Property could be one of the most profitable business sectors listed on the Indonesian Stock Exchange (IDX) last year and is expected to continue growing although at a slower pace on the back of increasing demand.
Most property companies posted two-digit growth in net profits during last year’s nine month period to September, outperforming the average increase of more than 400 listed firms, according to a number of financial reports.
The bourse corporate listing director Hoesen said that the average profit recorded by listed property companies far exceeded the 4 percent average growth of the net earnings of all listed companies during the January to September period last year. Most listed firms have yet to submit their financial reports for the full year 2012.
Among the companies to already submit full year reports is PT Bumi Serpong Damai (BSDE), which saw its profit rise around 53 percent in 2012 to Rp 1.29 trillion (US$132.87 million). Another example, Jakarta listed PT Alam Sutera Realty booked 98 percent increase in net profit in 2012.
An analyst at PT Samuel Sekuritas Benedictus Agung Swandono noted that property developers reported a 32 percent increase in revenue on compound annual growth rate (CAGR) basis during the 2009 to 2012 period.
“This year, property companies will continue to grow. In terms of amount, the growth won’t be far different from last year’s, however in term of percentage increase it will be smaller due to a lower base number in 2012 from 2011,” Agung said.
Agung also cited that property developers enjoyed a growing average selling price of their products during the 2010 to 2012 period, which contributed to companies’ higher profit margins.
Developers with portfolios in industrial estates enjoyed higher growth on the back of a jump in industrial land prices on growing demand. PT Bekasi Fajar Industrial Estate saw its net profits during the January to December period last year jump 293 percent. PT Jababeka also reported 126 percent growth in net profits during the first nine months of 2012. PT Surya Semesta Internusa — which runs its industrial estate business through a subsidiary called PT Suryacipta Swadaya — had a 174 percent jump in its net profit in 2012.
“The industrial estate sector remains attractive, benefiting from a high foreign direct investment in Indonesia in the next few years on the back of potential relocation of investment from China, which has higher labor cost and a renminbi appreciation issue. Indonesia has a demographic bonus with a potential labor supply and big consumer base,” Agung of Samuel Sekuritas said.
Figures from the Investment Coordinating Board (BKPM) showed that foreign direct investment reached Rp 206 trillion last year, a 17 percent increase compared to Rp 175 trillion in 2011. The Board is expecting that foreign investment will touch Rp 270 trillion this year.
As investment is expected to grow, industrial estate players are preparing to acquire more land to support their revenue increases.
Bekasi Fajar’s corporate secretary Khrisna Daswara said that the company planned to acquire 200 to 250 hectares of land.
“That is our plan in the next two years,” Khrisna said. Bekasi Fajar has around 766 hectares in land bank as of the end of last year.
The index of property stocks rose by 42.44 percent in 2012, the best performer among other sectoral indices, according to figures from the bourse. The property stock index has increased by 34.86 percent in the year to date — the best performer so far — according to figures from the bourse, as of March 22.
“Property stocks gave the highest yield last year. The drivers were booming residential projects, economic growth, housing backlog and the steady central bank interest rate, which helped people looking for mortgages,” Probo Sujono, an analyst with PT Millenium Danatama Sekuritas, said.