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P H
Sep 24,2017 09:04:18

We met with Summarecon Agung’s ($SMRA) management to get the latest insight on the company’s performance with the following key takeaways:

Management maintain FY17 presales target at IDR3.5trn and remain confident target will be achieved through several new launches in this 2H17. 8M17 presales was booked at IDR1.84trn or 53% from company’s target and 68% from our target.
o Several upcoming new launches in this 2H17 are:
o Bekasi – Burgundy phase 2 in 23 Sept, with total target proceeds of IDR210bn
o Serpong – Symphonia landed houses in Oct, with total target proceeds of IDR 450bn
o Bandung – residential and commercial launches in 4Q17, with total target proceeds of around IDR660bn.
o Karawang – Residential launch in 4Q17, with total target proceeds of IDR200bn.

Though confident for this year, management’s view towards 2018 was rather conservative with flat target marketing sales as it is near election year.

Regarding gearing position, there will IDR900bn of bonds due in 2018. The company plans to refinance the bond by using its several of internal cash plus issuing another bond. The company targets to lower its debt/equity ratio to 90%.

Maintain Neutral call with TP of IDR1,125 implying 60% discount to NAV. (Yualdo Tirtakencana)

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P H
Aug 14,2017 15:51:15

Although presales have improved in 2Q17, we cut our target FY17F
marketing sales to IDR2.7trn following its downward presales target
revision to IDR3.5trn along with the disappointing results in 2Q17.
Therefore, our FY17F-18F earnings are slashed by 20% and 21%
respectively, which lead to a lower new TP of IDR1,125 (from IDR 1,422, 3%
upside), implying a 60% discount to NAV. We remain cautious of
Summarecon because of its high gearing level and high interest costs.
However, we expect its performance to improve next year. Maintain
NEUTRAL.

- Target presales cut. As at 1H17, Summarecon Agung (Summarecon)
booked marketing sales of IDR1,438bn (-16% YoY, +118% QoQ) or
equivalent to 32% and 39% of the company’s and our initial target. 1H17’s
presales achievement was lower than its 5-year historical average trend of
52% during the first semester. Meanwhile, the latest 7M17 presales data
came in at IDR1,540bn or 20% lower compared to 7M16 and only accounted
for 41% from our initial target.
We believe that management was aware of the challenge and have revised
down its FY17 target marketing sales to IDR3.5trn from IDR4.5trn. After
taking into account the company’s revision and its soft presales in 7M17, we
too revise our target FY17F-18F presales to IDR2,895bn and IDR3,249bn
respectively. Currently, management’s plan for 2H17F product launches
comprise of the following:
i. IDR900bn from two launches in Serpong;
ii. IDR900bn from two launches in Bandung;
iii. IDR200bn from a shoplot launch in Karawang (Aug 2017);
iv. IDR500bn from two launches in Bekasi.

- Weak 2Q17 results & earnings adjustment. 2Q17’s topline grew 18%
QoQ mostly driven by apartment and retail sales while house, commercial,
and landplot sales were slow. Higher apartment sales led to higher cost of
goods sold (COGS), and combined with the higher marketing expenses in
opex, have eventually eroded 2Q17’s bottomline into negative territory. As
a result of the cut to target presales, we lower our earnings assumptions by
-20% and -21% for FY17F-18F respectively with net margins falling to 2.6%
this year (-313.6bps).

- Maintain NEUTRAL. We remain cautious on Summarecon due to its high
gearing and interest costs, as well as soft presales during 7M17 that led to
management lowering its targets. However, we expect improvements to
come in the next year with a 7% topline CAGR growth for FY17F-19F. Our
IDR1,125 TP implies a 60% discount to RNAV.

