APLN Buy on Growth - Indopremier

APLN recorded a better than expected marketing sales of Rp 2,4 trillion for FY2010 accompanied with lower gross profit margin compared to last fiscal year (31.54% current vs 33.64% last year). We see this as a favorable trend in line with the company’s asset light strategy: employ sales discount to boost marketing sales, thus freeing capital for new projects. Going forward for FY2011, the management is targeting Rp 3.5 trillion marketing sales and looks gallant to exceed it with 21% higher actual sales than budgeted for the first quarter of 2011. We are optimistic with the growth potential backed up by established track record of the management and maintain RNAV TP of Rp 480.

Higher than Expected Marketing Sales
The company recorded a strong marketing sales figure in 2010 with Rp 2,4 trillion compared to our forecast of Rp 1.6 trillion, which in turn led to higher revenue recognition to Rp 1.9 trillion vs our estimate of Rp 1.7 trillion. A positive surprise that is in line with the management strategy of high turnover approach.

Ahead Budget to Achieve Target Marketing Sales in 2011
Management guides Rp 3.5 trillion of marketing sales for 2011 and on track to meet their target (our internal estimation is Rp 3.51 trillion). In fact, first quarter of 2011 recorded 21% better marketing sales then the budget with Rp 925 billion on budget vs Rp 1.2 trillion actual. We are seeing a positive catalyst to achieve higher than targeted marketing sales figure, considering the percentage of actual marketing sales to target marketing reach more than 30% in the first quarter of 2011. This year, approximately Rp 3 trillion shall be allocated to its ongoing Podomoro City, Green Bay, and Kuningan City. In addition to, the management has launched two new projects since the beginning of 2011 with Green Permata in South Jakarta and Grand Taruma in Kerawang.

Reiterate Buy with TP of Rp 480
Attributable to higher sales and two new projects, we revise our revenue forecast by 6.22% in 2011 and 29.98% in 2012, resulting in Rp 2.93 trillion and Rp 4.08 trillion of total revenue. Further, we calculate fair value per share based on RNAV method and maintain our TP of Rp 480, representing FY11E PER 19.84x and PBV 2.26x, compared to FY10 year end PER 27.97x and PBV 1.76x.