SMRA - Anticipate Stronger Earnings and Marketing Sales Turnaround in 2024

KBVS Update
Friday, 17 May 2024

Anticipate Stronger Earnings and Marketing Sales Turnaround in 2024 
(Maintain BUY - TP: IDR1,310)

Highest quarterly earnings since 4Q14. In 1Q24, SMRA booked the highest quarterly profit in the last 10 year of IDR441.4 bn (+62.4% yoy; +290.8% qoq). Solid net profit growth mostly driven by higher revenue on property development segment by 58.3% yoy to IDR1.44 tn (which driven by higher recognition) and investment property segment by 21.5% to IDR480 bn. Following on the strong result, we have upgraded our earnings forecast to IDR1.03 tn. This adjustment reflects our anticipation of higher financing costs from the issuance of a new IDR1.3 tn bond in Jun’ 2024.

Anticipate stronger marketing sales in 2H24. SMRA’s booked IDR283.9 bn of marketing sales in Apr’23 (-38.5% yoy) resulting a IDR1.09 tn of marketing sales (-2.0% yoy) in 4M24, only achieved 22% of FY24 target. Geographically, the Bekasi and Serpong areas achieved 74% and 31% of their 2024 targets, respectively. We expect marketing sales to increase in the 2H24, driven by new launches in areas such as Bandung, Bogor, Crown Gading, Kelapa Gading (apartment launch), and the newly developed township Summarecon Tangerang (Bitung area).

Enhanced recurring income. Following the successful launch of Summarecon Mall Bandung, featuring approximately 47k sqm of NLA with a 70% occupancy rate as of Jan’24, and Gafoy, with about 8.5 k sqm of NLA in Mar’24, SMRA plans to open Summarecon Mall Bekasi Phase 2 in the 1Q25, adding approximately 42.7k sqm of NLA. In the mid-term, we anticipate further potential recurring income from ventures such as the Harris Hotel in Summarecon Bandung, and new Summarecon Malls in Bogor and Makassar.

Undemanding valuation. Reiterate BUY with TP IDR700 using DCF-based TP (WACC: 10.9%; LTG: 5%), which implied to 1.1x ‘24F PB and 82.4% discount to ‘24F RNAV.

Regards,
Benyamin Mikael -KBVS Research