- Risks to our call include the depleting prime landbank, deteriorating capital
structure with gearing on the rise, weaker presales, project delivery delays,
regulation changes affecting the sector, and better-than-expected demand.
(Yualdo Tirtakencana)

$SMRA

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P H
Dec 16,2016 11:52:33

SMRA: Marketing sales target cut by 14%

Summarecon Agung ($SMRA) cuts marketing sales target from IDR3.5tn to IDR3.0tn on the back of lower than expected ytd sales, reaching only IDR2.4tn in October. SMRA’s Chief Financial Officer, Michael Young, stated that the lagging property sales were due to the Nov 4 and Dec 2 rallies in Jakarta, causing consumers to hold off their money on liquid assets. (Tempo)

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P H
Dec 14,2016 08:06:02

Property (Overweight), ‘Tis The Season To Be Jolly About Mortgages
 
Our ground checks reveal that commercial banks are stopping their promotional mortgage rates. However, as they are aiming for double-digit mortgage growth rates next year, we expect them to re-introduce packages at lower rates as well – since the rates do not yet reflect the latest cut made by BI in Oct. Note that the combination of the relaxation of LTV thresholds and lower mortgage rates following the BI rate cut during 3Q16 resulted in a shifting of consumer preferences back to obtaining financing for properties via a mortgage.
¨ Promo on hold, but... we learnt that some banks are stopping their promotional mortgage packages this month. The current normal mortgage rate has a fixed interest rate of 9.5-10.25% for one year. Bank Central Asia (BCA) ($BBCA) is still offering the lowest mortgage rate with its latest Fix & Cap promotion, ie 7.99% pa fixed interest for the first three years and capped for a further three years at 8.99% pa. This is almost 50bps lower than what was offered in its previous Fix & Cap promotion. However, we believe IND Banks would continue to introduce lower mortgage rates in the future as:

i. Banks are aiming for double-digit growth in their mortgage segments in 2017. BCA and Bank CIMB Niaga ($BNGA) are aiming for 12% and 9-10% mortgage loan growth respectively;

ii. Based on research by rumah123.com, the most important factor in buying properties is the Bank Indonesia (BI) rate. Most buyers still utilise mortgage facilities to purchase properties. This is also reflected in the trend shifting back towards taking a mortgage as a payment method during 3Q16. This is due to a combination of the relaxation of the loan-to-value (LTV) thresholds and lower mortgage rates following BI’s rate cut.

As such, we expect banks to start re-introducing their respective mortgages at lower rates earliest by Jan 2017. Their current mortgage rates do not yet reflect the latest BI rate cut, which was made in October. Note, also, that presales activities in December are more moderate.

¨ Maintain OVERWEIGHT. We keep our OVERWEIGHT rating on the sector, as we expect a better outlook in 2017 as the following factors have already been priced in:

i. All the catalysts that include the tax amnesty;

ii. A potentially lower benchmark interest rate;

iii. The relaxation of the LTV threshold;

iv. The allowance for properties under construction to come under a second mortgage.

The share prices of property counters under our coverage have softened following public protests on 4 Nov that demanded incumbent Jakarta governor Basuki Tjahaja Purnama, commonly known as Ahok, be arrested for blasphemy. Share prices dropped further after the US election was concluded on 9 Nov. On average, share prices have plunged 9% YTD since 4 Nov. These numbers have recovered by 5% on average from their lowest level during the same period. Nonetheless, the sector is currently valued at a 65% discount to RNAV, or around -1.5SD from its 3-year mean of 56%, which looks compelling. (Lydia Suwandi)

$CTRA $ASRI $BSDE $SMRA $APLN $BKSL

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P H
Dec 02,2016 13:22:07

SMGR: Shadow Soaring Over
 
Kami optimis adanya peningkatan volume pada tahun 2017, hal ini berlandaskan karena 1) infrastructure project yang cukup besar, di mana hal ini akan menjadi fokus pemerintah ke depan; 2) outlook dari sektor property yang cukup positif mengingat sejumlah peraturan yang direlaksasi diharapkan mampu memberikan dampak positif terhadap penjualan property. Namun peningkatan permintaan belum mampu mengimbangi kompetisi yang cukup ketat antar perusahaan untuk memperoleh market shares, sehingga kami memperkirakan margin SMGR masih akan flat di 2017 mencapai 38.9%. Intisari dari report kami adalah:
 
·         Peningkatan volume permintaan
·         Flat gross margin
·         Posisi balance sheet yang baik dari SMGR
·         Rekomendasi HOLD untuk SMGR dengan target price Rp. 11,000

