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Equity Research Property
See important disclosure at the back of this report www.danareksa.com
Tuesday, 28 November 2017
Property NEUTRAL
Best to be selective
We maintain our NEUTRAL stance on the property sector for 2018. We do not see much improvement next year as we believe investors will be reluctant to invest in property, while marketing sales will mostly be supported by real homebuyers. Our top picks in the sector are PWON and CTRA. In the case of PWON, we believe the company stands to benefit from the bright outlook for the retail property segment. This should help the company to outperform its peers and deliver strong financial performance. For CTRA, we also forecast robust financial performance in 2018 underpinned by revenues recognition from the bulk sales of serviced apartments, and (ii) the normalization of revenues recognition after two years of slow revenues recognition in 2015 and 2016. Marketing sales in 10M17: still underpinned by bulk sales. In 10M17, based on the indicative numbers, the aggregate marketing sales reached IDR18.7tn, up by IDR3.6tn compared to the marketing sales in 9M17. The aggregate marketing sales in October 2017 were mainly supported by: (i) commercial land plot sales of IDR1.6tn recognized by BSDE, (ii) the recognition of serviced apartment sales to Ascott group amounting to IDR675bn by CTRA. Given this, we believe that BSDE will achieve its FY17 marketing sales target of IDR7.2tn, while SMRA and PWON will fall slightly short of their respective full year targets (with 91-95% realization, respectively). Outlook for 2018: Remain NEUTRAL. We do not foresee much improvement in property demand in 2018 (we only expect aggregate marketing sales to grow by 7.3%yoy, slightly higher than our 2017 marketing sales growth estimate of 5.0%) as we believe that marketing sales will still be supported by real homebuyers rather than investors. We believe that investors will remain reluctant to invest in property considering: (i) limited price appreciation, (ii) the historically low rental yields, (iii) the considerable price gap between the primary and secondary property markets, (iv) uncertainty regarding the presidential elections, (v) scrutiny from the tax authorities which encourages people to place their money in banks or to invest in higher yielding assets, such as government bonds. The varied take-up rates imply that buyers remain selective. Based on our mapping of 31 launches conducted by companies under our coverage in 2017, we note that the take-up rates for the product launches range widely from one project to another. For instance, from 17 landed residential projects launched in 10M17, the take-up rates range from 10.6% (Amarine phase 2 with 85 units available for sale) to 100% (Alegria with 184 units available for sale). This clearly shows that customers remain selective when buying property. While we do not foresee much improvement in demand in 2018, we also believe that buyers will remain selective. PWON and CTRA are our Top Picks for 2018. Given our optimism on the outlook for the retail property segment, we believe PWON (BUY IDR720) - which has the highest contribution from this segment - will outperform its peers and deliver strong financial performance. In addition, we also expect CTRA (BUY IDR1,350) to deliver strong financial performance in 2018 on the back of revenues recognition from the bulk sales of serviced apartments, and (ii) the normalization of revenues recognition after two years of slow revenues recognition in 2015 and 2016. We also upgrade our recommendation for SMRA to BUY due to cheap valuation.
JAKPROP relative to JCI Index
PWON relative to JCI Index
CTRA relative to JCI Index
Antonia Febe Hartono, CFA (62-21) 29 555 888 ext.3504 [email protected] Natalia Sutanto (62-21) 29 555 888 ext.3508
Target Price
Market Cap. P/E (x) P/BV (x) ROE (%)
Company Ticker Rec (Rp) (RpBn) 2017F 2018F 2017F 2018F 2017F
Alam Sutra ASRI IJ HOLD 400 7,585 5.3 7.2 0.9 0.8 18.6
Bumi Serpong Damai BSDE IJ BUY 2,000 32,334 8.2 11.6 0.7 0.7 12.0
Ciputra Development CTRA IJ BUY 1,350 22,458 24.0 14.9 1.6 1.5 7.1
Pakuwon Jati PWON IJ BUY 720 30,822 16.1 13.0 3.0 2.5 20.1
Summarecon Agung SMRA IJ BUY 1,100 12,840 44.7 34.0 2.0 1.9 4.5
450
475
500
525
550
11/2
8/2
016
12/2
6/2
016
1/2
3/2
017
2/2
0/2
017
3/2
0/2
017
4/1
7/2
017
5/1
5/2
017
6/1
2/2
017
7/1
0/2
017
8/7
/2017
9/4
/2017
10/2
/2017
10/3
0/2
017
11/2
7/2
017
-5.0
1.0
7.0
13.0
19.0
25.0
Jakprop Index (LHS) Relative to JCI Index (RHS) %
-10
5
20
35
50
500
590
680
770
11/2
8/2
016
12/2
6/2
016
1/23
/201
7
2/20
/201
7
3/20
/201
7
4/17
/201
7
5/15
/201
7
6/12
/201
7
7/10
/201
7
8/7/
201
7
9/4/
201
7
10/2
/201
7
10/3
0/2
017
11/2
7/2
017
PWON (LHS) Relative to JCI Index (RHS)%
1,000
1,125
1,250
1,375
1,500
11/2
8/2
016
12/2
6/2
016
1/2
3/2
017
2/2
0/2
017
3/2
0/2
017
4/1
7/2
017
5/1
5/2
017
6/1
2/2
017
7/1
0/2
017
8/7
/2017
9/4
/2017
10/2
/2017
10/3
0/2
017
11/2
7/2
017
-5
10
25
40
55
CTRA (LHS) Relative to JCI Index (RHS)%
2
www.danareksa.com See important disclosure at the back of this report
Valuation Since property demand is not expected to improve much in 2018, we use the +1SD target discount to NAV to value the property companies under our coverage. We make an exception however for PWON (BUY IDR720), as the company has the largest proportion of recurring revenues, making it more resilient, in our view. Besides PWON, we also like CTRA (BUY IDR1,350) given that it should record solid financial performance in 2018 even though its aggregate marketing sales are expected to be flat (+0.5%yoy). PWON (BUY IDR720) We reiterate our BUY call on PWON with a target price of IDR720 (SOTP based valuation with WACC of 12.6%, Terminal Growth of 4.0%, and target discount to NAV of 40%). In 2018, we expect PWON’s marketing sales to grow 11.1% yoy to IDR2.6tn, supported by the launch of its new flagship project in Jakarta. PWON’s financial performance should also outperform following: (i) the full recognition of revenues from the Pakuwon Mall Extension and Tunjungan Plaza 6, and (ii) the recognition of accounting revenues from its apartment projects
Exhibit 1. PWON’s historical discount to NAV Exhibit 2. PWON’s forward trailing P/E
Source: Bloomberg, Danareksa Sekuritas estimates Source: Bloomberg, Danareksa Sekuritas estimates
CTRA (BUY IDR1,350) We reiterate our BUY call on CTRA with a target price of IDR1,350 (SOTP based valuation with WACC of 12.6%, Terminal Growth of 4.0%, and target discount to NAV of 63%, based on historical +1SD). While we expect CTRA to record flat marketing sales of IDR7.3tn (+0.5%yoy) in 2018, should we exclude the one-off sales of IDR675bn in 2017, then our marketing sales estimate implies a 10.8%yoy increase, supported mainly, we believe, by the launch of new projects in South Jakarta and East Jakarta next year. We also expect CTRA’s financial performance to outperform on the back of: (i) revenues recognition from the bulk sales of service apartments in 4Q18, (ii) the normalization of revenues recognition after two years of slow revenues recognition in 2015 and 2016.
-2SD
-1SD
Mean
+2SD
+1SD
35.0%
40.0%
45.0%
50.0%
55.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
-1sd
mean 12.54
1sd
2sd
-2sd5
7
9
11
13
15
17
19
21
Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17
(x )
3
www.danareksa.com See important disclosure at the back of this report
Exhibit 3. CTRA’s historical discount to NAV Exhibit 4. CTRA’s forward trailing P/E
Source: Bloomberg, Danareksa Sekuritas estimates Source: Bloomberg, Danareksa Sekuritas estimates
BSDE (BUY IDR2,000) We have a BUY recommendation on BSDE with a target price of IDR2,200 (SOTP based valuation with WACC of 13.3%, Terminal Growth of 4.0%, and target discount to NAV of 68%, based on historical +1SD). We believe that with its abundant land bank of 4,200ha, the company has the flexibility to offer attractive products which will help spur marketing sales. Thus, we expect BSDE could maintain its historically high marketing sales of IDR7.3tn (+0.2%yoy) in 2018. Positioned as the developer with the lowest gearing ratio in the sector (26.3% in 2018F vs. its peers’ average of 45.8%), we believe BSDE will be less negatively impacted even though we expect normalization of its financial performance after the stellar performance in 2017.
Exhibit 5. BSDE’s historical discount to NAV Exhibit 6. BSDE’s forward trailing P/E
Source: Bloomberg, Danareksa Sekuritas estimates Source: Bloomberg, Danareksa Sekuritas estimates
SMRA (BUY IDR1,100) We have a BUY recommendation on SMRA with a target price of IDR1,100 (SOTP based valuation with WACC of 11.6%, Terminal Growth of 4.0%, and target discount to NAV of 65%, based on historical +1SD). In 2018, we expect SMRA to book modest marketing sales growth of 8.7%yoy supported by the launch of its new township, Summarecon Makassar. We believe with the recent share pressure following announcement on the deletion of SMRA from MSCI Index, has resulted on the SMRA’s share price to be undervalued. Fundamental wise, we expect SMRA to record strong marketing sales performance in November 2017 on the back of recognition from Verdi and Viveldi launching (IDR600bn). At the moment, SMRA is trading at 73.1% discount to my NAV, nears to its historical +2SD discount of 75.4%.
-2SD
-1SD
Mean
+2SD
+1SD
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
-1sd
Mean 16.42
1sd
2sd
-2sd
5
10
15
20
25
30
35
Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17
(x )
-2SD
-1SD
Mean
+2SD
+1SD
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
-1sd
mean 11.86
1sd
2sd
-2sd4
6
8
10
12
14
16
18
20
22
Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17
(x )
4
www.danareksa.com See important disclosure at the back of this report
Exhibit 7. SMRA’s historical discount to NAV Exhibit 8. SMRA’s forward trailing P/E
Source: Bloomberg, Danareksa Sekuritas estimates Source: Bloomberg, Danareksa Sekuritas estimates
ASRI (HOLD IDR400) We have a HOLD recommendation on ASRI with a target price of IDR400 (SOTP based valuation with WACC of 12.0%, Terminal Growth of 4.0%, and 73% discount to NAV, based on historical +1SD). The company’s marketing sales are expected to outperform its peers with 36.5%yoy growth in 2018, supported by more land sales to CFLD (100ha in 2018 vs. 50ha in 2017). Nonetheless, the revenues from the transaction will only be recognized in 2019. Thus, we expect ASRI to record sluggish financial performance in 2018 with less revenues recognition from CFLD sales (IDR1.0tn of sales to be recognized in 2018 vs. IDR1.4tn in 2017).
Exhibit 9. ASRI’s historical discount to NAV Exhibit 10. ASRI’s forward trailing P/E
Source: Bloomberg, Danareksa Sekuritas estimates Source: Bloomberg, Danareksa Sekuritas estimates
-2SD
-1SD
Mean
+2SD
+1SD
35.0%
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
-1sd
Mean 35.58
1sd
2sd
-2sd
-40
-20
0
20
40
60
80
100
Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17
(x )
-2SD
-1SD
Mean
+2SD
+1SD
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
85.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
-1sd
mean 11.69
1sd
2sd
-2sd
0
5
10
15
20
25
Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17
(x )
5
www.danareksa.com See important disclosure at the back of this report
Reality check on 2017 9M17 marketing sales: underpinned by bulk sales The aggregate marketing sales of the companies under our coverage in 9M17 reached IDR15.1tn, up by 11.6%yoy. This figure is 80.7% of our full year marketing sales target of IDR23.2tn and 69.8% of the management’s marketing sales target of IDR26.8tn. Note, however, that the 9M17 marketing sales figure includes two sizable one-off commercial land sales amounting to IDR840bn in 1Q17 and IDR1.6n in 3Q17. Excluding these one-off transactions, the 9M17 marketing sales reach only IDR12.7tn, down 6.2%yoy. The sluggish sales clearly show that overall property demand has been lethargic this year. Exhibit 11. Aggregate 9M17 marketing sales of companies under our coverage
Source: Companies, Danareksa Sekuritas
Indicative October 2017 marketing sales: still backed by bulk and land sales In 10M17, based on the indicative numbers, aggregate marketing sales reached IDR18.7tn, up by IDR3.6tn compared to the marketing sales in 9M17. The aggregate 10M17 marketing sales are 80.7% of our full year target and 69.8% of management targets.
Exhibit 12. Indicative marketing sales in 10M17 Exhibit 13. Achievement to target
Source: Companies, Danareksa Sekuritas estimates Source: Companies, Danareksa Sekuritas estimates
BSDE recorded the highest monthly marketing sales of IDR2.0tn in October 2017, supported by: (i) commercial land plot sales of IDR1.6tn, and (ii) proceeds from the “Price Lock” program of IDR400bn. In second place was CTRA which recorded additional marketing sales of IDR979bn, supported by marketing sales recognition from the service apartment sales to Ascott group amounting to IDR675bn.
4.3 4.1
1.6 2.2
1.3
5.3 4.8
1.8 2.0 1.3
6.2 6.8
2.0 2.3 1.4
-
3.0
6.0
9.0
CTRA BSDE PWON SMRA ASRI
in IDR tn
9M16 9M17 10M17
85.9%93.8%
85.1%
69.3%
45.7%
73.3%
94.2%
77.7%
65.6%
27.4%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
CTRA BSDE PWON SMRA ASRI
to our's target to management's target
4.3 4.1
1.6 2.2
1.3
5.3 4.8
1.8 2.0 1.3
21.5%17.1%
12.5%
-9.6%
-4.2%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
-
3.0
6.0
9.0
CTRA BSDE PWON SMRA ASRI
in IDR tn
9M16 9M17 Our target Management's target yoy changes (RHS)
6
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BSDE is likely to achieve its FY17 marketing sales target Looking at the indicative 10M17 marketing sales, we believe that BSDE will achieve its FY17 marketing sales target of IDR7.2tn, supported by the “Price Lock” program that will last up to December 2017, bolstered by regular inventory sales as well. However, we believe that the marketing sales of SMRA and PWON will fall slightly short of their respective full year targets (with 91-95% achievement). Note that SMRA’s marketing sales in 10M17 only reached 69.3% of our full year target (IDR3.3tn). Nonetheless, sales should pick up in November 2017, supported by marketing sales recognition from Verdi and Vivaldi (402 units available for sale, 90.0% take up rate, and marketing sales proceeds of IDR600bn) as well as from two product launches in the pipeline (shop houses in Summarecon Bandung and landed residential property in Summarecon Karawang). As for PWON, we expect its marketing sales to reach IDR2.4tn in 2017 vs. the management’s target of IDR2.6tn, supported by the sound performance in 10M17 (85.1% of our full year target) as well as one apartment launching in Pakuwon Mall which is in the pipeline.
