Sunday, November 6, 2011

Alam Sutera Tbk - BUY recommendation with a 12-month NAV TP of Rp550

by Kresna Securities

Investment Thesis

We reiterate our BUY recommendation with a 12-month NAV TP of Rp550.

Company's performance in 9M11 was in line and has formed 73.0%-79.9% of our FY11 estimate. We upgrade our marketing sales assumption this year by 14.9% to Rp2.6tr, following impressive marketing sales of Rp2.3tr in 9M11 (+69.0% YoY), as well as additional potential Rp200.0bn windfall from Pasar Kemis. In consequence, we revise up our FY12-13F revenue by 2.9%-7.4% and net income by 3.4%-6.8%.

Key Catalysts

· Marketing sales continues showing impressive progress. As of 9M11, ASRI has marked Rp2.3tr marketing sales, surging by 69.0% YoY over the same period last year. With the potential of an additional stream from Pasar Kemis (estimated around Rp200.0bn), company's FY11 marketing sales target of Rp2.5tr is likely to be achieved with no sweat.

· 3Q11 revenue rises by 5.4% QoQ. The company recorded 3Q11 revenue growth of 5.4% QoQ to Rp317.5bn versus Rp301.3bn in 2Q11, mainly driven by strong sales of land plots, which grew by 28.8% QoQ to Rp239.8bn. Meanwhile, houses and investment property revenue recorded negative growth of 32.1% and 34.9% QoQ in 3Q11, to Rp67.0bn and Rp10.8bn, respectively.

· Surging opex and financial charges hit bottom line performance. Increasing domination of high-margin land plot sales to total sales (78.2% of revenue in 3Q11 vs 65.4% in 2Q11) has pushed the consolidated gross margin up by 1.5% QoQ to 61.5%, bringing 3Q11 gross profit to grow by 8.0% QoQ to Rp195.3bn. Nevertheless, a 54.4% QoQ surge in operating expense (opex) to Rp41.0bn (particularly from significant increase in retribution and consultant fees) dampened operating margin by 2.6% QoQ to 48.6%. The Company thus posted zero operating profit growth, recorded at Rp154.3bn in 3Q11. Adding pressure from below was a significant increase in financial charges, up by 51.5% QoQ to Rp12.4bn. As such, 3Q11 net income suffered a decline of 4.7% QoQ to Rp124.8bn from Rp131.0bn in 2Q11.

Earnings Outlook

· 9M11 results still in line. Revenue reached 73.0% of our FY11E of Rp1.4tr while gross, operating and net profit formed 79.9%, 78.8% and 76.8% of our FY11E of Rp732.9, Rp623.7bn and Rp539.2bn. Considering these figures, we prefer to maintain our FY11 estimate numbers for the moment.

· Upgrading marketing sales and net profit estimates. However, we see upside potential on our 2012 onward forecast numbers, given better-than-expected marketing sales in 9M11 (nearly 100% of our FY11E) as well as possible additional sales of Rp200.0bn from Pasar Kemis. We therefore upgrade our FY11 marketing sales projection by 14.9% to Rp2.6tr while conservatively maintaining the figure for next year at Rp2.7tr (+2.7% YoY), leading us to upgrade our FY12-13 revenue forecast by 2.9%-7.4% to Rp2.1tr-Rp2.7tr and net income by 3.4%-6.8% to Rp844.1bn-Rp1.0tr

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