Walking in Moderate Pace
Key Takeaways:
• As the mortgage rate has gotten close to 8%, higher interest rates limit the companies' earnings. Based on our projection, for every 1% increase of interest rate for IDR1tn loan with tenor of 20yr (10yr fixed 7.98% and 10yr floating 13.5%) and 10% DP, there will be an increase in the monthly mortgage obligations by ~IDR576k/month.
• The property market continues to face challenges due to various factors, such as 1) geopolitical instability; 2) supply chain disruptions and inflation, which increases the cost of living, thus eroding the purchasing power needed to buy property.
• The government merely prolonged the LTV policy (0% DP), and we believe this is insufficient to adequately limit the risks that the real estate sector will face in the future.
• We change the recommendation from OVERWEIGHT to NEUTRAL outlook for Property sector in FY23F. The valuation is based on an average NAV discount ranging from 41% to 73%. With a 65% contribution to total marketing sales, we think the landed residential market will continue to be the industry leader. Our top choices are BSDE IJ (BUY; TP: IDR1,100) and CTRA IJ (BUY; TP: IDR1,050).