Exhibit 14. Launching under pipeline in 4Q17
Launching Type of project Names Area Available for
sale (units)
Price ticket (in IDR
bn/unit) Remarks
PWON Dec-17 Apartment La Vis condominium in
Pakuwon Mall Surabaya 300 2.0 In the first phase will offer 60
units for sale BSDE
Oct-17 Landed Residential The Savia Serpong 192 1.1-1.7 90 units have been sold Jan-18 Landed Residential Jadeite Serpong 124 4.2-11.7
SMRA
Oct-17 Landed residential Veldi - Symphonia Serpong 243 1.1-2.3 232 units has been sold Oct-17 Landed residential Vivaldi - Symphonia Serpong 159 2.0-3.2 130 units has been sold Nov-17 Shophouses Ruby Commercial Bandung 87 2.7-6.5 86 units has been sold Dec-17 Landed residential Kalista Homes Karawang 340 0.5-0.7 CTRA
Dec-17 Apartment Newton 2 Jakarta 650 1,000-1,500 NUP only less than 50% Dec-17 Apartment Citra Plaza Batam,
Nagoya Batam 650 500
Source: Companies, Danareksa Sekuritas
Lower mortgage rates not having much impact This year, Bank Indonesia has cut its reference rate by 50bps to bolster economic growth. The lower reference rate combined with competition among mortgage lenders has prompted banks such as CIMB Niaga (BNGA) to lower their normal mortgage rates by around 25bps. Some mortgage lenders, despite not lowering their normal mortgage rates, have offered various promotions. BMRI, for instance, offers a fixed rate for a few years at 5.99%. While the lower mortgage rate has resulted on the higher mortgage growth in September (+10.6%yoy in September 2017 vs. 8.1% in 2016), this has not sufficient to boost the marketing sales of companies under our coverage considering the negative marketing sales growth (excluding one-off sales) in 9M17. We believe the higher mortgage was supported by (i) mid to low price ticket item, as total outstanding subsidized mortgage of BBTN grew by 30.8%yoy in September 2017, (ii) improvement transaction on the secondary market. Based on our discussion with the local property brokers, they stated that the transaction value for the secondary market has improved by 10-20%yoy.
7
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Exhibit 15. Consumer loan interest rate Exhibit 16. Mortgage market share
Source: Bank Indonesia Source: Companies, Bank Indonesia
Exhibit 17. Outstanding mortgage balance
Source: Bank Indonesia
Exhibit 18. Mortgage rate tracker
12.4
12.6
12.8
13.0
13.2
13.4
13.6
13.8
Jan-17 Mar-17 May-17 Jul-17 Sep-17
State Banks Regional Gov. Banks
Private National Banks Commercial Banks
42%
8%7%
20%
9%
14%
BBTN BMRI BNGA BBCA BBNI Others
0%
5%
10%
15%
20%
25%
30%
35%
0
100
200
300
400
500
2008 2009 2010 2011 2012 2013 2014 2015 2016 Sep-17
Rp tn
Mortgage balance (LHS) Growth (RHS)
Rate Rate Rate
per Feb '17 per Oct '17 per Nov '17
BMRI Promotion - up to 28/02/17 Promotion - up to 31/12/17 Promotion - up to 31/12/17
7.75% Fixed 2y
6.99% Fixed 3y 6.19% Fixed 3y
Normal rate Normal rate Normal rate
9.50% Fixed 1y 9.50% Fixed 1y 9.50% Fixed 1y
9.75% Fixed 2y 10.75% Fixed 2y 10.75% Fixed 2y
7.77% Fixed 2y + 7.77% Fixed 2y +
8.77% Fixed 3y - only for priori ty customers 8.77% Fixed 3y - only for priori ty customers
8.50% Fixed 5y - only for priori ty customers 8.50% Fixed 5y - only for priori ty customers
BBCA Promotion - up to 28/04/17 Promotion - up to 29/12/17 Promotion - up to 29/12/17
6.25% Fixed 3y 7.00% Fixed 2y 7.00% Fixed 2y
8.75% Cap 3y 8.00% Cap 3y 8.00% Cap 3y
Normal rate Normal rate Normal rate
8.75% Fixed 1,2 y 8.75% Fixed 1,2 y 8.75% Fixed 1,2 y
8.50% Fixed 3y 8.50% Fixed 3y 8.50% Fixed 3y
9.00% Fixed 5y 9.00% Fixed 5y 9.00% Fixed 5y
8.25% Fixed 3y + 8.25% Fixed 3y + 8.25% Fixed 3y +
10.00% Cap 2y 10.00% Cap 2y 10.00% Cap 2y
BBNI Promotion - up to 31/03/17 Promotion - up to 29/12/17 Promotion - up to 29/12/17
8.40% Fixed 5 y 8.75% Fixed 5 y 8.75% Fixed 5 y
Normal rate Normal rate Normal rate
9.50% Fixed 1y 9.50% Fixed 1y 9.50% Fixed 1y
10.50% Fixed 2y 10.50% Fixed 2y 10.50% Fixed 2y
RemarksRemarksRemarksBanks
8
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Source: Danareksa Sekuritas
Rate Rate Rate
per Feb '17 per Oct '17 per Nov '17
BBTN Subsidized Subsidized Subsidized
5.00% Fixed to 20 years 5.00% Fixed to 20 years 5.00% Fixed to 20 years
Promotion - up to 31/3/17 Promotion - up to 31/12/17 Promotion - up to 31/12/17
8.75% fixed 1y 8.50% Fixed 1y 8.50% Fixed 1y
9.00% fixed 2y 9.00% Fixed 2y 9.00% Fixed 2y
9.50% fixed 3y 9.50% Fixed 3y 9.50% Fixed 3y
10.25% fixed 5y 10.25% Fixed 5y 10.25% Fixed 5y
Normal rate Normal rate Normal rate
9.75% Fixed 1y <200mn 9.75% Fixed 1y <200mn 9.75% Fixed 1y <200mn
9.90% Fixed 1y >200mn - 350mn 9.90% Fixed 1y >200mn - 350mn 9.90% Fixed 1y >200mn - 350mn
9.90% Fixed 1y >350mn 9.90% Fixed 1y >350mn 9.90% Fixed 1y >350mn
BNGA Top developer (PWON, CTRA, ASRI, BSDE)
6.65% Fixed 3y
6.99% Fixed 5y
Normal rate Normal rate
8.00% Fixed 1y 7.75% Fixed 1y 7.75% Fixed 1y
8.25% Fixed 3y 8.00% Fixed 3y 8.00% Fixed 3y
8.50% Fixed 5y 8.25% Fixed 5y 8.25% Fixed 5y
RemarksRemarksRemarksBanks
9
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Property outlook for 2018: not much improvement We maintain our NEUTRAL stance on the property sector as we do not foresee much improvement in property demand in 2018. On an aggregate basis, we expect the marketing sales of companies under our coverage to post moderate growth of 7.3%yoy, slightly higher than our 2017 marketing sales growth estimate of 5.0%. We believe that marketing sales will still be supported by real home buyers rather than investors. Should we exclude the expected one-off transaction as well as commercial land sales transactions, we expect the aggregate marketing sales to grow by 7.7%yoy, largely supported by the expected launch of greenfield projects in 2018 (SMRA will launch Summarecon Makassar, PWON will launch a project in Jakarta, CTRA will launch projects in East Jakarta and South Jakarta) as we assume flat marketing sales from the existing projects. In regard to the pricing, we still assume inflationary price adjustments of 3.5%yoy. Exhibit 19. Aggregate marketing sales of companies under our coverage
Source: Companies, Danareksa Sekuritas
Investors to remain reluctant to invest in property From the perspective of investors, we believe they will not see property as an attractive investment instrument in 2018 considering: (i) limited price appreciation, (ii) historically low rental yields, (iii) the considerable price gap between the primary and secondary property markets, (iv) uncertainty regarding the presidential elections, (v) scrutiny from the tax authorities. Given these factors, we believe investors will prefer to save or invest in higher yielding assets, such as government bonds. #1. Limited price appreciation We believe that with limited expected appreciation in real prices, investors will be reluctant to invest in property. Our argument appears to be backed by our analysis of historical price appreciation and expected marketing sales growth going forward. We note that price appreciation (in the period T+1) will drive demand from investors in the period T (see exhibit 20). We note that the average land price appreciation for the companies under our coverage was 5.6% in 9M17. With an inflation rate assumption of 3.5%, we estimate that the real price appreciation of property only reached 2.1% - the lowest real price appreciation in the last 8 years. Looking ahead to 2018, we estimate that the price appreciation will be limited to 3.5%, only slightly higher than the inflation rate forecast by Danareksa Research Institute of 2.5-3.5%. This implies only 0-1% real price appreciation. As such, we believe that investors are unlikely to view property as an attractive investment instrument.
21.0
26.8 27.125.3
22.123.2
24.9
-20%
0%
20%
40%
60%
-
5
10
15
20
25
30
2012 2013 2014 2015 2016 2017F 2018F
%IDR tn
CTRA ASRI SMRA BSDE PWON Growth (RHS)
10
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Exhibit 20. Price appreciation and marketing sales growth *based on average residential price increase of SMRA, CTRA, and ASRI
Source: Companies, Bank Indonesia, Danareksa Sekuritas
#2. Historically low rental yields The effective rental yield in Jakarta currently stands at only 4-4.2% in CBD and Non-CBD areas, considerably lower than the annual saving deposit rates that stand at 6.2-8.2%. Over the near term, we do not see much room for improvement in rental yields. Hence, with rental yields likely to stay flat, we believe that investors will be reluctant to invest in property and instead prefer higher yielding saving deposits. To assess the rental yields in Jakarta, we use the apartment rental asking rates and average apartment prices provided by Colliers Indonesia. We acknowledge that the apartment rental asking rates published are skewed towards serviced apartment rental rates (historically serviced apartments account for more than 60% of the average apartment rental asking rates in the CBD area) that are typically 40% higher than the asking rates for non-serviced apartments. We interpolate the asking rental rate to estimate the rental rate for non-serviced apartments. Based on this data, we estimate that the annual rental yields in the CBD area only stand at 4.9%, while for the Non-CBD area, we estimate that the annual rental rate only reached 5.2%. Exhibit 21. Rental yields in the CBD area
*Based on Danareksa’s data interpolation from the rental rate published by Colliers and the historical proportion of non-serviced apartment rate to total service and non-serviced apartments
Source: Colliers, Bank Indonesia, Danareksa Sekuritas
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
11.0%
2012 2013 2014 2015 2016 2Q17Service + non-service apartment Non-service apartment*
Min. Saving deposit rate Max. Saving deposit rate
19.0%
7.8%
-6.0%
-20.6%
-11.6%
-30.0%
-20.0%
-10.0%
0.0%
10.0%
20.0%
30.0%
0.0%
20.0%
40.0%
60.0%
80.0%
2012 2013 2014 2015 2016 9M17
Residential price increase* (LHS) Infation rate (LHS)
Real price increase (LHS) Marketing sales growth lag 1 period (RHS)
11
www.danareksa.com See important disclosure at the back of this report
Exhibit 22. Rental yields in the CBD area
*Based on Danareksa’s data interpolation from the rental rate published by Colliers and the historical proportion of non-serviced apartment rate to total serviced and non-serviced apartments
Source: Colliers, Bank Indonesia, Danareksa Sekuritas
Looking at the historical trends, the rental yields have trended down from their peak in 2013 (the yield reduction reached 1.3-1.4%, while in non-CBD areas it reached 2.5%). Should we take into account the real transactions rate, the rental yield reduction is even more severe (2.3-2.4%), thus implying a rental yield of 4.0% in the CBD and 4.2% in Non-CBD areas. During peak periods, property owners can increase their rental rates by 8-10% from the published asking prices given high demand. By contrast, however, Colliers noted that during periods of sluggish demand, owners give 10-20% discounts on the published rental rates in a bid to increase occupancy rates that currently only stand at 70.2% - the lowest in the past six years. Going into 2018, we do not expect much improvement in the occupancy rate for leased apartments, which, in turn, suggests a flattish rental yield.
1. Foreign workers mainly work on projects Although the Ministry of Employment stated that the number of foreign workers in Indonesia rebounded in 2016 (+7.5%yoy), we note that the increase was mainly driven by workers from China (+21.4%yoy), who are mainly employed to work in projects such as power plants – meaning they do not play a role in driving the occupancy rate for leased apartments.
Exhibit 23. Number of foreign workers
Source: Various sources
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
10.0%
2012 2013 2014 2015 2016 2Q17Service + non-service apartment Non-service apartment*
Min. Saving deposit rate Max. Saving deposit rate
72,407 68,957 68,762 69,025
74,183
-8.0%
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2012 2013 2014 2015 2016
Other foreign workers China workers Growth, yoy (RHS)
12
www.danareksa.com See important disclosure at the back of this report
2. Huge supply of apartments in the pipeline With additional apartment supply of 55,087 units in the pipeline (even though not all of the units will be available for lease), we still expect the additional supply to be considerable, thus putting further downward pressure on the occupancy rate and rental yield. (please see property segment: apartment page 21 for more detail).
#3. Considerable price gap between the primary and secondary markets to persist The price gap between the primary and secondary markets in Jakarta currently ranges from 5.2-30.3% - slightly wider than in September (0.6-28.0%). Given this, we believe that investors will be reluctant to invest in property, particularly with limited price appreciation in the offing, as the discount they need to offer in the secondary market to monetize the capital gain will leave little room for profits. To assess the price gap between the primary and secondary markets, we compiled data on offered prices from rumahdijual.com by area. For each area, we took 10-16 samples. Meanwhile, to determine the implied land price, we use a construction cost of IDR5-6.5mn/sqm, depending on the latest construction costs published by companies. Subsequently, we compare the implied land price after VAT from the secondary market to the primary land price after VAT offered by companies in their latest launches. Based on our findings, we conclude that the price gap in Greater Jakarta ranges from 2.1-30.3%, with the largest price gap seen in BSD City phase 2. Nonetheless, it should be noted that around 73% of our samples in BSD City phase 2 consist of products that have been launched before 2012; hence, the assumption of a IDR6mn/sqm construction cost will understate the value of the land. If we exclude these older projects, the average secondary land price in BSD stands at IDR14.0mn/sqm, or only a 11.1% discount to the primary market.
Exhibit 24. Price gap of primary and secondary market (after VAT)
Source: Companies, rumahdijual.com
Should we assess the price trend in the secondary market over the past three months (September to November), we note that the secondary market price in Greater Jakarta posted a slight decline of 3.1-5.7%. This has resulted in a slightly wider gap between the primary and secondary markets. We note that the largest increase was seen in the Alam Sutera area (4.7ppt), which has higher selling prices of IDR2.7-9.6bn/unit. We believe that with the weak market demand, it will be more difficult to sell properties with high selling prices, thus meaning that higher discounts are needed to attract buyers.
