www.dbsvickers.com ed-SGC / sa- MA Tread carefully Good marketing sales in 1Q15, supported by carry- over from last year But there are still challenges ahead with uncertainty and noise over new government’s policy direction Rolled over valuation base to 2016, which lifted RNAV by 8-23% Remain cautious on property sector: BUY SMRA Good 1Q15 marketing sales. Aggregate marketing sales (of companies under our coverage) grew 18% y-o- y in the quarter to reach 21% of full year guidance. However, a fair share was carry-over sales from year-end launches in 2014.Therefore, 1Q15 data is not an accurate indicator of the much hoped for sharp recovery in property demand this year. Challenges ahead. There is still much uncertainty and noise over the new government’s regulatory policies, which had influenced the volatility in property stocks as investors react quickly to regulatory news. We would lean towards a cautious view as the negatives have more pull than rerating catalysts currently. The negatives include:1) possibly large increase in tax on property transactions, 2) downward pressure on margins, and 3) slower economic growth. Rolled over valuation base to 2016. We nudged up FY15F marketing sales after reflecting the latest data and launches in the pipeline. We also rolled forward valuation base to 2016, resulting in 8-23% increases RNAV estimates and changes to recommendations (downgrade BSDE and APLN; upgrade CTRA). Reiterate cautious stance: BUY SMRA. Expect 1Q15 results to deliver decent earnings, because of strong FY13 and FY14 marketing sales. We recommend exposure to landed residential and retail mall properties. SMRA offers 14% upside to our target price, supported by plans to spin-off investment properties this year. JCI : 5,435.36 Analyst Edward Tanuwijaya +6221 3003 4932 [email protected]STOCKS Source: DBS Vickers Agung Podomoro Land : APLN has been focusing on high-rise developments and prides itself as the King of Jakarta superblocks. Most of its projects are in strategic inner city locations. Alam Sutera Realty : Upscale township developer in Serpong and Pasar Kemis (west Jakarta suburb). ASRI is diversifying its revenue base with more commercial properties such as retail malls and office towers. Bumi Serpong Damai : BSDE is Indonesia's largest landed residential property developer. Its core project is developing an integrated satellite city 15km west of Jakarta. BSDE enlarged its investment property portfolio after consolidating DUTI, SMT, & SMW. Ciputra Development : Large scale residential and commercial developer in 20 major cities throughout Indonesia, with most diversified product and consumer range. Established since 1981 and has listed subsidiaries in Ciputra Surya (CTRS) and Ciputra Property (CTRP) Lippo Karawaci : LPKR's five businesses are: township, healthcare, retail mall, hospitality and portfolio management. It has listed subsidiaries in Lippo Cikarang (LPCK) and Gowa Makassar Tourism Development (GMTD), and stakes in First REIT & LMIRT (both listed in Sire) Pakuwon Jati : Mixed-use property and residential township developer with assets in Jakarta and Surabaya. PWON has balanced portfolio with a large share of recurring revenues from retail malls Summarecon Agung : SMRA is one of Indonesia's most established property developers. It has three existing township developments and several investment properties in its portfolio which generates sizeable recurring income, c.30% of revenues. DBS Group Research . Equity 24 Apr 2015 Indonesia Industry Focus Indonesia Property Sector Refer to important disclosures at the end of this report Price Mkt Cap Target Price Performance (%) Rp US$m Rp 3 mth 12 mth Rating Agung Podomoro 438 694 380 3.6 61.8 FULLY VALUED Alam Sutera Realty 670 1,018 560 11.7 22.9 FULLY VALUED Bumi Serpong 2,110 2,997 2,150 (0.9) 30.4 HOLD Ciputra 1,475 1,729 1,340 (0.7) 41.3 HOLD Lippo Karawaci 1,315 2,346 1,360 24.4 24.4 HOLD Pakuwon Jati 500 1,862 550 1.0 40.1 HOLD Summarecon 1,930 2,153 2,200 13.3 76.2 BUY
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www.dbsvickers.com
ed-SGC / sa- MA
Tread carefully Good marketing sales in 1Q15, supported by carry-
over from last year
But there are still challenges ahead with uncertainty and noise over new government’s policy direction
Rolled over valuation base to 2016, which lifted RNAV by 8-23%
Remain cautious on property sector: BUY SMRA
Good 1Q15 marketing sales. Aggregate marketing sales (of companies under our coverage) grew 18% y-o-y in the quarter to reach 21% of full year guidance. However, a fair share was carry-over sales from year-end launches in 2014.Therefore, 1Q15 data is not an accurate indicator of the much hoped for sharp recovery in property demand this year.
Challenges ahead. There is still much uncertainty and noise over the new government’s regulatory policies, which had influenced the volatility in property stocks as investors react quickly to regulatory news. We would lean towards a cautious view as the negatives have more pull than rerating catalysts currently. The negatives include:1) possibly large increase in tax on property transactions, 2) downward pressure on margins, and 3) slower economic growth.
Rolled over valuation base to 2016. We nudged up FY15F marketing sales after reflecting the latest data and launches in the pipeline. We also rolled forward valuation base to 2016, resulting in 8-23% increases RNAV estimates and changes to recommendations (downgrade BSDE and APLN; upgrade CTRA).
Reiterate cautious stance: BUY SMRA. Expect 1Q15 results to deliver decent earnings, because of strong FY13 and FY14 marketing sales. We recommend exposure to landed residential and retail mall properties. SMRA offers 14% upside to our target price, supported by plans to spin-off investment properties this year.
Source: DBS Vickers Agung Podomoro Land : APLN has been focusing on high-rise developments and prides itself as the King of Jakarta superblocks. Most of its projects are in strategic inner city locations.
Alam Sutera Realty : Upscale township developer in Serpong and Pasar Kemis (west Jakarta suburb). ASRI is diversifying its revenue base with more commercial properties such as retail malls and office towers.
Bumi Serpong Damai : BSDE is Indonesia's largest landed residential property developer. Its core project is developing an integrated satellite city 15km west of Jakarta. BSDE enlarged its investment property portfolio after consolidating DUTI, SMT, & SMW.
Ciputra Development : Large scale residential and commercial developer in 20 major cities throughout Indonesia, with most diversified product and consumer range. Established since 1981 and has listed subsidiaries in Ciputra Surya (CTRS) and Ciputra Property (CTRP)
Lippo Karawaci : LPKR's five businesses are: township, healthcare, retail mall, hospitality and portfolio management. It has listed subsidiaries in Lippo Cikarang (LPCK) and Gowa Makassar Tourism Development (GMTD), and stakes in First REIT & LMIRT (both listed in Sire)
Pakuwon Jati : Mixed-use property and residential township developer with assets in Jakarta and Surabaya. PWON has balanced portfolio with a large share of recurring revenues from retail malls
Summarecon Agung : SMRA is one of Indonesia's most established property developers. It has three existing township developments and several investment properties in its portfolio which generates sizeable recurring income, c.30% of revenues.
DBS Group Research . Equity 24 Apr 2015
Indonesia Industry Focus
Indonesia Property Sector
Refer to important disclosures at the end of this report
Price Mkt Cap Target Price Performance (%)
Rp US$m Rp 3 mth 12 mth Rating
Agung Podomoro 438 694 380 3.6 61.8 FULLY VALUED Alam Sutera Realty 670 1,018 560 11.7 22.9 FULLY VALUED Bumi Serpong 2,110 2,997 2,150 (0.9) 30.4 HOLD Ciputra 1,475 1,729 1,340 (0.7) 41.3 HOLD Lippo Karawaci 1,315 2,346 1,360 24.4 24.4 HOLD Pakuwon Jati 500 1,862 550 1.0 40.1 HOLD Summarecon 1,930 2,153 2,200 13.3 76.2 BUY
Industry Focus
Indonesia Property Sector
Page 2
Good 1Q15 marketing sales supported by carry-over sales
Aggregate 1Q15 marketing sales grew by 18% y-o-y to reach 21% of full year guidance. But that is not an accurate indicator of a recovery in marketing sales this year as about 45% of the marketing sales were carry-overs from year-end launches last year. Aggregate marketing sales (YTD and forecast)
11,425 13,154
21,510
31,441
38,880 38,339
9,363
32,517
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2009 2010 2011 2012 2013 2014 2015F
Marketing sales achieved
DBS forecasted marketing sales (after 1Q15)
Rpbn
+35% CAGR
flattish
Source: DBS Vickers, Companies We estimate marketing sales will grow by 9% this year. Rising land prices and new projects in the pipeline will offset the impact of fewer pre-sold units at existing projects. 31% of FY15F marketing sales will come from new projects.
