SINARMAS LAND LIMITED
A26.SI
Sinarmas Land Limited - The Landbanking Giant
Highlights
- The unveiling of 10 economic reform packages by the Indonesian Government in 2015 in a bid to boost foreign direct investments (FDI).
- Majority of revenue continues to be derived in Indonesia; Bumi Serpong Damai (BSD) City and Kota Deltamas.
- 51.4% own subsidiary, Bumi Serpong Dermai Tbk (BSDE.JK, Rp1,945) achieved 90% of sales target in FY15; shortfall was due to project delays.
- 44.5% own subsidiary, Puradelta Lestari (DMAS.JK, Rp204) saw weaker sales in FY15 amid uncertainties in the global economic environment accompanied by the overall weak land sales in Indonesia.
- Completed the acquisition of Alphabeta Building in London and started contribution in 3Q15.
How do we view this?
- A strong pipeline of new property launches amounting to c. Rp6tr backed by a healthy demand for Indonesia residential properties would likely propel the absorption of these newly launched properties.
- We expect development sales from BSDE to remain as the primary driver of revenue for the group moving forward, and view that a targeted marketing sales in the region of Rp6.8tr in FY16 is achievable.
- Plentiful amount of land bank (7,000 hectares) remaining; puts Sinarmas Land (SML) in a good stead to ride on the recovery in the Indonesia economy.
- While industrial land sales were considerably muted in 2015, however, the adamant stance of developer on refusing to cut prices is a vote of confidence on the land value
- Low supply but strong demand for office space in Central London likely to benefit valuations for both of its office properties in London.
- We note that the group has entered into a net debt position of S$482m as at end Dec- 15 amid rapid expansions outside of BSD City and Kota Deltamas.
Investment Actions
- We remain positive about the company’s prospects going forward amid its strong fundamentals, and view that SML will be the beneficiary of a recovery in the Indonesia economy.
- We favour SML’s buoyant sales performance, deep development pipeline and a history of positive operating cash flows are avenues, which the group can leverage to strengthen its balance sheet.
- Along with a change of analyst, we maintain our BUY rating with a reduction in TP to $0.79 (S$0.96 previously) based on our SOTP RNAV estimates, taking into account of the higher amount of debt taken on its balance sheet to drive business expansions.
Peter Ng
Phillip Securities
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http://www.poems.com.sg/
2016-04-22
Phillip Securities
SGX Stock
Analyst Report
0.79
Down
0.96
