19 feb 2014 lpck maybank kimeng

SECTOR RESEARCH | Indonesia

February 19, 2014

UNDERWEIGHT

Property Sector
Arriving at the landing of the stairs




Initiate at Underweight . Forecast aggregate pre-sales in 2014
to plateau due to t ighter mortgage regulations and
macroeconomic uncertainty. Will turn more positive when
pre-sales dat a start to pick up, which we expect in 2H14.
Remain positive on the sector’s struct ural long-term growth,
supported by Indonesia’s large young population and low
mortgage-to-loan ratio.

(New)

Analysts
Aurellia Set iabudi
(62) 21 2953 0785
Aurellia. Set iabudi@maybank-ke. co. id
Wiliant o Ie
(62) 21 2557 1125
wiliant o. ie@maybank-ke. co. id

In this challenging time, we prefer developers with strong
balance sheets and conservative proj ects in low-middle
segment as demand for premium properties weaken. Top
BUYs: BSDE, CTRA and LPCK. Top SELL: ASRI.

Short-term hiccup before resuming growth
We expect more negat ive news in 1H14 f rom weak pre-sal es t ake-up
rat es and macroeconomi c uncert aint y bef ore t he president ial
elect ion. We also expect t he government t o impl ement t ight er
regulat ions should propert y prices cont inue t o rise sharply.

Stay with the conservative developers
During periods when earnings visibilit y is not high, we pref er
companies wit h st rong bal ance sheet s t hat have t he capabilit y t o
f und t heir proj ect s. We also pref er compani es wit h high revenue
cont ribut ion f rom invest ment propert ies f or earni ngs st abilit y.

Top picks: BSDE, CTRA and LPCK
Bumi Serpong Damai (TP IDR2, 000), Ciput ra Development (TP1, 330)
and Lippo Cikarang (TP IDR8, 000) are our t op picks in t he propert y
sect or f or t heir st rong balance sheet s and conservat ive proj ect s.
We calculat e RNAV by using DCF valuat ion of companies’ f ive-year
operat ing cash f lows and we assigned residual value f or t heir land
bank. We also use one-year f orward P/ E and P/ B mul t iples as sanit y
checks.

Stock

Ticker

Rating

Mkt Cap

RNAV/
share

Price

TP

U/ D Disc. to
Side
RNAV

PER
PER
CY14F CY15F

(USD m)

(local)

(local)

(local)

(%)

(%)

(x)

P/ B
ROE Div yield
CY14F CY14F
CY14F

(x)

(x)

(%)

(%)

Bumi Serpong Damai

BSDE IJ

Buy

2, 337

2, 857

1, 575

2, 000

27%

45%

10. 8

9. 6

2. 3

23%

1. 7%

Ciput ra Development

CTRA IJ

Buy

1, 338

2, 627

1, 025

1, 330

30%

61%

11. 2

10. 4

2. 1

20%

2. 4%

Lippo Cikarang

LPCK IJ

Buy

411

12, 865

6, 975

8, 000

15%

46%

6. 5

6. 0

1. 8

32%

0. 0%

Sent ul Cit y

BKSL IJ

Buy

474

1, 022

178

200

13%

83%

12. 4

7. 2

0. 9

8%

0. 0%

Alam Sut era Realt y

ASRI IJ

Sell

983

1, 352

590

500

-15%

56%

8. 2

7. 2

1. 7

23%

3. 6%

Bekasi Faj ar

BEST IJ

Hold

502

1, 058

615

590

-4%

42%

8. 5

7. 4

2. 0

25%

2. 7%

Lippo Karawaci

LPKR IJ

Hold

1, 869

1, 436

955

900

-6%

34%

13. 0

11. 4

1. 7

12%

1. 5%

Summarecon Agung

SMRA IJ

Hold

1, 254

2, 809

1, 025

1, 050

2%

64%

12. 1

11. 0

2. 8

25%

3. 0%

Sour ce: Bl oomber g, Maybank KE. Pr i ces ar e as of 17 Feb 2014

SEE PAGE 113 FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS

Indonesia Property

Arriving at the landing of the stairs
Af t er t he ext raordinary growt h of t he Indonesian propert y market over t he
past f ive years, we expect bot h prices and vol umes t o plat eau t his year as
t he cent ral bank t ight ens and economic growt h slows down.
We init iat e coverage of t he Indonesian propert y sect or at Underweight ,
alt hough we expect perf ormances t o diverge bet ween companies t hat have
higher low-rise or high-rise propert y mix and also bet ween companies t hat
have st rong balance sheet s and leveraged balance sheet s.

Expect more bad news in 1H14
We expect more negat ive news t o exert pressure on t he sect or f rom weak
pre-sales in 1H14. Tight mort gage lending f rom maj or banks due t o high
loan-t o-debt rat ios will reduce demand f rom homebuyers who require
f undi ng. We ant ici pat e pre-sal es wil l pick up in 2H14 when we expect
macroeconomic condit ions t o improve.

Short-term hiccup before resuming growth
We t hink t he sect or’ s short -t erm f undament als f ace chall enges on bot h t he
supply and demand side. We not e t he supply of prime land is diminishing
due t o st rong propert y sales since 2009. Developers are now f orced t o
replenish t heir land banks at signif icant ly higher cost s. This separat es
companies t hat st ill have ampl e prime land bank t o creat e more val ue. On
t he ot her hand, we also not e demand f or high-end propert i es has sof t ened
as af f ordabilit y diminishes wit h inf lat ion out pacing real income growt h.
We remain posit ive on t he sect or’ s st ruct ural long-t erm growt h on t he back
of Indonesia’ s large young populat ion and low mort gage t o t ot al loan rat io.
We also expect a sust ainable increase of income and moderni zed lif est yle
whereby t he number of peopl e per household declines, t heref ore driving
demand f or more housing.

Stick to those with strong balance sheets
In t imes when earni ngs visibilit y is not high, we pref er companies wit h
st rong balance sheet s and conservat ive proj ect s. We also like companies
wit h high revenue cont ribut ion f rom invest ment propert ies. We t hink when
demand is uncert ain, exposure t o high-risk proj ect s such as high-rise
condominiums may hurt developers’ f inancial st abi lit y.



3 Numbers that Matter

Slow pre-sales in 2013 (11%)

On aggregat e, pre-sal es of propert y
companies i n our universe grew 11%
YoY boost ed by bul k sales of Bumi
Serpong Damai. St ripping t he bulk
sales, organic pre-sal es only grew 5%
YoY.

February 19, 2014



Cautious pre-sales t arget

On aggregat e, propert y companies in
our universe gui ded f or pre-sal es
t arget growt h of 12% YoY in 2014F
wit h f ew companies st i ll guided f or
f lat growt h in 2014F. We t arget f or
5% growt h YoY in 2014F, on
aggregat e.



Weakening IDR against USD (-25%)

The Indonesian Rupiah weakens by
25% YoY in 2013 (end of period). This
has raised t he risks f or propert y
developers which have high port f olio
of high-rise bui ldi ngs as it increases
t he development cost s.

