Intiland Development: On The Right Track
Intiland has been delivering decent results –both presales and earnings. Its balance sheet remains strong, with a furthercatalyst to come from a strategic alliance for the South Quarter. We reiterate BUY, with a higher IDR675 TP (from IDR630, 14% upside) as we roll over our valuation base to FY17. Our TP implies FY17F-18F P/Es of 19.8-17.7x, with gearing falling to 56% in FY18.
¨ Catalyst in the pipeline. Talks with a potential partner for one of its key projects in Jakarta – South Quarter – are still underway. Intiland expects to maintain 60% ownership of the project. Based on our NAV calculation, South Quarter should be worth around IDR1.6trn, which should translate into a potential equity injection of IDR400-640bn. We believe our calculation is on the conservative side. We maintain our positive view on Intiland’s plan, as the strategic alliance should add value to the project, as well as mitigate risks.
¨ Forecast changes.We make some housekeeping changes, cutting our FY16F-17F earnings by 2-3%, after taking into account higher interest expense from its newly issued IDR bond. However, its increased 6M16 gearing should be temporary, as Intiland will repay IDR346bn worth of bondwhich matured 9 Jul. That, coupled with lower final sales tax of 2.5%, raises FY18F earnings by 8% and leads to net gearing of 34% (FY16F: 46%).
¨ Beneficiary of PMK 122/2016. Issued 8 Aug, this Finance Minister Regulation regulates the tax amnesty’s repatriated fund placement to non-financial sectors including property. In our view, this regulation should benefit property developers with large exposure to luxury houses or apartments, as these are likely to be the preferred type of properties for investment of the repatriated funds. As such, Intiland should benefit,as 65% of its properties are priced over IDR2bn per unit.
¨ On track. Management is optimistic about achieving its presales target. Its next new launch would be high-rise residences in Kebon Melati, with a sales target of IDR310bn. Intiland’s first semester performance has been decent, with presales achieving 47% of our target and revenue at 50% of our FY16 target, reflecting project delivery that is on track.
¨ Maintain BUY with higher TP. We roll over our valuation base to FY17, leading our TP to rise to IDR675. The stock is currently trading at a 57% discount to its RNAV, implying 18.3-16.9x P/Es for FY17F-18F.
¨ Key risks to our forecasts are:
i. Delays in projects delivery;
ii. Weak presales;
iii. Significant hike in material cost. (Lydia Suwandi)$DILD