Corporate Result Flash Ciputra Development - Bahana

1Q11 performance
§ CTRA reported 1Q11 bottom line which was inline with our and consensus estimates but operating profit was 6-7% below our and consensus. This was caused by some 34-35% y-y opex growth to support the company’s expansions in its Joint Operation (JO) projects.
§ 1Q11 net interest income coupled with high other incomes (+70% y-y) brought 1Q11 pre-tax profit slightly above our and consensus estimates, translating to flat pre-tax margin of 22%.
§ Higher 1Q11 tax (+21.5% y-y) combined with higher minority interest, following increased CTRA’s ownership on CTRP this year (from 52% in 2010 to 56% in 2011) brought 1Q11 net profit down to IDR31b (-7% y-y), resulting in lower net margin of 8.3%.

Outlook
We expect higher revenue and earnings to come in the subsequent quarters as CTRA has around IDR1.5t advance from customers to support 24% y-y revenue growth this year. Additionally, we expect CTRA to operate more efficiently in the following quarters, allowing 2011-12 operating margin improvements to 21-22% respectively. Aggressive plans to launch 8 new residential projects (through JOs) combined with existing 15 residential projects and 2 mixed used developments in Jakarta should support the company’s performance in the coming years.

Recommendation and valuation
Following higher than expected 2010 earnings, we have raised 2011-12 net profit estimate by 19.8% and 19.5% stemming from higher 2011-12 revenue and interest income contribution (exhibit 6). This has supported 2011 net profit to grow 8% y-y to IDR278b, translating to 13.2% net margin. We reiterate our BUY recommendation on the counter, which currently provides 32% upside potential from our discount to NAV-based TP.