CLSA CTRA 1H10 result

CTRA reported a 2Q10 result that is in-line with our forecast (50% of our FY10 number), with net profit reached Rp93bn in 1H10, an increase of 47% YoY.

Gross margin slightly declined in 2Q10 to 43%, below our expectation of 45%. We will analyze the breakdown once the full result is available.

We maintain our ‘SELL’ call on CTRA with TP: Rp300/sh, on the back of execution risk of the Ciputra World Jakarta’ projects. Construction delay and competition from nearby projects had translated into continuing weak pre-sales of the condominium. Further potential delay of its mall launching from Nov2011 to Jun/July 2012 imposes downside risk on the project returns, and potential further delay of subsequent projects in the
pipeline. Moreover, although current balance sheet can support the capex for the project, there is risk that cost will be higher than initially estimated given the delay. CTRA is now trading at 41% discount to its NAV, still more expensive than the sector’s average at 55%. We see more upsides by investing in other names such as SMRA and BSDE.