A laggard property play (Current price is below IPO price and below the price when this report was published on 28 April 2011) - JP Morgan

Agung Podomoro Land Alleviating the worries - firm 1Q11 earnings Improvement

• Positive 1Q11 should raise confidence in the stock. The company reported 1Q11 earnings of Rp148bn, up by 377% y/y. 1Q11 earnings are above our estimates and consensus (26% of ours and 28% of consensus). The firm 1Q11 earnings is a reversal from the 2H10 result. We saw improvements in all sections in gross margins (apartment, office, and rental) of 37% in 1Q11 compared to FY10’s 33%. Margin on
office sold was particularly strong, with 1Q11 gross margin of 42% higher than our expectation of 33%. We view that the company’s firm 1Q11 numbers should raise confidence in the company’s execution and recommend investors to buy post the result.

• Safe cushion: unrecognized sales + firm momentum on marketing sales. With the company’s firm 1Q11 marketing sales number of Rp1.1tr, we view the FY11 marketing sales target of Rp3tr as achievable. We estimate the company to have around Rp2.5tr of unrecognized sales as of 1Q11. In our estimate, Rp1.7tr of the unrecognized sales mainly comes from the company’s new projects; Greenbay Pluit, Green Permata, and Greenlake.

• Maintain OW, Dec-11 PT of Rp455. We are adjusting our FY11/12 earnings estimates for APLN by +1/-3% respectively after accounting for higher top-line and higher operating expenses. We maintain our OW, and slightly tweak our Dec-11 PT to Rp455 versus Rp470 previously on earnings adjustment and higher capex estimates. We think firm project deliveries and execution should raise confidence in the stock. Our Dec-
11 PT is based on a 15% discount to NAV (Rp8.1tr for existing projects and Rp2.2tr for potential new projects).

• Key risks: (1) Delay in execution or construction of projects, (2) Lack or slowdown of new projects.