Company
update:
Ciputra Development (CTRA IJ, BUY, TP: IDR1,920),
Better Outlook Ahead
Ciputra Development (CTRA IJ, BUY, TP: IDR1,920),
Better Outlook Ahead
Ciputra
booked presales in July worth IDR429bn, bringing YTD presales to IDR3.4trn, or
37% of our and the firm’s targets. We expect a better outlook for the sector
going forward, driven by the passing of the tax amnesty bill and lower final
property sales tax. Coupled with Ciputra’s well-anticipated new projects
pipeline, we believe the FY16 presales target of IDR9.3trn is achievable. Our
TP is raised to IDR1,920 (from IDR1,540, 16% upside) as we roll over our
valuation base year to FY17, with a lower discount to NAV of 40% (from 50%).
Maintain BUY.
¨
7M16
presales met 37% of target. Ciputra Development (Ciputra), which booked
presales totalling IDR429bn in July, has shown that its products are still well
received by the market. Hence, the company advised that it will start launching
new projects aggressively from September, as it expects people to shift their
focus to spending from the tax amnesty. July’s success was on the successful
launch at its BizHome in Tangerang, which generated sales of IDR340bn (93% out of
1,000 houses were sold at the pre-launch). Ciputra’s upcoming new launches
include projects in Samarinda, Cileungsi, Fatmawati, Kemayoran, Medan, Surabaya
(Northwest Park 2), shophouses in Makassar, and apartments in Ciputra World 2.
Nonetheless, we keep our presales forecast unchanged and believe that the
IDR9.3trn FY16 presales target is achievable.
¨
Tax
amnesty and merger plan still on! Ciputra is currently undergoing the tax
amnesty process and looking to transfer PT Ciputra Surya Tbk’s (CS) (CTRS IJ,
BUY, TP: IDR4,866) assets under its subsidiary. CS’ management advised that the
estimated penalty will be ~IDR10-20bn, with the process likely to be finalised
by end-September in order to enjoy the lowest penalty rate of 2%. As for merger
plans, management is still discussing the formulation and evaluation to obtain
fair valuations between the three publicly-listed units. In order for the
merger to happen, at least 75% of Ciputra’s shareholders must be present at the
EGM and give their approval before it can proceed. No estimated valuations on
the merger have been disclosed by management, but we believe the merger will
unlock greater value for CS’ shareholders. CS currently trades at a 71%
discount to its NAV, 8.8x FY17F P/E, and ROE of 22% (Figure 2).
¨
Lower
final tax. Effective
September, final tax on home sales will be cut to 2.5%, from 5%. For purchases
of homes smaller than 36 sq m, the rate will be only 1% and 0% for transfer of
land and/or buildings to the Government. With 83% of revenue coming from
development properties and a time-lag of 1.5 years between the booking of
presales and revenue recognition, the lower final tax is only expected to
affect FY18 earnings. As such, Ciputra’s FY18F net margins should expand by
200bps to 19% from our initial forecast of 17%.
¨
Maintain
BUY. We
roll over our valuation base to FY17, applying a lower discount to NAV of 40%
to derive our new TP of IDR1,920. Key risks to our forecasts include weak
presales and delays in construction projects.
Best regards,
Lydia Suwandi
Vice President
Research Analyst - Property
PT. RHB Securities Indonesia
