Deutache bank - Bakrieland Development - Sales bottoming out; Buy maintained

Property sales are off lows; Buy maintained
ELTY's March residential sales grew 5% mom. This trend will continue as banks resume lending, given liquidity improvement and manageable NPL. Mortgage rates dropped 500bps from recent peak to c. 10% as mortgage is one of the key drivers for loan growth. Early completion of toll roads too should allow ELTY to record positive FCF in 2011. Concerns over corporate governance are largely reflected in the high COE of 18.2%, a 100bps premium over other developers. This note marks the transfer of coverage from Raymond Kosasih to Fiky Silvia.

Bottoming out property sales
We believe the upcoming Bogor Outer Ring Road will alleviate the area's traffic congestion, further unlocking its landbank value. Although the credit crisis has affected the sector, we think it is on a path to recovery, albeit slowly, supported by long-term demand for new housing and the recent downward trend in rates. Early completion of toll road should start contributing to earnings in 4Q09 (from 2H10
previously), providing downside cushion with sustainable recurring income.

DCF is a more conservative valuation given lower price increase than
WACC
We believe DCF is a more conservative way to value Indonesian developers as opposed to PER and/or PB, given the long-term monetizing period of its asset base (land bank). Also, our DCF (property and toll) of Rp475 is more conservative than the company's property-only NAV of Rp531 (or Rp777 inclusive of toll-road).

Target price cut to Rp475; risks: delays in construction, lower
sales/prices
We assumed RFR of 11.1%, ERP of 5.4%, and beta of 1.3x to derive our DCF-based TP. Risks: higher mortgage rates, rising costs. See pp.10-12 for details.