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SMRA - 1Q20 Update

As of 1Q20, SMRA booked a revenue of Rp1T, which declined by -2.0% (Y/Y) from Rp1.1T in the same period last year. Gross margin deteriorated to 50.8% from 54.3%, pushed down by two of its segments: property development and other revenues. Operating expenses grew by +8.0% (Y/Y) and finance expenses were flattish (+3.0% Y/Y). Net profit was recorded at Rp37B, a drop from Rp42B in 1Q19 (-12.3% Y/Y).
LIKELY HALF-FINISHED

Revenues were seen to slightly decline by -2.0% (Y/Y) to Rp1T from Rp1.1T. Property development revenue was down by -7.0% (Y/Y), while on the other hand, investment property and other revenues were up by +3.5% (Y/Y) and +2.2% (Y/Y), respectively. Property development margin deteriorated to 53.4% from 60.2% and other revenues from 28.7% from 25.2%, while investment property margin improved to 58% from 56.6%. Operating expenses increased by +8.0% (Y/Y), driven up by promotion and advertising and salaries. 1Q20 net profit stood at Rp37B (-12.3% Y/Y). Our estimate for 2020F revenue and net profit: Rp4.3T (1Q20 result: 24% of 2020F estimate) and Rp245B (1Q20 result: 15% of 2020F estimate), as according to its seasonality, SMRA’s net profit tends to be stronger in the subsequent quarters.
VALUATION

We maintain our BUY recommendation with lower 12-month target price of Rp920/share (previous TP: Rp980/share, 75.5% discount to RNAV near its 3-year mean), as we think SMRA’s marketing sales realization will not reach the initial marketing sales target. The TP reflects 12-month P/E of 32.2x and P/B of 1.3x.

 

Tue July 14Th, 2020

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