Wednesday, August 17, 2011

PT Bumi Serpong Damai Tbk - Undervalued

by Indopremier Securities

Significantly Undervalued

The Company is better off with more diversified assets after completing the acquisition of DUTI, SMW and SMT last year. We see no short term catalyst for price boost, nonetheless we perceive the market price of stock as significantly undervalued compared to our TP Rp 1,500 from 55% discount to NAV. Recommend to BUY the stock.

High Quality, More Diversified Assets

The Company increases its land bank by 12.5 million m2 (around 57% of BSD City) and Rp 650 billion recurring income (26% of total revenue FY10) with the consolidation of DUTI, SMW and SMT. This consolidation appears logical considering those land banks are more widely spread outside Jakarta and the recurring income is generated from mature office tower and 4-star hotels.

Marketing Sales in-line

The management set target for FY11 marketing sales at Rp 3.4 trillion and the first half figure are in line with the full year target at Rp 1.696 trillion (50%). Average selling price of land bank in BSD City has reached Rp 3.5 million/sqm from Rp 3 million/sqm in the beginning of the year.

Cash Drag is an Issue

The Company retains Rp 4 trillion cash in balance sheets from rights issue last year. The management indicates a plan to do land bank acquisition in Surabaya as well as BSD City in the near future, but in the meantime, those cash will not go anywhere but dragging down ROIC and ROA.

Attractive NAV at Rp 1,500

We set our target price at Rp 1,500/share using NAV valuation with 55% discount. Even without short term catalyst, we perceive a very good bargain to BUY the stock at the current market price with 46% potential upside.

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