Analisa Saham CTRA, PWON dan SMRA

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Indonesia Property: Postcard From Kuala Lumpur: BUY CTRA, PWON, SMRA
(Henry Wibowo, Ghibran Al Imran - RHB Sekuritas) 

Kuala Lumpur marketing feedback; CTRA, PWON, SMRA are Top Picks. Our key message was our OVERWEIGHT sector rating (upgraded in Dec 2018). This was on a dovish rate sentiment, a stronger IDR and overhang related to the 17 Apr presidential election which is coming to an end, as pre-sales launch expectations for 2H19 have turned more aggressive. Property is among the key laggard sectors in the past 12 months, which we believe could see big turnaround post election (euphoria). 

Mixed feedbacks as some maintained it was too early, but we beg to differ. Property is one of the most underowned sectors in Indonesia right now. We expect the tide to turn post-election overhang, as developers are holding off on new launches while investors/property buyers are still in a wait-and-see mode. This is further backed by positive sentiment on the reversal of the interest rate direction. Earlier this year, US Fed chairman Jerome Powell commented that the US Fed rate is likely already at a peak – which was followed by similarly dovish comments from Bank Indonesia governor Perry Warjiyo. Valuations are attractive in terms of P/E and discount to NAV, ie hovering around 1-2 SD below the 5-year averages. 

Stock picks: Ciputra Development (CTRA), Pakuwon Jati (PWON) and Summarecon Agung (SMRA). Our top sector pick is CTRA (best corporate governance track record, growing contributions from low-cost housing (Citra Maja), and pan-Indonesia strategy). Our second pick is PWON (highest recurring income - 50% and the Blok M MRT catalyst. Our third pick is SMRA (potential unlocking of mall subsidiary assets in 4Q19 as one of its IDR-denominated bonds mature). We have NEUTRAL calls on BSDE and ASRI (both are Serpong-focused developers) due to their limited catalysts. 

Excluding BSDE, blended property 4Q18 EPS growth jumped 72% YoY. Of the six property companies we cover, and excluding BSDE (one-off big land sale in 4Q17), blended 4Q18 earnings surged 72% YoY (+30% QoQ), vs +13% YoY in 3Q18. This was mainly due to: better sales (especially in low-cost housing as well as stable recurring incomes), with growth accelerating to 22% YoY (3Q18: +6% YoY); and the IDR strengthening, which lessened interest expenses and bolstered FX gains from USD bond exposure. Blended FY18 earnings growth ramped up to 20% YoY, vs 2% YoY in 9M18. We excluded BSDE, as there were several one-off land sales during 4Q17 amounting to IDR2.4trn – which would have made FY17 a high base.

Report Link:  RHB