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onsidering the strong rallies which have occurred on the selling prices of housing land since 2010, we believe property companies with diversified business models and greater exposure toward commercial and high-rise projects will have the tendency to perform better in 2013.

In our view, rising investments propping up industrial land average selling prices (ASPs) to the highest ever this year (exhibit 1) will be followed by more expansions in retail, office and commercial segments.

On the retail side, the implementation of a moratorium on malls in 2011 has curbed retail space supply and supported higher rental rates. Demand support will also come from not only domestic retailers like Mitra Adi Perkasa and PARA Group, but also renowned retailers from Japan, Korea, Europe and the US, capitalizing on Indonesia’s growing middle class income earners (exhibit 2) and looking for more space in Jakarta and Greater Jakarta. Furthermore, we believe rising investment will continue to support strong demand for office space, both for relocations and expansions.

Going into 2013, we retain our bullish stance on property and industrial-state equities. Our top picks on the sector are Ciputra Development and Lippo Karawaci as they have diversified projects and significant growing recurring incomes. On the industrial front, we like Bekasi Fajar Industrial Estate and Lippo Cikarang, which have ample land bank supplies to meet continued demand for industrial land and strong ASPs to support higher margins ahead.

On landed-focus, Bumi Serpong Damai still remains undervalued compared to its peers considering its huge land bank reserves. In our view, faster and greater realization on additional commercial projects will support share price performance in the next 12-months. We also like Summarecon and Alam Sutera as they will continue to benefit from higher land bank value in their remaining locations, with additional 2013 recurring incomes from new retail malls/offices, which will cushion against lumpy revenue recognition, raise margins and help preserve high selling prices in those immediate areas.

For investors with preference toward high rise, commercial buildings, Ciputra Property will provide higher 2013 earnings growth of 39 percent year-on-year (2012:14.5 percent year-on-year), stemming from the operation of 122,000 square meters Lotte Shopping Avenue and more revenue recognition from apartments and offices in Ciputra World Jakarta complex. Other positive catalysts will also come from potential Joint Operation/Joint Venture commercial projects in the coming years.