Syntax Literate: Jurnal Ilmiah Indonesia p�ISSN: 2541-0849
e-ISSN: 2548-1398
Vol. 7, No. 10, Oktober 2022
FEASIBILITY STUDY OF
INTEGRATED REST AREA PROJECT OF TAMAN MINI INDONESIA INDAH
Hendra Gunawan, Eka Pria Anas
Faculty of Economics and Business, Master of Management, Universitas Indonesia, Indonesia
Email:
[email protected], [email protected]
Abstract
The Integrated Rest Area Project of Taman Mini Indonesia Indah is one of transit oriented development in a strategic location because it�s the starting point for commuters from around the east and south of Jakarta (Pondok Gede, Bekasi, Cibubur, and surrounding areas).� Another strategic aspect is the existence of Inner City toal roads, Jagorawi toll roads, JORR toll roads, Halim Perdanakusuma Airport, LRT, Tamini Square Shopping Center, and Taman Mini Indonesia Indah, which are aimed for the upper and middle class with the target of young professionals and public. This research aims to determine the feasibility of the Integrated Rest Area Project of Taman Mini Indonesia Indah when viewed from the aspects of feasibility study by making an analysis of the sensitivity of the Integrated Rest Area of Taman Mini Indonesia Indah to the impact of variable changes on NPV with optimistic, most likely, and pessimistic scenarios, and analyze the impact of changes in capital structure on project financing that affect the project's NPV.� Based on the assumptions, the integrated Rest Area Project of Taman Mini Indonesia Indah is feasible to do because it produces a positive Net Present Value, IRR > discount factor, PI > 1 and Payback Period before the operating period.� The use of 40% of loans turns out to produce the most optimal NPV. This project is feasible.
Keywords: feasibility study, sensitivity analysis, capital structure.
Introduction
This
study aimed to determine the feasibility of the Integrated Rest Area Project of
Taman Mini Indonesia Indah when viewed from the aspects of feasibility study by
making an analysis of the sensitivity of the Integrated Rest Area of Taman Mini
Indonesia Indah to the impact of variable changes on NPV with optimistic, most
likely, and pessimistic scenarios, and analyze the impact of changes in capital
structure on project financing that affect the project's NPV.
PT
Jasa Marga Related Business
(JMRB) is one of the subsidiaries of PT Jasa Marga (Persero) Tbk (JSMR) which is engaged in other business fields
(non-toll road business). JMRB was established on January 15, 2013, under the
name PT Jasamarga Properti
(JMP). JMRB's most important milestone was in 2019, where JMRB received a
management contract for the management of other businesses in all toll road
rest areas owned by Jasa Marga.
JMRB
is here to maximize the business potential of other businesses around Jasa Marga Group toll roads.
Based on the results of the 2019 Annual Meeting, PT Jasa
Marga (Persero) Tbk has decided that JMRB will become one of the core
businesses of PT Jasa Marga
(Persero) Tbk. JMRB's
business includes the development of industrial estates, offices, residences,
service areas (TIPs) or commonly referred to as service areas; Including
management (Resshye, 2015).
Taman
Mini Integrated Rest Area (IT) Project is the first concept in Indonesia where
developing Type C Rest Area Jagorawi KM 5 Toll Road (Fauza, 2022). which focuses on Transit Oriented Development. Taman Mini Integrated IT is
projected to become an interconnection area for public transportation and
public spaces incorporated in one area
(Hendrawan & Pangihutan,
2016). As JMRB's innovation project in developing toll
road corridors, Taman Mini Integrated IT has main principles, both in terms of
business, economy, social, and environment (Ersa, 2022).
According
to Azhar (2022), the business feasibility study aims to determine the best
possible allocation of company resources into each business activity to get
maximum output. In other words, a business feasibility study aims to measure
the profitability of the resources used in a business. A business feasibility
study is a preparatory activity before running a real business. Business feasibility
studies can be divided into two stages, namely business identification and
making feasibility studies which include cost-benefit analysis of the business
Identification
of investment opportunities is obtained from formal studies that try to see opportunities
for investment needs in certain sectors. For example, we examine investment
opportunities that can be developed in the agriculture, health or property
sectors. This business identification is not yet the basis for allocating
investment funds. The analysis of investment opportunities in this regard is
still very rough. In this stage, various factors that will affect the business
and benefits that will be obtained by the company must be studied.
