Property Sector - Solid 2Q24 Marketing Sales Achievement; Maintain OW

KBVS Update
Wednesday, 8 Aug 2024

Property Sector- Solid 2Q24 Marketing Sales Achievement; Maintain OW

In 1H24, property companies under coverage achieved their marketing sales targets. CTRA led with 55%, followed by BSDE (51%), PWON (50.4%), and SMRA (34.4%). Solid sales were driven by VAT discounts and low mortgage rates. The total sales growth for 2024 is estimated to rise by 6.6% yoy to IDR27.2 tn, a historic high.

In 2Q24, despite the slow Lebaran season, some companies reported strong or stagnant sales. CTRA saw a 67.9% yoy increase but a slower 16.9% qoq rise. BSDE had an 18.1% increase both yoy and qoq, mainly due to JV land plot sales. PWON reported a 27.4% yoy increase with stagnant qoq results, while SMRA experienced a 5% yoy decline but a 12.6% qoq increase.

New product launches are expected to boost 2H24 sales as VAT discounts reduce to 5.5%. CTRA plans five new products in major cities, potentially generating IDR2-2.5 tn. BSDE will introduce more units and launch mid-high premium residential products. We expect SMRA  to meet its IDR5 tn sales target with new launches in Bekasi, Bandung, and Tangerang. PWON plans a new tower in Kota Kasablanka extension.

New infrastructure projects in 2H24 will enhance property accessibility and marketability. The Cimanggis-Cibitung toll road and Phase 1B of the BSD-Balaraja toll road will significantly benefit these regions mainly for BSDE (Phase 3 BSD City and Kota Wisata) and SMRA (Summarecon Crown Gading). Despite the expected reduction in the VAT incentive and potential VAT rate increase in 2025, a decline in the BI 7-day repo rate within the next 6 to 12 months could boost property companies' share prices. However, mortgage rates may not decrease significantly.

We maintain an overweight rating, with BSDE (TP: IDR1,310) and SMRA (TP: IDR700) as top picks, anticipating robust earnings and marketing sales growth. BSDE have the potential to exceed their targets for 2024. SMRA appears promising due to potential corporate actions within the next year.

Regards,
Benyamin Mikael - KBVS Research