2H23 Prospects Looking Better
Key Takeaways:
• The monetary tightening era is bound to cease soon as the inflation rate has been proven to successfully moderate. Within a span of 10 months, the inflation cooled down to 3.52% in Jun-23 from its highest 5.95% back in Sep-22, and could trigger the Bank of Indonesia (BI) to soon cut its 7DRR from the current rate of 5.75%.
• The cuts will render affordable interest rates which will underpin property sales growth, lowering the KPR/KPA rates that hovered at 7.5%/7.7% in 4M23. Stable mortgage rates will benefit the majority of customer base, as mortgages still account for ~75% of property purchases in 1Q23.
• We view MICE business activities to become more prevalent in 2H23-FY24F which opens a flurry of opportunities for this sector’s recurring income. Not only MICE; sports competitions, exhibitions and similar events will spill positive outturns for hotels’ earnings.
• We view PWON and SMRA to potentially secure ~50% and ~32% of the aforementioned market opportunity in FY23E, reflected from their 1Q23 profit growth of 28.7% and 36.2%, respectively.
• Overall, We give a 3M Overweight and 12M Neutral rating for the property sector. The 3M overweight rating is based on the euphoric momentum for property purchases that could arise from the dovish sentiments that has started brewing. On the other hand, we hold a 12M neutral rating as we note that these companies still rely on residential sales as their backbone, with an averaging 64% of the marketing sales being derived from landed houses alone.
MNCS Research
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