-30.3%
-2.1%
-17.4%
-8.1%
-2.8% -3.4% -2.7%
-35%
-30%
-25%
-20%
-15%
-10%
-5%
0%
0
2
4
6
8
10
12
14
16
18
BSD City -Phase 2
GadingSerpong
Alam Sutera SummareconBekasi
CitralandSurabaya(South)
Pakuwon City GrandPakuwon
% discount to primaryin IDRmn/sqm
Average secondary price Primary price Discount/premium to primary (RHS)
13
www.danareksa.com See important disclosure at the back of this report
Exhibit 25. Price trend in the secondary market
Source: rumahdijual.com
Exhibit 26. Trend of price gap between primary and secondary market
Source: Companies, rumahdijual.com
#4. Uncertainty regarding the presidential elections We strongly believe that political uncertainty related to the presidential elections will reduce buying intentions for houses. Our argument is backed by the historical 6 months moving average of the house buying intentions index published by Danareksa Research Institute that tends to be negative one-year prior to elections. We expect a similar trend to be seen one year prior to the presidential elections in early 2019. Exhibit 27. House buying intention Source: Danareksa Research Institute
-3.1%-2.7%
-4.7%
0.2%
-0.9%-0.5%
-4.4%-5.0%
-4.0%
-3.0%
-2.0%
-1.0%
0.0%
1.0%
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
BSD City -Phase 2
GadingSerpong
Alam Sutera SummareconBekasi
CitralandSurabaya(South)
Pakuwon City GrandPakuwon
in IDR/sqm
Sep-17 Oct-17 Nov-17 Changes (RHS)
-35.0%-30.0%-25.0%-20.0%-15.0%-10.0%
-5.0%0.0%5.0%
BSD City -Phase 2 Gading Serpong Alam Sutera
SummareconBekasi
CitralandSurabaya(South) Pakuwon City
GrandPakuwon
Sep-17 Oct-17 Nov-17
(40.0)
(20.0)
0.0
20.0
40.0
60.0
80.0
100.0
Apr-08 Apr-09 Apr-10 Apr-11 Apr-12 Apr-13 Apr-14 Apr-15 Apr-16
Election 2009 Election 2014
14
www.danareksa.com See important disclosure at the back of this report
#5. Scrutiny from the tax authorities We strongly believe that close scrutiny from the tax authorities will discourage investment in property considering that it creates uncertainty in the investment environment. Note that in a bid to boost the tax to GDP ratio that reached only 10.3% in 2016 to 10.9% in 2017 and 11.5% in 2018, the Ministry of Finance introduced taxation reforms, both regulatory and administrative through extensification (increasing the compliance of existing taxpayers) and intensification (increasing the number of taxpayers). Exhibit 28. Tax revenue target Source: Ministry of Finance
With the ambitious tax revenues target translating into 14.5%yoy growth in 2017 (note, however, that because the tax revenues in 2016 included tax amnesty penalties of IDR107tn, then the government’s tax collection target is up 25.0%yoy should this amount be excluded), tax officers have been aggressively pursuing taxpayers deemed to have been evading tax, particularly non-participants in the Tax Amnesty program. Based on our channel checks, tax officers have come to several residential areas to check tax compliance. This has occurred not only in Jakarta but also in Tangerang and Surabaya. According to recent news, the Directorate General of Taxation will review the data of 770,000 taxpayers. Most of these taxpayers are non-participants in the Tax Amnesty program. From these taxpayers, the tax office has issued inspection instructions for 951 taxpayers and concluded inspections on 68 of them. These inspections have found unreported assets amounting to IDR5.7bn. Going into 2018, we expect that the tax authorities will continue to closely scrutinize taxpayers. The government seeks tax collection growth in 2018 to reach 9.3%yoy. Investors prefer to save rather than to invest From the point of view of investors, with potential price appreciation in the primary market of only 3-5%/pa, coupled with an additional rental yield of 4.0-4.2%/pa - yet with a secondary price gap of 2.1%-8.1% - we estimate that the potential investment return from property investment will only reach 5-7%/pa, or considerably lower than the current one-year saving deposits rate of 6.1-8.0%. We believe that most investors are aware of this situation, meaning they have a preference for time deposits and securities. As of September 2017, time deposits grew by 11.3%yoy according to Bank Indonesia data - the briskest pace in the past three years. Meanwhile, securities other than shares have seen strong growth of 51.7%yoy, the highest in the past four years.
11.9% 11.9%
11.4%
10.7%
10.4%
10.8%
11.5%
9.5%
10.0%
10.5%
11.0%
11.5%
12.0%
12.5%
600
800
1,000
1,200
1,400
1,600
1,800
2012 2013 2014 2015 2016 2017F 2018F
in IDRtn
Tax revenue (LHS) Tax to GDP ratio (RHS)
15
www.danareksa.com See important disclosure at the back of this report
Exhibit 29. Potential return from investing in property sector
*We use the real price appreciation in 9M17
**We use the smallest price gap of primary to secondary market in Gading Serpong of 2.1%
Source: Companies, rumahdijual.com, Bank Indonesia, Colliers, Danareksa Sekuritas
Exhibit 30. Time Deposit balance outstanding Exhibit 31. Securities other than shares balance outstanding
Source: Bank Indonesia Source: Bank Indonesia
Only real homebuyers can be counted on While demand for property from investors may be sluggish, we are more optimistic on the demand from real homebuyers. With the average prices offered by companies under our coverage ranging from IDR822-3,757mn/unit, we estimate that only 4.1% of the total households in Indonesia can afford to buy such properties (assuming the need for a disposable income above USD15,000/pa, a 9% mortgage rate, installments over 15 years, and a 20% down payment).
Exhibit 32. Average property price ticket for the companies under our coverage (9M17)
Source: Companies
0%
5%
10%
15%
20%
25%
-
500
1,000
1,500
2,000
2,500
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
9M
17
in IDRtn
Time depositGrowth of time deposit (RHS)Growth of M2 (RHS)
-50%
0%
50%
100%
150%
200%
-
5.0
10.0
15.0
20.0
25.0
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
9M
17
in IDRtn
Securities other than sharesGrowth in securities other than shares (RHS)Growth of M2 (RHS)
3,757
822
- 500
1,000 1,500 2,000 2,500 3,000 3,500 4,000
PakuwonCity
AlamSutera
Summ.KelapaGading
GrandPakuwon
CitraGarden Jakarta
Summ.Serpong
Summ.Bandung
Citraland PasarKemis
Summ.Bekasi
CitraRaya
Tangerang
in IDRmn/unit
16
www.danareksa.com See important disclosure at the back of this report
Exhibit 33. Estimated prices of affordable housing by disposable income *estimated based on 9% mortgage rate, 15 years of mortgage installment, and 20% of down
payment.
Source: Euromonitor, Danareksa Sekuritas
Euromonitor expects the number of households with disposable income higher than USD15,000/pa to increase by 3.0mn in 2018, or higher than the expected increase in 2017 of 2.6mn households, supported by both brisker expected nominal GDP growth (10.1% in 2018 vs. 9.8% in 2017) and a burgeoning middle class. These conditions should support the marketing sales of the companies under our coverage. Exhibit 34. Number of household with dissposable income higher than USD15,000/pa (in million) Source: Euromonitor
320
94
12
4
Disposable income (USD/year)
> USD 35,000
USD 15,000 - 35,000
USD 5,000-15,000
< USD 5,000
Affordable housing price (IDRmn/unit)*
> Rp1,550mn
Rp650mn-1,550mn
Rp200mn-650mn
< Rp200mn
2016
15.8
39.2
2.6 3.0
3.7
4.3
4.6
-
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
2016 2017 2018 2019 2020 2021 2022
Number of household (mn)
17
www.danareksa.com See important disclosure at the back of this report
Varied take-up rates imply that customers remain selective We have tried to map the take-up rates for each product launching conducted by the companies under our coverage. On an aggregate basis, we note that 31 launches were conducted in 10M17, largely dominated by landed residential projects and apartments. Compared to the number of launches in 2016 (only 28), we note that developers have been more aggressive in undertaking product launches in 2017. Nonetheless, in terms of the take-up rate, we note that it ranges widely from one project to another. For instance, from 17 landed residential project launches in 10M17, the take-up rate ranged from 10.6% (Amarine phase 2 with 85 units available for sale) to 100% (Alegria with 184 units available for sale). This clearly shows that customers remain selective when buying property. Exhibit 35. Take up rate for project launchings conducted in 10M17
Source: Companies, Danareksa Sekuritas
While we believe that most of the property demand in 2017 has been driven by real property buyers – as opposed to investors – who sought affordable properties in the price range of IDR650-2,400mn/unit (assuming disposable income of USD15,000-55,000/year, accounting for 6.2% of the total Indonesian population, 20% down payment, and 15 years mortgage period), the data shows that not all property in this price range recorded good take-up rates. Some examples being: Citraland Talassa (33.9% take-up rate) and Citraland Cibubur (31.4% take-up rate). At the same time, the data also shows that not all premium products – such as Sky 57 and City 57 with price tickets ranging from IDR2.8-10.0bn/unit - recorded sluggish take-up rates. For these two projects, the take-up rates were 85.4% and 100% respectively. This data further supports our premise that property buyers are being more selective. We believe the similar selective buying tendency to remain considering (i) we expect not much demand improvement in 2018, (ii) abundance supply in both primary and secondary market.
10.6%
29.0%
26.7%
17.2%
100.0%
100.0%
100.0%
90.0%
0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 120.0%
Landed residential
Shophouses
Apartment
Low rise apartment
18
www.danareksa.com See important disclosure at the back of this report
Positive sentiment may provide support As the marketing sales of the companies under our coverage are not expected to improve significantly, an overall re-rating of the property sector looks unlikely in our view. Nonetheless, there are several factors which may potentially create positive sentiment on the stocks under our coverage. These include: expected rate cuts in 2018, introduction of spatial LTV, and changes in regulations covering foreign property ownership. #1. Expect 1 or 2 rate cuts in 2018 Danareksa Research Institute (DRI) expects Bank Indonesia to conduct 1 or 2 rate cuts in 2018 in 1Q18 and 3Q18 with an expected lower inflation rate of 2.7-3.5% in 2018 vs. 3.5-4.0% in 2017. The expectation of a lower inflation rate largely reflects lower administered price hikes in 2018 considering the high base in 2017 following several administrative price hikes conducted in January, March, and May which contributed annual inflation of 1.5% in total. DRI believes that approaching the election year of 2019, the government will take a populist stance in regard to policymaking and hold electricity rates and fuel prices relatively flat, thereby keeping inflation manageable. Exhibit 36. Administrative price adjustments in 2017 and their impacts
Month Actions Impact to annual inflation (%)
January Electricity tariff hikes for 900VA (+30.7%), vehicle registration fees, LPG prices
Close to 1%
March Electricity tariff hikes for 900VA (+30.7%) 0.3% May Electricity tariff hikes for 900VA (+30.7%) 0.2%
Source: Danareksa Research Institute
This may not directly result in higher marketing sales … While lower mortgage rates will theoretically make property more affordable (see exhibit 37 for our sensitivity analysis on lower mortgage rates and affordable property prices), we don’t expect the rate cuts to directly result in higher marketing sales. From January 2015 to date, Bank Indonesia has cut its reference rate eight times yet the marketing sales of the developers under our coverage have remained weak (dropping 6.9%yoy in 2015 and falling 12.5%yoy in 2016), mainly owing to weak purchasing power, concerns over political uncertainty, and the long time it takes for the reference rate cuts to be transmitted to lower mortgage rates. Exhibit 37. Theoritical impact of 25 lower bps mortgage rate to property prices
Source: Danareksa Sekuritas
-
200
400
600
800
1,000
1,200
1,400
1,600
1,800
USD5,000-15,000 USD15,000 - 55,000 >USD55,000
in IDRmn/unit
Min. Affordable price ticket with 9% rate Min. Affordable price ticket with 8.75% rate
+1.5%
+1.5%
+1.5%
19
www.danareksa.com See important disclosure at the back of this report
… but create positive short-term sentiment on the property sector We believe that rate cuts will create positive short-term sentiment on the property sector as the sector is interest rate sensitive. Looking at specific companies, we believe that rate cuts would have a greater impact on the developers whose customers use mortgages to finance property purchases. Among the companies under our coverage, BSDE, ASRI, and CTRA have the highest proportion of customers who use mortgages (60%, 58%, and 51% respectively). Exhibit 38. Consumer financing profile (9M17)
Source: Companies
#2. Spatial and segmental LTV As part of the macro-prudential and countercyclical measures for housing loans, the central bank is considering the application of a LTV rule adjusted for demographic differences across the country with additional relaxation in several regions with low house prices, low housing loans, and a normal non-performing loans ratio. Moreover, BI also plans to implement a LTV ruling which is adjusted based on the property segment (apartment, landed residential, and offices). If a new regulation on spatial LTV is implemented, it should, in our view, create positive sentiment on CTRA since this company has the most projects coverage (both in terms of land bank and marketing sales). See exhibits 39 and 40 for the comparison.
Exhibit 39. Marketing sales contribution Exhibit 40. Land bank distribution
Source: Companies Source: Companies
Nonetheless, fundamentally, we believe the impact may not be significant considering: (i) after the LTV relaxation in 2016 (when the down payment requirement was reduced from 20% to 15% for first mortgages), most banks still required a 20% down payment, and (ii) spatial LTV relaxation will not trigger the tendency of “wait and see” investors to execute property purchase.
0%
20%
40%
60%
80%
100%
CTRA SMRA PWON ASRI BSDE
Greater Jakarta Greater Surabaya Other inner JavaSumatera Sulawesi KalimantanOther area
0%
20%
40%
60%
80%
100%
CTRA SMRA PWON ASRI BSDE
Greater Jakarta Greater Surabaya Other inner JavaSumatera Sulawesi KalimantanOther area
0%
20%
40%
60%
80%
100%
CTRA BSDE SMRA ASRI PWON
Inhouse financing Mortgage Cash
20
www.danareksa.com See important disclosure at the back of this report
#3. Foreign property ownership The government is currently preparing the new land Law, for which it has already submitted a list of issues (DIM) which are pertinent to parliament. In its proposal, foreigners would be eligible to hold “Right to Build” property of “Strata Title” assets on “Right to Build” land. Presently, foreigners are only permitted to acquire property with “Right to Use” title. This disadvantages foreigners considering: (i) there is very limited supply of property with this title, (ii) banks are also reluctant to allow property with “Right to Use” title to be used as collateral, (iii) it is more difficult to sell such property on the secondary market as local property buyers are also reluctant to buy property with “Right to Use” title. We believe that the changes in the regulation will positively impact the companies under our coverage, particularly PWON, BSDE, and SMRA since these companies have projects with property price tickets above the minimum threshold for foreign property ownership.
Exhibit 41. Price floor for foreign property ownership
in IDRbn Jakarta Banten West Java Central Java Yogyakarta East Java
Landed house 10.0 5.0 5.0 3.0 5.0 5.0 High rise 3.0 2.0 1.0 1.0 1.0 1.5
in IDRbn Bali West Nusa
Tenggara North
Sumatera East
Kalimantan South
Sulawesi Others
Landed house 5.0 3.0 3.0 2.0 2.0 1.0 High rise 2.0 1.0 1.0 1.0 1.0 0.8 Source: Ministry of Agrarian and Spatial Planning Regulation No. 29/2016.
Exhibit 42. High price ticket inventory
Developers Project Location Current take up
rate BSDE The Element Jakarta 45% Jadeite Banten 0%* PWON Angelo Jakarta 73% Bella Jakarta 65% Chianti Jakarta 48% One Icon Surabaya 66% SMRA Kesington Jakarta 62%
*launching will be conducted in January 2018
Source: Companies, Danareksa Sekuritas
21
www.danareksa.com See important disclosure at the back of this report
Property segment #1. Apartments: high supply in 2018 We are cautious on the outlook for the apartments segment in Jakarta. While the current average take-up rate has only reached 84.9%, Colliers expects additional apartment supply in 2018 to reach 27,903 units, almost double the historical five-year average supply of 13,475 units. With abundant supply and a limited take-up rate, we believe that price appreciation will be constrained. Colliers has noted that the average asking price in 2Q17 only appreciated by 3.8-4.5%yoy (depending on the location), only about half of the average 5-year historical price appreciation of 10.2%-14.9%.
