Ciputra Development (CTRA IJ; CP: IDR520; Not rated) - BNP Paribas

Key issues
ƒ CTRA has launched six housing projects in 1H11, out of the 12 planned for the year. All of them are outside Java Island under a joint operation with the land owners, with low risk for the company. Going outside Java is due to the economic growth within the 40 secondary cities in their roadmap for future projects. The target is to launch five new projects a year in the long term.
ƒ The subsidiary opened a retail area in Ciputra World in Surabaya on 22 July with Metro Department Store as the major tenant. 85% of the retail space is already leased at IDR120,000/sqm/month. The apartment project is 92% sold and will be delivered at the end of the year.
ƒ Another subsidiary has launched Dipo Business Center in Jalan Gatot Subroto in Jakarta, for strata title sales. This is a joint operation with Dipo Group, which will take 60% of the space when it is completed in mid-2013. The same company will
soon launch Ciputra World lot 11 which will consist of five luxury apartment towers in a 3ha land plot, four of them to be sold and one for serviced-apartments. They will build two towers (350 units each) in the first phase with completion slated for 2015.
ƒ CTRA is also building hospitals with the first one in Tangerang to start operation in September. They plan to build more hospitals located in their development areas with technical assistance from consultants to run it. Yield on the hospital business is projected at 15%.
ƒ Undeveloped land bank is 1,137ha (gross area) plus developed land of 513ha as of
June 2011. Net asset value is calculated by an independent valuer at IDR933/share as of December 2010.

Questions raised
ƒ How much has the land price increase been so far and will the upcoming bill on land acquisition for public use benefit land price? In the Jakarta area, land prices increased around 20% pa in the past three years compared to around 10% pa in other cities. The new bill will have direct positive impact on the infrastructure developers but there will be indirect impact on land prices for property developers.
ƒ Is there a property bubble? Not really, as property developers have been managing the supply and demand to control the price increase. Besides, there are no more new license for big developers which makes property prices in major development areas continue to increase as people want to live in better places.
ƒ Is property still affordable? Yes, with rising income and lower mortgage rates, people can afford it. Average down payment is 20% and mortgage rates are single digits.
ƒ Why is Ciputra going into the hospital business and what is the plan for this? This is to compliment the existing property developments, given the lack of good public hospitals and rising demand for healthcare. With the expected return of 15%, the company is looking at several other cities with Jakarta and Surabaya being the likely places for new hospitals.
ƒ What is the expected capex? IDR1.5t-2t for 2011 and IDR1t for 2012. The company plans to add IDR1t new loans in 2011 to complete the projects.
ƒ What is the expected marketing sales and profit for 2011? Ciputra expects IDR3.1t marketing sales in 2011, of which IDR1.5t was already booked in 1H11. Net profit is expected at IDR300b compared to IDR258b in 2010.

Current view
ƒ Not rated.