Indonesia Real Estate Property, price leaders, JP Morgan

Indonesia Real Estate Property, price leaders

We had meetings with several real estate firms and identified Alam
Sutera and Summarecon Agung as price leaders, due to their brands,
good location and access (and hence higher pricing power, as their real
estate tends to be the first choice of middle-upper-income buyers). We
think price leaders should trade at a lower discount to NAV than peers,
as they are price makers and should therefore have more stable
marketing sales during a downturn in the economy.

 Serpong: Alam Sutera: Alam Sutera (ASRI) was able to sell its
properties at an average price of Rp8MM per sqm in Jan-12, up 45%
Y/Y from Rp5.5MM per sqm. ASRI’s Jan-12 ASP is 33% higher than
our initial expectation of Rp6MM per sqm. The real estate market in
Serpong is still absorbing ASRI’s high prices, as shown by the
company’s firm marketing sales in Jan-12 (our channel checks with
marketing agents show that around Rp400B was sold). The company is
likely to surpass our marketing sales expectation of Rp3.1T and the
company’s own guidance of Rp2.9T.
 Bekasi: Summarecon Agung (Not Rated): Summarecon Agung
(SMRA) caters to middle-upper-income buyers in the Bekasi areas. The
companies that we met in Bekasi stated that they follow Summarecon’s
price increase. As the flyover access to its estate is scheduled to be
finished in 3Q12, SMRA plans to raise prices further from Rp3-4MM per
sqm to Rp5MM per sqm. SMRA’s management says its NAV per share
is currently Rp1,628, but the company is due to issue a new NAV
number in February-March.
 NAV growth makers: We think price leaders should command a lower
discount to NAV than peers as they are price makers and should be able
to increase their NAV faster. As Agung Podomoro Land (APLN) has a
large market share in the apartment space, it could potentially become a
price leader in certain locations. In our view, the company needs to add
more projects to solidify its position.

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