$SMRA

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P H
Nov 30,2016 12:39:00

Summarecon Agung ($SMRA): Progressing
 
Property: Indonesia
 
§ 10M16 marketing sales of IDR2.4tn; 2 projects to be launched: According to management’s monthly performance announcement, SMRA booked solid October sales of IDR218bn, of which around 74% were from the Springlake Bekasi project as the company managed to sell 288 apartments worth IDR162bn in sales with ASPs of IDR10mn-IDR15mn/unit. This translated into 10M16 marketing sales of IDR2.4tn, reaching 60% of management’s IDR4tn full-year target and 69% of ours. To meet its 2016 target, SMRA plans to launch 2 projects: (1) Summarecon Bandung (26 November) and (2) Summarecon Karawang (December). As we are positive on SMRA’s upcoming launches, we retain our 2016 marketing sales assumption of IDR3.5tn, particularly given company’s guidance of IDR1tn in sales from those projects.
 
§ Cutting 2016 revenue on longer recognition, but raising 2017-18’s: On a huge 60% high-rise contribution to 2014-2015 marketing sales, we expect SMRA to book poor 2016F revenue of IDR5tn, down 10% y-y translating into IDR105bn of net profit (-88% y-y). Based on the company’s explanation, the disappointing revenue recognition was basically due to the longer construction period of their strata title projects which require 3 to 4 years to hand over the units. The construction period is also written in SMRA’s sale and purchase agreements (PPJB). Currently, SMRA has around a IDR3tn high-rise pre-sales backlog from 2014-15 that is expected to be booked in 2018-19 while the remaining landed housing backlog is IDR2tn. Thus, we raise our 2017-18 revenue assumptions by 0.3-7.1% as we expect most of the marketing sales backlog to be recognized in those years.
 
§ Ready-to-launch projects; Retain TP of IDR2,150 with BUY rating: On solid planned project launches and escalating ASP growth (9M16: +8% y-y) helped by the government’s infrastructure development, we maintain our 12M TP of IDR2,150, based on a 55% discount to our 2017F NAV. However, we believe recent market underperformance was due to SMRA’s weak 3Q16 sales recognition. We believe SMRA’s upcoming project launches could offset investor sentiment as the bad news looks mostly priced in and we believe the stock is currently trading at a more attractive valuation. With 58% upside potential to our TP, we maintain our BUY rating. Risks to our positive view on SMRA include worse-than-expected project launches, a failed tax-amnesty program as well as delays on government infrastructure projects.
 

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P H
Nov 23,2016 10:02:42

$SMRA – Summarecon Serpong apartment launch -96 units – 80% take up rate
 
Summarecon Agung launched “Midtown” apartment on 19 November 2016. The apartment is situated in Summarecon Serpong, located strategically across the main commercial center, Summarecon Mall Serpong. SMRA launched 96 out of the total of 830 units, from 2 towers named Jefferson and Carmel.
 
Details on the launch:
Jefferson & Carmel tower:
Total unit offered: ~96 units
Price per unit: Rp426m-Rp2.1bn
Unit size: 23-92sqm
Price per sqm: Rp16-18m/sqm and Rp22-24m/sqm
Estimated pre-sales: ~Rp90bn or 2.5% of its FY pre-sales target
 
SMRA booked Rp2.2tn of pre-sales as of 9M16, 62% of its FY pre-sales target of Rp3.5tn.

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P H
Nov 15,2016 22:31:00

Summarecon Agung ($SMRA): Lower Gearing Is The Key

We remain cautious on Summarecon’s high gearing level, as weak GPMs from a change in sales mix may continue from lower-than-expected GPMs from new townships. And, following its presales target cut to IDR3.5trn and bad 3Q16 results, we lower our FY17F-18F earnings by 82%.Yet, coupled with the share price plunging~50% from its highest level, we believe the market has priced in the bearish views. Thus, we upgrade the counter to NEUTRAL (from Sell) with a slightly lower new IDR1,420 TP (from IDR1,480, 9% upside). Possible commercial land plot sales are likely to serve as the catalyst.

