Danareksa Summarecon Agung (SMRA IJ, Rp 940 BUY) Good results

Highlights:
l Revenues grew a brisk 21% yoy (+18% qoq) to Rp 311bn in 1Q10. The gross margin was squeezed a bit to 45.9% from 48.6% in 1Q09, however, due to higher direct costs.

l Thanks largely to economies of scale, the company was able to rein in operating costs. This is reflected in the 430bps decline in the opex to sales ratio to 20.9% in 1Q10. As a result, net profits also grew – up 119% yoy or 14% qoq - to Rp 51bn.

l The company’s balance sheet remained strong with a cash position of Rp 513bn and low net gearing of 21%.

Comments:
l The 1Q10 net profit is 18% of our full year forecast of Rp 278bn. As we expect revenues to increase further with the bulk-booking of 2009’s pre-sales of Rp 1.2Trn, the 1Q10 net profit looks to be in line with our full year forecast.

l The pressure on the gross margin in 1Q10 should be temporary as the 1Q10 accounting revenues of Rp 311bn are the booking of the company’s pre-sales in Jan-Mar 2009 of which 60% are from the launch of Grand Orchard in Kelapa Gading. Note that the gross margin on the Grand Orchard sales is 500bps lower (at an estimated 35-40%) than the gross margin on the Serpong sales.

l The pre-sales from Kelapa Gading and Serpong in 1Q10 reached Rp 320bn or 20% of our full year pre-sales estimate of Rp 1.6Trn.

l For April’s pre-sales number, we expect around Rp 370bn from its new launch in the area of Bekasi. Here the company launched 2 clusters of residential property - called Palm Residence and Maple Residence - with 475 units in total. All were sold at the launch on 24th April 2010, resulting in total sales of Rp 370bn (including Rp 15mn for each unit as a non-refundable booking fee).

l The company explained that the Bekasi launch was divided into three phases with price increases of 3% in each phase. Thus, the Average Selling Price ranges from Rp600mn to Rp640mn per unit for Palm Residence and from Rp900mn-950mn per unit for Maple Residence. This is equivalent to Rp1.6mn-1.9mn per sqm.

l All in all, we keep our forecast intact and maintain our BUY call on the stock. Our TP is set at Rp1,150, a 30% discount to the NAV and implies 3.6-3.2x PBV 10-11F and 28.5-22.5x PER10-11F.