Variations in the property development companies registered in Indonesia Stock Exchange (IDX) make it difficult to make investment decisions. Each company has their own portfolio that is influenced by different factors. Here we will sort the real estate industry into 3 types and analyze them one by one for the investment portfolio in 2017.
- In 2017, the industrial area development company especially Puradelta Lestari tbk (DMAS) has to be noticed
- High rise developers are running out of land reserves, except for PP Properti tbk (PPRO)
- Large capitalization property companies will get huge impact from Tax Amnesty (TA)
The first group is the large cap property developers. They have diverse product portfolio, from landed residential, high building, and even some in industrial areas. Geographically, their products are quite scattered across Indonesia. They are Bumi Serpong Damai tbk (BSDE), Lippo Karawaci tbk (LPKR), Pakuwon Djati tbk (PWON) and Summarecon Agung tbk (SMRA).
The second group is the high-rise developers. Included among these are PP Properti tbk (PPRO) and Intiland Development tbk (DILD). Meanwhile, the third group is the industrial area developers, including Puradelta Lestari tbk (DMAS) and Kawasan Industri Jababeka tbk (KIJA).
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Industrial Area Companies Must be Considered
It appears that in a comparison of these graphs, that of revenue growth since 2011, the industrial area developers have not had the strong momentum as the other two groups. This could be due to the lack of industrial area businesses in Indonesia. Various pro-business economic policy packages are deemed to be a driving factor to increase developers.
On other hand, are issuers ready to seize this opportunity? The capex since 2011 indicates that the companies from the industrial area have had relatively stable capex as compared to the other groups. This is natural, given the growth was quite steady. But the ratio of capital expenditures to revenues is relatively high, although declining; it is positive for growth. But what is surprising is they should be able to finance capital expenditures with cash, when looking at the average operating cash flow versus revenue that is much higher than other groups.
The comparison gives an opportunity for investors to focus on industrial area companies, especially DMAS which has huge land reserves with a strategic area and nice infrastructure access.
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High-rise Developers Begin to Run Out of Land Reserves
Most of the high-rise companies are concentrating on strategic land development in Jabodetabek, but the areas are either already taken or expensive. The companies reduced their capex especially this year. Several companies have exerted efforts to increase the reserves without any capex, for example, by cooperating with the landowner to proceed with the development without paying for the land.
However, there are still several companies that plan to increase reserves in other areas which have not yet been reached; an example is PP Properti tbk (PPRO) which has developed properties in Semarang, Surabaya, and Sulawesi.
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Large Cap Developers Significantly Benefit from TA
Tax Amnesty (TA) program, which has been successfully applied, will send substantial fund in the Indonesian capital market. It is estimated that one of the sectors that will benefit most are the property and infrastructure. With big fund, hence the large cap issuers would benefit most, because it has great liquidity to contain it. These five issuers can still be considered next year.
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