31% of FY15F marketing sales are from new projects
31%
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
2010 2011 2012 2013 2014 2015F
Existing projects New projectsRpbn
Source: DBS Vickers, Companies Property stocks have performed well YTD
14%
53%
96%
35%
50%
81%
24%
104%
34% 33%
26% 23%
19% 16%
5%
-3%-10%
10%
30%
50%
70%
90%
110%
LPKR APLN SMRA ASRI BSDE CTRA JCI Index PWON
2014 YTD-2015
Source: DBS Vickers, Bloomberg Finance L.P
1Q15 marketing sales achievement by developer
Developer
Marketing sales 1Q15 (Rpbn)
Marketing sales 1Q14 (Rpbn)
y-o-y (%)
1Q15 achievement
(as % of FY15
company guidance)
1Q15 achievement
(as % of DBS FY15 forecast)
FY15 marketing
sales guidance
(Rpbn)
DBS FY15F
marketing sales
(Rpbn)
DBS FY15F forecast
implied y-o-y growth (%)
Marketing sales FY14
(Rpbn)
Difference between our estimate to company guidance
Challenges remain ahead – regulatory and operationally
The volatility in property stocks this year is caused by two forces at play currently. There is much uncertainity over the direction of the property market as well as the new government’s policy direction. The following chart shows property stocks reaction to bits and pieces of news. JAKPROP index – strong reaction to regulatory news
7.25
7.5
7.75
8
95
100
105
110
115
Jan-15 Feb-15 Mar-15 Apr-15
JCI Index (LHS) JAKPROP Index (LHS) BI Rate (RHS)
%
News on potential
additional tax
News on bank
promotional rate
BI rate cut
(25bps)
Another news
on additional tax
News on potential
relaxation of Loan-to-Value(LTV) regulation
Developers indicating
good 1Q15 marketing sales
News on suspension
of North Jakarta reclamation project
(affecting few developers)
Source: DBS Vickers, Bloomberg Finance L.P. Note: JAKPROP Index is weighted index for stocks involved in property, real estate and construction sectors. We have been leaning towards a cautious view on the sector this year as we think the de-rating factors have more pull than the re-rating factors. Case for de-rating of property sector: Possibly higher tax on property transactions. The central
government’s revised 2015 budget assumes total tax revenue of Rp1,489tr (85% of total revenue, and represent 30% increase over 2014). As taxes from oil & gas activities are expected to drop by 42% y-o-y, the government has to target other sectors, like property, to compensate for the “overly optimistic” revenue target.
There may be two changes to the current property tax regulations: 1) changes to luxury tax criteria (from size to transaction value), and 2) reducing the transaction value that is subjected to additional 5% income tax.
Possible changes to property regulations
No Regulation Reference Remarks
1
Potential additional 5% income tax for property sales above Rp2bn
Income Tax article 22 - Ministry of
Finance Decree No. 253/PMK.03/2008
Currently applies to:- Landed residential (value > Rp10bn and/or are >500sqm) - High-rise residential units (value > Rp10bn and/or area >400sqm)
2
Potential changes in property luxury tax criteria (to Rp2bn threshold, instead of property size)
Ministry of Finance decree no.
121/PMK.011/2013
Currently applies to: - Apartment & townhouse (Building area more than150sqm)- Landed residential (Building area more than 350sqm)
Source: Ministry of Finance, DBS Vickers
After analyzing FY15F marketing sales of developers under our coverage, we found SMRA would be least affected - if the changes materialise - because only 43% of its launches this year would be priced at more than Rp2bn (US$170k) per unit. Also, there is a possibility of slower demand if the tax regulations are changed. Our analysis showed PWON would be the least likely to miss our estimated earnings for this year because 49% of its revenue is recurring (mostly form retail malls), the highest among developers in our coverage.
Earnings sensitivity to 10% miss in FY15F marketing sales
-2.8%-2.5% -2.5%
-0.8%
-2.4%-1.9%
-0.8%
-9.1%
-6.7%
-5.6%
-4.5% -4.4%
-3.7%
-3.0%
-10%
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
APLN ASRI SMRA CTRA BSDE LPKR PWON
FY15F FY16F
Source: DBS Vickers Further cost pressure. The government’s recent proposal to
gradually stop selling subsidised fuel (RON 88) and replace it with RON90 fuel (called Pertalite) under a floating price mechanism will have some impact on construction costs. Understating fuel and material costs, especially for large scale or high-rise projects and/or projects with longer completion periods, which require larger quantities of building materials (especially those priced in USD or require more complex engineering), could pressure margins.
A slower economy could result in slower property demand. It is a good bet to expect land prices and building construction costs to increase by an average of 10-15% this year as developers have reasonably strong holding power to wait for prices to meet their expectations, and hence, would continue to register respectable margins. However, the high property price to income ratio (affordability indicator) could discourage property purchases and reduce spreads between capital gains (in %) and deposit rates.
Weaker affordability: Housing price to income ratio has
been rising
0
2
4
6
8
10
12
14
16
18
2009 2010 2011 2012 2013 2014
x
Source: Numbeo
Property price growth to deposit rate ratio
3.2
2.0
1.4
4.1
8.2
8.7
1.8
0
1
2
3
4
5
6
7
8
9
10
2008 2009 2010 2011 2012 2013 2014
x
Source: DBS Vickers High foreign shareholding in developer stocks. Perception
of weak Indonesian macro economic condition could trigger a de-rating of property stocks which are high-beta in nature, have smaller caps, and have registered relatively good returns YTD.
Foreign ownership trend (as % of free float)
60.4%
69.2%
60.8%
65.9%
64.3%
48.1%
33.6%
30%
35%
40%
45%
50%
55%
60%
65%
70%
Jan-14 Apr-14 Jul-14 Oct-14 Jan-15
BSDE LPKR PWON SMRA CTRA ASRI APLN Source: Indonesia Central Securities Depository (KSEI), Bloomber Finance L.P, DBS Vickers
Industry Focus
Indonesia Property Sector
Page 5
Case for further re-rating of property sector:
Indonesia’s large banks have started to reduce mortgage rates to boost mortgage lending this year. Bank Central Asia (BBCA), which has been conservative with mortgage lending last year, led the pack at the end of 1Q15 by offering 5-year fixed rate (less than 9%) loans, and other large banks have followed since.
The Financial Services Authority (OJK) plans to discuss with Bank Indonesia to relax the Loan-to-Value (LTV) regulation for mortgage loans specified in BI’s circular no. 15/40/DKMP (effective 30Sep2013). This regulation had frozen the property market for a few months after implementation (mortgage portion had hit a 4-year lows of ~20% in early 2014). A relaxation would benefit developers which focus on landed residential development, where about 40% of buyers take a mortgage to finance property purchases.
Source: Bank Indonesia (BI), DBS Vickers There have been media reports on the potential
easing of foreign ownership rules in Indonesia. This would have an immediate implication on the broader buyer base for luxury high-rise apartment units, which would benefit/support developers with “premium” priced apartments in their development portfolios. We are not so optimistic of this happening soon because it will be a long and arduous process (i.e. “battle” in parliament) to change Indonesia’s Agraria Law no.5/1960, which covers basic rights to own property.
Reiterate cautious stance on property sector: BUY SMRA
The property sector is currently trading at 31% discount to RNAV, narrower than its 4-year average of 40%. Valuation is also reach at more than +1SD of mean forward PE, compared to the JCI Index which is trading at lower than +1SD of mean forward PE. We expect developers to deliver decent earnings growth in 1Q15, supported by relatively strong FY13 and FY14 marketing sales. Property sector PE band
Source: DBS Vickers, Bloomberg Finance L.P Developers: declining return on average equity (ROAE)
0%
10%
20%
30%
40%
50%
60%
APLN CTRA ASRI LPKR SMRA BSDE PWON
2013 2014 FY15F
Source: DBS Vickers, Bloomberg Finance L.P As explained in our sector report dated 2Dec2014, titled When the going gets tough, we favour developers with good exposure to landed residential and retail mall properties, and which offer decent returns at current price levels. The only BUY recommendation in the sector is SMRA for 14% upside and potential rerating driven by plans to spin-off investment properties at the end of this year.
