Buana Capital: Blue Bird Will Brighten Up IDX Floor

Bareksa.com - PT. Blue Bird Tbk (BIRD), set to list today, could be the next leading transportation company in the IDX. PT. Blue Bird Tbk should be able to compete in the transportation sector despite the risks, on the back of: (1) dominant market position (2) superior brand equity, (3) quality of fleet and drivers (4) ample growth opportunity (5) consistent historical revenue growth and (5) undemanding valuation of ~15x 2015F P/E with Rp16.6 tn market cap.

Blue Bird has strong market positioning with 33% market shares as of April 2014. Blue Bird fleet consists of 23,932 regular taxis, 1,252 executive taxis, 4,524 limousines and car rentals, and 590 buses.

It holds superior brand equity; According to Mark-Plus Insight in 2013, 90% of its research respondents in Jakarta, Surabaya, Bandung, and Medan could identify “Blue Bird” brand. The brand enables Blue Bird to command pricing premium, with Rp 7,000 flag fee tariff vs Rp ~6,000 from other brands.

Blue Bird is also able to attract better quality drivers than its competitors, Buana feel.

Chart: Distribution of Blue Bird

Source: Buana Capital

Regular taxi business has been growing from 2011 to 2013 in Jakarta by 19.3% and outside Jakarta by 12.6% (CAGR). Additionally, Blue Bird is well known as one of the pioneer taxi operator in Indonesia. It is led by experienced management who have been with the company for more than 40 years, and had delivered growth and success in the business.

Regular taxi, through “Blue Bird” and “Pusaka” brands, accounts for ~81% of the company revenue as of 30 April 2014. Revenue per regular taxi per day has risen by 4.1% CAGR from Rp 476,000 to Rp 557,969, while Silver Bird revenue per executive taxi has risen 12.2% CAGR from Rp 612,719 to Rp 971,945 in 2009-13.

Chart: Growing Regular Taxi Business in Jakarta

Source: Buana Capital

Chart: Growing Regular Taxi Business Outside Jakarta

Source: Buana Capital

Over the same period, Blue Bird delivered 24% revenue growth, 36% EBITDA growth, and 35% net profit growth, CAGR. The company aim to enhance its dominant position in the market further, and accelerate its growth path in the future. The company has ordered 2,900 additional taxi units, of which 975 have been delivered.

In the 6M14 Blue Bird generates Rp 2.3 tn revenue, Rp 547.9 bn operating profit, and Rp 402.8 bn net profits. The figures represent +30.3% YoY, +9.4% YoY and +2.8% YoY growth rate, respectively. At the IPO price Blue Bird will command Rp 16.6 tn market capitalization.

As comparison, listed Express Taxindo Utama (TAXI) generated Rp 227.0 bn (+30.9% YoY) revenue, Rp 41.4 bn (+9.1% YoY) operating profits, and Rp 49.8 bn (+36.1% YoY) net profits over the same time and period, and command market capitalization of Rp ~2.6 tn.

The offering price is equal to approximately ~15x 2015F P/E assuming normalize 1H14 profit will grow ~30% in 2015. BB Tbk. also offers its employee and management stock ownership program.

Among Blue Bird’s risk factors are:

1) Fuel Price Hike. The company estimates fuel cost contributes 20% to operating cost. Earnings may be at risk as the government plans to reduce subsidized fuel cost, as operating cost will increase. To maintain profitability during fuel price hike, the company may decide to either expand its fleet or hike tariff. If the company decides to impose higher tariff and puts burden to consumers, demand, consumer preference may change.

2) Wage Pressure. Another key factor rising salary for drivers’ incentive and minimum wage in Jakarta. According to the company’s data, wage increase of 29.7% CAGR from 2011 to 2013. If the company offer additional driver incentives to offer higher motivation or attract more good drivers, salary expenses could be at risk.

Tabel: Financial Summary

Source: Buana Capital

* Adeline Solaiman is a research analyst from PT Buana Capital