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Written by

David Chow, CFA

Azure Capital

Meeting Garuda Indonesia’s subsidiary

Feb 7, 2019

In Indonesia last week and visited Garuda Maintenance Facility Aero Asia Tbk (GMFI), which is 90% owned by PT Garuda Indonesia. I met up with their head of IR Pak Andromeda.GMFI is the largest maintenance, repair, and overhaul companies in Indonesia with a domestic market share reaching around 32% in terms of value and accounted for around 80% of the company’s revenue. Given that Indonesia is a vast archipelago, meaning it is dependent on-air transportation to transport people and goods. Based on data supplied by CAMRO, the total MRO business in Indonesia is expected to grow by 4-year CAGR of 11% in 2017 – 2021. In addition, with GMFI’s operational areas located in higher growth MRO markets like the Asia Pacific, making it well placed to expand its business further.Investors were previously concerned with their over-reliance on their parent Garuda for business as Garuda once accounted for 74% of GMFI business. The company recognises this concern and has worked hard to reduce this reliance. In 2018, Garuda related business is expected to fall to 52% of total revenue. In 2018, GMFI has signed partnership agreements. One of which was with Air France Industry where GMFI will get brand and technological know-how in airframe, component & engine maintenance and potential market flow. GMFI has also planned a couple of organic and inorganic initiatives for 2019.GMFI is trading at 7.3x FY19 PE compared to SIA Engineering’s 16.9x FY19 PE and ST Engineering’s 18.5x FY19 PE.