2

Indonesia Property

Has all the negative news been priced in?
We expect mor e negat ive news in 1H14 f r om weak pr e-sal es number s and
macr oeconomic uncer t ai nt y (pr e-el ect ion) t o exer t f ur t her pr essur e on t he
sect or . Al t hough t he 40% st eep f al l f r om it s peak in May 2013 has cr eat ed
val ue in some companies, we wil l t ur n mor e posit ive when pr e-sal es
r ecover , which we expect i n 2H14.
Indonesia property index down by 40% from its peak in 2013
The Indonesian propert y sect or has dropped 40% f rom it s peak in May 2013
since t he sect or ral lied in 2009. This correct ion is t he second largest in t he
sect or af t er it f el l 62% during t he 2008 global f inancial crisis.
The propert y sect or’ s st eep drop also widens t he discount t owards it s
RNAV. As we remain posit ive t owards t he long-t erm growt h of Indonesia’ s
propert y sect or, we expect compani es’ RNAV t o cont inue t o grow i n t he
f ut ure. On average, Indonesian propert y compani es under our coverage are
t rading at 51% discount t o 2014 RNAV.
Figure 2: RNAV table

Figure 1: Indonesia property index (JAKPROP)

Company

JAKPROP Index
600
500
400
300
200

RNAV/
share
(IDR)

Share
Discount
price
implied
(IDR)

Land
bank
(ha)

Land bank/
2013 sales

Alam Sut era Realt y

1, 352

590

56%

2, 002

18 years

Bumi Serpong Damai

2, 857

1, 575

45%

4, 068

19 years

Ciput ra Development

2, 672

1, 025

61%

1, 387

7 years

Lippo Karawaci

1, 436

955

34%

1, 333

25 years

Sent ul Cit y

1, 022

178

83%

13, 400

191 years

Summarecon Agung

2, 809

1, 025

64%

1, 502

30 years

1, 033

615

40%

681

11 years

12, 865

6, 975

46%

572

19 years

100
Indust rial Est at es

0
06

07

08

09

10

11

12

13

14

Bekasi Faj ar
Lippo Cikarang

Sour ce: Bl oomber g

Sour ce: Bl oomber g, Maybank KE. Pr i ces ar e as of 17 Feb 2014.
Not e: Det ai l cal cul at i on of RNAV pl ease see company sect i on. Land bank as of
9M2013.

Expect weak pre-sales in 1H14
Wit h mort gage lending st ill t ight and very f ew propert y proj ect s being
launched by developers at t he beginning of t his year, we expect pre-sal es
in 1H14 t o remain weak. We expect pre-sales t o st art t o pick up in 3Q14 on
t he back of an improving macro out look. We also not e developers are
t arget ing t o launch t heir proj ect s i n 2H14 t o secure higher t ake-up rat es.
We also expect developers t o increase ASPs conservat ively t his year t o
boost pre-sales and also t o not at t ract f urt her at t ent ion of t he regulat ors
which are monit ori ng t he high growt h of propert y prices.

February 19, 2014

3

Indonesia Property
Wit h weak pre-sales expect ed in 1H14 and conservat i ve ASP increases, we
assume f lat pre-sal es growt h in 2014F on aggregat e, in line wit h guidance
f rom companies. We sense many developers are becoming more caut ious
(f irst t ime since 2009) in t erms of launching proj ect s and many of t hem
have set f lat pre-sal es t arget s f or t his year.
Alt hough we believe Indonesia’ s economy wil l resume growt h in 2015, we
f orecast conservat ive pre-sales growt h f or 2015. We only incl uded proj ect s
t hat t he developers have announced in t heir pipelines in our assumpt ions.
We have not assumed any new proj ect s or bulk sales t o increase sales
volume. We f orecast Bumi Serpong Damai (BSDE IJ), Ciput ra Development
(CTRA IJ), Sent ul Cit y (BKSL IJ) and Summarecon Agung (SMRA IJ) t o have
double-digit pre-sales growt h in 2015.
We f orecast f lat pre-sal es growt h indust rial est at e land segment as we
expect invest ors t o wait and see f or t he upcoming parliament ary and
president ial el ect ion t o compl et e in July14. This applies f or Bekasi Faj ar
while Lippo Cikarang’ s sales growt h will be f rom non-i ndust rial segment .
Figure 3: Pre-sales overview
Company Name

Mar keting Sales
2012A

2013A

3, 648

4, 810

Gr owth
(y-y)

2013G

% to

Last

tar get

Tar get

Township Developer
Alam Sut era Realt y

32%

5, 600

86%

Jul'13

Bumi Serpong Damai

4, 280

7, 348

72%

7, 000

105%

Jan'13

Ci put ra Development

7, 298

8, 941

23%

9, 070

99%

Oct '13

Li ppo Karawaci

6, 760

4, 104

-39%

4, 708

87%

Sep'13

Sent ul Ci t y

1, 196

2, 085

74%

2, 000

104%

Aug'13

Summarecon Agung

3, 873

3, 725

-4%

3, 700

101%

Oct '13

1, 123

1, 090

-3%

1, 204

91%

Oct '13

2, 052

1, 698

-17%

2, 320

73%

Sep'13

30, 230

33, 801

12% 35, 602

95%

Industr ial Estates
Bekasi Faj ar
Li ppo Ci karang

Aggr egate
Sour ce: Company, Maybank KE
Not e: G=Company Gui dance

Figure 4: Pre-sales forecasts
Company Name

Mar keting Sales
2012A

2013A

2014F

2015F

2014/

2015/

2013

2014

Township Developer
Alam Sut era Realt y

3, 648

4, 810

5, 112

5, 149

6%

1%

Bumi Serpong Damai

4, 280

7, 348

5, 568

6, 879

-24%

24%

Ci put ra Development

7, 298

8, 941

9, 840

11, 970

10%

22%

Li ppo Karawaci

6, 760

4, 104

5, 057

5, 447

23%

8%

Sent ul Ci t y

1, 196

2, 100

2, 043

2, 374

-3%

16%

Summarecon Agung

3, 873

3, 725

3, 891

4, 891

4%

26%

Bekasi Faj ar

1, 123

1, 090

1, 266

1, 498

16%

18%

Li ppo Ci karang

2, 052

1, 698

2, 407

2, 791

42%

16%

30, 230

33, 816

35, 184

41, 000

4%

17%

Industr ial Estates

Aggregat e
Sour ce: Company, Maybank KE
Not e: F= Maybank KE For ecast

February 19, 2014

4

Indonesia Property

Fundamentals of the property market
Diminishing land bank, rising replacement cost s
From t he six t ownship developers t hat we cover, we est imat e propert y
sales net area of c. 981 ha f or landed resident ial f rom 2009 t o 2013.
Alt hough developers’ land banks i ncreased f rom 2009 t o 2013, we believe
t heir prime land banks are being deplet ed.
Figure 5: Land bank of township developers (as of 9M2013)
Company Name
Alam Sut era Realt y
Bumi Serpong Damai
Ciput ra Development
Lippo Karawaci
Sent ul Cit y
Summarecon Agung

Ticker

Landbank (ha)

ASRI IJ
BSDE IJ
CTRA IJ
LPKR IJ
BKSL IJ
SMRA IJ

2, 002
4, 068
1, 387
1, 333
13, 400
1, 502

Sour ce: Company, Maybank KE

This is apparent f or Alam Sut era where it s land bank in t he Serpong area
(14km f rom Jakart a) is running t hin wit h only 206 ha (t ot al development
area is 800 ha) in 2013 and t he company is current ly l ooking t o accumulat e
land in t he Nort h Serpong area. The developer purchased addit ional land
nort h of it s sit e in Serpong f rom Modernland Realt y at IDR2mn/ sqm. This is
eight t imes higher t han Alam Sut era's hist oric land bank average book
value of only IDR250k/ sqm back in 2008.
Wit h rising replacement cost s and short age of available land, we expect
developers t hat have higher land bank cost s t o develop proj ect s i n t he
middl e-high t ier segment where t hey can command higher prices t o cover
t he rising replacement cost s. Alt ernat ively, t hey will bui ld high-rise
buil dings t o increase t he ef f ect iveness of t heir land banks.

