Sinamars Land Limited - Phillip Securities 2016-05-16: Weak quarter despite strong take-ups

SINARMAS LAND LIMITED A26.SI

Sinarmas Land Limited - Weak quarter despite strong take-ups

Sinarmas Land’s (SML) 37% YoY decline in revenue was attributed to a lower number of residential unit hand overs, amid a change in cash collection pattern led by an extension of cash instalment payable by homebuyers from 2 to 4 years, as well as lower sales of land for commercial and industrial purposes in Indonesia. Sales volume of industrial land plots through PT Puradelta Lestari Tbk (DMAS) remained weak (2.6 hectares), although not unexpected.
Recurring income base was up 31.9% YoY to $37.6m, driven by higher rental income from newly completed commercial buildings in Indonesia, and higher contribution from Alphabeta Building in London.
PT Bumi Serpong Damai Tbk (BSDE) (51.5% owned by SML) as part of a consortium, bagged an infrastructure project tender worth Rp.6 trillion from the Indonesian Government to develop a 30km toll road, which connects Serpong and Balaraja in Banten province.

Marketing sales of properties were bottlenecked by fewer new property launches in BSD City despite registering strong take up rates. In 1Q16, there were 3 new residential property launches, namely Sevilla Park (77% sold), Vanya Park “Anartha House” (100% sold) and Mozia “Amarine” (86% sold). Management remains confident that the current strong sales momentum is expected to maintain for the 3 new condominium projects to be launched in 2H16, as well as other property launches outside of BSD City for the rest of 2016.
Sales of industrial land plots from DMAS remained muted and came in at Rp. 66 billion (2.6 hectares) and this was expected. The management expects a pickup in 2H16 from optimism in the domestic economic environment and a better investment climate, as the economic stimulus packages that were aggressively rolled out by the Indonesian government begin to take effect.
Recurring income base from hotel, rental and golf and resort operations continues to grow, registering a 31.9% YoY gain to $37.6m, as a result of maiden rental contribution from built-to- suit Courts Megastore and Green Office Park 6 in BSD city, as well as higher rental contribution from Alphabeta Building in London. Recurring income base in 1Q16 formed 24.5% of SML’s total revenue.

We have adjusted our estimates in particular to our revenue forecast, amid a permanent shift in cash collection pattern that is expected to moderate revenue collection moving forward.
However, we remain positive on SML’s prospects as a premium real estate developer moving forward, where the group continues to plough in strong sales at its development launches, as well as the slew of economic reform packages beginning to take effect in the Indonesian economy.
We maintain “BUY” with a downward adjustment of our TP to S$0.74 (previous $0.79).

Peter Ng Phillip Securities | http://www.poems.com.sg/ 2016-05-16

Phillip Securities SGX Stock Analyst Report BUY Maintain BUY 0.74 Down 0.79