Earnings boosted by one-off gain
BSDE recorded strong earnings of IDR 2.46 tn (+39.3% yoy) in 2Q17 with bottom line also jumped by 126.8% to IDR 1.27 tn (vs. IDR 563.1 in 2Q16). Both beat ours and consensus due to one off contribution from net income of associates and JV amounting to IDR 260.28 bn (vs. IDR 20.25 bn in 1H16). Gain in net income of associates and JV was underpinned by gain on bargain purchase of PT Karawang Bukit Golf (IDR 123.32 bn) and accumulation of stake on PLIN IJ from 42% to 44.1% in June (IDR 113.22 bn). Without gain from associates and JV, bottom line fell to IDR 1.17 tn, but still higher than our and consensus estimates. BSDE also shown strong revenue growth of 40.2% QoQ and managed to marginally push down its operation cost, which led to EBIT growth (+85% QoQ) and leaner margin to 56% in 1H17 (vs. 43% in 1Q17 and vs. 46% in 2Q16).
Contribution from land plots sales was one of the driving forces
Revenue contribution from land plots proceeds contributed as much as IDR 1.5 tn in 1H17 or 36% of total revenues which is greater than IDR 660 bn in 1H16 (+128% YoY) which was only 23% of total revenues. The contribution from land plot sales is largely from the 15ha sale to JV with Mitsubishi Corporation. Both land plots and residential sales contributed more than 72% of the company’s revenue in 1H17 (vs 61% in 1H16). Meanwhile, contribution from landed residential sold, significantly jumped to IDR 1.5 tn in comparison with 1H16 (IDR 412 bn), as BSDE was able to recognize more back lock from marketing sales. Revenues from landed houses were mainly attributed from BSD City and followed by Duta Pertiwi’s (DUTI IJ) projects named Grand Wisata Bekasi, Kota Wisata Cibubur, Taman Banjar Wijaya, Legenda Wisata dan Sinar Mas Wisesa’s project called Grand City Balikpapan.
Marketing sales run rate still slow
In 1H17, BSDE has achieved marketing sales amounting to IDR 2.5 tn or 34.74% run rate of its full year target (IDR 7.22 tn vs PSI target at IDR 6.85 tn). Compared to 1H16 achievements, the 2017 pre sales was slow due to narrower launching slots because of the Eid Mubarak festivity. In June alone, BSDE launched a middle segment housing cluster called Avezza in The Mozia district that offered ASP ranging from IDR 1.3 bn to IDR 2.2 bn per unit. BSDE managed to sell 57% of total units offered and has contributed IDR 126 bn to marketing sales. It is noteworthy that the recent products launched by BSDE were smaller in size (<130 sqm) and more affordable in price (<IDR 2.5 bn). In our view, this strategy is suitable to current Indonesia property market’s condition as buying power is yet to recover. We maintain our marketing sales target for FY17 at IDR 6.85 tn given 1H17 weak achievement.
Rating and Valuation
We maintain our BUY recommendation but revise 12 month forward target price of IDR 2,050 to IDR 2,110. We also raise our 17F/18F net profit estimates by 12%/8.3% as we expect BSDE to book higher back lock recognition from sales. Currently, BSDE trading at an attractive valuation 14.8x FY17E P/E and 53.3% discount to RNAV.