Intiland Development (DILD) Update-1

2010 net profit could jump significantly to around IDR490 billion from only IDR26 billion a year earlier. It is now trading at a p/e ratio of only 11.8 times 2010 prospective earnings, and 9.7 times 2011, far below the industrial average of 16 times.

DBS Intiland Development Coming back with a bang TP Rp 725.73

• Restructuring ends dormant years
• Strong development pipeline and potential
• Initiate coverage with BUY rating and 42.3% upside potential to Rp725.73 TP

Restructuring ends dormant years. DILD had been mostly dormant with no major developments since the 1997 Asian financial crisis. In 2007, there was a major
restructuring and a new CEO took over and implemented a new aggressive expansion plan, and its balance sheet turned around with debt dropping from Rp1.48tr to
Rp0.39tr post-restructuring. In 1H10, DILD tripled its land bank to 2400ha, of which 55ha are earmarked for high rise developments, the largest in Indonesia.

Strong project pipeline and potential. DILD has a strong development pipeline for the next five years. It will develop four townships with a minimum of 220ha of
saleable area, eight mixed-use high-rise developments with a minimum of 60ha of saleable area, and enter the budget hotel business by developing the Whiz Hotel chain
in major cities in Indonesia. DIDL also has minor developments such as the 146ha Ngoro Industrial Estate and 1.8ha Pinang Residences cluster.

BUY, 42.3% upside to Rp725.73 TP. Our TP is based on 30% discount to RNAV of Rp1036.80/share, to account for execution risks of future projects. DILD’s 10.5x FY10F PE multiple is cheaper than its property developer peers average of 23.6 FY10F. The stock is currently trading at undemanding 0.5x P/RNAV, and we initiate coverage with a BUY rating. The materialization of future projects could be a re-rating catalyst.


BNPP Intiland Development (DILD) Asset sales boost earnings TP IDR 750

ƒStrong 1H10 on low-yield asset sale.
ƒMore asset sales on the way; upgrade earnings.
ƒDevelopment of apartment projects and new landbank.
ƒTP raised to IDR750 (from IDR625); maintain BUY.

Strong 1H10 results
Intiland reported IDR223b net profit out of IDR455b sales revenue in 1H10. The net
profit has already achieved 78% of our previous earnings forecast for FY10, mainly because of the sales of low-yield assets, as explained by management during recent meetings with investors.

More asset sales on the way, leading to earnings upgrade
Part of management strategy is to dispose low-yield assets and use the proceeds to
concentrate on the next projects with higher returns. Intiland sold its Graha Residen (under PT Grand Interwisata) in Surabaya and recorded IDR137b profit below the operating level in June 2010. Aside from this, the company has been selling leftover land in Taman Semanan Indah in W. Jakarta, and in Graha Famili in W. Surabaya. It is also negotiating the sale of Wisma Manulife in Jakarta. Management expects more asset sales to create cash flow this year and early next year for major development in 1Park Residences, TB Simatupang, Kebon Melati, Cengkareng / Tangerang
new township, Talaga Bestari and Graha Natura. We adjust our earnings forecasts to include the profit from land and asset sales in 1H10, resulting in a net profit upgrade of 22%, to IDR347b for 2010. As Intiland plans to embark on several new projects in 2011, we should see strong earnings in 2012 when some projects are realised in the P&L.

Development of the new projects
1Park Residences, an apartment complex in S. Jakarta, is being constructed and Intiliand is doing the basement development. Of the two towers on offer, 62% or some 143 units have been sold thus far, with the third tower to be launched soon. The government recently reiterated plans to develop an 11,000ha new city in Maja, Banten, where Intiland has recently acquired 1,092 ha of land – a potential positive for Intiland’s land value.

Raise TP to IDR750 and maintain BUY
As land prices in some areas (especially close to newly completed infrastructure) have gone up, we have adjusted our RNAV calculation. Our TP of IDR750 is based on a 25% discount our RNAV estimate (which takes into account the dilution impact from the conversion of warrants) of IDR1,004 per share. While this is at premium to peers (based on our own and Bloomberg consensus estimates), we believe Intiland’s ability to deliver strong earnings is its strength. Downside risk is a significant increase in interest rates.