Indopremier Securities APLN Trillions Backlog from Superblocks

Total revenue to double in FY10, increasing recurring income shall lessen earnings volatility
APLN booked around Rp. 5 trillion of marketing sales by the end of the year leading to an estimated Rp. 5.26 trillion of backlog according to our calculation by the end of FY10, with recognizable portion of Rp. 1.56 trillion and a 106.5% increase of total revenue from FY09. Our forecast also shows strong revenue growth reaching 3.1 trillion by the end of FY12. Going forward, we also anticipate lessen earnings volatility seeing a rapid increasing portion of recurring income from 11.9% by the end of FY10 to 23.4% by the end of FY11.

Ongoing projects on schedule, new projects rolled out 
New acquisition of land bank in Jln. Pos Pengumben, Jakarta Barat, was made on December 21, 2010 and the ensuing launching of Green Permata project was scheduled on the upcoming January 28, 2011. Unlike previous project, Green Permata upholds a landed residential complex with 475 units houses offered in Rp 1.2 to 2.6 billion range and a high rise 15-level apartment aimed at middle low segment. We estimate an additional NAV of Rp. 227.68 billion from both Green Lake Sunter (99.9% ownership) and Green Permata (70% ownership) projects, bringing up the total NAV of all projects to Rp. 10.72 trillion. In addition, the company is in the process of several land bank acquisitions within Jakarta CBD proximity and Greater Jakarta this year.

High turnover reduces risk, improve margin
With superior brand name, APLN is able to target a niche asset light strategy by acquiring and developing land bank immediately as feasible. With no cash tied up in land bank, it becomes more flexible to face interest rate risk or changing market trend. The cash conversion cycle of the company is 698 days compared to 1,751 days on average and ROIC for FY11 shall reach 14.63%.

Reiterate Buy with 28% upside potential
Assuming 4-6.5% rental price appreciation, 10-15% sales price adjustment, and two to four years of marketing periods, we derive a net NAV of 9.87 trillion. Since the company does not have any land bank, we do not see a necessity to apply illiquidity discount in NAV valuation. New target price is Rp. 480/share, representing estimated TTM P/E of 23.69x and forward P/E of 11.27x.