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Thursday, March 31, 2011

Bakrieland Development Tbk (ELTY)

by Samuel Securities

Stable Margin

Highlights:

• ELTY reported revenue of Rp1,367 bn in FY10, grew by 29.1% yoy or 28.6% qoq, while net profit jumped by 35.6% yoy or 44.7% qoq to Rp178 bn.
• Operational margin looks stable, with gross margin stood at 48.9% (from 47%) and operating margin at 17.7% (from 15.7%).
• Total assets increased by 47.2% yoy after acquisition of Bukit Jonggol thru Rp3.2tr right issue in July 2010.


Comments:

• Overall, ELTY’s FY10 results were above our forecast and consensus, with net earning accounted for 158% of our FY10 estimates. Higher net earnings were mainly due to forex loss (+224% YoY) and associated income amounting to Rp6.8 bn, as well as lower tax rate of 6.7% (from 20.7%).
• Total debt increased by 42.3% to Rp4,385 bn as per Dec’10, but leverage level slightly declined after right issuance, with net gearing dropped to 0.43x (from 0.5x).
• Despite huge land bank after Jonggol acquisition (addition 500 ha land in Karang Tengah and 12,500 ha land in Bukit Jonggol), but no significant contribution yet to company’s earning. We view that company will require additional fund to finance the development of Jonggol considering current cash position of Rp860bn.
• We expect revenue to grow moderate by 16% in FY11 while gross margin will remain stable at 48-49%. Bottom line will be burdened by huge borrowing cost, our estimation is
Rp155 bn or decline by 14% YoY.

Action & Recommendation:

• The stock is currently trades at 0.7x PBV’11 and 43% discount from its NAV value of Rp241/share, while share price has been underperformed by 12.7% YTD. We retain our HOLD recommendation for the counter with price target Rp180/share (25% discount from NAV). Maintain HOLD

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