Marketing Sales FY21 Exceeds Target
• CTRA recorded revenue of IDR7.43 tn in FY21, an increase of 35.21% YoY (vs IDR5.49 tn in FY20) equivalent to 126%/127% of our target/company. CTRA sold 6,279 units with 33% of sales from Greater Jakarta, followed by 28% from Sumatra, 19% from Greater Surabaya.
• Landed house increased by 22% YoY and contribute 82% of its FY21 sales. In terms of tickets, a <IDR2bn/unit contributed 59% of FY21 marketing sales. In addition, the contribution of IDR2bn- IDR5bn sales recorded an increase of 35% in FY21 (29% in FY20). Several things that supported the achievement of marketing sales are: 1) Trend of low interest rates; 2) VAT policy for DTP in FY21; 3) Focus CTRA on landed house products.
Raises Marketing Sales Target in FY22E
• Launched 2 projects in North Sumatra. CTRA targets marketing sales of IDR7.81tn in FY22E, increasing 5.17% YoY. The Company has a strategy by launching two projects in Deli Serdang North Sumatra (a joint operation project with PT Perkebunan Nusantara (PTPN) II), namely: 1) CitraLand Bangun Sari Kota Deli Megapolitan with a target market middle segment and a range of IDR360mn-IDR1.2bn/ units; 2) CitraLand Sampali Kota Deli Megapolitan with a target market of mid-high segment and a range of IDR1.4bn-IDR3.8bn/unit. Both clusters will be launched in 2Q22E-3Q22E with a marketing sales target of IDR700bn in FY22E. We consider this target to be moderate in the midst of potential collaboration between CTRA and BKSL in FY22E (possible launch in 3Q22E-4Q22E), but the management has not included this plan in the FY22E target.
• Commodity boom will have an impact in FY22E. The management considers that the impact of the rising commodity prices had not been reflected in the achievement of marketing sales in FY21. This is indicated by the minimal contribution of marketing sales (around 2%) from heavy commodity areas. Management believes the commodity boom has the potential to be reflected in FY22E providing that the commodity price levels can be maintained until the end of FY22E. We have discussed the lagging-time between the commodity boom vs marketing sales. CTRA's view refers to the FY09-FY10 condition with the hope that it will repeat itself in FY21-FY22E.
• More confident in developing recurring income. People's mobility has started to ease, making CTRA to be quite confident in expanding its recurring income business. Some of the projects in progress are: 1) Office in Propan Tower Jakarta (18.7k sqm) in FY22E and Alessandro tower Surabaya (4.8k sqm) in FY23F; and 2) Ciputra World Surabaya and Citraland Surabaya mall with 63k sqm in FY23F.
Risk: Increase in Raw Materials and 7DRRR
We include the increase in raw materials as a risk, such as steel prices which have increased by 35.81% YTD (as of Apr 7-22) and cement prices which have increased 6%-8%, which potentially supress margins. In addition, the increase in 7DRRR is also a risk that remains to be considered due to 58% of CTRA purchases was from mortgage in FY21 and the Fed's plan to raise the interest rate up to 6x-7x in FY22E
Valuation and Recommendation: BUY at Target Price IDR1,350
We recommend BUY for CTRA, with a TP: of IDR1,350 which implies PE/PBV 15.01x/1.39x in FY22E. CTRA’s valuation has become attractive as it is currently traded at a level of –0.5 STD (average 3-years PE) at 12.17x PE. Risks to our call would include: 1) increase in raw materials (steel & cement); 2) interest rate; 3) Low purchasing power.
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