Rolled over valuation base to 2016
After reflecting the latest marketing sales data, launches in the pipeline, and our cautious view on the property sector, we adjusted marketing sales for all developers in our coverage. We also rolled forward our valuation base to 2016, resulting in a 8 - 23% increase in RNAV estimates. The changes to RNAV estimates, recommendations and TPs are summarised in the following tables on the right side of this page. The changes also led to revisions to FY15/16F revenues and net earnings (refer to changes in APPENDIX). Summary of changes to RNAV and assumptions
Company Previous RNAV
New RNAV
Key assumption
WACC Beta Equity portion
Debt portion
APLN 681 751 12.9% 1.2 62% 38%
ASRI 829 938 13.8% 1.4 60% 40%
BSDE 3,234 3,494 13.4% 1.2 75% 25%
CTRA 1,620 1,890 13.5% 1.3 65% 35%
LPKR 1,613 1,867 12.8% 1.2 60% 40%
PWON 600 619 13.5% 1.2 70% 30%
SMRA 2,543 3,134 13.4% 1.3 62.5% 37.5%
Source: DBS Vickers Assumptions to derive TP
Company
4-years average
discount to RNAV
Forecasted recurring revenue portion
Discountto RNAV to derive
TP
New TP
APLN 62% 29% 44.0% 380
ASRI 41% 7% 38.6% 560
BSDE 49% 9% 44.4% 2,150
CTRA 34% 16% 28.5% 1,340
LPKR 36% 25% 26.7% 1,360
PWON 19% 49% 9.9% 550
SMRA 37% 20% 29.9% 2,200
Source: DBS Vickers (* exclude healthcare portion) Summary of changes to TP and recommendation
Company New TP Previous TP Changes New Rec Previous Rec
1 Potential additional 5% income tax on property sales above Rp2bn
Income Tax article 22 -Ministry of Finance Decree No. 253/PMK.03/2008
31/12/2008 Waiting for new tax regulations. Currently applies to:- Landed residential (value > Rp10bn and/or area >500sqm) - High-rise residential units (value > Rp10bn and/or area >400sqm)
2 Potential changes in property luxury tax criteria (to Rp2bn threshold, instead of property size)
Ministry of Finance decree no. 121/PMK.011/2013
26/08/2013 Waiting for new tax regulations. Currently applies to:- Apartment & townhouse (area >150sqm) - Landed residential (area > 350sqm)
3 Implementation of balance ratio in housing development
Permenpera no.7/2013 & no.10/2012
30/10/2013 &
30/05/2012
- 1(luxury):2(middle):3(low cost) ratio for landed residential development - High-rise developer to build public housing (min. 20% of total area of each high-rise project)
4 Multi-storey building regulation in Jakarta province
Perda Jakarta no.4/1975 06/20/1975 Related to landplot ratio in Jakarta (ongoing changes expected)
5 Negative investment list (DNI) Presidential decree no. 39/2014
23/04/2014 List of restricted sectors for foreign investment
6 Max. 70% LTV for mortgage BI Circular No. 14/10/DPNP 03/15/2012 Impact dwindling with availability of developers' in-house financing
7 Refinement of LTV regulation above BI Circular No. 15/40/DKMP
09/24/2013 Impact dwindling with availability of developers' in-house financing
8 Restriction on fund disbursement by banks to property developers
BI Circular No. 15/40/DKMP
09/24/2013 Property developers have agreed with lenders on cash disbursement
9 Enforcement of Right-to-Use (HGB) land ownership limit
- - Proposal – unlikely to be strictly implemented
10 At least 80% of goods must be local products in retail malls and modern retailers. (Two-year window to comply)
Permendag no. 70/M-DAG/PER/12/2013 -
Unlikely to be implemented strictly Relaxation or exemption under certain conditions
FULLY VALUED Rp438 JCI : 5,435.36 (Downgrade from HOLD) Price Target :12-Month Rp380 (Prev Rp345) Reason for Report : Indonesia property sector report Potential Catalyst: Execution of North Jakarta reclamation projects Where we differ: The only negative call for the counter Analyst Edward Tanuwijaya+6221 3003 4932 [email protected]
Price Relative
Forecasts and Valuation FY Dec (Rpbn) 2013A 2014A 2015F 2016F Turnover 4,901 5,297 5,983 7,752 EBITDA 1,728 1,944 2,050 2,971 Pre-tax Profit 1,177 1,230 1,307 2,102 Net Profit 851 856 753 1,099 Net Pft (Pre Ex.) 851 856 753 1,099 EPS (Rp) 42 42 37 54 EPS Pre Ex. (Rp) 42 42 37 54 EPS Gth (%) 5 1 (12) 46 EPS Gth Pre Ex (%) 5 1 (12) 46 Diluted EPS (Rp) 42 42 37 54 Net DPS (Rp) 6 6 6 6 BV Per Share (Rp) 281 314 345 393 PE (X) 10.5 10.5 11.9 8.2 PE Pre Ex. (X) 10.5 10.5 11.9 8.2 P/Cash Flow (X) nm nm 99.1 10.2 EV/EBITDA (X) 7.4 6.8 8.0 5.9 Net Div Yield (%) 1.4 1.4 1.4 1.3 P/Book Value (X) 1.6 1.4 1.3 1.1 Net Debt/Equity (X) 0.3 0.3 0.5 0.5 ROAE (%) 15.8 14.0 11.1 14.5 Earnings Rev (%): (10) (8) Consensus EPS (Rp): 48 59 No. of brokers following: B: 5 S: 1 H: 2 ICB Industry : Real Estate ICB Sector: Real Estate Investment & Services Principal Business:APLN has been focusing on high-rise developments and prides itself as the King of Jakarta superblocks. Most of its projects are in strategic inner city locations.
Source of all data: Company, DBS Vickers, Bloomberg Finance L.P
At A Glance Issued Capital (m shrs) 20,501 Mkt. Cap (Rpbn/US$m) 8,979 / 694 Major Shareholders Indofica (%) 47.3 Jaya Lestari Persada (%) 14.7 Simfoni Gema Lestari (%) 5.1 Free Float (%) 29.9 Avg. Daily Vol.(‘000) 32,353
DBS Group Research . Equity 24 Apr 2015
Indonesia Company Focus
Agung Podomoro Land Bloomberg: APLN IJ EQUITY | Reuters: APLN.JK Refer to important disclosures at the end of this report
To dredge or not to dredge
1Q15 marketing sales reached 14% of full year guidance, and 18% of our forecast
Uncertainty over North Jakarta reclamation project
Downgrade to FULLY VALUED with Rp380 TP
Fair 1Q15 marketing sales. APLN booked Rp940bn marketing sales in 1Q15, down 49% y-o-y. That is 14% of full year guidance of Rp6.5tr (+8% y-o-y; c.30% higher than our full year forecast). Uncertainty over North Jakarta reclamation project. On 13April, several news reports, quoting the Maritime Affairs and Fisheries Ministry (KKP)’s director general for marine, coastal and small island affairs Sudirman Saad, said the central government has agreed to halt the North Jakarta reclamation project for further evaluation. Saad also questioned the Jakarta governor’s decision to issue a decree which allowed developer PT. Muara Wisesa Samudra (subsidiary of APLN) to build Pluit City, part of a man-made islet in the area. This suggests downside risk for developers with reclamation projects in their portfolio. Indicatively, APLN has registered Rp4.5tr in marketing sales for this project, and is currently waiting for urban planning approval from the Jakarta government before proceeding with the reclamation projects. Downgrade to FULLY VALUED with Rp380 TP. We added Pluit City – Island G project in our forecasts and rolled forward our RNAV estimate to 2016, RNAV resulting in Rp751/sh,which is 11% higher than the previous estimate. We applied 49% discount to RNAV (no change from previous assumption) to arrive at Rp380 TP.
