APLN: Solid sales continue - Mandiri

On the back of solid 3M11 sales, APLN started the year confidently. It posted 1Q11 of Rp148bn, above our and consensus estimate. This was coupled with expanded margin, notably from office and mall portfolios that came as a result from higher-than-expected ASP for offices, while the mall benefited from the transfer of its building management business last year that the business tends to drag margin during early of mall operation. We expect revenue boosting to continue in the remaining quarters, especially as the Green Bay Pluit that has been one of company’s main sales booster, has started to generate revenue. We maintain Buy on APLN. The stock offers attractive valuation with current PE11F of 13.5x, versus the industry average of PE11F 25.2x, and discount to RNAV11F 26% that still relatively cheap given minimal land bank that the company holds.

Solid 3M11 sales, a good for the year. Despite of aggressive set in beginning of the year (Rp3.7tn), APLN met its promise by reaching over 30% of its target during 3M11. This is a good start, especially in anticipating of 2nd semester trend that sales tend to slow due to many public holidays.

Revenue recognition continues to rise. We expect revenue to continue to rise in the remaining quarters, not to mention additional support from the start of the realization of the Green Bay Pluit project that aimed to reach 35% progress of completion by the end of this year. Green Bay Pluit contributed 23% to the 1Q11 sales of Rp1.1tn. Its 1st phase of 4 towers has sold 79% of total 3694 units as per Mar11.

New PSAK rule only accounting treatment, should not impact company operationally. We learned that starting next year the new Indonesian accounting rule (PSAK) will require Indonesian property developers to adopt standard of the revenue recognition based on transfer risk and benefit. Revenue from sales will only be realized upon completion of construction, not to mention for vertical developers. As a high-rise focused developer, APLN will be one of the most impacted, especially on the presentation of its profit and loss statement. However, we see this only an accounting treatment that won't affect its cash flow should the company continues to perform well.

Maintain Buy. We maintain Buy recommendation on APLN, on our confidence on the company’s good sales going forward. The stock still offers attractive valuation, with current traded PE11F of 13.5x, versus industry average of 25.2x, and relatively cheap discount to RNAV11F of 26%, given its minimal land bank. TP: Rp430/share.