We value AKRA at Rp1,600/share based on a sum-of-the-parts valuation methodology. Its three key businesses are as follows: 1) Trading: valued at a 2025E EV/EBITDA of 8.5x (at 5-years mean since 2019 when the industrial estate became part of its business and when the petroleum trading margin averaged ~Rp800/kL, based on our estimates); 2) Industrial estate, which consists of: a) land leased to PT Freeport Indonesia, valued using a DCF; and b) the remaining land bank, which is targeted to be sold to customers that will be part of an EV battery ecosystem (due to the Freeport smelter's presence and proximity to the nickel belt), valued using a DCF to capture the impact of accelerating demand; and 3) its retail fuel outlet JV with BP, valued using a DCF to capture the ramp-up in outlet presence and improving margins. Our DCF valuation is based on a 10% WACC, with a 7% risk-free rate, 6% equity risk premium, 8% cost of debt, 22% tax rate, 13% cost of equity, 1x beta, and 5% terminal growth. Meanwhile, our DCF valuation for the industrial estate business segment is based on an 11% WACC as we exclude the tax rate (since there is no tax shield to debt as tax is based on sales).

Key downside risks that could cause the shares to trade below our target price include: 1) no margin improvement in its trading and distribution business due to customer mix and prolonged wet weather; 2) delays in industrial land sales execution, which causes AKRA to miss another sales target and reduces investor confidence in the quality of the earnings guidance; and 3) higher than expected capex in 2025, resulting in a lower dividend.