52
72
92
112
132
152
172
192
212
186.3
236.3
286.3
336.3
386.3
436.3
486.3
536.3
Apr-11 Apr-12 Apr-13 Apr-14 Apr-15
Relative IndexRp
Agung Podomoro Land (LHS) Relative JCI INDEX (RHS)
Industry Focus
Agung Podomoro Land
Page
APLN: Trading at 1SD of mean forward PE
Source: DBS Vickers, Bloomberg Finance L.P
APLN: discount to RNAV trend
Source: DBS Vickers, Bloomberg Finance L.P
APLN: marketing sales (YTD and forecast)
Source: Company, DBS Vickers
APLN: RNAV summary
APLN portfolio Stake
owned Valuation
(Rpbn) RNAV
Investment Properties Central Park Mall 100% 2,568 2,568 Pocy Extension 100% 818 818 Senayan City Mall 26% 2,482 633 SCTV Tower - Senayan City 26% 332 85 Panin Tower - Senayan City 26% 239 61 Kuningan City Mall 60% 1,248 749 AXA Tower - Kuningan City 60% 635 381 Green Bay Pluit Mall 100% 760 758 SoHo@MT Haryono 100% 68 68 Festival City Link Bandung 59% 576 339 Emporium Pluit Mall 53% 1,725 910 Lindeteves Trade Center 35% 99 35 Mal Plaza Balikpapan 65% 1,674 1,088 Pullman Hotel, Central Park 100% 852 852 Harris Hotel - Festival Citylink 59% 178 105 Sofitel, Nusa Dua, Bali 75% 1,925 1,444 Amaris Hotel - Thamrin City 100% 130 130 POP Hotel - Festival City Link 59% 166 98 Senayan City Apartments 26% 17 4 BnB Hotel, Kelapa Gading 51% 180 92 Mercure, Kelapa Gading 100% 284 284 Pullman Bandung 85% 424 360 IBIS Bandung 85% 406 345 Indigo Hotel Bali 51% 884 451 Pullman Vimala Hills 100% 677 677
Investment Properties Total Surplus/(Deficit) - 1 13,334
Property Developments Green Bay Coast View 100% 0 0 Green Bay Sea View 100% 117 116 Green Bay Bay View 100% 0 0 Green Bay Kiosk 100% 0 0 Green Lake Sunter -A t t
100% 0 0 Green Permata 70% 3 2 Grand Taruma - Karawang 90% 245 220 Central Park - Office 100% 0 0 Metro Park Residence 80% 70 56 Vimala Hills. Gadog 100% 576 575 SOHO@Pocy 100% 486 486 Madison Park 100% 165 165 SOHO@MT Haryono 100% 400 400 Garden Shopping Arcade 2 100% 0 0 Simprug (Pakubuwono R id )
60% 821 492 Balikpapan 65% 340 221 Plaza Kenari Mas 50% 541 271 Makassar 51% 362 185 Batam 80% 574 459 Deli Medan 58% 1,584 919 HarcoGlodok 69% 1,136 784 Klender 85% 359 305 Pluit City - island "G" 100% 2,018 2,018
Total PV of future development profits - 2 7,675
FY15F Net Cash (Debt) - Rpbn 3
-5,614
RNAV (1+2+3) 15,395 Fully Diluted Share base (bn) 21 RNAV per share (Rp) 751
APLN has been focusing on high-rise developments and prides itself as the King of Jakarta superblocks. Most of its projects are located in strategic inner city locations.
Quick turnover business model Business continuity depends on the successful acquisition
of new projects.
Valuation Risks
We downgrade APLN to FULLY VALUED as there is risk of the reclamation project being suspended. Our TP of Rp380 is based on 49% discount to our RNAV. APLN is currently trading at 43% discount to RNAV (narrower than its 4-year average of 62%) and 11.6x FY15F PE (+1SD of mean forward PE).
Potential additional tax and stricter regulations for property sector Increasingly difficult to find strategic acquisition targets.
Business continuity depends on successful project acquisition, especially in Greater Jakarta where residential landbank is diminishing. Hence, margins may not be sustainable.
Additional tax (and revision of existing tax regulations) on property could surpress demand.
Stricter regulations for high-rise developments. Plot ratio approval and balanced ratio rules, when strictly implemented, could potentially slow property demand. Liquidity tightening could slow demand further.
Potential interest rate hike. Property demand is sensitive to and is negatively correlated to interest rate movements
Capital intensive projects require large funding. High-rise and retail mall developments require large upfront capital. Cost of external financing has to be kept in check
Source: DBS Vickers
Page 15
Company Focus
Agung Podomoro Land
Segmental Breakdown FY Dec 2012A 2013A 2014A 2015F 2016F
Note : Share price and Target price are adjusted for corporate actions.
1
2
3
4
5
6
7
89
249
299
349
399
449
Apr-14 Aug-14 Dec-14 Apr-15
Rp
www.dbsvickers.com ed: SGC / sa: MA
FULLY VALUED Rp670 JCI : 5,435.36 Price Target : 12-Month Rp 560 (Prev Rp490) Reason for Report : Part of Indonesia property sector report Potential Catalyst: Better demand for Pasar Kemis township Where we differ: One of few negative calls Analyst Edward Tanuwijaya +6221 3003 4932 [email protected]
ICB Industry : Real Estate ICB Sector: Real Estate Investment & Services Principal Business: Upscale township developer in Serpong and Pasar Kemis (west Jakarta suburb). ASRI is diversifying its revenue base with more commercial properties such as retail malls and office towers.
Source of all data: Company, DBS Vickers, Bloomberg Finance L.P
At A Glance
Issued Capital (m shrs) 19,649Mkt. Cap (Rpbn/US$m) 13,165 / 1,018Major Shareholders Tangerang Fajar (%) 16.7 Manunggal Prime Develop. (%) 11.9 Selaras Citamanunggal (%) 11.4Free Float (%) 50.1Avg. Daily Vol.(‘000) 113,922
DBS Group Research . Equity 24 Apr 2015
Indonesia Company Focus
Alam Sutera Realty Bloomberg: ASRI IJ EQUITY | Reuters: ASRI.JK Refer to important disclosures at the end of this report
Shedding debt burden 1Q15 marketing sales at 10% of full year
guidance
Sharp reduction in USD bonds, as expected
Maintain FULLY VALUED call with Rp560 TP Serpong commercial land sales remain top contributor. ASRI booked Rp568bn marketing sales 1Q15, down 33% y-o-y. Commercial land sales in Serpong (Rp315bn) remained the largest contributor at 55% of revenues, the rest were from the launch of Pasar Kemis (PK) residential cluster (Andara & Bahana) at end February. Nudged up FY15F marketing sales. ASRI achieved only 85% of its marketing sales target in FY14, but some of the shortfall (c.Rp750bn) will be captured this year, Hence, we revised up FY15F marketing sales by 4% to Rp5.1tr, representing 21% growth y-o-y but still 11% below guidance. These lifted our FY15/16F earnings by 7%/3%. Shaved off US$150m bonds in April. ASRI has called the remaining US$83.4m of its US$150m bond series (issued on 27 Mar 2012 at 10.75% coupon rate) at c.105% of the face value. This is within our expectation. That would reduce US$ bonds on its balance sheet to US$460m (comprising two series of bonds that will mature in 2019 and 2020) and net gearing to a more acceptable c.50% (from 87% in Dec 2014). Maintain FULLY VALUED, raised TP to Rp560. We rolled forward our RNAV base to 2016 which led to Rp938/sh, 13% higher than our previous estimate. Our TP is based on 40% discount to RNAV (no change), which is Rp560. Exposure to USD debt remains a key risk for ASRI as the IDR continues to weaken.
90
140
190
240
290
340
256.5
356.5
456.5
556.5
656.5
756.5
856.5
956.5
1,056.5
1,156.5
Apr-11 Apr-12 Apr-13 Apr-14 Apr-15
Relative IndexRp
Alam Sutera Realty (LHS) Relative JCI INDEX (RHS)
Industry Focus
Alam Sutera Realty
Page 19
ASRI: Trading at below average mean forward PE
Source: DBS Vickers, Bloomberg Finance L.P.
ASRI: discount to RNAV trend
Source: DBS Vickers, Bloomberg Finance L.P.
Non-Serpong projects to contribute more to marketing
sales
Source: Company, DBS Vickers ASRI: marketing sales (YTD and forecast)
Upscale township developer in Serpong and Pasar Kemis (west Jakarta suburb). ASRI is diversifying its revenue base with more commercial properties such as retail malls and office towers.
Potential from new township and projects Rapid growth of new township frontier. New township
Pasar Kemis (c.17km from its existing Serpong township in West Jakarta) will be a key growth driver going forward following the successful launch on 15 Sep 2013.
More commercial properties will lift land value. ASRI focuses on selling commercial land in the existing and maturing Serpong development to increase its land value.
Potential value from Bali cultural park development. The master plan for Garuda Wisnu Kencana (GWK) is still under development. There is potential upside from ~30ha area surrounding the cultural park.
Valuation Risks
We maintain our FULLY VALUED recommendation for ASRI. Exposure to USD debt remains a key risk for ASRI given the weak IDR. Our TP of Rp560 is based on a 40% discount to RNAV. ASRI is currently trading at 33% discount to RNAV (narrower than its 4-year average of 42%) and 9.2x FY15F PE (below average mean forward PE).
Potential additional tax, stricter regulations for property sector, and exposure to USD debt Additional tax (and revision of existing tax regulations) on
property could surpress demand. Stricter regulations for high-rise developments. Plot ratio
approval and balanced ratio rules, when strictly implemented, could potentially slow property demand. Liquidity tightening could slow demand further.
Potential interest rate hike. Property demand is sensitive to and is negatively correlated to interest rate movements.
Exposure to USD debt. A weaker IDR would raise hedging cost for ASRI’s USD global bonds which will mature in 4-6 years.
