CIMB Company Update – Total Bangun Persada – Higher margin outlook

Maintain Outperform on TOTL with a higher target price of Rp315 (from Rp300), following our 14-30% earnings upgrade and the application of a lower discount of 20% (from 30%) to our market P/E target of 15x. We are now projecting a 3-year EPS CAGR of 30%, up from 18% on the back of: 1) higher margins as its direct contracting scheme appears to be working well, spurred by a stronger-than-expected property recovery; and 2) the impending launch of its Bali property project in Oct 10 with sales recognition in 2011/12, another margin booster. Having underperformed its peers of late due possibly to its below-average growth outlook, TOTL’s share price now deserves a re-rating, in our view, on margin catalysts.