Business
feasibility studies are very important and become the basis for decision making
for someone who wants to build a company. A feasibility study is conducted to
see whether the product to be made is needed by the community in large enough
quantities and sustainably. Furthermore, whether the resources needed, such as
human resources, equipment, materials, and management systems can be provided
so that the business runs well and provides positive returns. If the present
value of the cash flow generated by the business is greater than the value of
the investment, then the project is worth running.
Theoretically,
with this research, it is hoped that the results can be used as a basis for
information for future studies. In addition, from a managerial aspect, it is
hoped that, with this research, it will be able to provide an overview to JMRB
management of the feasibility of this project, this can also be useful for
prospective creditors who will fund this project.
Literature Review
The
business feasibility study aims to determine the allocation of the company's
resources as best as possible into each business activity to get maximum
output. The preparation of a
feasibility study is the most crucial stage in the decision-making process
because it will affect the economy in general. The technicians will assess the
physical condition of the project and design it so that operating costs are
minimum.
According
to Narindra (2016), a project has five stages:
1.
Evaluation and planning stage.
The
main focus at this stage is estimating costs globally, for the purposes of
project decision analysis.
2.
Conceptual engineering stage.
At
this stage, the estimated project cost can be calculated in more detail based
on the estimated quantity of work and information on the unit price of work.
3.
Detailed engineering stage.
At
this stage there are already construction drawings, so that cost estimates can
be calculated in more detail by considering things such as construction
methods, preliminary work carried out, project site conditions and
determination of project implementation time.
4.
Construction stage.
At
this stage the work has been carried out based on the planning that has been
made in the previous stages.
5.
Project evaluation stage.
At
this stage the evaluation of the results or realization of the project is
carried out by comparing what happened in the field with the initial plan made.
Some
parties or institutions that require feasibility studies, namely Investors, Creditors / Banks, Government.� To run the
project well, an objective assessment is needed. According to Damodaran (2012), in general there are three project assessment methods, namely:
1.
Discounted Cash Flow Valuation,
which determines the value of assets by calculating the present value of
projected future cash flows.
2.
Relative Valuation, which
determines the value of assets based on comparable asset prices relative to
common variables of earnings, cash flow, book value, or sales.
3.
Contingent Claim Valuation,
which uses option pricing models to measure the value of assets that provide
option characteristics
To
conduct a business feasibility test,
several
calculations are carried out, such as calculating the NPV and IRR of the project. According
to Arjunan (2022), the technique used to calculate NPV (Net Present Value) is to discount
project cash flow instead of earning or income. When assessing a stand-alone
project, what is done is to discount the cash flow received from the project.
The basic investment rules generally state accepting a project if the NPV is
greater than zero and rejecting a project if the NPV is less than zero. This
NPV regulation provides good decision guidance because with a larger NPV will increase
the overall value of the company.
According
to Arjunan (2022), the rationale of the IRR method is to provide a number that concludes
the benefits of a project. The resulting figure does not depend on interest
rates that refer to the capital market. In general, investment regulations
mention accepting a project if the IRR is greater than the discount rate and
rejecting the project if the IRR is less than the discount rate. Because with
an IRR greater than the discount rate means the project will give a positive
NPV. By calculating IRR, it can be ranked several project choices that can
provide the largest IRR value.
To
answer the given research question is carried out through 3 stages. Each stage
is connected and confirmed with each other, resulting in a comprehensive study.
The stages of preparing this research are as follows:
1.
�Primary and secondary data collection
Primary and secondary data are
obtained from various relevant agencies, the Central
Bureau of Statistics, Bank Indonesia, and also from the management of PT. �JMRB in the form of information, statistical figures, and various other
supporting data. Surveys are also conducted to find out market data. The
collected data is then processed and analyzed systematically, resulting in
information relevant to the purpose of this study.