Exhibit 43. Apartment supply Exhibit 44. Yoy price appreciation trend
Source: Colliers Source: Colliers
The abundant supply will, in our view, also put downward pressure on the rental market. Note that the average occupancy rate for rental apartments for lease currently stands at 68.4-72.5%, or down from its peak of 75.9%-84.6% in 2014. The lower occupancy rate has put pressure on rental rates, which started to decline in early 2015. As such, the outlook for rental apartments looks muted in our view, especially considering: 1) the competition coming from individually owned apartments and 2) it will take some time for the large incoming supply of around 55,087 units to be absorbed.
Exhibit 45. Occupancy rate of apartment for lease Exhibit 46. Yoy changes in rental rate
Source: Colliers Source: Colliers
Despite this backdrop, we believe PWON should be fairly resilient even though it has significant exposure to the apartment segment (contribution marketing sales from apartments will reach an estimated 60.1% of the total in 2018). We take this view because the take-up rate for upper-class apartments (that Cushman defines as having a price of IDR35mn/sqm) is still relatively stable compared to other
-
5,000
10,000
15,000
20,000
25,000
30,000
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
F
20
18
F
20
19
F
units
Additional supply 5 years average
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
Sep
-12
Jan
-13
May
-13
Sep
-13
Jan
-14
May
-14
Sep
-14
Jan
-15
May
-15
Sep
-15
Jan
-16
May
-16
Sep
-16
Jan
-17
May
-17
CBD South Jakarta Non Prime
60%
65%
70%
75%
80%
85%
Dec
-13
Mar
-14
Jun
-14
Sep
-14
Dec
-14
Mar
-15
Jun
-15
Sep
-15
Dec
-15
Mar
-16
Jun
-16
Sep
-16
Dec
-16
Mar
-17
Jun
-17
CBD South Jakarta Non-Prime Total
-10.0%
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
Jun
-13
Oct
-13
Feb
-14
Jun
-14
Oct
-14
Feb
-15
Jun
-15
Oct
-15
Feb
-16
Jun
-16
Oct
-16
Feb
-17
Jun
-17
Non Prime CBD
22
www.danareksa.com See important disclosure at the back of this report
classes. In 9M17, PWON’s apartment portfolio in Jakarta contributed 21.5% of its total marketing sales, with sales generated by its Kota Kasablanka project which has prices of above IDR40mn/sqm.
Exhibit 47. Take up rate for apartment based on price segment Exhibit 48. PWON’s apartment porfolio (9M17)
Source: Colliers Source: Company
#2. Offices: Significant supply in the pipeline The outlook for strata title offices in Jakarta also looks challenging given the growing supply in the primary market which has not been accompanied by increasing demand. As a result, the occupancy rate has trended down, both in the CBD and non-CBD areas. In addition, the increasing bargaining power of the lessee will enable them to get lower rental prices at the expense of the landlord. Colliers expects 29 office buildings to commence operations in the period 2017-2020. This will result in additional supply of 2.6mn sqm, or almost half the outstanding supply at the end of 2016 of 5.4mn sqm. Although the number of enquiries has started to increase, only a few transactions have been recorded. As such, the occupancy rate stands at 83% (in the CBD area), 74.1% (in TB Simatupang) and 85% (outside the CBD and TB Simatupang). With plentiful supply in the pipeline, Colliers expects the occupancy rate to trend down further in the future.
Exhibit 49. Occupancy rate of apartment for lease Exhibit 50. Office rental rate
Source: Colliers Source: Colliers
The low occupancy rate has also put downward pressure on the rental rate, both in the CBD and Non-CBD areas. For the CBD area, Colliers has noted that several developers have reduced their rental rates in a bid to maintain the occupancy rate. In turn, this has indirectly impacted the rental rates for office buildings outside the CBD area, where the average rental rate for Grade A buildings is about
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
Sep
-15
Dec
-15
Mar
-16
Jun
-16
Sep
-16
Dec
-16
Mar
-17
Jun
-17
Sep
-17
Low-mid segment Mid segment
Upper middle Upper
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
F
20
18
F
20
19
F
20
20
F
sqm
Additional supply 7 years average
-0.6%
-8.2%
2.2%
-13.1%-15.0%
-10.0%
-5.0%
0.0%
5.0%
-
100,000
200,000
300,000
400,000
500,000
Premium Grade A Grade B Grade C
in IDR/sqm/mo
2016 6M17 Yoy changes (RHS)
21.5%
78.5%
Jakarta Surabaya
6.3%
18.9%
9.1%65.6%
Casa Grande Angelo Bella Chianti
23
www.danareksa.com See important disclosure at the back of this report
the same as that for A grade office buildings in the CBD which have a better location. Coupled with the supply of new office buildings that offer rentals below market rates in a bid to attract demand, we believe that the outlook for the office market remains bleak. Despite the challenging conditions, we believe the prospects for the office portfolios of the companies under our coverage (including PWON and BSDE) look good. PWON currently has three office towers available for rent (2 office towers in Kota Kasablanka and 1 office tower in Gandaria City) that are fully occupied thanks to long-term tenant commitments from ICBC, Prudential, Huawei, HP, LG, and Bank of Tokyo. For BSDE, which just acquired a low-rise office tower in the Sinarmas MSIG office in the Sudirman area, we believe the office tower will show resilience given the focus on the captive market of MSIG Insurance. Since the acquisition was completed in September 2017, the occupancy rate has ramped up to 30% from 18% previously. Looking forward, the occupancy rate is expected to increase to 60% next year and to 100% by 2020. #3. Retail: Safe and Sound Jakarta: limited supply over the next 2 years We remain upbeat on the outlook for the retail property market given the moratorium on stand-alone prime-retail development in Jakarta’s CBD since 2011 and the fact that additional supply of prime-retail property is very limited. This has culminated in only moderate growth in the cumulative supply in the last seven years. Against this backdrop, the occupancy rate of retail areas in Jakarta has stabilized at around 86.1%
Exhibit 51. Additonal retail area supply Exhibit 52. Location of additional retail area supply in 2020
Source: Colliers Source: Colliers
This year, Colliers estimates that the cumulative supply of retail areas will only grow by 3%yoy. Colliers only expects a large increase in supply to take place in 2020 - mostly in West Jakarta and Central Jakarta where the companies under our coverage have limited exposure. SMRA and PWON do not have retail areas in West Jakarta although BSDE’s shopping mall at “the South Gate” will commence operation in 2020. We believe impact of these additional areas to occupancy rate of South Gate will be limited, considering Aeon will fully rent all the retail area in South Gate. In addition, we also expect the recent trend of department and fashion store closures (Debenhams, Lotus, GAP) to have a minimal impact on the investment properties of the companies under our coverage since:
-
100,000
200,000
300,000
400,000
500,000
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
F
20
18
F
20
19
F
20
20
F
in sqm
Annual rentail space supply 7 years average
34.0%
38.3%
19.1%
8.5%
West Jakarta Central Jakarta South Jakarta East Jakarta
24
www.danareksa.com See important disclosure at the back of this report
(i) Despite the closures, the total gross retail space of major retailers has still increased. Our retail analyst has noted that the gross retail space of retailers under our coverage still indicates positive growth in 9M17 (+0.8%yoy) with further expansion expected to continue in the next two years.
Exhibit 53. Gross retail space of retailers under our coverage
Source: Companies, Danareksa Sekuritas
(i) Premium class shopping centers tend to maintain occupancy rates above
97% (the decline in occupancy rates was seen in the lower-class shopping centers),
(ii) International retailers are still seeking to expand. Miniso, a Japanese variety store chain, recently opened its fifth store in Mall Artha Gading, after opening four stores in Mall Taman Anggrek, Lippo Mall Puri, Margo City, and Supermall Karawaci. Meanwhile, Russel Hobbs has recently teamed up with local partners including Best Denki, Electronic City, Sogo Department Store, Metro Department Store, and Hartono Electronic.
(iii) Stable visitor traffic. PWON’s mall portfolio traffic remains stable at 10,000-14,000 cars/day (depending on the mall: Gandaria City’s average traffic is 10,000cars/day, with 13,000cars /day for Pakuwon Mall). With a lot of traffic, PWON enjoys a stable occupancy rate and the bargaining power to increase its rental area by 6%pa.
(iv) Plenty of inquiries remaining. Both of PWON and SMRA claimed that they still have inquiries tenancy remaining, which we believe will be sufficient to offset the potential decrease in closure of several department store. The potential inquiries including from the food and beverage segment that typically have considerable higher rental rate (+/- 20%).
Exhibit 54. Closure of Lotus in Jakarta Theatre Thamrin Exhibit 55. Closure of Lotus in Jakarta Theatre Thamrin
Source: Bisnis Indonesia Source: Detik Finance
3.3 3.4 3.5 3.5 3.6
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
4.0%
-
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2015 2016 9M17 2017F 2018F
in mn sqm
RALS MPPA LPPF MAPI Growth in total area (RHS)
25
www.danareksa.com See important disclosure at the back of this report
Exhibit 56. Closure of GAP in Pondok Indah Exhibit 57. Closure of Debenhams
Source: Detik Finance Source: Kumparan
Surabaya: massive supply on the cards From 2017 to 2020, Colliers expects additional retail area of 299,000sqm, or about one-third of the current outstanding retail area of 1mn sqm. These new retail areas are expected to intensify competition in the future. In turn, this may lead to more volatile occupancy rates.
Exhibit 58. Additional rental area in Surabaya Exhibit 59. Existing and future retail distribution in several regions in Surabaya
Source: Colliers Source: Colliers
Despite the addition of a lot of rental areas going forward, we remain upbeat on the outlook for the retail portfolios of the companies under our coverage in the near term, considering: (i) most additions will take place in 2020, (ii) the companies under our coverage have diverse tenants (H&M in Surabaya has only opened in Tunjungan Plaza, Galaxy Mall, and Pakuwon Mall, Uniqlo in Surabaya only opened in Tunjungan Plaza and Pakuwon Mall), and (iii) stable visitor traffic.
Exhibit 60. We expect stable occupancy rate for investment properties portfolio of companies under our coverage
Source: Colliers
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
2017F 2018F 2019F 2020F
in sqm
- 100,000 200,000 300,000 400,000 500,000
West Surabaya
East Surabaya
North Surabaya
South Surabaya
Central Surabaya
'000 sqm
Existing supply Future supply in 2017F-2020F
80%
85%
90%
95%
100%
Gandaria City KotaKasablanka
Blok M Plaza Lotte Avenue CiputraJakarta
Mall KelapaGading
SummareconSerpong
SummareconBekasi
PakuwonMall
TunjunganPlaza
2016 2017 2018
26
www.danareksa.com See important disclosure at the back of this report
0%
20%
40%
60%
80%
100%
CTRA PWON ASRI SMRA BSDE
Development Shopping centre Hotel Other recurring
Choosing the right mix While not much improvement in property demand can be expected in 2018, either in the residential or high-rise segments, we remain upbeat on the outlook for the retail areas segment. As such, we expect PWON to outperform its peers.
Exhibit 61. Marketing sales proportion (2018) Exhibit 62. Contribution of Development revenues (2018)
Source: Danareksa Sekuritas Source: Danareksa Sekuritas
Exhibit 63. Development and recurring revenue proportion (2018)
Source: Danareksa Sekuritas
0%
20%
40%
60%
80%
100%
CTRA PWON ASRI SMRA BSDEResidential, commercial Apartment Office
0%
20%
40%
60%
80%
100%
CTRA PWON ASRI SMRA BSDEResidential, commercial Apartment Office
27
www.danareksa.com See important disclosure at the back of this report
Financial performance: flat We expect the aggregate revenues of the companies under our coverage to record flattish growth of 1.8%yoy in 2018. Company wise, we expect CTRA and PWON to outperform their peers with revenues growth of 25.3%yoy and 15.4%yoy, respectively. Exhibit 64. Aggregate revenue growth
Source: Companies, Danareksa Sekuritas
CTRA and PWON will outperform their peers For CTRA, we expect the recognition of its serviced apartment sales to Ascot and the normalization of revenues recognition after two years of slow revenues recognition to support development revenues. Meanwhile, for PWON, we expect the full recognition of revenues from the Pakuwon Mall Extension and Tunjungan Plaza 6 to support recurring revenues while recognition of accounting revenues from its apartment projects will support its development revenues. Exhibit 65. Revenue growth in 2018F
Source: Danareksa Sekuritas
Meanwhile, we expect BSDE and ASRI to record negative revenues growth of 17.6% and 15.0%, respectively, in 2018F. For BSDE, we expect the company’s financial performance to normalize after the stellar growth in 2017, thanks to recognition of three sizable land sales. Meanwhile, for ASRI, lower revenues recognition from the land sales to CFLD (IDR1.5tn in 2017 vs. IDR1.0tn in 2018) will result in 17.6% lower development revenues.
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2012 2013 2014 2015 2016 2017F 2018F
in IDR bn
Total revenue (LHS) Total revenue growth (RHS)
Development revenue growth (RHS) Recurring revenue growth (RHS)
-30%
-20%
-10%
0%
10%
20%
30%
40%
BSDE SMRA CTRA PWON ASRI
Total revenue Development revenue Recurring revenue
28
www.danareksa.com See important disclosure at the back of this report
Managing gearing is the key Given the cyclical nature of revenues recognition in the property sector, we favor developers with lower gearing. Thus, although BSDE and ASRI are both expected to record negative growth in 2018, we believe BSDE will outperform ASRI given it has the lowest gearing ratio.
Exhibit 66. Net gearing ratio comparison Exhibit 67. EBITDA coverage ratio comparison
Source: Companies, Danareksa Sekuritas Source: Companies, Danareksa Sekuritas
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
ASRI SMRA PWON CTRA BSDE Sector
2017F 2018F
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
ASRI SMRA PWON CTRA BSDE
2017F 2018F Covenant
www.danareksa.com See important disclosure at the back of this report 1
Equity Research Company Update
Tuesday,28 November 2017
Pakuwon Jati(PWON IJ) BUY
Maintain The good performance continues
We reiterate our BUY call on PWON with target price of IDR720. With solid marketing sales in 10M17 which will be supported by the La Vis launching, we believe PWON will achieve marketing sales of IDR2.4tn this year (+4.2%yoy). Going into 2018, we expect PWON to record higher marketing sales growth supported by new project launches (+11.1%yoy). We also remain optimistic with PWON’s strong retail portfolio considering its good visitors traffic. Solid marketing sales in October 2017. PWON recorded marketing sales of IDR200bn in October 2017, still supported by sales from its existing projects. As such, on a cumulative basis, PWON recorded marketing sales of IDR2.0tn, or reaching 85.1% of our full year marketing sales target of IDR2.4tn and 77.7% of the management’s target of IDR2.6-2.7tn. With the solid marketing sales in 10M17 and condominium launch in Pakuwon Mall Surabaya in November 2017 (La Vis was launched with prices starting from IDR2bn/unit or IDR30mn/sqm), we believe that PWON will achieve our marketing sales target. Expect 11.1% marketing sales growth in 2018. Going into 2018, we expect PWON to record marketing sales of IDR2.6tn, +11.1%yoy. While we do not expect considerable improvement on the property demand, which reflected on our flattish expected marketing sales from existing projects, PWON stated that it plans to launch new flagship project in 2018, which we expect will support marketing sales growth in 2018. Strong retail portfolio with nothing to be worried about. Despite the recent trend of department and fashion store closures (Debenhams, Lotus, GAP), we remain optimistic on PWON’s retail portfolio. We believe that most retail closures reflect limited visitor traffic, whereas PWON’s mall portfolio traffic remains stable at 10,000-14,000 cars/day (depending on the mall: Gandaria City’s average traffic is 10,000cars/day, with 13,000cars /day for Pakuwon Mall). With a lot of traffic, PWON enjoys a stable occupancy rate and the bargaining power to increase its rental area by 6%pa. We reiterate our BUY call. We reiterate our BUY call on PWON with target price of IDR720. In arriving on our target price, we use SOTP based valuation, a WACC of 12.6%, Terminal Growth of 4.0%, and target discount to NAV of 40%. Although we remain cautious on the outlook for property demand next year, we believe PWON with its strong recurring income will be more resilient. PWON currently trades at a 46.7% discount to NAV, near to its historical +1SD of 49.4%.
