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Property sales: Exceeding targets
After experiencing strong property sales this year, some of our listed Indonesian property counters have increased their 2010 sales targets by 16 percent higher on average
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fter experiencing strong property sales this year, some of our listed Indonesian property counters have increased their 2010 sales targets by 16 percent higher on average. In general, sales of landed property products, mainly comprised of houses, shop houses and land lots, have been leading the way to higher marketing sales.
In the last six quarters, Summarecon (SMRA), Ciputra Development (CTRA) and Alam Sutera (ASRI) reached their sales peak in second quarter, 2010, while Bumi Serpong Damai (BSDE) and Lippo Karawaci (LPKR) booked their highest quarterly sales in first quarter, 2010 as their products serve as inflationary hedge.
SMRA’s sales in the second quarter, 2010 were the highest quarterly among others, resulting from strong demand of its products, which are located in Kelapa Gading and Serpong as well as a new project launch in Bekasi.
CTRA’s sales, through joint operations with local land owners in eight different locations in Indonesia, increased to Rp 513 billion in the second quarter, this year, a new quarterly record high.
For ASRI, the company’s strate-gic location has brought more sales to its residential and commercial products.
Additionally, year-to-date property prices have increased by at least 15 to 30 percent resulting in lucrative capital gains. Having said that, every counter under our coverage has clearly benefited from the current strong momentum in the property industry, driven by low interest rates and improving economic growth. Going forward, we expect Indonesia’s property sector to continue growing.
An additional positive catalyst for property sector is the government’s plan to submit the draft bill on land acquisition for use of public infrastructure, expected to be legalized by the House of Representatives at the end of this year.
The new law should jump start neglected toll road projects in 2H11. For example, the Kebon Jeruk–Ulujami toll road, currently undergoing land acquisition process, should benefit from this upcoming law. This 7 kilo meters toll road will complete the Jakarta outer ring road (JORR1) and provide improved access to the Serpong area to the benefit of SMRA, BSDE and ASRI. In total, these three companies have 4,140 ha of land in Serpong to be developed as new satellite cities.
From the seven property counters under our coverage, only two (LPKR and ELTY) have a net gearing higher than 30 percent.
The others run their businesses with lower leverage, allowing resilience assuming Indonesia experiences another economic downturn in the future.
Thus, Indonesian property companies have not only exceeded targets in terms of their marketing sales, but have also managed to pay down debts, markedly improving their balance sheets over the years.
The writer is an analyst at PT Bahana Securities.