¨ Earnings to start improving in FY18. We remain cautious on Summarecon Agung (Summarecon). This is as its capital structure with total interest bearing debt is IDR7trn, ie a doubling of its gearing level to 1.18x in just three years, while its financial performance is expected to remain soft due to:

i. Weak property demand in FY16, which has forced Summarecon to tweak its presales target to IDR3.5trn – as such we expect flat revenue over the next two years;

ii. GPMs have also contracted to 46% (FY15: 52%) and are likely to remain flat with its new townships in Bandung and Karawang only yielding GPMs of 30-35% and 25% respectively;

iii. High interest costs and higher earnings attributable to non-controlling interests.

However, we expect improving earnings from FY18 onwards, thanks to lower final sales tax, a lower presales mix from apartment sales and more visible recovery on property demand in FY17. This would be led by tax amnesty initiatives and allowance for “off-plan” properties for second mortgages.

¨ Forecast change. We slash our FY17F-18F earnings by 82%, taking into account the reasons above. Nonetheless, we expect earnings to start growing conservatively by >10% in FY18 onwards. This is backed by a lower sales tax rate and decreased presales contributions from apartment sales. Our forecast has yet take into account possible sales from commercial land lots, which Summarecon advised may generate presale values of IDR175-350bn. If included, these potential sales should grow gross profit and net profit further by around 6% and41%respectively, assuming 60% GPMs and 35% net margins.

¨ Upgrade to NEUTRAL. We still believe lowering the gearing ratio ought to give Summarecon greater financial stability. With its cash flow mainly reliant on the presales performance of its development properties, selling more landed residential and commercial land lots may be a good strategy for now, bearing the risk of its ability to replenish its landbank. Nonetheless, the share price has plunged ~50% from its highest IDR1,940 level. This may reflect the market having priced in the bearish view. As such, we upgrade our stance to NEUTRAL (from Sell), with a new IDR1,420 TP (from IDR1,480) that is derived from a 52% discount to the estimated RNAV. (Lydia Suwandi)

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P H
Sep 22,2016 11:21:59

Site Visit to Summarecon Bandung: Good Progress

Continues to deliver best project execution

We recently visited Summarecon Bandung, SMRA’s latest township that
was first launched in late 2015. We saw development of the brownfield
project is progressing well. However, SMRA recently revised down its
FY16 pre-sales target by 22% from IDR4.5t (also MKE target) to IDR3.5t (-
19% YoY). Maintain HOLD as we are positive on SMRA’s long-term outlook
from its three new townships, but we believe the near-term potential is
already priced in. Our TP of IDR1,750 is based on a 44% discount to RNAV
and 3.5x P/BV FY17F (+2SD above its five-year mean).

Direct toll-road access is almost completed

At the new township development in Bandung, there will be two direct
accesses to the Summarecon Bandung Township: the direct toll-road exit
and the Jakarta-Bandung High Speed Train (HST) Station. During our visit,
we saw that the direct toll-road exit is almost completed. The
construction took only one year. We expect KCIC (project owner of HST)
to commence construction of the HST in a few weeks.

Leading township in Bandung

Besides SMRA’s development, there is no other township development in
the city. Furthermore, the local government’s plan to move the city’s
administration office to Summarecon Bandung adds value. Currently
SMRA owns 350ha of land in Bandung and this can be expanded to
1,000ha providing sustainable development for SMRA for more than 20
years.

Company lowering FY16 pre-sales target to IDR3.5t

SMRA’s pre-sales reached only IDR2t in 8M16. SMRA also announced it has
revised down its FY16 pre-sales target by 22% to IDR3.5t (from IDR4.5t)
as demand in 3Q16 is still soft as they see that buyers are busy on tax
amnesty program. This will lower our RNAV and earnings estimates in
FY18F onwards. Every 10% drop in 5 year pre-sales will lower RNAV by 2%.