Recurring contribution will remain small at ~6% of total revenue.
Source: DBS Vickers
Page 21
Company Focus
Alam Sutera Realty
Segmental Breakdown FY Dec 2012A 2013A 2014A 2015F 2016F
Note : Share price and Target price are adjusted for corporate actions.
1
2
3
4
5
6
7
8
9
412
462
512
562
612
662
712
Apr-14 Aug-14 Dec-14 Apr-15
Rp
www.dbsvickers.com ed: SGC / sa: MA
HOLD Rp2,110 JCI : 5,435.36 (Downgrade from BUY) Price Target : 12-Month Rp 2,150 (Prev Rp 1,950) Reason for Report : Part of Indonesia property sector report Potential Catalyst: Venturing outside Greater Jakarta Where we differ: We are one of two neutral calls for the counter Analyst Edward Tanuwijaya +6221 3003 4932 [email protected]
ICB Industry : Real Estate ICB Sector: Real Estate Investment & Services Principal Business: BSDE is Indonesia's largest landed residential property developer. Its core project is developing an integrated satellite city 15km west of Jakarta. BSDE enlarged its investment property portfolio after consolidating DUTI, SMT, & SMW.
Source of all data: Company, DBS Vickers, Bloomberg Finance L.P
At A Glance
Issued Capital (m shrs) 18,372Mkt. Cap (Rpbn/US$m) 38,765 / 2,997Major Shareholders Paraga Artamida (%) 25.3 Ekacentra Usahamaju (%) 25.2 Warner Invest. Bhd (%) 10.2Free Float (%) 26.1Avg. Daily Vol.(‘000) 35,258
DBS Group Research . Equity 24 Apr 2015
Indonesia Company Focus
Bumi Serpong Damai Bloomberg: BSDE IJ EQUITY | Reuters: BSDE.JK Refer to important disclosures at the end of this report
Gearing for acquisition 1Q15 marketing sales at 30% of full year
guidance
Imminent USD bond issuance will lift net gearing, indicates potential acquisition
Downgrade to HOLD with Rp2,150 TP
Strong 1Q15 marketing sales. BSDE booked Rp2.2tr marketing sales in 1Q15, up 27% y-o-y, to reach 30% of full year guidance of Rp7.5tr. Landed residential property, primarily clusters in flagship township BSD City (Regentown & Vanya Park) was the major contributor at 81%. A fair share of 1Q15 marketing sales was carried over from year-end launches last year and inventories sales.
USD bond issuance imminent. Fitch and Moody issued BB- and Ba3 ratings for BSDE on 15 April. Bloomberg news reported that BSDE might issue up to US$250m of 5NC3 bonds at 6.75% coupon rate in the near term. The proceeds will be utilised for expansion and to acquire landbank. This bond is expected to lift net gearing to 7% (from 3% at end 2014).
Slight adjustment to FY15F marketing sales & earnings. Reflecting the FY14 result, latest marketing sales data, we revised up our FY15F marketing sales assumption by 3% to Rp7tr (up 7% y-o-y but 7% below company guidance). However, our FY15/16F earnings estimates were reduced by 3%/3% considering the additional interest expense from above US$ bond issuance, and hence our estimates were c.15% below consensus expectations.
Downgrade to HOLD with Rp2,150 TP, given recent rally (+16% YTD). We rolled forward our RNAV estimate to 2016, resulting in Rp3,494/sh; a 8% increase from previous estimate of Rp3,234/sh. We applied 38.6% discount to RNAV (no change from previous assumption) to arrive at Rp2,150 TP. Potential exposure to USD debt will add to BSDE’s risk in this current weakening IDR to USD.
80
100
120
140
160
180
200
220
666.0
866.0
1,066.0
1,266.0
1,466.0
1,666.0
1,866.0
2,066.0
2,266.0
Apr-11 Apr-12 Apr-13 Apr-14 Apr-15
Relative IndexRp
Bumi Serpong Damai (LHS) Relative JCI INDEX (RHS)
Page 25
Company Focus
Bumi Serpong Damai
BSDE: Trading at average of mean forward PE
Source: DBS Vickers, Bloomberg Finance L.P
BSDE: discount to RNAV trend
Source: DBS Vickers, Bloomberg Finance L.P
BSDE: marketing sales (YTD and forecast)
Source: Company, DBS Vickers. Note: Marketing sales in 2013 exclude Rp1.9tr land sales to JVs (HK Land and AEON mall and marketing sales in 2014 exclude the land sales to JV.
BSDE: RNAV summary
BSDE portfolio Stake owned
Landbank area (ha)
RNAV
Investment properties
Wisma BII Jakarta, Surabaya, Medan 60% 646
Plaza BII Tower II & III Jakarta 63% 1,531
Le Grandeur Mangga Dua 85% 549
Le Grandeur Balikpapan 85% 179
DP Semarang Mall 100% 268
Rasuna Epicentrum Walk 100% 297
Stakes in Plaza Indonesia 34% 5,133
Commercial (ITCs) 89% 2,186
Investment & Commercial Properties Total Surplus/(Deficit) (Rpbn) - 1
10,521
Planned development
BSD City 100% 1,750 30,213
Grand Wisata, Bekasi 46% 580 500
Legenda Wisata, Cibubur 85% 15 14
Kota Bunga, Cipanas 85% 16 5
Banjar Wijaya, Tangerang 89% 40 319 Taman Permana Buana, West Jakarta
BSDE is Indonesia's largest landed residential property developer. Its core project is developing an integrated satellite city 15km west of Jakarta. BSDE enlarged its investment property portfolio after consolidating DUTI, SMT, & SMW.
Focus on developing area and potential value of new projects outside Greater Jakarta Value concentrated in BSD City development. This
development accounts for c.90% of BSDE's valuation and has a landbank of 3,424ha.
Unlocking value through new projects outside Greater Jakarta.
Valuation Risks
We downgrade BSDE to HOLD on valuation and potential exposure to USD (through planned bond issue) amid the weak IDR environment. Our TP of Rp2,100 is based on 38% discount to our RNAV. The target valuation discount is below its 4-year average of 48%. The stock is also relatively expensive at 18x FY15F PE (+1SD of mean forward PE).
Potential additional tax and stricter regulations for property sector Additional tax (and revision of existing tax regulations) on
property could surpress demand. Stricter regulations for high-rise developments. Plot ratio
approval and balanced ratio rules, when strictly implemented, could potentially slow property demand. Liquidity tightening could slow demand further.
Potential interest rate hike. Property demand is sensitive to and is negatively correlated to interest rate movements
Potential exposure to USD debt with the planned bond issuance is a risk amid the weak IDR environment
Source: DBS Vickers
Page 27
Company Focus
Bumi Serpong Damai
Segmental Breakdown FY Dec 2012A 2013A 2014A 2015F 2016F
Revenues (Rp bn) Land, house, 2,996 4,903 4,265 6,358 6,795 Land and strata title 12 1 356 0 0 Rental 365 461 581 217 233 Hotel 129 121 102 119 125 Service charge 77 92 102 108 113 Others 147 163 165 173 182Total 3,728 5,741 5,572 6,974 7,448Gross Profit (Rp bn) Land, house, 1,729 3,413 3,145 4,132 4,417 Land and strata title 6 1 146 0 0 Rental 331 419 510 190 205 Hotel 90 78 64 74 78 Service charge 77 92 102 108 113 Others 147 163 165 173 182Total 2,381 4,166 4,132 4,677 4,994Gross Profit Margins Land, house, 57.7 69.6 73.7 65.0 65.0 Land and strata title 53.9 81.7 40.9 N/A N/A Rental 90.6 90.9 87.7 87.7 87.7 Hotel 69.6 64.5 62.1 62.1 62.1 Service charge 100.0 100.0 100.0 100.0 100.0 Others 100.0 100.0 100.0 100.0 100.0Total 63.9 72.6 74.1 67.1 67.0 Income Statement (Rp bn)
Note : Share price and Target price are adjusted for corporate actions.
