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Ciputra Development (CTRA IJ) Summary

Core Content

Ciputra Development (CTRA IJ) is a real estate company based in Indonesia. As of the latest update, the company's share price is IDR830, with a target price of IDR940, indicating a 13% increase. The market capitalization is USD876M, and the average daily trading volume is USD0.8M. The current share price is at a 70% discount to its net asset value (NAV), which is IDR47,163 billion, translating to a NAV per share of IDR3,110. The HOLD recommendation remains unchanged, with the target price now set at IDR940.

Main Points

• Presales Performance:

  • As of 8M15, CTRA recorded presales of IDR4,866 billion, which is 51% of the FY15 presales target of IDR9,481 billion. This is attributed to the economic slowdown and the overhang of higher property taxes.
  • The company has not launched any of its planned new projects for FY15 due to weak market sentiment, particularly in the high-rise segment in Jakarta.

• Forecast Adjustments:

  • Presales for FY15-17 have been reduced by 16%, 9%, and 9%, respectively.
  • EPS for FY15-17 has been cut by 14%, 12%, and 19%, respectively, due to the reduced presales and higher interest rates.
  • The economic slowdown and potential tax changes are key factors affecting the outlook.

• Valuation and Risks:

  • The current valuation is considered attractive, but the HOLD recommendation is maintained due to the continued challenges.
  • The target price of IDR940 reflects a 70% discount to RNAV and 1.5x PBV for FY16.
  • Downside risks include a persistently weak economy, IDR depreciation against USD, interest rate hikes, and regulatory issues.
  • Upside risks include potential interest rate cuts and effective economic stimulus.

Key Information

• Market Capitalization: IDR12.6T
• Free Float: 69.2%
• Issued Shares: 15,166 million
• Major Shareholder: Sang Pelopor (31.0%)
• Share Price Performance:
  • 1-month: -18.2%
  • 3-month: -36.6%
  • 12-month: -24.2%
• Valuation Metrics:
  • P/E (Core): 12.9 (FY15), 9.4 (FY14), 10.6 (FY16), 11.8 (FY17)
  • P/BV: 2.0 (FY15), 1.5 (FY14), 1.4 (FY16), 1.3 (FY17)
  • EV/EBITDA: 1.6 (FY15), 2.7 (FY14), 3.2 (FY16), 4.0 (FY17)
• Financial Performance:
  • Revenue for FY15 is estimated at IDR7,873.2 billion.
  • EBITDA for FY15 is estimated at IDR2,671.9 billion.
  • Core net profit for FY15 is IDR1,186.1 billion.
  • Core EPS for FY15 is IDR78.
• Liquidity and Leverage:
  • Net debt/equity is expected to increase to 57.3% in FY17 due to lower presales in FY15.
  • The company may consider increasing leverage through bank loans or issuing shares for Ciputra Residence's expansion.

Summary of Financial Forecasts

Key Figures and Analysis

• The shift in payment methods has seen a decline in mortgage payments from 33% in FY14 to 24% in 8M15, influenced by high interest rates and stricter bank underwriting.
• Greater Jakarta and Greater Surabaya contribute 73% of presales in 8M15, showing resilience to the economic slowdown.
• Ciputra Surya and Ciputra Property are expected to be the most resilient, with Ciputra Property being the most affected due to its reliance on high-rise projects.
• The company's gearing is expected to rise in FY17 due to the projected decline in profitability from lower presales in FY15.

Conclusion

Despite the current attractive valuation, the HOLD recommendation is maintained due to the ongoing economic challenges and potential regulatory risks. The outlook for CTRA remains uncertain, with a focus on the need for market recovery and potential adjustments in leverage. The company's performance and financial health are closely tied to the broader economic environment and real estate market conditions in Indonesia.