22 November 2018


Expected Trajectory, Still Down!


9M18 Results: Mixed Earnings, BSDE and ASRI Affected by FX Losses
We note developers under our coverage have reported varied performance through 9M18. Revenues
were observed to increase an average of –1.68% YoY (vs. 13.84% YoY in 9M17), reflecting
67.91%/64.88% of MNCS’/Consensus’ estimate. PWON posted the highest 3Q18 revenue at 19.00%
YoY, to IDR5.23 tn, followed by CTRA (7.89% YoY), ASRI (1.05% YoY) and SMRA (0.71% YoY).
Meanwhile, BSDE and DMAS reported revenue decreased by -18.94%/-19.77% YoY, victims of poorer
land & building sales. On the other hand, average presales in 9M18 reached 73.91%/70.23% of
MNCS’/Companies’ target. Although 9M18 revenue did reveal a positive turn, bottom line was hit by
FX losses. SMRA recorded the highest net profit of 70.24% YoY, followed by PWON (25.23% YoY) and
CTRA (2.40% YoY) while DMAS, ASRI and BSDE saw net income drain away, as the USD/IDR went
sliding to a level of IDR14,929 (-10.24% YTD).

Key Catalyst FY19F: Relaxing LTV and Sustainable FDI in Property Sector
We observed how LTV relaxation in 8M18 is expected to benefit the mid-low segment, as the
preferred KPR scheme for most buyers, as BI loosened the LTV provision for all types of first-home
purchases. We believe that a loosening of LTV ratio will be the path to increase the percentage of
home ownership, even though it will only be reflected in the next 6-12 months. Furthermore, we are
certain FDI opportunities in our property sector continue to grow, as it already holds a major portion
of FDI. In our view, affordable labor and availability of land & infrastructure also serve as national
competitive advantages: investment in housing & industrial area segments rose significantly by
73.42% YoY, valued at USD3,528.88 mn in 9M18.


Potential Risk coming from Higher Interest Rates and a Weakening Rupiah
BI unexpectedly hiked its 7DRRR six times by 11M18, popping 175bps to 6%. We see it potentially
cranking up KPR/KPA interest rates, even to a 9M18 interest rate of 9.40%/9.37% (vs. 10.15%/10.59%
in 9M17). Furthermore, a weakening Rupiah hurts sentiment in property sector as it slid to IDR14,929
in 9M18 (-10.24% YTD), potentially impairing the net profit margin of companies with steep USD


NEUTRAL Recommendation with Selected Stocks: CTRA, DMAS and SMRA
We maintain a NEUTRAL outlook for the property sector in FY19E, expecting presales to stagnate, in
FY18E/FY19F at 3.91%/2.34%, YoY due to: 1) Loosening LTV, with the potential to attract more firsttime
buyers; 2) Prospective residential segment for lower and middle-market: 3) Sustained FDI in
property sector. Potential risks: 1) Interest rate; 2) higher NJOP; 3) Rupiah exchange rate. Our
preferred stocks are CTRA (HOLD; TP: IDR1,100), DMAS (BUY; TP: IDR202), and SMRA (BUY; TP:

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