Alam Sutera Realty – Indonesia 2010 results preview: Earnings in line - UOB KayHian

What’s New
• Robust 2010 bottom line performance. Management indicated that 2010 net profit may reach Rp300b or more than tripled 2009’s net profit of Rp94b. Stellar bottom line performance was mainly driven by: a) robust revenue growth of 88% yoy to about Rp750b, b) improving profit
margins on the back of higher ASP of land sales.
• Business expansion mode is on. The company plans to acquire a 6-7ha land bank in Sanur-Bali worth about Rp200b (to develop a hotel & resort property). Although this acquisition has not been finalised yet, it shows that ASRI is seriously aiming to strengthen its property investment divisions (targeting recurring incomes accounted for about 20% of total revenues in the next five years).


Stock Impact
• No surprise on the results. The indicated 2010 net profit of Rp300b is in line with our FY10 forecast of Rp296b. Meanwhile, the company expects to book 2010 revenues of Rp750b, which is basically lower than our FY10 revenue estimation of Rp837b. This means that profit margins would be much better than our expectations.
• Proposed 2010 DPS is likely at Rp4. Following these stellar 2010 results, ASRI plans to distribute total dividend of Rp70b (DPS of Rp4) with payout of 23%. The management would propose this dividend distribution during EGM, which will be held in May.
• Expects 2011 earnings to grow by 65% yoy. We expect 2011 earnings to improve further by 65% yoy to Rp700b, backed by greater portion of strong marketing sales in 2010 (+52% yoy to Rp1.6t) to be booked this year. We also envisaged 2011 marketing sales to grow further by 15%
yoy to Rp1.8t, which is driven by additional sales from new residential developments in Pasar Kemis (to be launched in 2H11).

Earnings Revision/Risk
• None.

Valuation/Recommendation
• Still a BUY with target price of Rp400. While current FY11F P/B is trading on a par with peers’ average of 2.0x, the stock is compelling based on: a) low FY11F PE at 9.7x or lower than sector’s 14.1x, and b) share price is also at a steep 54% discount to our RNAV estimate of Rp571/share.