2.
Literature study
Literature study aims to obtain
an appropriate theoretical basis in analyzing the subject matter. The
literature study was conducted by reviewing the supporting literature in the
preparation of this research, namely Corporate Finance books covering topics of
discussion on Capital Budgeting, Sensitivity Analysis, and Real Estate Finance
and Investment.
3.
Data processing
At this stage, after all the
data needed to conduct the analysis is obtained, the author will analyze all
data relevant to the predetermined subject matter. The steps that will be
carried out in this stage are:
a.
First, this study will use
assumptions in calculating investment costs, revenues, operational costs and
projections based on data obtained from the internal management of PT. JMRB.
b.
Second, projecting the
company's cash flow during the preparation, construction, and marketing periods
to then obtain the results of Net Present Value, Internal Rate of Return,
Profitability Index and Payback Period from the project or investment based on
the financing scheme or structure proposed by the company (60% loans and 40% own capital).
c.
Third, conduct a sensitivity
analysis to changes in the rate of increase in property prices that may occur
in the future to then recalculate the Net Present Value, Internal Rate of
Return, Profitability Index and Payback Period of the project or investment as
consideration in assessing the feasibility of the project or investment.
This
research will discuss several aspect;
1.
General Aspects.
This aspect discusses issues related to site review,
supporting facilities, and development rules, SWOT Analysis, TOWS Matrix and
Business Model Canvas. In feasibility study document, a description of the
general aspects usually occupies the initial part of the document.
SWOT analysis is a strategic planning analysis
method used to monitor and evaluate the company's environment both external and
internal environment for a specific business goal. SWOT is an acronym for the
words: strengths, weaknesses, opportunities, and threats in a project or
business speculation. Those four factors make up the acronym SWOT. In the
Integrated Rest Area business planning, a SWOT analysis is obtained as follows:
TOWS and SWOT have different focuses. TOWS analysis
first studies and identifies the choice of strategy options to be made
externally.
The organization or company also studies the
opportunities that exist in the market and recognizes the possibilities that
can be done. This action allows the company to control and control threats that
are present from outside. SWOT focuses more on the internal conditions of the
company. The company looks at what strengths and weaknesses it has. After that,
they learn how external factors such as opportunities and threats affect the
company.
Other things is Business Model Canvas (BMC) /
strategy used by JMRB to map target consumers, finance, and infrastructure by
looking at Key Partners to Revenue Streams.
2.
Market Aspect
The market aspect discusses the study of potential
competitor projects in the scope of the construction and development of project
that include Retail and Hospitals. This is the basis for assumptions for the
calculation of NPV, IRR, Payback Period, and Profitability Index.
Retail Market Study. This study explores the
potential of competing projects in the scope of the construction and development
of Taman Mini Integrated IT, namely Retail.
Hospital Market Study. This study discusses the
potential of competing projects in the linkup of the construction and
development of Taman Mini Integrated IT, namely the Hospital.
3.
Technical Aspects
In this section, technical matters will be discussed
in detail which include technical development criteria, building configuration,
selling price, facilities, parking, and development time schedule.
Retail supporting facilities are intended to meet
the needs of various needs of the surrounding community, in addition to
surrounding residents can also be the target market of this retail support
facility. Given the attractive market opportunities from LRT, toll road users,
and Taman Mini Indonesia Indah users, and the surrounding communities, the
proposed retail support area is quite large, with a net area of 2,200 m2 with
an efficiency of 15%. Each retail unit with a standard size of 20-40 m2 so that
it can be used as specialty shops. This unit can also be combined so that it
becomes a caf� or the like. Thus, the market mix of tenants can vary. The
division of the retail area is divided into two floors. This is to facilitate
the division of zoning, in addition to maximizing the use of floors that are
adjusted to the height of the building and proportional buildings.
Parking Needs. The parking area is placed on the
western part of the building so that it is not visible from the front of the
Project. The author recommends parking in the form of buildings because it will
be cheaper than basement parking. In addition, the height of the building will
also benefit visibility so that the project can look more monumental.