12 3
4
5
6
7
8
9
1363
1463
1563
1663
1763
1863
1963
2063
2163
2263
Apr-14 Aug-14 Dec-14 Apr-15
Rp
www.dbsvickers.com ed: SGC / sa: MA
HOLD Rp1,475JCI : 5,435.36 (Upgrade from FULLY VALUED) Price Target :12-MonthRp1,340 (PrevRp1,125) Reason for Report :Part of Indonesia property sector report Potential Catalyst: Ciputra International and JO projects Where we differ:Earnings are lower than consensus estimates and guidance Analyst Edward Tanuwijaya+6221 3003 4932 [email protected]
Price Relative
Forecasts and Valuation FY Dec (Rpbn) 2013A 2014A 2015F 2016F Turnover 5,077 6,344 7,777 9,468 EBITDA 1,698 2,403 2,799 3,301 Pre-tax Profit 1,709 2,147 2,340 2,837 Net Profit 977 1,325 1,296 1,569 Net Pft (Pre Ex.) 977 1,325 1,296 1,569 EPS (Rp) 64 87 85 103 EPS Pre Ex. (Rp) 64 87 85 103 EPS Gth (%) 66 36 (2) 21 EPS Gth Pre Ex (%) 66 36 (2) 21 Diluted EPS (Rp) 64 87 85 103 Net DPS (Rp) 12 19 26 26 BV Per Share (Rp) 419 431 491 568 PE (X) 22.9 16.9 17.3 14.3 PE Pre Ex. (X) 22.9 16.9 17.3 14.3 P/Cash Flow (X) 13.0 nm 2684.5 22.0 EV/EBITDA (X) 14.7 11.8 10.3 8.7 Net Div Yield (%) 0.8 1.3 1.8 1.7 P/Book Value (X) 3.5 3.4 3.0 2.6 Net Debt/Equity (X) CASH 0.1 0.1 CASH ROAE (%) 16.4 20.5 18.5 19.5 Earnings Rev (%): 16 (15) (10) Consensus EPS (Rp): 24 N/A N/A No. of brokers following: B: 9 S: 4 H: 7 ICB Industry :Real Estate ICB Sector: Real Estate Investment & Services Principal Business:Large scale residential and commercial developer in 20 major cities throughout Indonesia, with most diversified product and consumer range. Established since 1981 and has listed subsidiaries in Ciputra Surya (CTRS) and Ciputra Property (CTRP) Source of all data: Company, DBS Vickers, Bloomberg Finance L.P
At A Glance Issued Capital (m shrs) 15,166 Mkt. Cap (Rpbn/US$m) 22,370 / 1,729 Major Shareholders Sang Pelopor (%) 30.6 Credit Suisse Singapore (%) 8.1 Free Float (%) 61.3 Avg. Daily Vol.(‘000) 13,602
DBS Group Research . Equity 24 Apr 2015
IndonesiaCompany Focus
Ciputra Development Bloomberg: CTRA IJ| Reuters: CTRA.JK Refer to important disclosures at the end of this report
Plain sailing 1Q15 marketing sales reached 16% of full year
guidance
JO projects will remain key earnings driver going forward
Upgrade to HOLD with Rp1,340 TP
Seasonally strong 1Q15 marketing sales. CTRA booked Rp1.75tr marketing sales, up 28% y-o-y, to reach 16% of full year guidance of Rp11tr (+27% y-o-y). Contribution from direct projects remained high at 75%, followed by subsidiaries Ciputra Surya (CTRS) with 20% and Ciputra Property (CTRP) at 5.6%. The mortgage portion (at 40%) has reverted to 2012 levels after falling in early 2014 after Bank Indonesia imposed stricter Loan-to-Value (LTV) ratios. In-house financing remains the preferred payment method for customers (at 48% of total transactions). JO projects will remain earnings driver. In 1Q15, JO projects contribution hit a record high of 59%. CTRA has 10 new projects in the pipeline this year (with eight located outside Java).Greater Jakarta and Surabaya projects remain the company’s major projects. Revised FY15F marketing sales & earnings. After adjusting for FY14 results and the latest marketing sales data, we revised up FY15F marketing sales by 12% to Rp9.8tr (+14% y-o-y; 10% below guidance). But FY15F/16F earnings are reduced by 15%/10% because of additional interest expense for the SGD MTN issued on 13Feb2015. Hence, our estimates are c.12% below consensus expectations. Upgrade to HOLD with Rp1,340 TP. CTRA has risen 10% YTD after the recent rally. We rolled forward our RNAV estimate to 2016, resulting in Rp1,890/sh,17% higher than the previous estimate. We applied 29% discount to RNAV to arrive at the TP.
85
135
185
235
285
333.0
533.0
733.0
933.0
1,133.0
1,333.0
1,533.0
1,733.0
Apr-11 Apr-12 Apr-13 Apr-14 Apr-15
Relative IndexRp
Ciputra Development (LHS) Relative JCI INDEX (RHS)
Industry Focus
Ciputra Development
Page 31
CTRA: Trading at mean forward PE
Source: DBS Vickers, Bloomberg Finance L.P
CTRA: discount to RNAV trend
Source: DBS Vickers, Bloomberg Finance L.P Increasing contribution from JO projects
Source: Company, DBS Vickers
Mortgage portion back to 2012 levels
Source: Company, DBS Vickers CTRA: marketing sales (YTD and forecast)
Source: Company, DBS Vickers
Greater Jakarta projects to remain major contributors
CitraGrand City Palembang - JO Palembang Landed Residential 323 JO 323 1.1%
CitraLand City Samarinda - JO Samarinda Landed Residential 298 JO 298 1.1%
CitraGarden + Land Banjarmasin - JO Banjarmasin Landed Residential 105 JO 105 0.4%
CitraLand Celebes Makassar - JO Makassar Landed Residential 0 JO 0 0.0%
CitraGreen Dago Bandung - JO Bandung Landed Residential 43 JO 43 0.2%
Other JO projects Landed Residential 3013 JO 3,013 10.6%
Ciputra Property (CTRP IJ) 5,237 58% 9,023 18.4%
Ciputra Surya (CTRS IJ) 6,560 63% 10,470 23.1%
Net Debt -113
RNAV 28,531
Fully Diluted Share base (bn) 15.166
Fully Diluted RNAV per share 1,890
Source: DBS Vickers
Company Focus
Ciputra Development
Page 36
INVESTMENT THESIS
Profile Rationale
CTRA is a large scale residential and commercial property developer in 20 major cities throughout Indonesia, with the most diversified product and consumer range. Established in 1981, CTRA owns listed subsidiaries Ciputra Surya (CTRS) and Ciputra Property (CTRP).
Diversifying nationwide Diversified property play. CTRA has a presence in 29 cities
withmore than 60 projects in its portfolio to tap demand in different regions.
Successful township developer. Given its 30-yearproven track record, CTRA is a preferred joint operation (JO)
partner for land owners in new cities.
Valuation Risks
We upgrade CTRA to HOLD. CTRA has risen10% YTD following the recent rally. Our TP of Rp1,340 is based on 29% discount to RNAV. The target valuation discount is narrowerthan its 4-year average of 34%. The stock is also relatively expensive at 16.9x FY15F PE (mean forward PE).
Potential additional tax, stricter regulations for property sector, and exposure to USD debt Additional tax (and revision of existing tax regulations) on
property could surpress demand. Stricter regulations for high-rise developments. Plot ratio
approval and balanced ratio rules, when strictly implemented, could potentially slow property demand. Liquidity tightening could slow demand further.
Potential interest rate hike. Property demand is sensitive to and is negatively correlated to interest rate movements.
Limited upside to recurring income. Recurring income is derivedfrom matured malls and hotels in Jakarta and Semarang, while there is limited upside to rents at newly opened Lotte Shopping Avenue mall because most of the large tenants have signed 20-year leases.
Source: DBS Vickers
Page 34
Company Focus
Ciputra Development
Segmental Breakdown FY Dec 2012A 2013A 2014A 2015F 2016F
Revenues (Rpbn) Land lots 267 275 164 1,178 1,151Office and Condo sales 498 932 1,181 1,116 1,397Residential+shophouse 1,921 3,033 3,875 4,214 5,409Recurring 636 837 1,124 1,269 1,510 Total 3,323 5,077 6,344 7,777 9,468Gross Profit(Rpbn) Land lots 206 65 122 825 806Office and Condo sales 290 429 572 447 559Residential+shophouse 836 1,584 1,974 2,107 2,704Recurring 335 468 666 629 733 Total 1,667 2,546 3,334 4,007 4,803Gross ProfitMargins Land lots 77.3 23.5 73.9 70.0 70.0Office and Condo sales 58.2 46.1 48.4 40.0 40.0Residential+shophouse 43.5 52.2 51.0 50.0 50.0Recurring 52.6 55.9 59.2 49.6 48.5 Total 50.2 50.2 52.5 51.5 50.7 Income Statement (Rpbn)
Note : Share price and Target price are adjusted for corporate actions.