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P H
Jul 27,2016 08:50:24
EARNINGS CALENDAR (Half Year 2016 - Estimated)

JULY 2016

Jul 25, 2016 :
$BBTN (Bank Tabungan Negara (Persero) Tbk PT)

Jul 26, 2016
$BDMN (Bank Danamon Indonesia Tbk PT)
$BMRI (Persero) Tbk PT Earnings Release - 4:00PM GMT+7

Jul 27, 2016
$AALI (Astra Agro Lestari Tbk PT)
$HMSP (Hanjaya Mandala Sampoerna Tbk PT)
$LPPF (Matahari Department Store Tbk PT)
$MPPA (Matahari Putra Prima Tbk PT)
$PTBA (Bukit Asam (Persero) Tbk PT)

Jul 28, 2016
$ASII (Astra International Tbk PT)
$BEST (Bekasi Fajar Industrial Estate Tbk PT)
$BJBR (PT Bank Pembangunan Daerah Jawa Barat dan Banten Tbk)
$DOID (Bloomberg)
$NCO (Vale Indonesia Tbk PT)
$JPFA (Bloomberg)
$PSAB (Bloomberg)
$SSMS (Bloomberg)
$SMGR (Semen Indonesia (Persero) Tbk PT)
$UNTR (United Tractors Tbk PT)
$UNVR (Unilever Indonesia Tbk PT)

Jul 29, 2016
$ASRI (Alam Sutera Realty Tbk PT)
$ADHI (Bloomberg)
$BSDE (Bumi Serpong Damai Tbk PT)
$BNGA (Bloomberg)
$BNLI (Bloomberg)
$BNII (Bloomberg)
$BKSL (Bloomberg)
$BHIT (Bloomberg)
$BISI (Bloomberg)
$CPIN (Bloomberg)
$CTRA (Ciputra Development Tbk PT)
$CTRP (Bloomberg)
$ELSA (Bloomberg)
$GIAA (Bloomberg)
$GJTL (Bloomberg)
$GGRM (Gudang Garam Tbk PT)
$NKP (Bloomberg)
$INTP (Indocement Tunggal Prakarsa Tbk PT)
$INDF (Indofood Sukses Makmur Tbk PT)
$ICBP (Indofood CBP Sukses Makmur Tbk PT)
$INDY (Bloomberg)
$KARW (Bloomberg)
$KAEF (Bloomberg)
$KIJA (Bloomberg)
$KLBF (Kalbe Farma Tbk PT)
$KRAS (Bloomberg)
$LPKR (Lippo Karawaci Tbk PT)
$LSIP (Perusahaan Perkebunan London Sumatra Indonesia Tbk PT)
$MAPI (Bloomberg)
$PWON (Bloomberg)
$PNBN, $PNLF, $PNIN (Bloomberg)
$PTPP (Bloomberg)
$RALS (Bloomberg)
$SMRA (Bloomberg)
$TBLA (Bloomberg)
$TLKM (Telekomunikasi Indonesia (Persero) Tbk PT)
$TOTL (Bloomberg)
$WSKT (Bloomberg)

AUGUST 2016
Aug 1, 2016
$HRUM (Harum Energy Tbk PT)
$SSIA (Surya Semesta Internusa Tbk PT)

Aug 10, 2016
$ITMG (Indo Tambangraya Megah Tbk PT)

Aug 12, 2016
$EXCL (XL Axiata Tbk PT)

Aug 29, 2016
$ADRO (Adaro Energy Tbk PT)
$ANTM (Aneka Tambang (Persero) Tbk PT)
$BBRI (Bank Rakyat Indonesia (Persero) Tbk PT)
$ISAT (Indosat Tbk PT)
$PGAS (Perusahaan Gas Negara (Persero) Tbk PT)

SEPTEMBER

Sep 13, 2016
$SMCB (Holcim Indonesia)

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P H
May 02,2016 17:21:11
Property Development - Weak 1Q16 results

- SMRA, CTRA and BSDE 1Q16 dropped 60-89% yoy and missed our estimates.

- Only PWON results were in line with our and consensus estimates.

- The profit misses were generally attributed to slower revenue recognition as marketing sales slowed down since late 2013 alongside stretched payment terms.

- We believe this will pose earnings risk to all developers under our coverage, although tax amnesty may provide support to share prices in the near term.