Last price (IDR) 640
Target Price (IDR) 720
Upside/Downside +12.5%
Previous Target Price (IDR) 720
Stock Statistics
Sector Property
Bloomberg Ticker PWON IJ
No of Shrs (mn) 48,160
Mkt. Cap (IDR bn/USDmn) 30,822/2,282
Avg. daily T/O (IDR bn/USDmn) 18.8/1.4
Major shareholders
Pakuwon Arthaniaga 56.1%
Alexander Tedja 0.0%
Estimated free float (%) 43.9
EPS Consensus(IDR)
2017F 2018F 2019F
Danareksa 39.7 49.3 53.7
Consensus 40.9 46.7 51.9
Danareksa/Cons (2.8) 5.5 3.4
PWON relative to JCI Index
Source : Bloomberg
Antonia Febe Hartono, CFA
(62-21) 29 555 888 ext.3504
Natalia Sutanto
(62-21) 29 555 888 ext.3508
Key Financials Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 4,625 4,841 5,726 6,609 6,790 EBITDA, (IDRbn) 2,558 2,593 2,984 3,337 3,422 EBITDA Growth, (%) 3.5 1.4 15.1 11.8 2.5 Net profit (IDRbn) 1,262 1,671 1,913 2,373 2,585 EPS (IDR) 26.2 34.7 39.7 49.3 53.7 EPS growth (%) (49.8) 32.4 14.5 24.0 9.0 BVPS, (IDR) 149.9 180.3 214.1 256.5 301.8 DPS, (IDR) 4.5 4.5 5.9 6.8 8.4 PER (x) 24.4 18.4 16.1 13.0 11.9 PBV (x) 4.3 3.5 3.0 2.5 2.1 Dividend yield (%) 0.7 0.7 0.9 1.1 1.3 EV/EBITDA (x) 13.2 13.0 11.2 9.6 9.1
Source : PWON, Danareksa Estimates
www.danareksa.com See important disclosure at the back of this report 2
Exhibit 1. REVENUE AND GROWTH Exhibit 2. NET PROFIT AND GROWTH
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 3. MARGINS Exhibit 4. GEARING LEVEL
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 5. PWON’s historical discount to NAV Exhibit 6. Property sector’s historical discount to NAV
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Further improvements in the occupancy rate in Pakuwon Mall and Tunjungan Plaza. Since its commercial commencement in February 2017, the occupancy rate of Pakuwon Mall Extension has soared from 60% to 82%. With the recent opening of Uniqlo, as well as the expected opening of LC Waikiki and Tokyo Street in December 2017, the company expects to further increase its occupancy rate for Pakuwon Mall Extension to 90% by the end of the year. We believe this will raise further the blended average occupancy rate of Pakuwon Mall that currently stands at 94% to 96-97%.
-2SD
-1SD
Mean
+2SD
+1SD
35.0%
40.0%
45.0%
50.0%
55.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
-2SD
-1SD
Mean
+2SD
+1SD
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
www.danareksa.com See important disclosure at the back of this report 3
Meanwhile, for Tunjungan Plaza 6, which recently opened in September 2017, the company also claimed that the occupancy rate would increase from 65% currently to 80% by the end of the year, supported by two major tenants: H&M and English First. We also expect the blended average occupancy rate for Tunjungan Plaza to be boosted from its current level of 96% to 97%. Strong development revenues recognition likely to continue in 4Q17. In 9M17, PWON recorded 53.7%yoy higher apartment and office revenues. This stellar performance was supported by revenues recognition from 2 tower apartments in the Kota Kasablanka project (Angelo and Bella). Going into 4Q17, the company expects the massive recognition from the apartment project to continue, particularly supported by Chianti tower in Kota Kasablanka. With the expectation of encouraging 4Q17 results, we revise up our revenues target by 10.1% to IDR5.7tn.
Exhibit 7. NAV calculation
Source: Company, Danareksa Sekuritas
Land bank
Location Stakes Area
(ha) Plot ratio
Price per
sqm
(Rp mn/sqm)
Method RNAV
(Rp bn)
Kota Kasablanka South Jakarta 100.0% 3.4 75% 32.7 NAV 835
Gandaria City South Jakarta 83.3% 1.9 75% 13.1 NAV 155
TB Simatupang South Jakarta 70.0% 4.5 75% 27.1 NAV 641
Pakuwon City East Surabaya, East Java 100.0% 233.4 65% 15.9 NAV 24,079
Outside Pakuwon City East Surabaya, East Java 100.0% 21.5 65% 14.2 NAV 1,982
Tunjungan City Central Surabaya, East Java 100.0% 2.1 75% 32.7 NAV 516
Supermall Pakuwon Indah West Surabaya, East Java 67.1% 0.6 65% 14.0 NAV 37
Grand Pakuwon Township West Surabaya, East Java 100.0% 151.5 65% 9.3 NAV 9,169
Outside Grand Pakuwon West Surabaya, East Java 100.0% 6.9 65% 7.2 NAV 325
Royal Plaza South Surabaya, East Java 75.0% 1.8 75% 22.4 NAV 227
Bekasi West Java 83.9% 3.2 0.6 Cost 15
Daan Mogot West Jakarta 100.0% 11.0 9.0 Cost 990
Total land bank 441.8
Investment Property
Kota Kasablanka South Jakarta 100% DCF 4,134.7
Gandaria City South Jakarta 83% DCF 3,778.4
Tunjungan City Central Surabaya, East Java 100% DCF 5,982.7
Supermall Pakuwon Indah West Surabaya, East Java 67% DCF 3,517.7
Royal Plaza South Surabaya, East Java 75% DCF 505.8
Pakuwon Town Square East Surabaya, East Java 100% DCF 104.1
Blok M Plaza South Jakarta 100% DCF 489.0
Hotels DCF 1,419.0
Future - mixed used development
Kota Kasablanka South Jakarta 100% DCF 1,813.1
Tunjungan Plaza Central Surabaya, East Java 100% DCF 355.7
Pakuwon City East Surabaya, East Java 100% DCF 397.0
Supermall Pakuwon Indah West Surabaya, East Java 67% DCF 585.0
Total asset (Rp bn) 62,052
Net debts (Rp bn) 1,231
Advance from customer (Rp bn) 2,974
Net asset value (Rp bn) 57,848
Discount to NAV (%) 40%
Number of shares outstanding (bn shares) 48.2
Target price (Rp/share) 720
www.danareksa.com See important disclosure at the back of this report 4
Exhibit 8. Income Statement
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Revenue 4,625 4,841 5,726 6,609 6,790
COGS (1,957) (2,088) (2,539) (3,044) (3,116)
Gross profit 2,669 2,754 3,186 3,565 3,673
EBITDA 2,558 2,593 2,984 3,337 3,422
Oper. profit 2,265 2,260 2,676 3,027 3,112
Interest income 176 112 122 177 328
Interest expense (251) (342) (297) (278) (247)
Forex Gain/(Loss) (277) 58 29 12 0
Income From Assoc. Co’s (3) (9) 0 0 0
Other Income (Expenses) (169) (23) (144) (3) (6)
Pre-tax profit 1,741 2,057 2,385 2,935 3,187
Income tax (341) (276) (347) (407) (432)
Minority interest (139) (109) (125) (155) (169)
Net profit 1,262 1,671 1,913 2,373 2,585
Core Net Profit 1,539 1,613 1,884 2,361 2,585
Exhibit 9. Balance Sheet
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Cash & cash equivalent 2,071 2,432 2,956 4,096 4,654
Receivables 302 237 500 577 593
Inventory 2,254 2,860 3,435 3,981 4,500
Other Curr. Asset 570 395 468 540 555
Fixed assets - Net 1,457 1,700 1,787 1,897 2,008
Other non-curr.asset 11,912 12,848 13,519 14,250 14,971
Total asset 18,778 20,674 22,907 25,633 27,632
ST Debt 536 769 413 754 1,020
Payables 313 312 436 522 535
Other Curr. Liabilities 959 1,034 1,090 1,259 1,293
Long Term Debt 4,396 4,479 5,044 4,581 3,866
Other LT. Liabilities 3,119 3,059 3,278 3,826 4,048
Total Liabilities 9,323 9,654 10,261 10,943 10,763
Shareholder'sFunds 7,219 8,684 10,310 12,355 14,533
Minority interests 2,236 2,336 2,336 2,336 2,336
Total Equity & Liabilities 18,778 20,674 22,907 25,633 27,632
www.danareksa.com See important disclosure at the back of this report 5
Exhibit 10.Cash Flow
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Net income 1,262 1,671 1,913 2,373 2,585
Depreciation and Amort. 271 333 308 311 309
Change in Working Capital (634) (294) (731) (440) (503)
OtherOper. Cash Flow 463 182 353 599 78
Operating Cash Flow 1,361 1,893 1,842 2,842 2,469
Capex (1,494) (2,154) (811) (971) (957)
Others Inv. Cash Flow (590) 745 (174) (53) 85
Investing Cash Flow (2,084) (1,409) (985) (1,024) (872)
Net change in debt 997 332 209 (123) (449)
New Capital 0 0 0 0 0
Dividend payment (216) (216) (286) (328) (407)
Other Fin. Cash Flow (796) (238) (257) (227) (183)
Financing Cash Flow (15) (122) (334) (678) (1,039)
Net Change in Cash (738) 361 524 1,140 558
Cash - begin of the year 2,809 2,071 2,432 2,956 4,096
Cash - end of the year 2,071 2,432 2,956 4,096 4,654
Exhibit 11. Key Ratios
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Growth (%)
Sales 19.4 4.7 18.3 15.4 2.7
EBITDA 3.5 1.4 15.1 11.8 2.5
Operating profit 19.9 (0.2) 18.4 13.1 2.8
Net profit (49.8) 32.4 14.5 24.0 9.0
Profitability (%)
Gross margin 57.7 56.9 55.7 53.9 54.1
EBITDA margin 55.3 53.6 52.1 50.5 50.4
Operating margin 49.0 46.7 46.7 45.8 45.8
Net margin 27.3 34.5 33.4 35.9 38.1
ROAA 7.1 8.5 8.8 9.8 9.7
ROAE 18.8 21.0 20.1 20.9 19.2
Leverage
Net Gearing (x) 0.3 0.3 0.2 0.1 0.0
Interest Coverage (x) 9.0 6.6 9.0 10.9 12.6 Source : PWON, Danareksa Estimates
www.danareksa.com See important disclosure at the back of this report 1
Equity Research Company Update
Tuesday,28 November 2017
Ciputra Development(CTRA IJ) BUY
Maintain Brighter outlook
We maintain our BUY recommendation on CTRA with target price of IDR1,350 as we expect CTRA’s financial performance in 2018 to outperform its peers given: (i) recognition of its service apartment sales to Ascot, (ii) the normalization of revenues recognition after two years of slow revenues recognition. Gearing wise, we also expect CTRA to reported gearing ratio ahead (47.8% in 2018 vs. 63.0% in 9M17) on the back of (i) SGD115mn debt refinancing, (ii) limited capex in 2018. Marketing sales in 10M17: on track to meet our full year target. CTRA recorded marketing sales of IDR6.2tn in 10M17, up by 7.4%yoy. This figure is 85.7% of our marketing sales target (IDR7.3tn) and 73.3% of the management’s target (IDR8.5tn). In October, CTRA recorded marketing sales of IDR979bn, supported by the recognition of Ascott service apartment marketing sales of IDR675bn. With two projects still in the pipeline, Newton 2 and Citra Plaza Batam, for which we expect marketing sales of IDR200-300bn each (assuming a 50% take-up rate) and regular sales of IDR300bn per month, we believe that CTRA should achieve our full year marketing sales target of IDR7.3tn. Expect stellar financial performance in 2018. Although we remain cautious on the outlook for property demand in 2018 considering 171 regional elections will take place (as reflected in our flattish marketing sales target which is up by only 0.5%yoy), we expect CTRA to record solid financial performance (+25.3%yoy at the topline and +60.6%yoy at the bottom line) given: (i) revenues recognition from the bulk sales of service apartments in 4Q18, (ii) the normalization of revenues recognition after two years of slow revenues recognition in 2015 and 2016. Manageable gearing. In 9M17, CTRA reported a gearing ratio of 63.0%, slightly higher than its level in December 2016 of 46.6%. This stemmed from the issuance of SGD150mn of Medium Term Notes which carry a coupon rate of 4.85% and are due in 2021. Nonetheless, as the bulk of the proceeds from the bonds issuance will be used to refinance debts (SGD115mn) as well as for the repayment of Medium Term Notes due in 2018 in October 2017 (amounting to SGD47mn), we expect the gearing to normalize by the end of this year at 49.6%. Going into 2018, we expect the gearing to stand at 47.8% considering the limited capital expenditure allocation of IDR1.5tn (flat compared to the capex allocation in 2017). Maintain our BUY recommendation. We maintain our BUY recommendation on CTRA with target price of IDR1,350. In arriving at our target price, we use SOTP based valuation with WACC of 12.6%, Terminal Growth of 4.0%, and a 62.5% target discount to NAV. Our target discount to NAV is based on the historical +1SD discount to NAV.