Diminishing affordability
On t he demand side, rapidly rising propert y prices, especially in t he
Great er Jakart a area, has reduced t he af f ordabili t y of middl e-income
consumers as propert y prices have risen f ast er t han income growt h. For
exampl e, propert y prices in t he Serpong area (suburban area in t he West
of Jakart a) have seen a st rong 33% CAGR f rom 2009-2013, according t o
Alam Sut era. For t he same period, minimum wages in Jakart a grew at onl y
16% CAGR.
Propert y prices in 14 Indonesian cit ies have cont inued t o rise st rongly t o
close t he gap wit h t he nat i onal minimum wage growt h (f igure 6), accordi ng
t o Bank Indonesia. We see t he af f ordabilit y of consumers will remain low
when t he gap bet ween propert y price growt h and nat ional minimum wage
growt h is narrow.
Our view of t he dimi nishing af f ordabilit y is in line wit h our economist at
Maybank BII, Josua Pardede, who believes domest ic consumpt ion wil l slow
in 2014. His t eam f orecast s domest ic consumpt ion on discret ionary
product s t o slow down 6% in 2014F-2015F. This is due t o t he higher int erest
rat e and macroeconomic uncert aint y and t hat people t end t o save more
t han spend.

February 19, 2014

5

Indonesia Property
Figure 6: Property price index growth vs. national minimum wage growth
Propert y price index growt h
Nat ional minimum wage growt h
25%
20%
15%
10%
5%
0%
-5%
-10%
-15%
2006

2007

2008

2009

2010

2011

2012

2013

Sour ce: Bank Indonesi a, St at i st i cs Indonesi a, Maybank KE
Not e: Pr oper t y pr i ce i ndex of 14 maj or ci t i es i n Indonesi a

Figure 7: House price to income ratio

760x

73x

62x

60x

35x

33x

31x

25x

Thail and

Hong Kong

Singapore

Taiwan

Mal aysia

Japan

Philippines

China

Cambodia

India

134x 124x

Indonesia

320x

Sour ce: Gl obal Pr oper t y Gui de 2012

The lack of inf rast ruct ure, especially public t ransport , has also f orced
many Indonesians t o commut e by privat e cars or mot orcycl es, f orci ng t hem
t o allocat e an i ncreasing port ion of t heir budget f or t ransport at ion cost s.
It ’ s wort h not ing t hat subsidized f uel prices and parking cost s increased by
44% and 100% YoY in 2013. This is one of t he many rising living expenses in
Indonesia where i nf lat ion reached 8. 38% in 2013 (f igure 7).
El ect ricit y t arif f s increased by 15% YoY in 2013, t he government is in t he
process of removing subsidies f or large houses (>6, 600 wat t ) and t he t arif f s
may increase by a minimum 34% t his year. We believe t his will have a
signif icant impact on homeowners and we expect it will hinder large-size
house purchases.
As t he purchasing power of Indonesia's middle-income populat ion decli nes,
we believe t hey will be f orced t o relocat e t o suburban areas wit h smaller
spaces and/ or t o propert ies of a lower value.

February 19, 2014

6

Indonesia Property
Figure 8: Inflation in Indonesia
(%)
20
Inf lat ion
18
16
14
12
10
8
6
4
2
0
05

06

07

08

09

10

11

12

13

Sour ce: Bank Indonesi a, Maybank KE

Structural underlying demand remains strong
Indonesia’ s young and propert yive populat ion provi des st rong underl ying
demand t o t he propert y sect or. Nearly 55% of t he Indonesian populat ion is
in t he 20-54 age cat egory. The count ry also has a healt hy birt h rat e
(2. 15%-2. 25%), as per census 2010. Moreover, we beli eve t he count ry’ s
economic growt h is sust ainable at above 5%, which will support t he growt h
of income per capit a. Our economics t eam f orecast s t he Indonesian
economy wil l grow at 5. 6% and 6. 0 % in 2014 and 2015.
Figure 9: Indonesia’ s population
As per census 2010

Figure 10: Indonesia’ s GDP growth
(%)
7

90+
Female

80-84

Male

7

70-74

6

60-67

6

50-54

5

40-44
5

30-34
20-24

4

10-14

4

0-4

3
-12

-8

-4

Sour ce: St at i st i cs Indonesi a, Maybank KE

0

4

8

12
(mn people)

00

01

02

03

04

05

06

07

08

09

10

11

12

13 14F 15F

Sour ce: St at i st i cs Indonesi a, Maybank KE

Accordi ng t o St at ist ics Indonesia, t he number of people per household
decreased t o an average of f our per househol d i n t he Jakart a area as of
2010. We beli eve t his is due t o a shif t in lif est yle of t he young Indonesian
populat ion where peopl e want t o live in modern cl ust ered houses and are
no longer keen t o live wit h an enlarged f amily.
The Indonesian government est imat es a housing backlog of 15m as of 2013.
Even wit h a house ownership rat e of 80. 2% as of 2012, according t o dat a
f rom St at ist ics Indonesia, we t hi nk t he large young populat ion wil l
cont inue t o support t he propert y market i n t he long run.