$SMRA $CTRA $BSDE $PWON
Bear
P H
Apr 08,2016 09:19:54
Summarecon achieved 15% of FY16 marketing sales target by 1Q16

As of 1Q16, Summarecon Agung (SMRA) books Rp675bn in marketing sales or 15% of total marketing sales target for 2016, which stands at Rp4.5tn, on the back of new property launches in Summarecon Serpong, Summarecon Bekasi, Summarecon Kelapa Gading, and Summarecon Bandung with each contributing Rp200bn, Rp120bn, Rp80bn, and Rp275bn, respectively. In addition, the company has allocated Rp510bn of capex to acquire 85ha of land in several locations. As of Dec’15, the company has a total land bank of 1,917ha.

$SMRA
Bear
P H
Apr 01,2016 10:10:21
Alam Sutera Realty Books Lower Profits Last Year

Profits at the property company Alam Sutera Realty ($ASRI) dropped 42 percent last year due to low sales, the company revealed in its financial report on Thursday (31/03).

Alam Sutera Realty's profits dropped to Rp 684 billion ($51 million) in 2015 from Rp 1.18 trillion a year earlier.

The company's sales and other income from services dropped 23 percent to Rp 2.8 trillion last year, down from Rp 3.6 trillion a year earlier. Costs also dropped to Rp 2.1 trillion, down 16 percent from Rp 2.5 trillion a year earlier.

The listed property developer forecasts its marketing sales to rise 35 percent this year to Rp 5.8 trillion on the back of the new office and apartment projects.

Still, according to ratings agency Standard & Poor's, the outlook for real estate developers is not too bright this year. The flat property sales will remain this year for most developers.

Another property developer Summarecon Agung ($SMRA) also reported a decline in its profits last year on the back of higher expenses and low sales.
Bear
P H
May 31,2015 23:57:44
Meeting with Indonesia Shopping Center Management Association

- We met with Alphonzus Widjaja, the Secretary-General of Indonesia Shopping Center Management Association. Attached are the key takeaways:

- Mall tenants are suffering currently. Mall tenants are experiencing the burden of slowing economy. Discussion with the tenants indicate that their revenue is down by 30-40% YoY, worst hit is the fashion stores. The fashion stores also suffered due to the rising dollar. Even though traffic on the malls are maintained, but customers are trending down their purchase. Even the F&B restaurants are experiencing decline on SSSG. However, the SSSG in food court (such as Eat & Eat) increased as the mall visitors opt for cheaper meals.

- The retailers are halting or slowing down expansion. HERO and Carrefour are not expanding at all for this year. For some stores, sales per transaction declines significantly. Other retailers are slowing down their expansion. Only Matahari Department Store and Hypermart are still expanding. Foreign retailers, such as Lotte and Central are also not aggressively opening new stores like in the previous years.

- What would the mall owners do? At the current juncture, the mall retailers would not give any discount on the rental rate or service charge. However, to ease the tenants’ burden, the mall owners would ease the cash payment or installment of the tenants.

- Bargaining power tilted to the retailers at the moment? Previously, we believe that the bargaining power is more towards mall owners, due to ferocious appetite of both domestic and foreign retailers to expand. However, on the onset of slowing economy, the bargaining power is currently tilted towards retailers. Hence, during the opening of a new mall, retailers could negotiate for a lower rental rate or subsidy for its fitting-out. However, Summarecon could still have bargaining power, due to its successful track record on both Summarecon Serpong and Summarecon Kelapa Gading.

- We don’t see earnings risk on the mall operators just yet. Despite the weak revenue of retailers, heavy discounting on the rental rate is unlikely. Hence, earnings from mall should remain stable. We maintain our Buy stance on PWON and SMRA. PWON generates 43% and SMRA 30% of its revenue from recurring income (malls and hospitality). We have Buy on PWON with TP of Rp620 and Buy on SMRA with TP of Rp2,000. Due to the good track record on both of these mall operators, we think tenant is unlikely to ask discount on the rental rate.
Bear
Quotes delayed, except where indicated otherwise.
SMRA
1,020.00 15.00 (1.45%)
SUMMARECON AGUNG IDR100
Last Update 02:54:11