CLSA SMRA 1H result - In-Line

• SMRA reported a good result for 2Q10 – broadly in-line with our expectation, with 1H10 net profit reached Rp102bn, 46% of our FY10 expectation.

• On a QoQ basis, revenue was up 18%, however higher than expected gross profit margin (55% in 2Q10, vs 46% in 1Q10) resulted in expansion of gross profit by 41%. Due to higher tax paid in 2Q10 resulted in a flat net profit growth QoQ.

• Reiterating our BUY on SMRA. Now trading at 43% discount to its NAV. We continue to like the company as a strong property developer. 6M10 sales was ~80% of our FY10E of RP1.6tn. However, the company had revised their target from Rp1.6tn to Rp1.9tn, which means 6M10 sales was 66% of this target. Clearly, there is upside risk to our marketing sales estimate this year, which will translate into higher earnings estimates for FY11/12. On the investment property (e.g. malls), we believe the performance continues to be good. We will analyze the breakdown when the full result is out.