February 19, 2014

7

Indonesia Property

Influence from the banking sector
Liquidity tightening
Monet ary measures impl ement ed by t he cent ral bank were aimed at
slowing down l ending as t he loan-t o-deposit rat io (LDR) of t he banking
syst em reached 90% as of end-2013. The LDR limi t permissible by t he
cent ral bank is 92% based on t he new regulat ions on 1 Sep 2013 (down
f rom 100%).
Moreover, as most banks reached t heir f ul l -year l oan growt h t arget i n
1H13, new mort gage disbursement s slowed down in 2H13. We not e several
banks put a complet e halt t o new mort gage disbursement s by Sep 2013 and
raised t heir mort gage rat es by 2%-3% in 2H13. Mort gage loan growt h f or
Jan-Nov 2013 was 18%.
Accordi ng t o our banks analyst , Rahmi Mari na, large mort gage lenders such
as Bank Cent ral Asia (BCA), Bank Negara Indonesia (BNI) and Bank
Tabungan Negara (BTN) are t arget ing slower mort gage loan growt h of 17%
in 2014 (vs. 23% in 2013). Our economist at Maybank BII also t arget s a
lower propert y credit growt h of 20% in 2014F; lower t han t he hist orical
growt h of 24%-25% in 2011-2012.
Figure 11: Loan-to-deposit ratio in Indonesian banking system
95

Figure 12: Mortgages-to-total loans in Indonesia
9. 5%

(%)

Mort gage/ Loan
85

9. 0%

75
8. 5%
65
8. 0%
55
7. 5%

45
35
05

06

07

08

Sour ce: Bank Indonesi a, Maybank KE

09

10

11

12

13

7. 0%
Jan10

Oct 10

Jul11

Apr12

Jan13

Oct 13

Sour ce: Bank Indonesi a, Maybank KE

The end of low interest rates
The 175bps i ncrease in t he ref erence rat e in six mont hs f rom 5. 75% t o 7. 5%
in Nov 2013 has led t o a 2-3% mort gage int erest rat e hike. According t o
Bumi Serpong Damai and Ciput ra Development , t his has led t o t he
post ponement of propert y purchases, especial ly of propert ies acqui red f or
invest ment purposes.
However, we also t hink t he f undament als of individuals who invest in t he
propert y sect or might also be af f ect ed by t he slowing domest ic economy,
low export s and volat ilit y of t he Indonesian Rupiah t owards ot her maj or
currencies.
Finally, we t hink f irst homebuyers who need mort gages will also be
af f ect ed and wil l be f orced t o purchase cheaper propert ies.

February 19, 2014

8

Indonesia Property
Rupiah depreciation raises const ruction cost
The weakeni ng of t he Indonesian Rupiah against t he US Dollar has had a
negat ive impact on t he propert y sect or, especial ly high-rise development s.
Approximat ely 40% of t he cost (such as st eel , mechanical and el ect rical)
f or buil ding high-rise propert ies are US-dollar relat ed. However,
developing landed resident ial propert ies are less sensit ive t o currency
volat ilit y because only around 10% of cost s are US-dollar relat ed.
Figure 14: IDR/ USD rate

Figure 13: Bank Indonesia reference interest rate

13, 000

(%)
14

IDR/ USD Spot Rat e

BI Rat e

12, 000

12
11, 000
10
10, 000

8

9, 000

6

8, 000

4
06

07

08

09

Sour ce: Bank Indonesi a, Maybank KE

10

11

12

13

14

05

06

07

08

09

10

11

12

13

14

Sour ce: Bank Indonesi a, Maybank KE

Hedging the forex
The volat ilit y of t he Rupiah has also l ed t o higher hedging cost s f or some
developers. Alam Sut era’s hedgi ng premium increased f rom 1. 00% t o 2. 25%
f or t he lat est hedge agreement it ent ered int o in Sep 2013. Alt hough we
expect t he company t o incur l ess f orex losses t hrough hedging, we expect
t he hedging premium expenses t o increase.
Besides monet ary hedging, cont ract ors are increasingly less wi lling t o ent er
int o const ruct ion cont ract s t hat lock in t he prices of raw mat erials. Di rect
cont ract ing has been increasingly used bet ween cont ract ors and t he
developers. Direct cont ract ing ref ers t o only renderi ng const ruct ion
services by t he cont ract ors and t hat al l t he raw mat erials wil l be sourced
direct ly by t he developers. Wit h direct cont ract ing, we see a higher risk of
development cost s escalat ing.

February 19, 2014

9

Indonesia Property

Regulatory environment
Wit h t ight er r egul at ions on t he pr oper t y sect or imposed by t he cent r al
bank in l at e 2013, we bel i eve aut hor it ies ai m t o cur b t he r api d gr owt h of
pr oper t y pr ices i n Indonesi a.
Revision to the LTV regulation
On 24 Sep 2013, Bank Indonesia (BI) revised t he loan-t o-val ue (LTV)
regulat ions f or mort gages and aut omobil e loans. Under t he new
regulat ions, f irst -t ime home buyers are required t o make 30% down
payment whil e second home buyers 40% down payment f or homes wit h an
area of more t han 70sqm. Previously, al l home owners needed t o pay 30%
down payment only.
This move is aimed at reduci ng speculat ion and t o encourage more f irst
home buyers t o use mort gages. On t he ot her hand, we also f ear invest ors
will hold of f in invest ing i n propert ies, which can sl ow pre-sales, as t hey
swit ch t o ot her invest ment asset classes such as bonds, which of f er higher
yields wit h lower risks.
We t hi nk if t he government beli eves propert y prices are st il l not under
cont rol , it may impose ot her t ight ening measures such as increasing t he
t ax f or t he change of ownership in propert y or t he annual t ax rat e on land
and buil dings.

Restriction on full payment of mortgages to property developers
Generally, banks do not give loans t o Indonesian propert y developers f or
t he const ruct ion of landed resident ial proj ect s. Theref ore, developers
source working capit al f rom t he f ul l payment of pre-sales f rom mort gages
or f rom cust omers who pay in f ull up f ront . A mort gage will be f ully
disbursed by t he bank at t he signi ng of t he loan agreement . But in Oct ’ 13,
BI issued new regulat ions f or banks t o only disburse cust omers’ mort gages
upon complet ing cert ain milest ones of a propert y development .
Mort gage-disbursement schemes f or each developer will dif f er wit h each of
t he banks. Ciput ra Development announced st art ing Jan’ 14 it will deposit
t he f ull mort gage loan int o t he company's escrow account which wil l earn
deposit int erest rat e and be disbursed by t he f ol lowing schedul e:
Figure 15: Ciputra Development timeline of mortgage-loan disbursement
Stages
Signing of mort gage cont ract
Complet ion of f oundat ion
Topping of f
Hand-over
Change of t it le

Old
100%

New
0%
50%
30%
10%
10%

Sour ce: Company dat a, Maybank KE

We do not expect t he new regulat ions t o have much impact on t he
cashf low of t he big devel opers, which general ly have suf f icient working
capit al. Out of t he eight developers we cover, f our have a net cash
posit ion. We t hink t he new regulat ions will have a more subst ant ial ef f ect
on t he smal ler developers as t hey general ly rel y on f ull cash received on
pre-sales f or t heir working capit al.
Most developers believe t he minimum 30% down payment is suf f icient t o
cover t he f ul l const ruct ion cost s of a proj ect . For big developers such as
Ciput ra wit h t heir j oint operat ion business model and Bumi Serpong Damai,
which accumulat ed it s land bank 10 t o 20 years ago, t he cost of land is
relat ively low and t hey can command a GPM of 50-60% f or landed
resident ial propert ies.
February 19, 2014

