BUMI SERPONG DAMAI (BSDE IJ): Weathering the (Property) Slump April 2, 2018

FY17 Results: Beyond Expectation

For the whole FY17, top and bottom lines soared by 57% to IDR 10.35 tn and by 174% to IDR 4.92 tn respectively (Figure 1 & 2). Development property remained the major source of revenue (87%) and the other 13% driven by investment properties (Figure 3). Furthermore, BSDE recorded gross profit of IDR 7.59 tn (+61%) and operating profit of IDR 5.48 tn (+95%).

Gross profit grew faster than excpected (+61%) and ultimately gross margin rose to 73% (vs 72% in FY16). This was due to larger portion of revenue recognition from land plot sales which contributed 43% of total revenue. FY17 land plots sales stood at IDR 3.1 tn, the biggest since 2014 (IDR 2 tn).

In terms of costs, SG&A expenses grew by 11% to IDR 2.12 tn, on the back of a rise in advertising and promotion (+38.9%). Nontheless, the growth in SG&A expenses is still below its CAGR 2012-16 growth which is 15% (Figure 4).

Aggressive FY17 Marketing Approach

BSDE booked marketing sales of IDR 7.2 tn (+16%), matching its marketing sales target. However, excluding its land plots sales, marketing sales met only 57% of the target. Land plot sales contributed 43% (IDR 3.1 tn), followed by housing sales which contributed 31% (IDR 2.27 tn) (Figure 5).

The Price Lock program, played a key role in enabling BSDE to achieve its target. It was a marketing program that lasted only 3 month (October-December) and aimed to provide buyers with favorable home equity financing scheme. To own a house, buyers only need to pay a 15% down payment through 6-12 installments and the 85% can be paid starting January 2020. By mid December 2017, BSDE managed to raked in IDR 1.5 tn.

Valuation and Recommendation

We reinitiate our coverage on BSDE with a BUY rating and a RNAV-based target price of IDR 2,190, a 50% discount to RNAV. It implies a 2018F P/E of 8.15 and 23% upside potential. It is based on the assumptions of 5.2% terminal growth rate, 7.23% market risk premium, 6.5% risk-free rate and 14% WACC.

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