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Sunday, October 2, 2011

Alam Sutera Tbk - 3Q11 review

by Kresna Securities

Investment Thesis

We maintain our BUY call on ASRI with higher NAV TP of Rp550/share. Strong marketing sales of Rp2.0tr in 8M11 have beaten company's targets as well as exceeding our estimate; consequently, we upgrade our FY11/12 marketing sales by 25.0%/17.1% to Rp2.3tr/Rp2.7tr. We also raise FY11/12 gross margin to 52.3%/52.5%, thanks to stronger-than-expected land appreciation this year. As a result, our projected FY11/12 net income increases by 1.0%/17.0% to Rp539.2bn/Rp790.4bn. An additional land bank in Pasar Kemis also signifies value accretive to the company.

Key Catalysts

Alam Sutera land appreciation continues. Alam Sutera's strategic position, as well as its well-established facilities and infrastructure, have pushed its land prices rising considerably. YTD, sold land price for residential is at Rp5.3m/sqm, representing a 48.9% higher land selling price than that of 2010, while commercial land is set at Rp7.0m/sqm, or 63.9% higher than last year's figure.

Strong Aug11 marketing sales of Rp629.2bn... ASRI succeeded in recording Rp629.2bn in marketing sales in Aug11, this result mainly supported by the launching of The Prominence cluster, a new strategically located commercial area (just around 5 minutes from Alam Sutera toll gates). The launch of the cluster was a tremendous success; within only 3 hours every unit was sold off, yielding around Rp464.0bn.

...have pumped 8M11 marketing sales to Rp2.0tr, thus beating initial target.

Strong marketing sales in Aug11 have uplifted marketing sales in 8M11 to a figure of Rp2.0tr, above company's initial target of Rp1.7tr. Therefore, ASRI upgraded its marketing sales target for 2011 by 29.4% to Rp2.2tr, thus only targeting Rp240.0bn marketing sales for the remainder of the year. Together with the launching of Pasar Kemis next month, a venture which is projected to reap around Rp200.0bn, we have confidence this new target is eminently achievable.

Awaiting the execution of Pasar Kemis in Oct11. The company plans to launch its first product at Pasar Kemis next month; at the beginning, ASRI plans to sell 8hawide residential area for middle-low segment, which is expected to generate around Rp200.0bn marketing sales. ASRI intends to sell small-size house products at affordable prices. The name of the product is yet to be disclosed.

Earnings Outlook

Upgrading FY11-12 marketing sales... Regarding proven strong 8M11 marketing sales (which already exceed our FY11 target of Rp1.8tr), we upgrade ours by 25.0% to Rp2.3tr. Higher marketing sales from Pasar Kemis next year, coupled with strongerthan- expected land appreciation, also lead us to revise up FY12 marketing sales target by 17.1% to Rp2.7tr.

...and margin assumption. We upgrade our gross margin assumption for FY11/12 by 1.8%/2.4% to 52.3%/52.5% due to better-than-expected gross margin this year which, we believe, is inevitable with higher than expected land price appreciation.

Maintain BUY recommendation with higher TP of Rp550. We upgrade our TP to Rp550/share as we shift our base year to 2012 and upgrade our FY11/12 net profit estimate by 1.0%/17.0%. Stronger-than-expected land appreciation, plus additional land acquired in Pasar Kemis of 227ha are the key reasons.

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