10

Indonesia Property

Limited upside, prefer low-mid segments
Limited upside for premium properties
Indonesian propert y devel opers have been enj oying margin expansion as
propert y prices cont inue t o increase whil e cost s remain under cont rol .
However, we believe t his t rend wi ll sei ze and we est imat e margins wil l
normali ze over t he next t wo years (due t o lag in recognit ion).
As discussed earlier, l ower af f ordabilit y wi ll drive middle-income
Indonesians t owards propert ies of a smal ler size or l ess value. This impli es
t he market f or low-middl e segment propert ies inst ead will be great er t han
f or premi um propert ies.
Moreover, as regulat ors cont inue t o curb t he rise in propert y prices and as
development and replacement cost s rise wit h inf lat ion and a weakening
rupiah, we f orecast devel opers wil l be f orced t o f ocus on t he low-middl e
segment and i ncrease sales volume t o maint ain pre-sales growt h.
Finally, wit h rising development cost s, it is not f easible f or developers t o
lower sel ling pri ces t o boost sales in prime areas. We believe most
developers will be unwil ling t o launch premium development s at lower
prices as it will hurt t heir brand equit y. The upside f or high-segment
development s is capped as we expect slow demand i n t his segment means
developers are unabl e t o increase prices excessively.
Figure 17: EBIT margins of Indonesian developers

Figure 16: Gross margins of Indonesian developers

0. 7

ASRI IJ

BSDE IJ

CTRA IJ

LPKR IJ

BKSL IJ

SMRA IJ

BEST IJ

LPCK IJ

0. 6

ASRI IJ

BSDE IJ

CTRA IJ

LPKR IJ

BKSL IJ

SMRA IJ

BEST IJ

LPCK IJ

0. 5
0. 6

0. 4
0. 3

0. 5
0. 2
0. 1

0. 4

0
2008

0. 3

2009

2010

2011

2012

2013F

2014F

2015F

-0. 1
-0. 2

0. 2
2008

2009

2010

Sour ce: Company dat a, Maybank KE

2011

2012

2013F

2014F

2015F

-0. 3

Sour ce: Company dat a, Maybank KE

Prefer companies offering low-mid segment developments
We pref er developers t hat of f er more af f ordabl e propert ies as af f ordabilit y
declines i n Indonesia wit h rising cost of f unds and a higher cost of living.
We not e several developers under our coverage have shif t ed t hei r
market ing and development st rat egy more t owards t he low-middle
segment of landed and high-rise resident ial propert ies.
Summarecon Agung plans t o launch high-rise resident ial development s i n
t he Serpong and Bekasi areas in 2014 t hat t arget t he low-mi ddle segment .
Alam Sut era also impl ement ed a similar st rat egy by ramping up it s proj ect
in t he Pasar Kemis area (low-middle segment ).
Ciput ra Development plans t o launch a one-t ower apart ment in West
Jakart a in 2014 at an indicat ive pri ce of IDR19mn/ sqm, down f rom it s
init ial IDR30mn/ sqm due t o concerns over t he l ow t ake-up rat e f or
premi um development s.

February 19, 2014

11

Indonesia Property
We are more caut ious on proj ect s in t he mi ddle-upper segment as we t hink
t his market is more sensit ive t o an economic slowdown, which reduces
invest ment appet it e i n t he propert y sect or. Our view is support ed by t he
sof t ening t ake-up rat es in several middl e-upper propert y proj ect s in 4Q13,
which we expect t o cont inue t o 1H14.

Second tier cities prices t o cat ch up
We f orecast in 2014, propert y prices in 2nd-t i er cit i es in Great er Jakart a
will grow at a f ast er rat e, cat ching up wit h t he 1st -t i er cit ies. We
cat egorize Jakart a and Serpong as 1st -t ier cit ies, and Bekasi, Tangerang
and Bogor as 2nd-t ier cit ies in t he Great er Jakart a area.
While Jakart a remains t he cent re of Indonesia's economy, we expect
urbanizat ion t o cont inue, which wil l boost propert y demand in t he Great er
Jakart a area.
We believe t here is great er upside f or 2nd-t ier cit ies compared t o 1st -t i er
cit ies as prices in 2nd -t ier cit ies have been lagging t he 1st -t ier cit ies. We
expect land prices i n 2nd-t i er cit ies t o close t he huge gap wit h land pri ces
in 1st -t ier cit ies (Jakart a and Serpong).
Figure 18: ASP of townships in Greater Jakarta

(IDRmn/ sqm)

Alam Sut era
Summarecon Serpong
Grand Wisat a
Kot a Wisat a
Sent ul Nirwana

BSD Cit y
Cit ra Raya Tangerang
Summarecon Bekasi
Sent ul Cit y
Pasar Kemis

14. 0

12. 0

10. 0

8. 0

6. 0

4. 0

2. 0

0. 0
2008

2009

2010

2011

2012

2013

Sour ce: Company dat a, Maybank KE

Sent ul Cit y, Bumi Serpong Damai, Summarecon Agung and Ciput ra
Development are well posit ioned t o t ap t he growing demand f or propert ies
in t he 2nd-t ier cit ies. We believe t he 2nd-t ier cit ies will provide support t o
t he 2014 pre-sales of t hese developers.

February 19, 2014

12

Indonesia Property

Stick to developers with strong balance sheets
We pr ef er t he devel oper s wit h st r ong bal ance sheet s, conser vat ive
pr oj ect s and sol id r ecur r ing income pr oper t ies in t imes of uncer t aint y.
Strong balance sheet is king and conservative proj ects important
We have more conf idence in t he developers t hat are in a net cash posit ion
t o f inance t heir working capit al. We also not e developers are slowing down
t heir capex by choosing conservat ive proj ect s f or t his year.
Figure 19: Cash level of Indonesian developers (as of 9M13)
Company Name
Tow nship Developer
Alam Sut er a Realt y
Bumi Ser pong Damai
Ciput r a Development
Lippo Kar awac i
Sent ul Cit y
Summar ec on Agung

Indust rial Est at es
Bekasi Faj ar Indust r ial Est at e
Lippo Cikar ang

Cash

Tot al Debt Net c ash % of USD debt Net DER

840
3,817
3,828
3,276
877
2,618

4,838
3,129
2,165
7,435
1,847
1,848

-3,998
688
1,663
-4,159
-970
770

90%
0%
0%
99%
31%
1%

75%
-5%
-18%
30%
14%
-18%

420
658

559
-

-139
658

0%
0%

6%
-40%

Sour ce: Company dat a, Maybank KE

Bot h Lippo Karawaci and Alam Sut era have USD bonds in t heir books
amount ing t o USD380m and USD526m. At t he t ime of writ ing, Alam Sut era
had hedged t he princi pal of t he bond it issued in 2012 and 2013 up t o
IDR12500/ USD and t hat t hey have not hedged t heir 2014 USD225m bond.
We have concerns regarding Alam Sut era's bond due t o a currency
mismat ch as t hey earn all t heir sal es in Indonesian Rupiah. As of 9M13,
Alam Sut era suf f ered f orex losses of IDR121b or 9% of it s EBIT.
Lippo Karawaci has nat ural hedgi ng t hrough it s income f rom management
f ees in SGD f rom t he Singapore-based REITS of around SGD11. 3m annual ly,
which covers half of t he annual bond coupon payment s of about USD25m
(assuming SGD1. 274/ USD). As of 9M13, Lippo Karawaci booked a f orex gain
of IDR141b or 12% of it s EBIT.
We pref er developers wi t h conservat ive proj ect s such as low-middl e
segment landed resident ial propert ies rat her t han hi gh-rise proj ect s which
carry more risk. A landed/ low-rise resident ial proj ect can generally be
post poned when t ake-up rat es are low.
However, it is more probl emat ic t o post pone high-rise proj ect s due t o a
low t ake-up rat e. This is because compani es normally appoint and sign a
development cont ract wit h t he cont ract or prior t o propert y launching t o
boost cust omers' conf idence in t he proj ect .
High-rise proj ect s in t he Jakart a area have been experiencing dif f icult y i n
obt aining buil ding permit s f rom t he local government . This has hit highrise proj ect s signif icant ly and delayed a number of proj ect launches in
2013.
We like Bumi Serpong Damai and Ciput ra Development f or t he high port ion
of low-resident ial proj ect s sales. Li ppo Karawaci and Summarecon Agung
have propert y mix which weighs more t owards high-ri se proj ect s.