1 2
3
4
5
6 7
8
878
978
1078
1178
1278
1378
1478
1578
Apr-14 Aug-14 Dec-14 Apr-15
Rp
www.dbsvickers.com ed: SGC / sa: MA
HOLD Rp1,315 JCI : 5,435.36 Price Target :12-Month Rp1,360 (Prev Rp1,200) Reason for Report :Part of Indonesia property sector report Potential Catalyst: Faster monetisation of high-rise projects Where we differ:Earnings lower than consensus estimate and guidance Analyst Edward Tanuwijaya+6221 3003 4932 [email protected]
ICB Industry :Real Estate ICB Sector: Real Estate Investment & Services Principal Business:LPKR's five businesses are: township, healthcare, retail mall, hospitality and portfolio management. It has listed subsidiaries in Lippo Cikarang (LPCK) and Gowa Makassar Tourism Development (GMTD), and stakes in First REIT & LMIRT (both listed in Singapore)
Source of all data: Company, DBS Vickers, Bloomberg Finance L.P
At A Glance
Issued Capital (m shrs) 23,078Mkt. Cap (Rpbn/US$m) 30,347 / 2,346Major Shareholders Pacific Asia Holdings (%) 17.9Free Float (%) 82.1Avg. Daily Vol.(‘000) 80,270
DBS Group Research . Equity 24 Apr 2015
Indonesia Company Focus
Lippo Karawaci Bloomberg: LPKR IJ EQUITY | Reuters: LPKR.JK Refer to important disclosures at the end of this report
Deeper value from Cikarang 1Q15 marketing sales reached 21% of full year
Heavy reliance on marketing sales to drive earnings for the next three years
Maintain HOLD with Rp1,360 TP; prefer direct exposure to subsidiary LPCK
Good 1Q15 marketing sales. LPKR booked Rp1.4tr marketing sales in 1Q15, up 55% y-o-y, to reach 21% of full year guidance of Rp6tr (+15% y-o-y). A fair share of 1Q15 marketing sales was carried over from year-end launchof Delta Silicon 8 (JV) and Westwood Apartment (in Orange County, Lippo Cikarang, East Jakarta suburb) last year. LPCK driving marketing sales. Our FY15F marketing sales is Rp5.6tr, (+8% y-o-y), which is 6.3% below full year guidance. LPCK’s contribution will keep rising in the next three years to 65% in FY17F (from 47% in FY14). Therefore, we prefer direct exposure to subsidiary LPCK (BUY; Rp13,900 TP offers 16% upside) because of cheaper valuation and stronger projected growth going forward. Maintain HOLD.The stock offers limited upside to our Rp1,360 TP. We rolled forward our RNAV estimate to 2016, resulting in Rp1,867/sh, which is 16% higher than our previous estimate. We applied 27% discount to RNAV (no change from previous assumption) to arrive at Rp1,360 TP. Two drawbacks for the counter are expensive valuation (especially for the healthcare unit) and exposure to USD debt as the IDR continues to weaken.
72
92
112
132
152
172
192
212
531.0
731.0
931.0
1,131.0
1,331.0
1,531.0
1,731.0
1,931.0
Apr-11 Apr-12 Apr-13 Apr-14 Apr-15
Relative IndexRp
Lippo Karawaci (LHS) Relative JCI INDEX (RHS)
Industry Focus
Lippo Karawaci
Page 38
LPKR: Trading at mean forward PE
Source: DBS Vickers, Bloomberg Finance L.P.
LPKR: discount to RNAV trend
Source: DBS Vickers, Bloomberg Finance L.P
Rising contribution from LPCK(marketing sales)
Source: Company, DBS Vickers LPKR: marketing sales (YTD and forecast)
Source: Company, DBS Vickers
LPKR: RNAV summary
Portfolio City Category Value (Rpbn)
Stakes Full Value (Rpbn)
% of total
Landbank (ha)
Urban Developments Lippo Village - Karawaci West Jakarta Residential 12,044 100% 12,044 23.9% 153 Lippo Cikarang East Jakarta Industrial 7,602 54% 14,078 15.1% 509 Tanjung Bunga Makassar Makassar Residential 1,810 50% 3,620 3.6% 315 San Diego Hills East Jakarta Memorial Park 1,538 100% 1,538 3.1% 97 Micro Suburbs 12,044 100% 12,044 23.9% 153
Subtotal 22,994
Large Scale Integrated Development Kemang Village South Jakarta Mixed-use 1,555 90% 1,727 3.1% 6.2 St. Moritz West Jakarta Mixed-use 2,017 100% 2,017 4.0% St. Moritz Makassar Mixed-use 281 100% 281 0.6% City of Tomorrow Surabaya Mixed-use 255 85% 300 0.5% New projects (Apartment & Office) Jakarta Residential & Office 377 100% 377 0.7% Others (land, retail space inv. & other dev) 800 100% 800 1.6%
Subtotal 5,285
Hospitals Subtotal 11,478 78% 14,678 22.8%
Retail malls Retail space inventory 2,814 100% 2,814 5.6%
Subtotal 2,814
Hotels Aryaduta Lippo Village 680 FREIT 680 1.3% Aryaduta Jakarta, Medan and Pekanbaru 1,150 100% 1,150 2.3%
Subtotal 1,830
REIT units 6,032 FREIT &LMIRT
5,485 13.5%
Net Debt 7,345 RNAV 43,088 Fully Diluted Share base (m) 23.077 Fully Diluted RNAV per share 1,867
LPKR operates five business units: township development, healthcare, retail mall, hospitality, and portfolio management. It owns several listed subsidiaries: Lippo Cikarang (LPCK) and Gowa Makassar Tourism Development (GMTD), and stakes in First REIT & LMIRT (both listed in Singapore).
Good portion of recurring income,growth from healthcare segment Successful private healthcare player. LPKR is unique and
ahead of other developers in tapping on healthcare needs in Indonesia, which is under-penetrated relative to the region.
Ample landbank for development. With three urban developments, two large-scale mixed-used developments and a few smaller residential and commercial projects in the pipeline, LPKR can grow marketing sales in the next few years.
Sizable recurring income to sustain development. LPKR currently derives c.40% of its consolidated revenue from healthcare andc.15% from other investment properties. This should provide some buffer when property sales moderate.
Valuation Risks
We maintain our HOLD recommendation for LPKR. Our TP of Rp1,360/sh is based on 27% discount to our RNAV. LPKR is currently trading at 25% discount to RNAV (narrower than its 4-year average) and 20.6x FY15F PE (expensive due to high valuation for the healthcare unit).
Potential additional tax, stricter regulations for property sector, and exposure to USD debt Additional tax (and revision of existing tax regulations) on
property could surpress demand. Stricter regulations for high-rise developments. Plot ratio
approval and balanced ratio rules, when strictly implemented, could potentially slow property demand. Liquidity tightening could slow demand further.
Potential interest rate hike. Property demand is sensitive to and is negatively correlated to interest rate movements.
Exposure to USD debt. A weaker IDR would raise hedging cost for LPKR’s USD global bonds which will mature in 5-7 years.
Capital intensive projects require large funding. High-rise and retail mall developments require large upfront capital. Cost of external financing has to be kept in check
Source: DBS Vickers
Page 40
Company Focus
Lippo Karawaci
Segmental Breakdown FY Dec 2012A 2013A 2014A 2015F 2016F
Note : Share price and Target price are adjusted for corporate actions.
1
2
3
4
5
6
7
8
855
955
1055
1155
1255
1355
1455
Apr-14 Aug-14 Dec-14 Apr-15
Rp
www.dbsvickers.com ed: SGC / sa: MA
HOLD Rp500 JCI : 5,435.36 Price Target : 12-Month Rp 550 (Prev Rp 530) Reason for Report : Part of Indonesia property sector report Potential Catalyst: T.B. Simatupang project launch Where we differ: Being the 1 of 2 neutral calls for the counter Analyst Edward Tanuwijaya +6221 3003 4932 [email protected]
ICB Industry : Real Estate ICB Sector: Real Estate Investment & Services Principal Business: Mixed-use property and residential township developer with assets in Jakarta and Surabaya. PWON has balanced portfolio with a large share of recurring revenues from retail malls
Source of all data: Company, DBS Vickers, Bloomberg Finance L.P
At A Glance
Issued Capital (m shrs) 48,160Mkt. Cap (Rpbn/US$m) 24,080 / 1,862Major Shareholders Pakuwon family (%) 62.0Free Float (%) 20.8Avg. Daily Vol.(‘000) 117,148
DBS Group Research . Equity 24 Apr 2015
Indonesia Company Focus
Pakuwon Jati Bloomberg: PWON IJ | Reuters: PWON.JK Refer to important disclosures at the end of this report
Steady and ready 1Q15 marketing sales more than doubled y-o-y
to reach 35% of full year guidance
Surabaya projects (including superblock project acquired last year) will continue to drive marketing sales
HOLD, limited upside to Rp550 TP
Strong 1Q15 marketing sales. PWON booked Rp1.2tr marketing sales in 1Q15, reaching 35% of full year guidance of Rp3.4tr. Over 20% of that came from the new township Grand Pakuwon cluster that was launched in Dec 2014. Surabaya projects remain marketing sales driver. Surabaya projects (including the Pakuwon Indah superblock project) contributed c.70% of FY14 marketing sales. Given the strong achievement in 1Q15, PWON will meet our FY15F marketing sales of Rp3.7tr (at 60-40 split between Surabaya and Jakarta, and c.8% higher than guidance). HOLD, limited upside. We rolled forward our RNAV base to 2016, which led to Rp619/sh, about 3% higher than our previous estimate. Our TP of Rp550 is based on 12% discount to RNAV (no change). We remain positive on PWON’s business fundamental as the large share of recurring revenue from retail malls should ensure stable earnings, but its exposure to USD debt remains a key risk amid the weak IDR environment.
