoY to Rp42bn, contributing 16% of 1Q revenue, up from 14% in 1Q13. Logistics contributed 13% of 1Q gross profit (+292% YoY), up from 4% in 1Q13. 1Q gross margin expanded to 29%, vs. 15% in FY13, while operating margin expanded to 21%, vs. 7% in FY13. High growth and margin expansion are positive catalysts for ASSA.

Maintain Buy. We maintain our forecast and our Buy rating on ASSA (TP Rp395, unchanged), based on equal-weight on 14.0x 2014F P/E and 1.38x 2014F P/BV. The stock is attractively priced at 10.0x 2014F P/E.

*Franky Kumendong and Andre Maningkas are equity analyst of PT Buana Capital. This article is part of the Equity Research of PT Buana Capital