SMRA - Undemanding valuation despite a weak marketing sales

KBVS Update
Tuesday, 15 December 2023

Undemanding valuation despite a weak marketing sales
(Maintain BUY; TP: IDR700)

Weak marketing sales in FY2023F. SMRA booked IDR3.7 tn of marketing sales (-10.9% yoy) in 11M23. We view the decline in marketing sales is primarily attributed to a subdued market appetite in certain regions, notably Serpong and Bandung, where achievements reached only 49% and 48% of the FY23 targets, respectively. Consequently, we anticipate a 9% decline in FY23F marketing sales to IDR4.5 tn, which falls short of the company's guidance of IDR 5.0 tn for FY23F.

Expect marketing sales to reach IDR 4.95 tn tn in 2024F (+10%). We expect SMRA’s marketing sales could rebound by 10% in 2024F due to low-base effect in 2023F as well as benefit from the VAT exemption program. SMRA has IDR1.9 tn eligible inventory for the VAT exemption program with IDR1.1 tn of residential, IDR389 bn of shophouse, and apartment of IDR364 bn.

Several catalysts in 2024. Several catalysts in 2024 is potential rebound in marketing sales, continuation in earnings growth, as well as the commencement of Summarecon Mall Bandung in 2024, we expected it to make a IDR50 bn contribution to recurring income for 2024F.

We reiterate BUY on SMRA with target price of IDR700 using DCF-based TP (WACC: 11.2%; LTG: 5%), which implied to 1.1x ‘24F PB and 82.8% discount to ‘24F RNAV.

Regards,
Benyamin Mikael -KBVS Research