Mandiri Sekuritas BSDE: The roll-out continues

Bumi Serpong Damai posted in-line 1H10 net earnings of Rp183bn (+46.9%yoy). With July sales number back on track, the year-end target is likely to be met, with premium clusters launchings as the potential upside. We are rolling our forecast to 2011, the stock currently trades at 51% discount to NAV11F, with new TP: Rp1,210 (+44%) for end of year 2011.

Improvement in margins. BSDE continues showing strong quarterly result, with 1H10 earnings surging 45.9% yoy, following improvement on operating and net margin to 56.1% and 30.1%, respectively, from 48.2% and 23.3%, in the same period last year. The higher margin was contributed mainly from land lot sales, as improvement of land l! ot price to Rp5mn/sqm (Rp3.5mn/sqm in 09).

Sales rebound in July. With first-half marketing slightly lagging (43.8% of Rp2tn target), the company’s July sales rebounded to about Rp275bn, 88% higher compared to the average monthly sales for the first six months of 2010.

Tapping high segment to reach higher margins. Despite continuing to sell landed houses to the mid-income segment, in the second half the company also plans to expand its market to the higher-margin high-end segment through the launching of 2 (two) new premium clusters on 70ha and 10ha area of land. The latter will be offered in chunk lots (1000-3000m2 each), though both being offered at the similar land price range of Rp7mn – 10mn/sqm. The two clusters are located on their hill side, with the Cisadane! river as view.

Maintain Buy. With four sub clusters are in queue to be booked (generally each sub-clusters contribute ±Rp150bn), together with expected additional bookings from commercial lots sales which may contribute up to Rp300bn, the sales target balance should not be an issue, as currently the company still enjoys the benefit of strong domestic consumption and gentle interest rate environment. Should, the company be able to smoothen the premium cluster sales this year! , it will provide upside for the company y, especially the lot sales, which directly be realized on the year-end book. We are rolling our forecast to 2011, with new TP of Rp1,210, a 30% discretionary discount to our NAV11F. The stock currently trades at 51.1% discount to our NAV11F. We maintain buy on the counter.