Last price (IDR) 1,210
Target Price (IDR) 1,350
Upside/Downside +11.6%
Previous Target Price (IDR) 1,350
Stock Statistics
Sector Property
Bloomberg Ticker CTRA IJ
No of Shrs (mn) 15,425
Mkt. Cap (IDR bn/USDmn) 18,665/1,382
Avg. daily T/O (IDR bn/USDmn) 23.4/1.7
Major shareholders
Founder 30.6%
Credit Suisse AG, Singapore 7.9%
Estimated free float (%) 45.0
EPS Consensus(IDR)
2017F 2018F 2019F
Danareksa 50.5 81.1 89.4
Consensus 56.3 71.5 83.8
Danareksa/Cons (10.4) 13.5 6.6
CTRA relative to JCI Index
Source : Bloomberg
Antonia Febe Hartono, CFA
(62-21) 29 555 888 ext.3504
Natalia Sutanto
(62-21) 29 555 888 ext.3508
Key Financials Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 7,514 6,739 6,457 8,092 8,598 EBITDA, (IDRbn) 2,577 2,048 1,898 2,485 2,747 EBITDA Growth, (%) 7.2 (20.5) (7.3) 30.9 10.6 Net profit (IDRbn) 1,645 1,112 937 1,505 1,659 EPS (IDR) 107.3 72.1 50.5 81.1 89.4 EPS growth (%) (3.4) (32.8) (30.0) 60.6 10.2 BVPS, (IDR) 750.8 831.4 737.0 814.3 897.6 DPS, (IDR) (10.3) (7.9) (4.5) (3.8) (6.0) PER (x) 10.8 16.1 23.0 14.3 13.0 PBV (x) 1.5 1.4 1.6 1.4 1.3 Dividend yield (%) (0.9) (0.7) (0.4) (0.3) (0.5) EV/EBITDA (x) 7.8 10.3 13.6 10.7 9.4
Source : CTRA, Danareksa Estimates
www.danareksa.com See important disclosure at the back of this report 2
Exhibit 1. REVENUE AND GROWTH Exhibit 2. NET PROFIT AND GROWTH
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 3. MARGINS Exhibit 4. GEARING LEVEL
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 5. CTRA’s historical discount to NAV Exhibit 6. Sector’s historical discount to NAV
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
-2SD
-1SD
Mean
+2SD
+1SD
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
-2SD
-1SD
Mean
+2SD
+1SD
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
www.danareksa.com See important disclosure at the back of this report 3
Exhibit 7. NAV calculation
Source: Company, Danareksa Sekuritas estimates
Location Stakes Area
(ha) Plot ratio
Price per
sqm
(Rp mn/sqm)
Method RNAV
(Rp bn)
Land bank
Direct owned
Citraland Surabaya East Java 100.0% 781.0 60% 3.7 NAV 17,326
CitraHarmoni Sidoarjo East Java 98.1% 71.0 60% 3.0 NAV 1,265
Citraland Lampung Lampung 99.9% 26.0 60% 2.9 NAV 458
Citragarden Sidoarjo East Java 60.0% 3.0 60% 4.7 NAV 50
Citragarden Lampung Lampung 99.9% 2.0 60% 1.2 NAV 15
Citra Garden City Jakarta 100.0% 60.0 60% 13.7 NAV 4,936
Citra Raya Tangerang Tangerang 100.0% 657.0 60% 2.6 NAV 10,308
Citra Indah Jonggol Bogor, West Java 100.0% 241.0 60% 1.1 NAV 1,623
Citraland Pekanbaru Riau 100.0% 8.0 60% 3.1 NAV 147
Citraland NGK Jambi Jambi 100.0% 2.0 60% 2.5 NAV 30
Total land bank 2,632.0
Joint operation projects 21,773
Projects under development 8,888
Investment Property 10,678
Total asset (Rp bn) 77,497
Net debts (Rp bn) 5,099
Advance from customer (Rp bn) 5,491
Net asset value (Rp bn) 66,906
Discount to NAV (%) 63%
Number of shares outstanding (bn shares) 18.6
Target price (Rp/share) 1,350
www.danareksa.com See important disclosure at the back of this report 4
Exhibit 8. Income Statement
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Revenue 7,514 6,739 6,457 8,092 8,598
COGS (3,786) (3,450) (3,315) (4,240) (4,391)
Gross profit 3,729 3,290 3,142 3,852 4,207
EBITDA 2,577 2,048 1,898 2,485 2,747
Oper. profit 2,353 1,806 1,654 2,239 2,500
Interest income 230 217 284 289 246
Interest expense (487) (566) (608) (638) (660)
Forex Gain/(Loss) 0 0 0 0 0
Income From Assoc. Co’s 7 (2) (2) (2) (2)
Other Income (Expenses) 63 46 91 91 91
Pre-tax profit 2,166 1,501 1,419 1,979 2,176
Income tax (425) (330) (393) (331) (359)
Minority interest (95) (59) (89) (143) (158)
Net profit 1,645 1,112 937 1,505 1,659
Core Net Profit 1,645 1,112 937 1,505 1,659
Exhibit 9. Balance Sheet
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Cash & cash equivalent 3,034 3,468 3,454 3,110 4,236
Receivables 1,323 1,702 1,631 1,694 2,177
Inventory 7,010 7,945 8,974 9,901 10,734
Other Curr. Asset 655 595 666 672 803
Fixed assets - Net 2,962 3,034 3,120 3,207 3,295
Other non-curr.asset 11,274 12,328 13,631 14,844 16,169
Total asset 26,259 29,072 31,477 33,429 37,415
ST Debt 1,375 1,686 2,664 3,359 2,738
Payables 1,417 1,372 1,464 1,559 1,999
Other Curr. Liabilities 5,221 4,253 3,632 3,468 4,400
Long Term Debt 3,902 4,976 5,110 4,851 5,713
Other LT. Liabilities 1,293 2,487 2,951 3,011 3,693
Total Liabilities 13,208 14,774 15,820 16,248 18,543
Shareholder'sFunds 11,510 12,824 13,679 15,113 16,660
Minority interests 1,540 1,474 1,978 2,068 2,211
Total Equity & Liabilities 26,259 29,072 31,477 33,429 37,415
www.danareksa.com See important disclosure at the back of this report 5
Exhibit 10.Cash Flow
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Net income 1,645 1,112 937 1,505 1,659
Depreciation and Amort. 223 243 244 246 247
Change in Working Capital (694) (1,291) (1,198) (1,082) 410
OtherOper. Cash Flow 257 348 324 349 413
Operating Cash Flow 1,431 412 307 1,017 2,729
Capex (1,151) (701) (750) (750) (750)
Others Inv. Cash Flow (666) (287) (522) (461) (504)
Investing Cash Flow (1,817) (988) (1,272) (1,211) (1,254)
Net change in debt 637 1,403 510 436 461
New Capital 0 0 0 0 0
Dividend payment (158) (123) (83) (70) (112)
Other Fin. Cash Flow 53 (272) 524 (517) (699)
Financing Cash Flow 531 1,009 952 (151) (350)
Net Change in Cash 146 433 (13) (344) 1,126
Cash - begin of the year 2,889 3,034 3,468 3,454 3,110
Cash - end of the year 3,034 3,468 3,454 3,110 4,236
Exhibit 11. Key Ratios
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Growth (%)
Sales 18.5 (10.3) (4.2) 25.3 6.3
EBITDA 7.2 (20.5) (7.3) 30.9 10.6
Operating profit 6.8 (23.3) (8.4) 35.4 11.7
Net profit (2.4) (32.4) (15.7) 60.6 10.2
Profitability (%)
Gross margin 49.6 48.8 48.7 47.6 48.9
EBITDA margin 34.3 30.4 29.4 30.7 32.0
Operating margin 31.3 26.8 25.6 27.7 29.1
Net margin 21.9 16.5 14.5 18.6 19.3
ROAA 6.6 4.0 3.1 4.6 4.7
ROAE 14.7 9.1 7.1 10.5 10.4
Leverage
Net Gearing (x) 0.2 0.2 0.3 0.3 0.2
Interest Coverage (x) 4.8 3.2 2.7 3.5 3.8 Source : CTRA, Danareksa Estimates
www.danareksa.com See important disclosure at the back of this report 1
Equity Research Company Update
Tuesday,28 November 2017
Bumi Serpong Damai(BSDE IJ) BUY
Maintain Steady progress
BSDE has indicated marketing sales of IDR6.8tn in 10M17, or reaching 93.8% of our full year target (IDR7.3tn) and 94.2% of the management’s target (IDR7.2tn). In October alone, BSDE’s indicative marketing sales reached IDR2.0tn, supported by: (i) commercial land plot sales of IDR1.6tn, and (ii) proceeds generated from the price lock program of IDR400bn. Going into 2018, we believe the marketing sales of BSDE will remain firm, underpinned by commercial land plot sales. Maintain BUY. Superlative marketing sales in October 2017. BSDE has indicated marketing sales of IDR6.8tn in 10M17, or reaching 93.8% of our full year target (IDR7.3tn) and 94.2% of the management’s target (IDR7.2tn). In October alone, BSDE’s indicative marketing sales reached IDR2.0tn, supported by: (i) commercial land plot sales of IDR1.6tn, and (ii) the IDR400bn proceeds from “Price Lock”. In regard to the latter, note that the marketing sales from the launch of The Savia (amounting to IDR90bn, a 47% take-up rate from 192 units available for sale) were included in the proceeds of the “Price Lock” program. Set to achieve our full year marketing sales target. With the solid marketing sales in 10M17 along with the “Price Lock” program up to December 2017, we believe BSDE can achieve our full year marketing sales target. BSDE is currently accepting reservations for upper segment landed residential units in BSD City’s Jadeite with 124 units available for sale and prices ranging from IDR4.2-11.7bn/unit. The launching will take place in January 2018. Outstanding financial performance this year. As we expect the company to recognize revenues from the commercial land plot sales this year, we revise up our 2017 revenue and net profit targets by 14.1% and 24.0%, respectively. As such, our new revenue and net profit targets imply 44.3%yoy and 118.4%yoy growth, respectively. Flat marketing sales in 2018. Going into 2018, we only expect BSDE to record flat marketing sales of IDR7.3tn (+0.2%yoy), still mainly underpinned by land plot sales. While we remain cautious on the outlook for property demand next year (as reflected in our flattish growth estimate for regular property sales of +1.6%yoy), we believe that BSDE will enjoy greater flexibility in conducting product offerings given its ample land bank of more than 4,000ha. We reiterate our BUY call. We reiterate our BUY call on BSDE with target price of IDR2,000 (SOTP based valuation with WACC of 13.3%, Terminal Growth of 4% and 68% discount to NAV). Our target discount to NAV is based on the historical +1SD discount to NAV of BSDE. The higher target discount to NAV is inline with our cautious view on the outlook for property demand next year.
Last price (IDR) 1,680
Target Price (IDR) 2,000
Upside/Downside +19.0%
Previous Target Price (IDR) 2,000
Stock Statistics
Sector Property
Bloomberg Ticker BSDE IJ
No of Shrs (mn) 19,247
Mkt. Cap (IDR bn/USDmn) 32,334/2,394
Avg. daily T/O (IDR bn/USDmn) 26.6/2.0
Major shareholders
Paraga Artamida 26.6%
Ekacentra Usahamaju 25.0%
Estimated free float (%) n/a
EPS Consensus(IDR)
2017F 2018F 2019F
Danareksa 203.8 144.7 84.5
Consensus 145.9 145.5 152.6
Danareksa/Cons 39.7 (0.6) (44.6)
BSDE relative to JCI Index
Source : Bloomberg
Antonia Febe Hartono, CFA
(62-21) 29 555 888 ext.3504
Natalia Sutanto
(62-21) 29 555 888 ext.3508
Key Financials Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 6,210 6,522 9,408 7,748 6,039 EBITDA, (IDRbn) 3,103 3,060 5,231 3,952 2,724 EBITDA Growth, (%) 11.1 (1.4) 70.9 (24.4) (31.1) Net profit (IDRbn) 2,139 1,796 3,923 2,784 1,627 EPS (IDR) 111.2 93.3 203.8 144.7 84.5 EPS growth (%) (46.5) (16.0) 118.4 (29.0) (41.6) BVPS, (IDR) 979.4 1,069.3 1,263.6 1,387.6 1,457.5 DPS, (IDR) 19.9 11.3 9.5 20.7 14.7 PER (x) 15.1 18.0 8.2 11.6 19.9 PBV (x) 1.7 1.6 1.3 1.2 1.2 Dividend yield (%) 1.2 0.7 0.6 1.2 0.9 EV/EBITDA (x) 11.0 11.9 6.7 9.2 13.5
Source : BSDE, Danareksa Estimates
www.danareksa.com See important disclosure at the back of this report 2
Exhibit 1. REVENUE AND GROWTH Exhibit 2. NET PROFIT AND GROWTH
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 3. MARGINS Exhibit 4. GEARING LEVEL
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 5. BSDE’s discount to NAV Exhibit 6. Sector’s discount to NAV
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
-2SD
-1SD
Mean
+2SD
+1SD
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
-2SD
-1SD
Mean
+2SD
+1SD
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
www.danareksa.com See important disclosure at the back of this report 3
Exhibit 7. Site plan of Jadeite
Source: Company
www.danareksa.com See important disclosure at the back of this report 4
Exhibit 8. NAV calculation
Source: Company, Danareksa Sekuritas estimates
Land bank
Location Stakes Area
(ha) Plot ratio
Price per
sqm
(Rp mn/sqm)
Method RNAV
(Rp bn)
BSD City Tangerang
Developed Tangerang 100.0% 224.7 60% 11.5 NAV 15,530
Undeveloped Tangerang 100.0% 2,214.4 60% 5.7 NAV 76,083
Kota Wisata Cibubur, West Java 88.6% 118.6 60% 3.8 NAV 2,418
Grand Wisata Bekasi 88.6% 538.1 60% 4.6 NAV 13,016
Grand City Samarinda, East Kalimantan 55.0% 96.0 60% 4.6 NAV 1,443
Balikpapan Balikpapan 55.0% 203.1 60% 2.9 NAV 1,913
Kota Bunga Cipanas, West Java 88.6% 9.6 60% 0.1 NAV 7
Mangga Dua Centre Surabaya, East Java 88.6% 0.4 60% 0.5 NAV 1
Rasuna South Jakarta 100.0% 2.5 60% 28.8 NAV 434
Legenda Wisata Cibubur, West Java 88.6% 15.3 60% 0.9 NAV 77
Manado North Sulawesi 100.0% 14.0 60% 0.7 NAV 61
MT Haryono Central Jakarta 100.0% 0.8 16.7 At cost 133
Jatiasih Bekasi 88.6% 84.4 0.1 At cost 102
Tanjung Sari Surabaya, East Java 88.6% 1.7 6.1 At cost 90
Tanjung Barat - Lenteng Agung Jakarta 88.6% 5.4 2.7 At cost 127
Roxy II Central Jakarta 100.0% 17.0 5.5 At cost 930
Benowo Surabaya, East Java 88.6% 429.3 0.3 At cost 1,110
Makassar South Sulawesi 100.0% 5.4 7.7 At cost 414
Cibubur West Java 88.6% 163.5 0.2 At cost 253
Dukuh Pakis Surabaya, East Java 100.0% 3.1 8.8 At cost 272
Palembang South Sumatera 100.0% 143.5 0.1 At cost 206
Total land bank 4,290.7
Investment property
Mall and office under BSDE DCF 10,940
Mall and office under PLIN 45% DCF 2,077
Total asset (Rp bn) 127,632.7
Net debts (Rp bn) 3,916.2
Sales advance (Rp bn) 5,247.9
Net asset value (Rp bn) 118,469
Discount to NAV (%) 68%
Number of shares outstanding (bn shares) 19.2
Target price (Rp/share) 2,000
www.danareksa.com See important disclosure at the back of this report 5
Exhibit 9. Income Statement
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Revenue 6,210 6,522 9,408 7,748 6,039
COGS (1,572) (1,840) (2,538) (2,137) (1,597)
Gross profit 4,638 4,681 6,870 5,611 4,442
EBITDA 3,103 3,060 5,231 3,952 2,724
Oper. profit 2,901 2,835 4,909 3,615 2,486
Interest income 251 222 143 222 163
Interest expense (575) (613) (613) (657) (772)
Forex Gain/(Loss) 139 (116) 39 11 0
Income From Assoc. Co’s 48 241 80 105 136
Other Income (Expenses) (48) (145) 0 0 0
Pre-tax profit 2,715 2,425 4,558 3,296 2,013
Income tax (364) (387) (335) (299) (261)
Minority interest (212) (241) (300) (213) (125)
Net profit 2,139 1,796 3,923 2,784 1,627
Core Net Profit 2,001 1,913 3,884 2,773 1,627
Exhibit 10. Balance Sheet
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Cash & cash equivalent 6,109 3,569 5,554 4,069 3,845
Receivables 166 417 607 500 389
Inventory 6,548 7,441 8,423 9,356 10,243
Other Curr. Asset 3,283 4,302 3,318 3,172 3,815
Fixed assets - Net 803 823 971 441 687
Other non-curr.asset 18,429 21,127 24,949 27,880 29,596
Total asset 36,022 38,292 44,864 46,460 49,618
ST Debt 2,055 1,121 2,300 1,390 2,261
Payables 317 261 721 753 913
Other Curr. Liabilities 3,774 4,184 5,123 4,840 5,789
Long Term Debt 5,869 6,527 6,223 6,635 6,024
Other LT. Liabilities 1,910 1,846 2,404 2,363 2,808
Total Liabilities 13,925 13,939 16,771 15,981 17,795
Shareholder'sFunds 18,850 20,581 24,321 26,707 28,051
Minority interests 3,247 3,772 3,772 3,772 3,772
Total Equity & Liabilities 36,022 38,292 44,864 46,460 49,618
www.danareksa.com See important disclosure at the back of this report 6
Exhibit 11.Cash Flow
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Net income 2,139 1,796 3,923 2,784 1,627
Depreciation and Amort. 196 225 322 337 238
Change in Working Capital (2,171) (1,723) 1,190 (931) (311)
OtherOper. Cash Flow (259) 414 709 398 797
Operating Cash Flow (94) 712 6,145 2,588 2,351
Capex (955) (969) (2,024) (1,137) (824)
Others Inv. Cash Flow (364) (1,736) (2,235) (1,408) (985)
Investing Cash Flow (1,319) (2,705) (4,259) (2,544) (1,809)
Net change in debt 3,493 (381) 1,104 (453) 264
New Capital 0 0 0 0 0
Dividend payment (383) (217) (182) (398) (283)
Other Fin. Cash Flow 1,591 50 (822) (678) (747)
Financing Cash Flow 4,701 (548) 99 (1,529) (766)
Net Change in Cash 3,289 (2,540) 1,986 (1,485) (224)
Cash - begin of the year 2,820 6,109 3,569 5,554 4,069
Cash - end of the year 6,109 3,569 5,554 4,069 3,845
Exhibit 12. Key Ratios
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Growth (%)
Sales 10.6 5.0 44.3 (17.6) (22.1)
EBITDA 11.1 (1.4) 70.9 (24.4) (31.1)
Operating profit 8.9 (2.2) 73.1 (26.3) (31.2)
Net profit (44.0) (16.0) 118.4 (29.0) (41.6)
Profitability (%)
Gross margin 74.7 71.8 73.0 72.4 73.6
EBITDA margin 50.0 46.9 55.6 51.0 45.1
Operating margin 46.7 43.5 52.2 46.7 41.2
Net margin 34.5 27.5 41.7 35.9 26.9
ROAA 6.7 4.8 9.4 6.1 3.4
ROAE 12.5 9.1 17.5 10.9 5.9
Leverage
Net Gearing (x) 0.1 0.2 0.1 0.1 0.1
Interest Coverage (x) 5.0 4.6 8.0 5.5 3.2 Source : BSDE, Danareksa Estimates
www.danareksa.com See important disclosure at the back of this report 1
Equity Research Company Update
Tuesday,28 November 2017
Summarecon Agung(SMRA IJ) BUY
Upgrade Too cheap to ignore
We upgrade our recommendation on SMRA from HOLD to BUY with unchanged target price of IDR1,100. We believe with the recent share pressure following announcement on the deletion of SMRA from MSCI Index, has resulted on the SMRA’s share price to be undervalued. Fundamental wise, we expect SMRA to record strong marketing sales performance in November 2017 on the back of recognition from Verdi and Viveldi launching (IDR600bn). At the moment, SMRA is trading at 73.1% discount to our NAV, nears to its historical +2SD discount of 75.4%.