February 19, 2014

13

Indonesia Property
Investment properties add value
Most of t he developers under our coverage cont i nue t o ramp up t heir
invest ment propert ies t o secure st able recurri ng income f rom ret ail space,
of f ices, hot els, golf courses, t heme parks and even hospit als. These
invest ment propert ies provide st abilit y in earni ngs and hel p t o maint ain
high margins. Invest ment propert ies add val ue t o propert y compani es in
light of a slowing propert y market in 2014.
Lippo Karawaci and Summarecon Agung have t he most revenue
cont ribut ion f rom invest ment propert ies in t erms of value. Bumi Serpong
Damai, Ciput ra Development and Sent ul Cit y also cont inue t o ramp up
t heir recurring i ncome by adding i nvest ment propert ies such as hot els,
hospit als, of f ice bui ldings and t heme parks. On average, Invest ment
propert ies cont ribut ed 16% t o t ot al revenue 2013F of t he eight propert y
companies we cover.
We t hi nk t he government 's decision t o remove t he elect ricit y subsidy on
shopping mal ls, hot els and of f ices will have minimal impact on propert y
companies. They have hist orically passed on any t ari f f adj ust ment s t o t he
t enant s and we t hink it is less likely occupancy rat es will f all , especial ly in
of f ices where t he t enant s are inelast ic.
Figure 20: Composition of recurring income of Indonesian developers (2013F)
Ticker

Property
sales

Recurring
income

Propert y Developer
Alam Sut era Realt y
Bumi Serpong Damai
Ciput ra Development
Lippo Karawaci
Sent ul Cit y
Summarecon Agung

ASRI IJ
BSDE IJ
CTRA IJ
LPKR IJ
BKSL IJ
SMRA IJ

95%
87%
89%
56%
80%
81%

5%
13%
11%
44%
20%
19%

Indust rial Est at es
Bekasi Faj ar Indust rial Est at e
Lippo Cikarang

BEST IJ
LPCK IJ

97%
93%

3%
7%

Company

Sour ce: Company dat a, Maybank KE

February 19, 2014

14

Indonesia Property

Industrial estates
We bel ieve FDI inf l ows wil l cont i nue i n t he f or eseeabl e f ut ur e, dr ivi ng t he
demand f or i ndust r ial est at es, al t hough we expect a pot ent ial t empor ar y
sl owdown in t he next 12 mont hs due t o t he upcomi ng par l iament ar y and
pr esident ial el ect ions in 2014. We l ike Lippo Cikar ang as t he company i s
ver sat il e and can f ace a sl owdown i n t he indust r ial l and segment by sel l ing
r esident ial pr oper t ies.
Prefer industrial estates with ample land bank and strategic locations
We have a conservat ive out look f or 2014 and pref er i ndust rial est at es wit h
ample land bank and st rat egic locat ions as t hese will be t he f irst choice f or
companies looking t o set up propert yion f acilit ies in Indonesia when t he
economy recovers. For t he longer t erm, we believe FDI inf low t o Indonesia
will be sust ainabl e as t he count ry is bl essed wit h rich nat ural resources and
a rising middl e class t hat f uels domest ic consumpt ion.
Figure 21: Foreign Direct Investment (FDI)

Figure 22: Investment to GDP
35%

Inv Realizat ion: Foreign: Tert iary Sect or (TS)
35, 000

Invest ment / GDP (nominal)

Inv Realizat ion: Foreign: Secondary Sect or (SS)

(USD mn)

Invest ment / GDP (real)

Inv Realizat ion: Foreign: Primary Sect or (PS)

30, 000

30%

25, 000

25%

20, 000
15, 000

20%
10, 000
5, 000

12

13

9M13

11

2012

10

2011

09

2010

08

2009

07

2008

06

2007

05

2006

04

2005

03

2004

02

2003

01

2002

00

2001

2000

15%

0

Sour ce: St at i st i cs Indonesi a, Maybank KE

Sour ce: BKPM, Maybank KE

Hist orically, indust rial est at e land prices have seen st rong appreciat ion due
t o t he limit ed supply of ready-t o-use land, driven by st rong demand since
2010 when annual land sal es reached 560ha, up 216% f rom 2009. We t hink
indust rial land sal es wil l remain sof t in 2014 due t o t he upcomi ng
parliament ary and president ial el ect ions as companies would like t o gain
assurance on t he next government , which t hey hope will promot e
economic growt h.
Figure 24: ASP of industrial estates

Figure 23: Annual sales of industrial estates
(Hect ares)
1, 400

Annual sales

1, 200

(IDR/ sqm)
3, 000, 000
2, 500, 000

1, 000

Jabodebek

2, 000, 000

Bant en

800
1, 500, 000

600
400

1, 000, 000

200

500, 000

0
00

01

02

03

04

05

06

Sour ce: Col l i er s Int er nat i onal , Maybank KE

February 19, 2014

07

08

09

10

11

12

13

07

08

09

10

11

12

13

Sour ce: Bank Indonesi a, Maybank KE

15

Indonesia Property
The Jakart a-Cikampek t ol l road belt is t he indust rial hub in Indonesia wit h
over 8, 300ha of developed land. It is dominat ed by t he aut omot ive sect or,
according t o companies’ report s. It s proximit y t o t he int ernat ional seaport
and airport has made it t he prime indust rial est at e area in Indonesia.
Current ly t here are seven maj or indust rial est at es along t he Jakart aCikampek t oll road. As we can see i n t he f igure below, t he anchor t enant s
of each i ndust rial est at e are mainly f rom t he aut omot ive sect or. We
beli eve t he aut omot ive sect or wil l cont inue t o invest in t his area despit e
t he big increase in mi nimum wage, as t he sect or is not labour-int ensive.
Figure 25: Industrial estates in the Jakarta – Cikampek toll road
Concession
area (ha)

Developed Land bank
area (ha)
(ha)

Company name

Industrial estate

Maj or tenants

Puradelt a Lest ari

Greenland Int ernat ional
Indust rial Cent er (Greenland
Indust rial)

