Price Target : Rp375; APLN IJ
· 9M12 earnings exceeded expectation, accounting for 99%/97% of our/consensus estimates
· Strong 3Q12 earnings on GPM surge
· Forecast and TP under review
9M12 earnings outperformance. 9M12 revenue and earnings came in at Rp3.5tr (+32% y-o-y) and Rp683bn (+51%y-o-y), respectively, comprising 89%/84% and 99%/97% of our/consensus FY12F estimates. This stronger than expected result is driven by faster recognition of Green Bay Pluit and 6.3ppt YoY GPM expansion to 45.7%.
Vast 3Q12 GPM margin improvement. Despite 3Q12 revenue growing 10% y-o-y and 2% q-o-q to Rp1.2tr, earnings surged 121% y-o-y and 14% q-o-q to Rp245bn. 3Q12 GPM expanded 10.9ppts y-o-y and 11ppts q-o-q to 51.6% on recognition of better margin products and higher proportion of recurring income (17% of total revenue) that commands high GPM of 75%. Note that in 3Q12, APLN has started to recognize rental income from its acquisition of Plaza Balikpapan.
Result is pegged to project progress. APLN’s results are driven by percentage completion of its projects and most of these are high-rise developments. Although faster project progress can translates into strong earnings as in 9M12, it also means that revenue is brought forward. We are not overly concerned on FY12F earnings. Given the faster recognition, APLN will likely beat its net profit target of Rp720-730bn for FY12F. For FY13F, we would expect fast monetization from APLN’s seven acquisitions to date to make up for this faster recognition in FY12F.
Forecasts and TP under review. Given better-than-expected earnings, we are reviewing our forecasts to better reflect revenue recognition and acquistions. Share price appreciated by 4.3% following the results announcement, which could reflect the market’s easing concerns over APLN’s business sustainability especially as it has already embarked on an acquisition trail. Despite the jump in share price, valuation remains cheap at only 5.2x FY13F PE, which is at a steep discount to peers.