Expect strong marketing sales in November 2017. Despite SMRA’s marketing sales in 10M17 only reached IDR2.3tn in 10M17, down by 5.1%yoy (73.7% of our full year marketing sales target (IDR3.1tn) and 65.6% of the management’s target (IDR3.5tn)), we expect SMRA to record strong marketing sales in November 2017 on the back of marketing sales recognition from Veldi and Viveldi of IDR600bn as well as regular sales. As such, we expect SMRA to record marketing sales of IDR3.0tn in 11M17, accounts for 90.5% of our marketing sales target and 85.7% of management. Likely to achieve our marketing sales target. Considering the solid marketing sales performance - coupled with two launches in the pipeline (shophouses in Summarecon Bandung and landed residential in Summarecon Karawang), we believe that SMRA will likely to achieve our 2017 marketing sales of IDR3.3tn. For 2018, we expect SMRA to record marketing sales of IDR3.6tn (implying 8.7%yoy growth) considering: (i) expected marketing sales recognition from the sale of land to its JV of IDR160bn, (ii) additional marketing sales from the Summarecon Makassar launching. Bond issuance to lower the blended interest rate. Last week, SMRA announced that it would issue the second phase of its shelf registered bonds amounting to IDR800bn with a coupon rate of 8.8%. All of the proceeds will be used to refinance its outstanding bank loans that incur a higher interest rate of 9.9%. Thus, ceteris paribus, we expect the issuance of this bond to result in a 12bps lower blended interest rate (down from 10.4% to 10.3%). Upgrade our recommendation to BUY. We upgrade our recommendation for SMRA with unchanged target price of IDR1,100 (SOTP based valuation with WACC of 11.6%, Terminal Growth of 4.0%, 65% target discount to NAV). We believe with the recent share pressure following announcement on the deletion of SMRA from MSCI Index, has resulted on the SMRA’s share price to be undervalued. At the moment, SMRA is trading at 73.1% discount to our NAV, nears to its historical +2SD discount of 75.4%.
Last price (IDR) 890
Target Price (IDR) 1,100
Upside/Downside +23.6%
Previous Target Price (IDR) 1,100
Stock Statistics
Sector Property
Bloomberg Ticker SMRA IJ
No of Shrs (mn) 14,427
Mkt. Cap (IDR bn/USDmn) 12,840/951
Avg. daily T/O (IDR bn/USDmn) 22.4/1.7
Major shareholders
Semarop Agung 25.4%
Sinarmegah Jayasentosa 6.6%
Estimated free float (%) 62.1
EPS Consensus(IDR)
2017F 2018F 2019F
Danareksa 19.9 26.2 25.1
Consensus 22.0 33.2 40.3
Danareksa/Cons (9.7) (21.1) (37.8)
SMRA relative to JCI Index
Source : Bloomberg
Antonia Febe Hartono, CFA
(62-21) 29 555 888 ext.3504
Natalia Sutanto
(62-21) 29 555 888 ext.3508
Key Financials Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 5,624 5,398 5,319 5,627 5,538 EBITDA, (IDRbn) 2,009 1,678 1,551 1,634 1,618 EBITDA Growth, (%) (12.1) (16.5) (7.6) 5.3 (1.0) Net profit (IDRbn) 855 312 287 378 362 EPS (IDR) 59.3 21.6 19.9 26.2 25.1 EPS growth (%) (38.3) (63.6) (7.9) 31.6 (4.2) BVPS, (IDR) 416.8 432.7 450.8 475.3 498.2 DPS, (IDR) 20.0 5.0 1.8 1.7 2.2 PER (x) 15.0 41.2 44.7 34.0 35.5 PBV (x) 2.1 2.1 2.0 1.9 1.8 Dividend yield (%) 2.2 0.6 0.2 0.2 0.2 EV/EBITDA (x) 8.7 10.8 12.1 11.5 11.6
Source : SMRA, Danareksa Estimates
www.danareksa.com See important disclosure at the back of this report 2
Exhibit 1. REVENUE AND GROWTH Exhibit 2. NET PROFIT AND GROWTH
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 3. MARGINS Exhibit 4. GEARING LEVEL
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 5. SMRA’s historical discount to NAV Exhibit 6. Property sector’s historical discount to NAV
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Two launchings in the pipeline Going into November and December 2017, the company has two project launches in the pipeline. From these two launches, we estimate that SMRA can record additional marketing sales of IDR200bn.
1. Shop houses in Summarecon Bandung In November 2017, the company plans to conduct the launch of shop houses in Summarecon Bandung, named Ruby and Topaz with 87 units available for sale and prices starting from IDR2.7-6.5bn/unit (implying a land price of IDR17.9mn/sqm). On the launching day, SMRA managed to sell 68 units of shophouses (78.2%). We estimate this to result on additional marketing sales of IDR300bn.
-2SD
-1SD
Mean
+2SD
+1SD
35.0%
40.0%
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
-2SD
-1SD
Mean
+2SD
+1SD
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
www.danareksa.com See important disclosure at the back of this report 3
Exhibit 7. Shop houses in Summarecon Bandung
Source: Company
2. Landed residential in Summarecon Karawang
Going into December 2017, the company also plans to launch 126 units of landed residential project in Summarecon Karawang. In the first phase, SMRA will give 50 priority numbers to employees in the Karawang area (provided they can show a certificate of employment at a company operating in the surrounding industrial estate). The price ticket offered at the new Kalista cluster of IDR458-689mn/unit (assuming building cost of IDR6mn/sqm, the land price stood at IDR4.1mn/sqm) is considerably lower than the price ticket offered at the preceding cluster, New Elora (IDR896-1,844mn/unit – assuming building cost of IDR6mn/sqm, the land price stood at IDR6.4mn/sqm). The company stated that the considerable price discrepancy was due to location factor. With the affordable prices being offered, we are optimistic on the take-up rate for this project. Assuming a 90% take-up rate, we estimate the launching to result in additional marketing sales of IDR72bn.
Monetizing its inventory: Mega Deal To monetize its outstanding inventory that has reached IDR5.8tn (consisting of construction in progress inventory of IDR5.5tn and ready for sale inventory of IDR217bn) and to boost its marketing sales, SMRA introduced a promotional program named Mega Deal in October 2017 that offers various promotions, including cash back and longer installment periods for down payments for certain products in Summarecon Bekasi, Summarecon Kelapa Gading, and Summarecon Emerald Kawang. We believe this promotional program has also boosted SMRA’s marketing sales in October 2017.
Exhibit 8. Summarecon’s Mega Deal program Source: Company
Summarecon Bekasi Summarecon Bekasi
Products Promotions Products Promotions
Springlake Cash back 20% Springlake Cash back 15%
Springlake View Cash back 10% Springlake View Cash back 5%
Primerose Condovilla Cash back 10% Primerose Condovilla Cash back 5%
Summarecon Kelapa Gading Summarecon Kelapa Gading
Products Promotions Products Promotions
Kesington Apartment Cash back 12.5% Kesington Apartment Cash back 7.5%
Summarecon Emerald Karawang Summarecon Emerald Karawang
Products Promotions Products Promotions
Advani and Elora Cash back 3% Advani and Elora Cash back 3%
Hard Cash
The first stage of cash back will be granted after
payment of downpayment (3-10%), the remaining
cash back will be paid after handed over
Mortgage
In the first three years, SMRA will give subsizied
mortgage rate so that consumer will only borne with
fixed mortgage rate of 4.2%
Summarecon Bekasi
Products Promotions
Springlake 20% DP for 36 installment
Springlake View 20% DP for 36 installment
Primerose Condovilla 20% DP for 36 installment
Ruby Commercial 20% DP for 24 installment
Summarecon Kelapa Gading
Products Promotions
Kesington Apartment 10% DP for 12 installment
Summarecon Emerald Karawang
Products Promotions
Advani and Elora 20% DP for 36 installment
Baloon payment
www.danareksa.com See important disclosure at the back of this report 4
Additional marketing sales from the sale of land to its JV Recently, SMRA signed a MoU to establish a joint venture with Sumitomo Forestry to develop 4.4ha of land bank in Summarecon Bekasi. SMRA will have a 51% stake in the JV. Aimed at upper income consumers, the JV will offer 160 units for sale with prices starting from IDR2bn/unit (implying a land price of IDR15mn/sqm). The launching will be conducted in mid-2018. Although we are not optimistic in regard to the expected marketing sales proceeds from the launching considering the high prices offered, we believe the JV will positively impact SMRA from the land sales to the JV. With the land price of IDR4mn/sqm, we expect additional marketing sales of IDR160bn. As the JV is still being set up, we expect the marketing sales for the land sales transaction to be recognized in 2018.