2, 989

1, 059

1, 930

Lippo Cikarang

Delt a Silicon

3, 000

2, 169

596

Jababeka

Kot a Jababeka

5, 600

1, 820

1, 168

Mit ra Karawang Raya

Kawasan Indust ri Mit ra
Karawang

500

500

-

Bekasi Faj ar Indust rial Est at e

MM 2100

1, 350

825

681

Ast ra Honda Mot or, LG

Surya Semest a Int ernusa

Surya Cipt a Indust rial Est at e

1, 400

893

272

Ast ra Int ernat ional, Nest le

Sinarmas Land &It ochu Group

Karawang Int ernat ional
Indust rial Cit y

1, 400

1, 080

-

Suzuki, Ast ra Ot opart s, Takat a
Hankook Tire
Samsung Elect ronics, KAO,
Unilever
Honda Prospect Mot or

Toyot a Mot or, Yamaha Mot or

Sour ce: Company dat a, Maybank KE

February 19, 2014

16

Indonesia Property

Risks to our view
Interest-rate hikes
An increase in int erest rat es in Indonesia may negat ively impact t he
demand f or propert y development s. High int erest rat es can l ead t o
reduced consumer spendi ng, which can negat ively af f ect t he cust omers’
abilit y t o make payment s and coul d reduce demand f or t he proposed
development s.
Also, high i nt erest rat es may make it more dif f icul t f or cust omers t o be
qualif ied t o secure f inancing, which coul d negat ively af f ect demand f or
resident ial development s. Our economist expect s t he i nt erest rat e t o
remain unchanged at 7. 50% in 2014F and anot her 25bps hike t o 7. 75% in
2015F.

Liquidity crunch
As of YE 2013, t he loan-t o-deposit (LDR) rat io in Indonesia’ s banking
syst em is 90%. This is close t o t he limit of 92% set by t he cent ral bank. If
t his sit uat ion persist s, we might see less mort gage loan disbursement ,
which wi ll decrease t he demand f or propert ies f rom cust omers t hat requi re
f undi ng.

Economic downturn
We believe Indonesia is current ly f acing a f ew macroeconomic chall enges.
Prices of it s main commodit ies (coal, CPO, rubber, met als) remain weak
whilst oil prices cont i nue t o st and at around USD100/ barrel . Indonesia's
t rade balance relies on commodit ies and current ly cont ribut es 32% t o t he
count ry's t ot al export .
We f ear t hat if demand f or Indonesia's commodit ies remains light , it could
pose a risk t o t he count ry's GDP growt h. Moreover, alt hough government
expendit ure is not slowi ng down in t his el ect ion year, we expect t his
expendit ure alone will not be enough t o sust ain GDP growt h.
The 8. 38% inf lat ion i n 2013 is above BI’ s 3. 5-5. 5% i nf lat ion t arget on t he
back of rising f ood and subsidized f uel prices. Indonesia’ s economy grew
5. 72% in 2013. Previously, it grew by more t han 6. 0% since 2010. For t his
year, our economist f orecast s an inf lat ion of 5. 12%.

Currency volatilit y
Currency volat ilit y will i ncrease t he risk of high-rise proj ect s, as 40% of
t heir bui ldi ng cost s are relat ed t o t he USD/ IDR rat e. If t he currency
st abilizes, we t hink propert y companies wil l priorit ize high-rise proj ect s
because t hey general ly have higher margins t han low-rise proj ect s.

Land acquisition
Wit h limit ed available land f or f ut ure development s, t here is a risk t hat
companies wi ll not be abl e t o expand t hei r land banks, which can impede
t heir f ut ure growt h. Fail ure t o acquire suit able land in good locat ions may
adversely af f ect f ut ure business expansion plans.

February 19, 2014

17

Indonesia Property

Valuation and top picks
Our val uat ion met hod f or t he pr oper t y sect or uses a combinat ion of
discount t o RNAV and one-year f or war d P/ E val uat ion. We assigned
discount t o RNAV accor di ng t o ear nings visibil it y and bal ance sheet heal t h.
Our t op picks f or t he t ownshi p devel oper s ar e Bumi Ser pong Damai (BSDE
IJ) and Ci put r a Devel opment (CTRA IJ), and Lippo Cikar ang (LPCK IJ) f or
indust r ial est at es.
We like Bumi Serpong Damai (BSDE) f or it s st rong balance sheet , ample
prime land bank and conservat ive proj ect s. It s balance sheet also support s
st rat egic acquisit ions of land and invest ment propert ies f or an addit ional
source of growt h.
We also like Ciput ra Development f or it s diversif ied propert y mix and
st rong balance sheet . It s Joint Operat ion business model al lows f or savings
in capex, which can be all ocat ed t o i nvest ment propert ies t o secure st abl e
earnings in t he f ut ure.
Lippo Cikarang (LPCK) is our t op pick f or i ndust rial est at es f or it s st rong
balance sheet and versat ilit y in sel ling eit her i ndust rial or resident ial
propert ies. Al t hough it s land bank is not huge, we t hink t he company can
t ap t he growing demand f or resident ial propert ies in t he Cikarang area.
Lippo Cikarang has t he highest ROE i n our universe wi t h t he lowest P/ E.

Asset play vs. earnings play
We val ue t he propert y companies using a combi nat ion of earnings and
asset s as we would like t o see earnings support ed wit h suf f icient land bank
(asset ) t o ensure it can be sust ained.
Discount to RNAV
We est imat e t he 2014 RNAV by cal culat ing t he f ive-year net present val ue
of t he sal e proceeds. We do t his by using a WACC assigned t o each
company, based on t he land bank’ s excess market value in t he past f ive
years. We val ue t he invest ment propert i es using t he net cash f lows l ess
direct cost s using t he WACC as t he assumed cap rat e.
Figure 26: 2014 RNAV
Company Name

Tic k e r

Rating

RNAV /

Share

Discount

share

pric e

implied

Prope rty De ve lope r
Alam Sut er a Realt y

ASRI I J

Sell

1, 352

590

Bumi Ser pong Damai

BSDE I J

Buy

2, 857

1, 575

Ciput r a Development

CTRA I J

Buy

2, 627

1, 025

Lippo Kar awaci

LPKR I J

Hold

1, 436

955

Sent ul Cit y

BKSL I J

Buy

1, 022

178

Summar econ Agung

SMRA I J

Hold

2, 809

1, 025

Bekasi Faj ar

BEST I J

Hold

1, 058

615

Lippo Cikar ang

LPCK I J

Buy

12, 865

6, 975

56%
45%
61%
34%
83%
64%

Industrial Estate s

Sour ce: Company, Bl oomber g, Maybank KE.

42%
46%

Shar e pr i ces ar e as of 17 Febr uar y 2014.

