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Wednesday, December 7, 2011

Alam Sutera Tbk - Maintaing BUY

Kresna : ASRI

Investment Thesis

We maintain our BUY rating on ASRI with NAV TP of Rp550. Our positive view is underpinned by: 1) Superior profitability (margin and ROE) among others in the industry, 2) Upbeat marketing sales this year (+63.4% YoY), which will lead to robust revenue growth of 39.2% CAGR11-13, and 3) new revenue contribution from the opening of Mall @ Alam Sutera in 2Q12. Currently, the company is trading at FY12 PBV of 2.2x, the second highest in the sector after SMRA (2.6x). We believe such a multiple is justifiable given ASRI’s high asset quality as well as superior growth profile projected for 2012. This can be seen from ASRI’s FY12 PEG which only stood at 0.16x - the lowest amongst its peers in the sector. Worth to note: should rights issue plan materialize next year, our FY12 EPS forecast may decline by 9.1% to Rp43.0 while our NAV TP by 3.6% to Rp530.

Key Catalysts

Solid marketing sales growth in 10M11. The company recorded Rp198.5bn in marketing sales in Oct11. Hence, total marketing sales as of 10M11 have reached Rp2.5tr, up by 75.5% YoY. This has led the company to revise its sales target by 8.0% from Rp2.5tr to Rp2.7tr.

The premiere of Suvarna Padi. ASRI is now developing its 1,062ha undeveloped land bank in Pasar Kemis, by working on its second project: a residential complex with a golf view – named Suvarna Padi (85ha). The company has launched two initial clusters in late Oct11: Cempaka and Akasia (both of them cover 28ha area). It is reported that sales within the first week of premiere launch reached Rp89.9bn, or 45% of company’s FY11 target. With offering selling prices between Rp1.6m-Rp2.5m/sqm, gross margin may rise as high as 60.0%.

The inauguration of Mall @ Alam Sutera. The mall, which will entail a Rp500.0bn investment, has 78,000sqm gross floor area (GFA) with 68,000sqm net leasable area (NLA) and will commence operation in mid-2012. Revenue from this mall is projected to reach Rp56.4bn in 2012 and Rp126.7bn by 2013.

Rights issue: cushion amid economic uncertainty. During EGM on 25 Nov11, the company has acquired approval to carry out a non-preemptive rights issue for a maximum of 1.78bn shares, to be implemented within a 2-year period following the approval. Assuming minimum price of Rp399/share, the company may raise around Rp712.7bn in capital. However, management admitted that this is more of a precautionary measure and the least preferred alternative to initial debt financing.

Robust marketing sales lead to strong revenue growth. We forecast revenue in 2012/13 to grow by 51.3%/27.2% YoY to Rp2.1tr/Rp2.7tr, supported by strong marketing sales this year (+63.4% YoY to Rp2.6tr) and new revenue contribution from its first mall, estimated to reach Rp56.4bn/Rp126.7bn in 2012/13.

Margin to slide in 2013 – net income will continue growing rapidly. We expect company's gross margin in 2012 to stabilize around 52.4%, then declining slightly, by 0.7% to 51.7% in 2013, due to higher revenue recognition from Pasar Kemis projects, which has a relatively lower margin than Serpong. However, net income is still expected to grow robustly, by 56.5% YoY to Rp844.1bn in 2012 and 27.2% YoY to Rp1.0tr in 2013.

Rights issue scenario analysis: 1) our FY12 EPS forecast may decline by 9.1% to Rp43.0, 2) FY12 ROE will move downwards, from 24.9% to 20.9% (still the highest in the industry) and 3) our NAV TP is cut by 3.6% to Rp530, from a current Rp550.

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