The new launching of Summarecon Agung (SMRA IJ) property is another confirmation of how strong Summarecon brand equity is.
It certainly helps that mortgage rate is low by Indonesian standard. Looking at the five (out of six) biggest mortgage lenders in this country, we are looking at 31% YoY mortgage growth in 1H10. Historically, around 60-70% of the property buyers at Summarecon Serpong site utilize mortgage.
When you combine strong brand equity and low mortgage rate, you are going to get some interesting result. SMRA’s launching of “The Springs” last weekend saw 97% of the units offered were sold within hours last Saturday (usually only corner plots left). The launching was the talk of the town over the weekend.
What is even more amazing is that each potential buyer apparently had to take their queue number a week before launching, paying Rp5mn for the queue number assigned. Each queue number holder had to specify 3 units that they intend buy (no guarantee not yet taken by those who got lower queue number). The point is: one should feel privileged and lucky to have a chance to buy a unit at SMRA launching. What a brand equity!!
The initial launch was 400 units with price starting from about Rp700mm (US$78k) per unit (implying land only price of Rp3mn or US$335/psm). Preliminary estimate is Rp300bn sales from this launch. The Springs is a 100ha residential development, for 5-6 years.
Our property analyst Sarina revised up marketing sales target (19%) for FY10 to Rp1.9tn from previously Rp1.6tn. We estimate SMRA has reached 78% of this new sales forecast YTD. The risk is clearly on the upside.
We also raised our TP to Rp1,250/sh. Maintain BUY.
Other key points from the report:
· Ramping up investment property. The investment assets continued to have strong performance in 1H10 with stable gross profit margin of 55%.
· Harris Hotel in Kelapa Gading started operation in May, currently at 70% occupancy.
· Serpong mall Phase 2 to start construction, and will open in July 2011. This adds 45,000sqm NLA to the existing 34,000sqm. SMRA had also increased rates for its malls through the increase in US$/Rp peg rate. Occupancy rates on the malls remain high, at 95%. Well-run malls + limited competition at the moment.
· Valuation: still attractive at 37% discount to NAV, it had traded at a premium historically. We raised our profit forecasts by 11-15% for FY11/12 on the back of higher sales expectations.
· We think there is still upside risk to our numbers given its strong momentum in sales.
· We also raised our TP to Rp1,250/sh. Maintain BUY.
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