P/ E and P/ B multiples
We use a one-year f orward P/ E valuat ion t o value companies. We use oneyear f orward earnings as most revenue and t heref ore earni ngs of propert y
sales are recorded in 12-18 mont hs due t o a lag in recognit ion. We also use
a one-year f orward P/ B valuat ion t o mai nt ain t he valuat ion consist ency
where earnings visibilit y is not high.
February 19, 2014

18

Indonesia Property
Figure 27: Valuation matrix
Stock

Ticker

Alam Sutera Realty

ASRI IJ

Rating

Mkt Cap

RNAV/share

Price

(USD mn)

TP U/D Side

Disc. to
PER
PER P/B (x)
ROE Div yield
RNAV
(%) CY14F CY15F CY14F CY14F CY14F

(local)

(local)

(local)

(%)

Sell

983

1,352

590

500

-15%

56%

8.2

7.2

1.7

23%

Bumi Serpong Damai BSDE IJ

Buy

2,337

2,857

1,575

2,000

27%

45%

10.8

9.6

2.3

23%

1.7%

Ciputra Development

CTRA IJ

Buy

1,338

2,627

1,025

1,330

30%

61%

11.2

10.4

2.1

20%

2.4%

Lippo Karawaci

LPKR IJ

Hold

1,869

1,436

955

900

-6%

34%

13.0

11.4

1.7

12%

1.5%

Sentul City

BKSL IJ

Buy

474

1,022

178

200

13%

83%

12.4

7.2

0.9

8%

0.0%

3.6%

Summarecon Agung

SMRA IJ

Hold

1,254

2,809

1,025

1,050

2%

64%

12.1

11.0

2.8

25%

3.0%

Bekasi Fajar

BEST IJ

Hold

502

1,058

615

590

-4%

42%

8.5

7.4

2.0

25%

2.7%

Lippo Cikarang

LPCK IJ

Buy

12,865

6,975

8,000

15%

46%

6.5

6.0

1.8

32%

0.0%

411

Sour ce: Company, Bl oomber g, Maybank KE. Shar e pr i ces ar e as of 17 Febr uar y 2014.

As seen i n t he f igures bel ow, Lippo Cikarang has t he highest ROE at 32%,
f ollowed by Ciput ra Development , Bumi Serpong Damai, Summarecon
Agung and Alam Sut era. However, we t hink t hat Summarecon Agung is
already f airly priced at almost 3. 0x P/ B 2014F, l imit ing t he pot ent ial
upside. We also t hi nk t hat Alam Sut era carries higher risk of currency
volat ilit y which might hurt it s f inancial st abilit y.
Figure 29: P/ B and ROE (2014F) at our target price

Figure 28: P/ B and ROE (2014F) at current price
(P/ B)

ASRI IJ
BKSL IJ

BSDE IJ
SMRA IJ

CTRA IJ
BEST IJ

LPKR IJ
LPCK IJ

(P/ B)

3. 0

3. 5

2. 5

3. 0

ASRI IJ
BKSL IJ

BSDE IJ
SMRA IJ

CTRA IJ
BEST IJ

LPKR IJ
LPCK IJ

2. 5

2. 0
2. 0

1. 5
1. 5

1. 0

1. 0

0. 5

0. 5

0%

5%

10%

15%

20%

Sour ce: Company dat a, Bl oomber g, Maybank KE

February 19, 2014

25%

30%

(ROE)
35%

-

(ROE)
0%

5%

10%

15%

20%

25%

30%

35%

Sour ce: Company dat a, Bl oomber g, Maybank KE

19

Indonesia Property
Alam Sut era Realty
We expect ASRI’ s pre-sales t o be f lat i n 2014F wit h 6% growt h YoY. We
expect t he new t ownship, Pasar Kemis, t o cont ribut e more sales t han it s
mat ure Alam Sut era t ownship. It s hef t y invest ment in Bali is st ill yet t o be
proven successf ul and we expect it t o st art making a mat erial cont ri but ion
in 2016F when t he proj ect is complet ed.
ASRI’ s earnings are under pressure t o cover t he cost of f unds f rom it s USD
bonds amount ing t o USD526m. We est imat e t hat i nt erest expenses wil l
dilut e 21% of it s 2014F EBIT.
We set our TP at IDR500, a 63% discount t o it s RNAV of IDR1, 352. Our TP
t ranslat es t o 6. 9x P/ E and 1. 4x P/ B 2014F. We assigned a WACC of 12. 2%
f or ASRI t o derive t he DCF valuat ion. Our TP is in line wit h it s hist orical
f ive-year mean of one-year f orward P/ E mean of 7. 1x. This is slight ly
below it s one-year f orward P/ B mean of 1. 7x.
Figure 30: ASRI historical forward P/ E

Figure 31: ASRI P/ E band
1, 200

18
16

1, 000

SD + 1

14
800

12

Mean

10
600

8
6

400

4

SD - 1
200

2
0
2009

2010

2011

2012

2013

2014

0
2009

2010

2011

2012

2013

2014

Sour ce: Company dat a, Maybank KE

Sour ce: Company dat a, Maybank KE

Not e: Company’ s hi st or i cal f or war d PE compar ed t o f i ve-year hi st or i cal mean as
wel l as one st andar d devi at i on above and bel ow mean.

Not e: Company’ s hi st or i cal f or war d PE compar ed t o f i ve-year hi st or i cal mean as
wel l as one st andar d devi at i on above and bel ow mean.

Figure 32: ASRI historical forward P/ B

Figure 33: ASRI P/ B band

4. 5

1, 200

4. 0
1, 000

3. 5
3. 0

SD + 1

800

2. 5

Mean

600

2. 0
1. 5

400

1. 0

SD - 1
200

0. 5
0. 0
2009

2010

2011

2012

2013

2014

0
2009

2010

2011

2012

2013

2014

Sour ce: Company dat a, Maybank KE

Sour ce: Company dat a, Maybank KE

Not e: Company’ s hi st or i cal f or war d PB compar ed t o f i ve-year hi st or i cal mean as
wel l as one st andar d devi at i on above and bel ow mean.

Not e: Company’ s hi st or i cal f or war d PB compar ed t o f i ve-year hi st or i cal mean as
wel l as one st andar d devi at i on above and bel ow mean.

February 19, 2014

20

Indonesia Property
Bumi Serpong Damai
Wit h an ampl e 4, 800ha of prime land bank, we est i mat e it s current land
bank is suf f icient f or more t han 10 years of development . It s propert ies
t arget t he middle segment in several locat ions, which we t hink will be
more resilient f aci ng t he headwinds in t he sect or. We believe BSDE’ s land
bank wil l increasingly become more valuabl e in t he f ut ure.
We f orecast it will have IDR5. 4t in pre-sal es, a f lat growt h f rom it s organic
pre-sales in 2013 (t ot al 2013 pre-sal es IDR7. 3t ). However, it s
det erminat ion t o add more invest ment propert ies will also provide
earnings st abilit y i n t he f ut ure.
We set our TP at IDR2, 000, a 30% discount t o it s RNAV of IDR2, 857. Our TP
t ranslat es t o 13. 7x P/ E and 2. 9x P/ B 2014F. We assigned a WACC of 12. 0%
f or BSDE t o derive t he DCF valuat ion. Our TP is cl ose t o 1SD above t he
hist orical f ive-year mean of one-year f orward P/ E mean of 10. 8x and oneyear f orward P/ B mean of 2. 1x.
Figure 34: BSDE historical forward P/ E

Figure 35: BSDE P/ E band

20

2, 500