Jan 20, 2017 11:30:04

Bumi Serpong Damai ($BSDE): Company visit: 2017 outlook
Property: Indonesia

-  Uptrend in quarterly marketing sales of c.IDR6.1tn in 2016: Supported by its “price amnesty program” for its BSD City project, BSDE recorded around IDR2tn of marketing sales in 4Q16, cementing an uptrend since 1Q16 (Exhibit 6). The company provided discounts of up to 15% during phase I (Oct–Nov), which resulted in c.IDR1.1tn of pre-sales, while another c.IDR900bn was achieved during phase II (Nov–Dec) given lower discounting. As a result, BSDE expects 2016 marketing sales to reach around IDR6.1tn, or 90% of its full-year original target, in line with our full-year estimate. We expect to see 9% y-y marketing sales growth in 2017, of which 72% of total sales would be derived from the BSD City project. This report marks a transfer of analyst coverage.
-  Additional 2017 top-line growth from 2 JV projects: Backed by BSDE’s two recent JVs – the Balaraja toll road and the Mitsubishi Smart Living project – we expect the company to book an additional c.IDR1.8tn of revenue this year. Total land sales value for the Balaraja toll road should be around IDR900bn (50ha area x IDR1.8mn/sqm ASP) for the first 10km out of 30km of total toll-road length. BSDE holds 50% equity in this project, while both Astratel and Kompas control the other 50%. The Mitsubishi project, which consists of landed and shop houses, has total estimated value of c.IDR1.4tn (19ha land area x IDR7.5mn/sqm ASP), of which IDR500bn was booked in 2016 with the remainder to be recorded in 2017.    

-  New project launches in Jakarta and Surabaya: Apart from BSD City, BSDE is expanding further into regional areas, having launched two apartments in Jakarta: (1) Southgate, located in Tanjung Barat, with starting prices at IDR30mn/sqm; a mixed-use development project with a retail mall, offices, apartments, a hotel and condos for sale; and (2) Aerium, located in Taman Permata Buana, with 1.8ha of land area comprised of a two-tower condominium and several townhouses for sale. This is a JV project with Itochu, a multinational general trading company based in Japan, with BSDE owning a 51% stake. In addition, the company is planning to launch one of six new apartment towers (1,000 units/tower) in Benowo, Surabaya, with starting prices of IDR300mn/unit.  

-  Benefiting from operation of UNVR’s new office: Unilever Indonesia ($UNVR) is moving its headquarters to BSD Green Office Park in January–February of this year, bringing some 7k workers to the benefit of BSDE’s residential area project in BSD city. As such, we expect the land ASP in BSD City to rise from IDR12mn/sqm at present to IDR13.5mn/sqm in 2017.    

BUY with unchanged IDR2,350 TP
Recent market outperformance (Exhibit 4) likely was based on solid pre-sales. We believe this is sustainable due to BSDE’s expansion beyond its property development in BSD City, providing longer-term growth and stability through geographic diversification. We apply a 55% discount to our end-2017F NAV to determine our unchanged IDR2,350 12M TP. Risks: BSD City infrastructure delays and higher high-rise property demand.