PT Pakuwon Jati Tbk.

The stable outlook on Pakuwon reflects our view that the company will extend its record of careful growth over the next 12-24 months, at a time when acquisition opportunities may be abundant in a still subdued Indonesian property market. We expect the company to have good project execution and maintain consistent cash flow adequacy over the period. We could lower the rating if we expect Pakuwon's debt-to-EBITDA ratio to consistently remain above 2.5x. This would primarily happen if the company departs from its cautious financial policies. Given the high share of recurring income, a marked increase in leverage would require a steep rise in Pakuwon's capital spending or sizable land acquisitions. We may raise the rating if Pakuwon: (1) significantly

...Prudent financial policy will help to maintain financial position despite moderately high capital expenditure.We expect PT Pakuwon Jati Tbk. (Pakuwon) to maintain prudent financial management by refraining from significant debt-funded acquisitions and by financing capital expenditure through internal funds over the next 12-24 months. We therefore believe the company will maintain low leverage. Proposed Bekasi projects should have limited rating impact. We estimate the total construction cost of the project at Indonesian rupiah (IDR) 2 trillion, which will be spent over the next four years. Pakuwon is able to absorb the construction cost through internal cash flows, resulting in limited a impact on its leverage....

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