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94
114
134
154
174
194
214
155.7
205.7
255.7
305.7
355.7
405.7
455.7
505.7
555.7
605.7
Apr-11 Apr-12 Apr-13 Apr-14 Apr-15
Relative IndexRp
Pakuwon Jati (LHS) Relative JCI INDEX (RHS)
Industry Focus
Pakuwon Jati
Page 44
PWON: Trading at (-)1SD of mean forward PE
Source: DBS Vickers, Bloomberg Finance L.P.
PWON: discount to RNAV trend
Source: DBS Vickers, Bloomberg Finance L.P.
Marketing sales breakdown – Surabaya & Jakarta
Source: Company, DBS Vickers PWON: marketing sales (YTD and forecast)
Mixed-use property and residential township developer with assets in Jakarta and Surabaya. PWON has a balanced portfolio with a large share of recurring revenues from retail malls.
Steady recurring income to support property development growth King of steady recurring income. Recurring revenues
account for 46% of total revenues (highest among developers). PWON's long term target is a 50-50 mix.
Strong bargaining power against retail mall operators. As one of largest retail space owner and operator in Jakarta and Surabaya, PWON should benefit from strong demand for retail space from both foreign and local brands, coupled with limited available retail space.
Good mix of property developments. PWON has existing successful residential townships and high-rise developments in both Jakarta and Surabaya.
Valuation Risks
We maintain our HOLD recommendation for PWON. We remain positive on the stock as the large share of recurring revenue from retail malls should ensure stable earnings. However, exposure to USD debt remains a key risk amid the weak IDR environment. Our TP of Rp530 is based on 12% discount to our RNAV. PWON is currently trading at 19% discount to RNAV (at 4-year average) and 13x FY15F PE (at -1SD of mean forward PE).
Potential additional tax and stricter regulations for property sector Additional tax (and revision of existing tax regulations) on
property could surpress demand. Stricter regulations for high-rise developments. Plot ratio
approval and balanced ratio rules, when strictly implemented, could potentially slow property demand. Liquidity tightening could slow demand further.
Potential interest rate hike. Property demand is sensitive to and is negatively correlated to interest rate movements.
Capital intensive projects require large funding. High-rise and retail mall developments require large upfront capital. Cost of external financing has to be kept in check.
Source: DBS Vickers
Page 47
Company Focus
Pakuwon Jati
Segmental Breakdown FY Dec 2012A 2013A 2014F 2015F 2016F
We forecast FY15 marketing sales will grow by 11% y-o-y
Trimmed FY15/16F earnings after strong FY14 results and additional coupon payment
Top pick in property sector for its premium development and product mix flexibility
Strong 1Q15 marketing sales growth. SMRA booked Rp1.27tr marketing sales in 1Q15, which doubled y-o-y to reach 23% of full year guidance of Rp5.5tr (+19% y-o-y). A fair share of 1Q15 marketing sales was from Serpong Midtown apartments that were launched in Nov 2014, while the rest came from inventory sales forother townships (i.e. Kelapa Gading and Bekasi) Revised down earnings in FY15F due to exceptional FY14 result. Reflecting the FY14 result, latest marketing sales data, we revised our FY15F marketing sales assumption to Rp5.4tr (up moderately 10.8% y-o-y and slightly below company guidance). Our FY15/16F earnings estimates were reduced by 16%/9% considering the exceptional FY14 result (i.e. better revenue recognition that expected) and the additional coupon payment from Rp1.1tr bond and sukuk issuance (representing 26% of total debt) in 10Oct2014. BUY,Rp2,200 TP.We rolled forward our RNAV estimate to 2016, resulting in Rp3,134/sh, 23% higher thanour previous estimate. We applied 30% discount to RNAV (no change from previous assumption) to arrive at Rp2,200 TP. There is potential upside to RNAV if it spins off investment properties next year, which could be another rerating catalyst for SMRA.
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97
117
137
157
177
197
217
237
396.0
596.0
796.0
996.0
1,196.0
1,396.0
1,596.0
1,796.0
1,996.0
Apr-11 Apr-12 Apr-13 Apr-14 Apr-15
Relative IndexRp
Summarecon Agung (LHS) Relative JCI INDEX (RHS)
Industry Focus
Summarecon Agung
Page 51
SMRA: Trading at +2SD of mean forward PE
Source: DBS Vickers, Bloomberg Finance L.P.
SMRA: discount to RNAV trend
Source: DBS Vickers, Bloomberg Finance L.P.
SMRA: marketing sales (YTD and forecast)
Source: Company, DBS Vickers
SMRA: RNAV summary
SMRA portfolio Stake
owned Land bank
(ha) RNAV
Investment Properties
Mal Kelapa Gading 100% 3,209
La Piazza 100% 260
Gading Food City 100% 48
Summarecon Mal Serpong - Phase 1 100% 558
Plaza Summarecon 100% 12
Plaza Summarecon Serpong 100% 31
Menara Satu Office 100% 94
Summarecon Mal Serpong - Phase 2 100% 739
Summarecon Mall Bekasi 100% 1,065
Harris Hotel Kelapa Gading 100% 365
POP Hotel, Kelapa Gading 100% 165
Harris Hotel Bekasi 100% 498
Investment Properties Total Surplus/(Deficit) - 1 6,792
Township developments
Kelapa Gading 100% 387
The Springs - Serpong 54% 295
Scientia Garden - Serpong 69% 1,340
Summarecon Bekasi 100% 5,592
Summarecon Bandung 100% 1,509
Total PV of future development profits - 2 9,123
High-rise developments
Kensington Apartments 100% 1,116
Scientia Apartment - Serpong 69% 607
Springlake Apartment - Bekasi 100% 795
High-rise development surplus value (Rpbn) - 3 2,518
SMRA is one of Indonesia's most established property developers. It has three existing township developments and several investment properties in its portfolio which generates sizeable recurring income, c.30% of revenues.
Greater Jakarta focus with potential new township Greater Jakarta focus. SMRA has three township
developments in three regionsin Greater Jakarta. There is sron reception during its project launches.SMRA is well-placed to ride on rsing property demand in the long run.
Delivers as promised. SMRA has a good reputation among buyers and good project execution track record.
New townshipsin Bogor and Bandung to add value.
Valuation Risks
We maintain our BUY recommendation for SMRA, which is our top pick among property developers. Our TP of Rp2,200 is based on 30% discount to our RNAV. SMRA is currently trading at 40% discount to RNAV (wider than its 4-year average) and 22x FY15F PE (+2SD of mean forward PE).
Potential additional tax and stricter regulations for propertysector Additional tax (and revision of existing tax regulations) on
property could surpress demand. Stricter regulations for high-rise developments. Plot ratio
approval and balanced ratio rules, when strictly implemented, could potentially slow property demand. Liquidity tightening could slow demand further.
Potential interest rate hike. Property demand is sensitive to and is negatively correlated to interest rate movements
Source: DBS Vickers
Page 53
Company Focus
Summarecon Agung
Segmental Breakdown FY Dec 2012A 2013A 2014A 2015F 2016F
Note : Share price and Target price are adjusted for corporate actions.
1 2
34
5
6
7
89
1030
1230
1430
1630
1830
2030
Apr-14 Aug-14 Dec-14 Apr-15
Rp
Industry Focus
Indonesia Property Sector
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STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame)
BUY (>15% total return over the next 12 months for small caps, >10% for large caps)
HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps)
FULLY VALUED (negative total return i.e. > -10% over the next 12 months)
SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame)
* Share price appreciation + dividends
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Industry Focus
Indonesia Property Sector
Page 57
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