4.
Financial Aspect
In this section, we will discuss in detail the
assumptions on which the calculation is based, the calculation of Net Present
Value, Internal Rate of Return, Profitability Index, and Payback Period,
Sensitivity Analysis, and Capital Structure.
Earnings Projections. The rental rate for each
tenant is made based on a sales level survey for the same type of project
around the project site. Here is the assumption for the revenue.
Discount Rate. The discount rate is calculated based
on WACC calculations. Each capital category is weighted proportionally. The
agreed funding scheme is 60% own capital and 40% bank loans.
Loan interest rates. The interest rate on bank loans
is calculated using the average investment interest rate of the Persero bank group in 2023. The loan interest rate uses
data from the Persero bank because the developer is a
subsidiary of one of the State-Owned Enterprises that always uses loans from
the company's bank. The loan interest rate is 8.5% obtained from the average
investment interest rate of the Persero bank in 2023.
Cost of equity. Cost of equity is calculated using the CAPM (Capital Asset Pricing Model) formula, where the risk freerate (Rf) uses Indonesia Government Bond yield data with a tenor of 5 years, the Rf value is based on the projected period of cash flow, beta (β) using the project industry beta and real estate which is 1.32 taken from Reuters, country risk premium (Rm � Rf) of 8.8% obtained from the Damodaran website which states the country risk premium for Indonesia is 8.8%.
Cost Assumption. Here are the assumptions used to
calculate development costs consisting of land costs, construction costs, and
pre-operation costs. Construction costs are obtained from the Cost Allocation
Plan (RAB) which is calculated based on estimates made by company.
Capital Structure Analysis. The selection of capital
structure as a source of funding will affect the Net Present Value generated by
the project. Funding sources can come from own capital and from loans where
each has disadvantages and advantages. The source of funding does not always
have to come from loans because the result of the loan is the amount of
interest that must be paid on the loan which of course will affect the
company's financial performance or cash flow. In this analysis, all assumptions
except the capital structure are considered fixed and unchanged.� In this analysis, the discount rate will be
adjusted for changes in the portion of own capital in the funding structure.
The maximum loan portion required by the bank is 60% of the total funding so
that changes in the capital structure are made to the equity portion. From the
simulated capital structures, it can be seen that the larger the portion of
loans used, the greater the NPV value, the greater the discount rate, and the
greater the IRR. This is in accordance with the concept of leveraging that can
maximize returns. So, it can be seen that the capital structure that produces
optimal NPV is 40% equity and 60% loans.
Risk of Changes in Loan Interest Rate. In current
conditions, there is a tendency for loan interest rates to rise due to the
increasingly saturated property market or fall due to improving macroeconomic
conditions so analysis needs to be carried out sensitivity to the risk of
changes in loan interest rates. Here are the scenarios based on the risk of
changes in loan interest rates: Most likely: loan interest rate of 8.5%,
Pessimistic: loan interest rate of 9.5% (up 1%), Optimistic: loan interest rate
of 7.5% (down 1%). It can see that the three optimistic, most likely, and
pessimistic scenarios all produce positive NPV and IRR > discount rate so
that�� this project can be categorized as
feasible even in the pessimistic scenario.
Project Feasibility Analysis. Based on
pre-determined assumptions, project feasibility can be calculated based on Net
Present Value (NPV), Internal Rate of Return (IRR), Payback Period, and
Profitability Index indicators.
Based on historical data, mall retail feasibility
ranges from 15-20%. From the table above, Taman Mini Indonesia Indah Integrated
IT project produces a positive NPV, IRR > from Discount Rate, Payback Period
of 13 years, and Profitability Index > 1 so that this project can be
categorized as FEASIBLE.
Conclusion
The
calculations for this research have not been fully completed, but by looking at
the 4 existing aspects, and especially the financial aspect, where the IRR
reaches 15.11% (Based on historical data, mall retail feasibility ranges from
15-20%), this project can be categorized as FEASIBLE.
