We initiate coverage on Alam Sutera with an Outperform rating and target price of Rp275, based on DCF (WACC 13%). Alam Sutera is a notable property developer in Serpong, the most vibrant suburbs of Jakarta, being a leader of land prices in the area. In the next three years, we expect earnings growth of 66%, providing catalysts for a re-rating. Our target price of Rp275 takes into account cash flows from the development of the Serpong land bank and its retail mall operation in 2012. Our target price implies a 50% discount to RNAV, relatively aggressive to its own historical average of a 70% discount, arguably justified by its better profitability and better economic conditions.
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