Bumi Serpong Damai (BSDE-BUY-IDR910-TP:IDR1,160) Size does matter - Bahana

Big land bank with big opportunity; Reiterate BUY with higher TP
BSD City, a key development of Bumi Serpong Damai (BSDE) located in Serpong-South Tangerang, will continue to be the choice for many future home owners due to supportive infrastructure development in our view. In terms of size, BSDE has a huge land bank (4,945ha), the second biggest amongst our property coverage (after ELTY), to support sales growth in the coming years. We see strong demand to continue this year stemming from Indonesia’s young and productive population, supported also by the current low interest rate environment. Following 10 to 15% y-y higher selling prices in property products, we apply 8.3% higher average land price to BSDE and arrive at NAV/share of IDR1,456. Thus, we upgrade its TP to IDR1,160 based on 20% discount to NAV. Within the property sector, BSDE has the second largest market cap with reasonable liquidity. BUY.

2011 net profit to grow 74% y-y
We estimate modest 2011 revenue growth of 9% y-y to IDR2.7t as most growth will come from BSD city, since projects from 3 sister companies are already at maturing stages. On the back of high marketing sales in 4Q09 and 1H10, we estimate 2011 development revenue to grow 10% y-y to reach IDR2t while recurring earnings from DUTI and SMT commercial projects (ITC, hotels and offices) will only grow 5% y-y to IDR680b. We estimate flat 2011 gross margin resulting from more revenue booked from houses and more infrastructure developments. While we maintain 2011-12 operating margins at 35%, we estimate 2011-12 net margins to reach 25-27% respectively, translating to 74-19% y-y net profit growth.

3M11 sales reached 28% of total 2011 target
BSDE continues to book high quarterly sales in 1Q11 (exhibit 6), mostly stemming from launches in 12.8ha residential clusters targeted to the middle and middle-up market segment. In the coming months, BSDE plans to launch more residential clusters and commercial areas. The company also plans to start offering non-polluting industrial area totaling to 300ha. Combined with upcoming plans to launch a new satellite city in Benowo-Surabaya (250ha area) and continued residential development in Balikpapan (200ha), BSDE is optimistic to reach IDR3.3t (+40% y-y) marketing sales this year.

1Q11 results: On target to achieve our 2011 projections
BSDE reported 1Q11 results which were mostly in line with our full-year expectations. 1Q11 bottom line doubled on y-y basis to IDR162b, helped by higher net interest income, other incomes and the absence of extraordinary losses. We estimate lower interest expense paid this year following its IDR600b bonds due this year and will be paid through its internal cash generation. As per 3M11, BSDE reported high cash position of IDR3.7t to support its capex expansion of IDR2t and bond payment. Net interest income and other incomes led to 26.1% net margin in 1Q11, compared to our 2011 net margin estimate of 25.1%.