Exhibit 9. NAV Calculation
Source: Company, Danareksa Sekuritas
Land bank
Location Stakes Area
(ha) Plot ratio
Price per sqm
(Rp mn/sqm) Method
RNAV
(Rp bn)
Summarecon Kelapa Gading North Jakarta 100% 8.0 65% 21.7 NAV 1,129
Summarecon Serpong Tangerang
Own Land Tangerang 100% 304.0 65% 7.3 NAV 14,334
JO with JBC Tangerang 70% 138.0 65% 8.7 NAV 5,434
JO with The Spring Tangerang 55% 42.0 65% 8.7 NAV 1,299
Summarecon Bekasi
Own Land Bekasi 100% 121.0 65% 7.8 NAV 6,126
JO with DSA Bekasi 51% 272.0 0.2 At cost 336
Summarecon Bandung West Java 100% 334.0 65% 4.5 NAV 9,816
Summarecon Bali Bali 100% 20.0 2.5 At cost 501
Summarecon Bogor West Java 100% 404.0 0.2 At cost 757
Summarecon Makassar South Sulawesi
Own Land South Sulawesi 100% 151.0 0.5 At cost 683
JO with SMC South Sulawesi 51% 299.0 0.5 At cost 689
Summarecon Karawang West Java 100% 33.0 65% 3.6 NAV 769
Others 100% 195.0 0.5 At cost 881
Apartment and office 1,089
Investment property
Mall and retail DCF 8,175
Hotels DCF 2,504
Other properties DCF 1,844
Total asset (Rp bn) 56,367
Net debts (Rp bn) 5,953
Advance to customer (Rp bn) 2,767
Net asset value (Rp bn) 47,646
Discount to NAV (%) 65%
Number of shares outstanding (bn shares) 14.4
Target price (Rp/share) 1,100
www.danareksa.com See important disclosure at the back of this report 5
Exhibit 10. Income Statement
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Revenue 5,624 5,398 5,319 5,627 5,538
COGS (2,717) (2,800) (2,863) (2,999) (2,908)
Gross profit 2,907 2,598 2,456 2,628 2,630
EBITDA 2,009 1,678 1,551 1,634 1,618
Oper. profit 1,768 1,409 1,273 1,346 1,323
Interest income 74 101 125 106 107
Interest expense (483) (634) (615) (672) (673)
Forex Gain/(Loss) 0 0 0 0 0
Income From Assoc. Co’s 0 0 0 0 0
Other Income (Expenses) 24 1 4 4 4
Pre-tax profit 1,382 878 788 785 762
Income tax (318) (272) (231) (204) (205)
Minority interest (209) (293) (270) (203) (195)
Net profit 855 312 287 378 362
Core Net Profit 855 312 287 378 362
Exhibit 11. Balance Sheet
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Cash & cash equivalent 1,504 2,076 1,765 1,778 1,793
Receivables 152 548 540 572 563
Inventory 4,925 5,531 6,016 6,453 6,845
Other Curr. Asset 709 546 510 509 504
Fixed assets - Net 420 451 418 385 356
Other non-curr.asset 11,048 11,658 11,855 12,119 12,026
Total asset 18,758 20,810 21,103 21,816 22,086
ST Debt 983 1,402 2,304 2,770 3,607
Payables 328 289 233 244 237
Other Curr. Liabilities 3,099 2,526 2,369 2,430 2,324
Long Term Debt 5,214 6,024 5,326 4,961 4,161
Other LT. Liabilities 1,604 2,403 2,378 2,513 2,481
Total Liabilities 11,229 12,645 12,609 12,918 12,810
Shareholder'sFunds 6,013 6,243 6,504 6,857 7,187
Minority interests 1,517 1,923 1,990 2,041 2,090
Total Equity & Liabilities 18,758 20,810 21,103 21,816 22,086
www.danareksa.com See important disclosure at the back of this report 6
Exhibit 12.Cash Flow
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Net income 855 312 287 378 362
Depreciation and Amort. 222 266 277 287 295
Change in Working Capital (1,413) (1,542) (654) (396) (492)
OtherOper. Cash Flow 414 1,454 467 666 536
Operating Cash Flow 79 489 377 935 700
Capex (567) (471) (140) (160) (180)
Others Inv. Cash Flow (1,347) (440) (184) (224) 107
Investing Cash Flow (1,914) (911) (324) (384) (73)
Net change in debt 1,815 1,229 203 101 37
New Capital 0 0 0 0 0
Dividend payment (266) (81) (26) (24) (32)
Other Fin. Cash Flow (483) (634) (615) (672) (673)
Financing Cash Flow 1,066 514 (438) (594) (667)
Net Change in Cash (770) 91 (385) (44) (40)
Cash - begin of the year 1,771 1,504 2,076 1,765 1,778
Cash - end of the year 1,504 2,076 1,765 1,778 1,793
Exhibit 13. Key Ratios
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Growth (%)
Sales (2.3) (4.0) (1.5) 5.8 (1.6)
EBITDA (12.1) (16.5) (7.6) 5.3 (1.0)
Operating profit (14.9) (20.3) (9.6) 5.7 (1.7)
Net profit (38.3) (63.6) (7.9) 31.6 (4.2)
Profitability (%)
Gross margin 51.7 48.1 46.2 46.7 47.5
EBITDA margin 35.7 31.1 29.2 29.0 29.2
Operating margin 31.4 26.1 23.9 23.9 23.9
Net margin 15.2 5.8 5.4 6.7 6.5
ROAA 4.9 1.6 1.4 1.8 1.6
ROAE 15.0 5.1 4.5 5.7 5.2
Leverage
Net Gearing (x) 0.6 0.7 0.7 0.7 0.6
Interest Coverage (x) 3.7 2.2 2.1 2.0 2.0 Source : SMRA, Danareksa Estimates
www.danareksa.com See important disclosure at the back of this report 1
Equity Research Company Update
Tuesday,28 November 2017
Alam Sutra Realty(ASRI IJ) HOLD
Maintain Mixed Signals
We reiterate our HOLD call on ASRI with unchanged target price of IDR400. While we expect ASRI to record stellar marketing sales in 2018 (+36.5%yoy), largely thanks to more land sales to CFLD, ASRI is expected, nonetheless, to book lower revenues (-15.0%yoy) and lower net profits (-26.4%yoy) with less revenues recognition from CFLD. At the moment, ASRI is trading at 74.0% discount to our NAV, nears to its historical +1SD discount of 73.9%. October 2017 marketing sales: still backed by inventory. ASRI indicated marketing sales of IDR1.4tn in 10M17, or reaching just 45.6% of our full year marketing sales target (IDR3.0tn) and 27.4% of the management’s target (IDR5.0tn). In October alone, ASRI Indicated marketing sales of IDR100-150bn, supported by the sale of inventory. While ASRI previously mentioned that it had two project launches in the pipeline for this year, ASRI is still completing the land preparation progress for these projects – meaning the project launches could be delayed to next year. We maintain our marketing sales target. If we exclude the potential land sales to CFLD of IDR1tn from our marketing sales target, ASRI’s marketing sales in 10M17 would be 70.2% of our full year target. Nonetheless, we still maintain our regular marketing sales target of IDR2.0tn as we expect: (i) regular sales in November and December 2017 to reach IDR100-150bn, and (ii) potential commercial land plot sales in the Alam Sutera township. At the moment, the outstanding inquiries for the commercial land plots have reached 5ha, with a selling price of IDR25mn/sqm. Conservatively assuming a conversion ratio of 30%, we estimate additional marketing sales of IDR300-400bn. 2018: stellar marketing sales but lethargic financial performance Going into 2018, we expect ASRI to record strong marketing sales growth of 36.5%yoy. While we remain cautious on the outlook for property demand next year, as indicted by the flattish growth in regular sales (+2.4%yoy), we expect ASRI to deliver more land sales to CFLD next year (100ha vs. 50ha this year). Nonetheless, the revenues recognition from the transaction will only be recognized in 2019. Thus, we expect ASRI to record sluggish financial performance in 2018 with less revenues recognition from CFLD sales (IDR1.0tn of sales to be recognized in 2018 vs. IDR1.4tn in 2017). Maintain HOLD. We reiterate our HOLD call on ASRI with target price of IDR400. To arrive at our target price, we use SOTP based valuation with WACC of 12.1%, Terminal Growth of 4.0% and a 73% target discount to NAV (historical +1SD discount to NAV). At the moment, ASRI is trading at 74.0% discount to our NAV, nears to its historical +1SD discount of 73.9%.
Last price (IDR) 386
Target Price (IDR) 400
Upside/Downside +3.6%
Previous Target Price (IDR) 400
Stock Statistics
Sector Property
Bloomberg Ticker ASRI IJ
No of Shrs (mn) 19,649
Mkt. Cap (IDR bn/USDmn) 7,585/561
Avg. daily T/O (IDR bn/USDmn) 11.9/0.9
Major shareholders
Tangerang Fajar Industrial Estate 25.2%
Manunggal Prime Development 18.7%
Estimated free float (%) 48.1
EPS Consensus(IDR)
2017F 2018F 2019F
Danareksa 73.1 53.8 89.6
Consensus 53.1 56.8 60.0
Danareksa/Cons 37.5 (5.3) 49.4
ASRI relative to JCI Index
Source : Bloomberg
Antonia Febe Hartono, CFA
(62-21) 29 555 888 ext.3504
Natalia Sutanto
(62-21) 29 555 888 ext.3508
Key Financials Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Revenue, (IDRbn) 2,784 2,716 4,064 3,456 4,486 EBITDA, (IDRbn) 1,706 1,177 1,892 1,504 2,226 EBITDA Growth, (%) (13.8) (31.0) 60.6 (20.5) 48.0 Net profit (IDRbn) 597 509 1,436 1,056 1,760 EPS (IDR) 30.4 25.9 73.1 53.8 89.6 EPS growth (%) (45.6) (14.7) 182.2 (26.4) 66.6 BVPS, (IDR) 328.5 360.5 427.0 462.5 538.7 DPS, (IDR) 7.0 0.0 (6.5) (18.3) (13.4) PER (x) 12.7 14.9 5.3 7.2 4.3 PBV (x) 1.2 1.1 0.9 0.8 0.7 Dividend yield (%) 1.8 0.0 (1.7) (4.7) (3.5) EV/EBITDA (x) 8.4 12.1 7.5 9.3 5.5
Source : ASRI, Danareksa Estimates
www.danareksa.com See important disclosure at the back of this report 2
Exhibit 1. REVENUE AND GROWTH Exhibit 2. NET PROFIT AND GROWTH
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 3. MARGINS Exhibit 4. GEARING LEVEL
Source: Company, Danareksa Sekuritas estimates Source: Company, Danareksa Sekuritas estimates
Exhibit 5. ASRI’s historical discount to NAV Exhibit 6. Sector’s historical discount to NAV
Source: Danareksa Sekuritas estimates, Bloomberg Source: Danareksa Sekuritas estimates, Bloomberg
Gearing is trending down. Going into 2018, we expect ASRI’s gearing ratio to trend down from 92.3% in 9M17 to 81.8% on the back of: (i) expected cash inflows from land sales to CFLD, (ii) limited capex allocation. For 2018, we expect the company to record land acquisition capex of IDR750-800bn, similar to this year’s capex allocation.
-2SD
-1SD
Mean
+2SD
+1SD
55.0%
60.0%
65.0%
70.0%
75.0%
80.0%
85.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
-2SD
-1SD
Mean
+2SD
+1SD
45.0%
50.0%
55.0%
60.0%
65.0%
70.0%
Jun 2016 Sep 2016 Dec 2016 Mar 2017 Jun 2017 Sep 2017
www.danareksa.com See important disclosure at the back of this report 3
Discussions on the Tower: On. After back and forth progress regarding discussions on the sales of the Tower, the company stated that the discussions were restarted in October 2017. Nonetheless, as we expect the process for the sale of the Tower to be lengthy, we do not incorporate potential Tower sales into our forecast. Nevertheless, we conduct sensitivity analysis on the impact of the Tower transaction on our net profit targets for 2018.
Exhibit 7. Sensitivity to the impact of the Tower sales
Scenario 1: no bulk sales Scenario 2: bulk sales,
exercised in 2017 Scenario 3: bulk sales,
exercised in 2018
Take up rate for The Tower 2017 20% 100% 20% 2018 24% 100% 100%
Marketing sales (in IDRbn)
2017 3,004 4,676 3,004 2018 4,101 4,018 5,690
Net profit (in IDRbn)* 2017 1,436 1,436 1,436 2018 1,056 2,144 2,144
Source: Company, Danareksa Sekuritas *Regardless the marketing sales recognition, we expect the revenue recognition from the transaction of the Tower to be in 2018.
www.danareksa.com See important disclosure at the back of this report 4
Exhibit 8. NAV calculation
Source: Company, Danareksa Sekuritas
Land bank
Location Stakes Area
(ha) Plot ratio
Price per sqm
(Rp mn/sqm) Method
RNAV
(Rp bn)
Alam Sutera Tangerang 145.0
Residential Tangerang 100.0% 21.8 60% 11.4 NAV 1,485
Commerical Tangerang 100.0% 123.3 60% 18.4 NAV 13,579
Pasar Kemis Tangerang 100.0% 1,555.0 NAV
Residential Tangerang 100.0% 1,321.8 60% 2.0 NAV 15,513
Commerical Tangerang 100.0% 233.3 60% 3.0 NAV 4,227
Cianjur West Java 100.0% 80.0 0.1 At cost 88
Riau Riau 100.0% 75.0 0.1 At cost 45
Sanur Bali 100.0% 6.0 3.4 At cost 206
GWK, Badung Bali 100.0% 63.0 0.1 At cost 36
Cikokol Tangerang 100.0% 15.0 2.0 At cost 307
Others 100.0% 2.7 0.5 At cost 14
Investment property
Mall and retail DCF 435.7
Office for lease DCF 111.1
Other DCF 253.8
Office and Apartment
Office (Prominence and The Tower) DCF 1,296.8
Apartment (Kota Ayodya, Peddington) DCF 309.0
Total net asset value 37,905
Net debts (Rp bn) 6,338
Advance from customer (Rp bn) 2,376
Net asset value (Rp bn) 29,191
Discount to NAV (%) 73%
Number of shares outstanding (bn shares) 19.6
Target price (Rp/share) 400
www.danareksa.com See important disclosure at the back of this report 5
Exhibit 9. Income Statement
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Revenue 2,784 2,716 4,064 3,456 4,486
COGS (728) (1,251) (1,843) (1,634) (1,906)
Gross profit 2,056 1,465 2,221 1,823 2,580
EBITDA 1,706 1,177 1,892 1,504 2,226
Oper. profit 1,628 1,096 1,810 1,418 2,143
Interest income 38 53 59 55 60
Interest expense (159) (226) (283) (236) (231)
Forex Gain/(Loss) (438) 157 68 24 0
Income From Assoc. Co’s 0 0 0 0 0
Other Income (Expenses) (167) (358) (60) (62) (35)
Pre-tax profit 902 723 1,594 1,199 1,937
Income tax (217) (213) (154) (140) (171)
Minority interest (88) (1) (4) (3) (5)
Net profit 597 509 1,436 1,056 1,760
Core Net Profit 1,035 351 1,368 1,032 1,760
Exhibit 10. Balance Sheet
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Cash & cash equivalent 638 1,189 1,091 1,198 2,977
Receivables 151 197 350 298 386
Inventory 1,156 1,208 858 648 522
Other Curr. Asset 454 241 234 198 210
Fixed assets - Net 1,097 1,149 1,256 1,363 1,476
Other non-curr.asset 14,914 15,955 16,962 17,591 18,139
Total asset 18,710 20,186 20,999 21,541 23,956
ST Debt 77 323 369 685 279
Payables 1,288 631 627 668 780
Other Curr. Liabilities 2,387 2,480 2,214 2,254 2,878
Long Term Debt 7,291 7,511 7,314 6,851 7,289
Other LT. Liabilities 1,064 2,053 1,979 1,890 2,041
Total Liabilities 12,107 12,998 12,503 12,348 13,266
Shareholder'sFunds 6,454 7,083 8,391 9,088 10,585
Minority interests 148 105 105 105 105
Total Equity & Liabilities 18,710 20,186 20,999 21,541 23,956
www.danareksa.com See important disclosure at the back of this report 6
Exhibit 11.Cash Flow
Year to 31 Dec (IDRbn) 2015A 2016A 2017F 2018F 2019F
Net income 597 509 1,436 1,056 1,760
Depreciation and Amort. 78 81 82 86 83
Change in Working Capital 1,044 (411) (67) 380 761
OtherOper. Cash Flow (1,540) 827 (19) (75) 152
Operating Cash Flow 178 1,006 1,432 1,447 2,757
Capex (1,295) (787) (738) (654) (574)
Others Inv. Cash Flow 642 53 (231) 55 60
Investing Cash Flow (653) (733) (969) (600) (514)
Net change in debt 762 466 (151) (147) 32
New Capital (125) 109 0 0 0
Dividend payment (135) 10 (127) (359) (264)
Other Fin. Cash Flow (269) (307) (283) (236) (231)
Financing Cash Flow 233 278 (561) (741) (463)
Net Change in Cash (242) 551 (98) 106 1,779
Cash - begin of the year 881 638 1,189 1,091 1,198
Cash - end of the year 638 1,189 1,091 1,198 2,977
Exhibit 12. Key Ratios
Year to 31 Dec 2015A 2016A 2017F 2018F 2019F
Growth (%)
Sales (23.3) (2.4) 49.6 (15.0) 29.8
EBITDA (13.8) (31.0) 60.6 (20.5) 48.0
Operating profit (14.7) (32.6) 65.0 (21.6) 51.1
Net profit (45.6) (14.7) 182.2 (26.4) 66.6
Profitability (%)
Gross margin 73.9 53.9 54.7 52.7 57.5
EBITDA margin 61.3 43.4 46.5 43.5 49.6
Operating margin 58.5 40.4 44.5 41.0 47.8
Net margin 21.4 18.7 35.3 30.6 39.2
ROAA 3.3 2.6 7.0 5.0 7.7
ROAE 9.5 7.5 18.6 12.1 17.9
Leverage
Net Gearing (x) 1.0 0.9 0.8 0.7 0.4
Interest Coverage (x) 10.2 4.9 6.4 6.0 9.3 Source : ASRI, Danareksa Estimates