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Alam Sutera Realty (ASRI IJ) Summary

Core Content Overview

Alam Sutera Realty (ASRI IJ) is a real estate company in Indonesia with a current share price of IDR520 and a target price of IDR750, reflecting a 44% increase. The company has a market capitalization of USD756M and an average daily trading volume of USD2M. Maybank maintains a BUY rating for ASRI, citing its undemanding valuation and high-quality assets.

Key Financial Metrics

Presales and Capex Adjustments

• Presales Target Revision: ASRI reduced its FY15 presales target from IDR5.8t to IDR4.5t, citing macroeconomic challenges. The actual presales in 1H15 were IDR1,165b, which is 26% of the revised target.
• Presales by Product:
  • Commercial land plots: IDR326b in 1Q15, IDR8b in 2Q15
  • Residential: IDR293b in 1H15
  • Apartments: IDR176b in 1Q15, IDR424b in 2Q15
  • Offices: IDR57b in 1Q15, IDR1,143b in 2Q15
• Presales by Location:
  • Serpong: IDR403b in 1Q15, IDR263b in 2Q15
  • Pasar Kemis: IDR197b in 1Q15, IDR302b in 2Q15
• Capex Adjustment: ASRI reduced its FY15 capex budget from IDR3t to IDR2.25t, with financing coming from a new IDR500b bank loan and internal cash. The capex breakdown is as follows:
  • Land Acquisition: IDR950b (down from IDR1,000b)
  • Construction - High Rise: IDR800b (down from IDR1,000b)
  • Construction - Low Rise: IDR500b (down from IDR1,000b)

Extraordinary Sales and Market Conditions

• ASRI has signed two Memorandum of Understandings (MoUs) with foreign parties for the sale of land in Serpong and Pasar Kemis, with both MoUs set to expire by 4Q15 and expected to materialize in FY16.
• The potential extraordinary sales are estimated at IDR9,400bn, with:
  • Serpong: 20 ha at IDR15m/sqm
  • Pasar Kemis: 300 ha at IDR2m/sqm
  • Sanur: 6 ha at IDR6.6m/sqm

Earnings and Valuation Adjustments

• Earnings Estimates: Maybank has cut its FY15-FY17 earnings estimates by 9%, 17%, and 9% respectively, due to slower presales growth.
• Valuation:
  • ASRI currently trades at a 66% discount to RNAV and at 7.4x PER for FY15.
  • The revised target price of IDR750 represents a 51% discount to RNAV and a 10.7x P/E ratio for FY15.
  • The company's RNAV is calculated at IDR30,062bn, with a share price of IDR1,530, and a 51% discount to RNAV.

Performance and Outlook

• Share Price Performance:
  • 1-month: -9.6%
  • 3-month: -20.0%
  • 12-month: -1.9%
  • Relative to index: +7.1%, +14.9%, +3.3%
• Key Assumptions:
  • ASRI expects presales of IDR4,330b for FY15, a +2% YoY increase.
  • The office market remains challenging due to corporate hesitation to expand.
  • The LTV relaxation is expected to support sales in Pasar Kemis, where 36% of customers require mortgages.
• Profitability:
  • Gross margin increased to 82% in 2Q15 due to higher land plot sales.
  • EBIT margin and net margin remained stable in 1H15 at 65% and 26% respectively.

Summary of Key Points

• Presales: Reduced target to IDR4.5t for FY15, with 1H15 presales at IDR1,165b.
• Capex: Lowered FY15 capex to IDR2.25t, financed by a bank loan and internal cash.
• Valuation: Maintains BUY rating despite lower target price, with current share price at 66% discount to RNAV.
• Extraordinary Sales: Expected to materialize in FY16 from MoUs, with potential revenue of IDR9,400bn.
• Financial Health: Net debt/equity reduced from 93.6% to 80.6% for FY15, and ROAE and ROAA are expected to improve.

Additional Notes

• The company's assets are still undervalued, with a significant discount to RNAV.
• The target price reflects slower presales growth and forex losses.
• The revised estimates and assumptions are based on updated company guidance and market conditions.