EQUITY RESEARCH - MNCS SECTOR UPDATES

Property Sector - July 11, 2024

Property Sector
The Dawn of a Promising Upsurge
OVERWEIGHT
Residential: Resilient prices and volume despite contradictive interest rates
• Residential sales grew by +31.2% YoY in 1Q24, meanwhile the ASP was relatively stable with
+1.9% YoY growth. Developers recorded an average increase in marketing sales of 13.1% YoY in
Return (%) -1D -1W -1M 1Q24, with approximately ~46-47% marketing sales resulting from the VAT incentive, in line with
JCI 0.41 1.17 5.19 the 100% VAT allowance in 1H24 and 50% in 2H24. According to the survey from Rumah123,
Tangerang became the most popular location reaching 15.6%, followed by South Jakarta (11.4%)
LQ45 0.93 1.69 3.15
and West Jakarta (10.8%), with a price range of IDR1-3billion/unit. Bogor and Denpasar were the
BSDE IJ -0.51 2.08 3.70 two most consistent and resilient regions in terms of annual price growth, having the highest
spread above the annual inflation rate. The steady housing price growth in Bogor resulted from
CTRA IJ 0.82 8.41 6.52
various factors, such as the infrastructure development. Meanwhile, the strength of the property
SMRA IJ 0.00 7.84 4.76 market in Bali was primarily supported by the tourism sector and several policies and incentives
PWON IJ -1.02 4.28 -3.47
that allow foreign ownership.
• High rental costs may spur a surge in home ownership. The increase in home ownership rates
EPS Growth (%) FY24E FY25F to 84.5% in FY23 indicated a shift as consumers become more interested in property, while rental
data showed a decline to 5.0% (exhibit 03). We note that the inflation in the property rental index
BSDE IJ +51.9 +19.8
since FY22-1H24 (exhibit 04) might contribute to this consumer behaviour change, prompting
CTRA IJ +18.5 +44.5 preference to purchase property during this period. This was also reflected in the average growth
SMRA IJ +24.2 +22.9
of mortgages disbursed (+11.3% YoY), with the KPR/KPA position at 7.0%/7.4% in 1Q24. The
stable mortgage rates were favourable for customers, given that as of 1Q24, ~75% of property
PWON IJ +13.4 +14.1 purchases were still funded by mortgages.

Recurring income: Average revenue flourished by 11.5% YoY

• From the recurring income metric, developers experienced an average growth of 11.5% YoY in
1Q24. The absence of new malls in the past two years has positively impacted the recovery of
occupancy rates, especially in Jakarta, with the average occupancy rate of the Greater Jakarta area
(Jabodetabek) was at 70.3% in 1Q24. This occupancy performance is expected to recover back to
80%, but in longer period, considering the potential of new mall establishments.
• Several malls will be developed in the Greater Jakarta area (Jabodetabek), including: 1) Lippo Mall
East Side, which is expected to complete in FY24E, 2) Living World Kota Wisata (in Bogor), and 3)
Aeon Mall Deltamas (in Bekasi), which has officially opened. Meanwhile, Pakuwon Mall and
Summarecon Mall Bekasi phase 2 are currently under construction and are expected to be ready
by FY25F-FY26F.
• We believe the business development of several outlets in the F&B sector, along with the
competition in lifestyle and sports (MAPI and ERAA), has also contributed to the recovery as we
observe a significant number of outlet rollouts in malls. Additionally, several malls are undergoing
renovations with thematic concept to attract a higher number of visitors.

Hold out hope for steady Rupiah

In our view, developers tend to be fundamentally sound in terms of revenue. However, some external
factors that are quite sensitive to the property sector are hindering the price movements. The
depreciation of the Rupiah to the level of approximately IDR16,200-16,400 led BI to lift the 7DRR by
25bps in Apr-2024 and the 10yr government bond yield at 6.85%-7.15%, which eventually held back
property stock movements. Our economist anticipates an improvement in the Rupiah if foreign
exchange reserves and inflation stay on track, propelled with a cool-off in geopolitical tensions. Under
this scenario, we expect a brighter turnaround in the property sector. On a YTD basis, BSDE and CTRA
were the two players in our universe that recorded net foreign inflows, amounting to IDR42.6billion
and IDR150.3billion, respectively.

Overweight Recommendation for the Property Sector

We maintained a Overweight rating for the property sector. The valuation is based on an average
NAV discount ~55%-70%. BSDE, CTRA and SMRA are our top picks, as they will benefit from the
incentive program due to its high product mix <IDR5bn per unit. The hawkish narrative is also another
factor to drag on properties, as 70% of home purchases are derived from mortgages. Aside from that,
the election period, as has been shown historically, is also poised to hamper property sales
performance.

P/E (x) P/B (x)

Mkt Cap TP
Ticker Rec
(IDR tn) (IDR/Sh)
FY24E FY25F FY24E FY25F

BSDE IJ 20.8 7.4 6.2 0.6 0.5 BUY 1,400

Research Analyst CTRA IJ 22.7 9.8 8.3 1.0 0.9 BUY 1,300
Muhamad Rudy Setiawan
SMRA IJ 9.2 14.4 11.8 1.1 1.0 BUY 750
Muhamad.setiawan@mncgroup.com
PWON IJ 18.9 11.4 10.0 1.1 1.0 BUY 585

Sources : Bloomberg, MNCS

MNCS Research Division Page 1

 EQUITY RESEARCH - MNCS SECTOR UPDATES
Property Sector - July 11, 2024

Exhibit 01. The trend of mortgage distribution and mortgage rate

Loans Landed House High rise

8.00 740,000
7.74 7.75 7.74 7.74 7.71 720,000
7.80 7.66 7.64 7.60 7.58 700,000
7.54 7.52 7.49
Mortgage rate (%)

7.60 7.47 7.46 7.44 7.44 680,000

7.40 7.57 7.55 7.52 660,000

IDR bn
7.49 7.46
7.41 7.37 640,000
7.20 7.36 7.32 7.28 7.24 7.20 7.17 620,000
7.00 7.14
7.04 7.03 600,000
6.80 580,000
6.60 560,000
1M23 2M23 3M23 4M23 5M23 6M23 7M23 8M23 9M23 10M23 11M23 12M23 1M24 2M24 3M24 4M24

Sources : OJK, MNCS

Exhibit 02. Trend of mortgages disbursed 5 big banks in FY21-1Q24 (IDR tn)

Mandiri BTN BCA BNI BRI

600
51.5 53.1
On average growth of 500 44.0 58.5 46.1 60.1
mortgages disbursed 39.1 53.5 54.5
+11.3 YoY in 1Q24 49.6 121.7
400 121.8
109.1 109.6
97.5
300

200 261.7
285.6
264.6
292.7
244.8

100
46.2 50.1 56.0 50.8 57.4
0
FY21 FY22 FY23 1Q23 1Q24

Sources : Companies, MNCS

Exhibit 03. The trend of rental vs own house in 1999-2023

Rentals (%) - LHS Own House (%) - RHS

The ownership
11 86
increased to 84.5% in
FY23. We attribute 10
84
this to rising rental 9
costs, supported by 82
increased mortgages 8
disbursement and 7 80
higher sales volumes
6
78
5
76
4
3 74
FY99
FY00
FY01
FY02
FY03
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11

FY12

FY13

FY14
FY15
FY16
FY17
FY18
FY19
FY20
FY21
FY22
FY23
FY11*

FY12*

FY13*

Sources : BPS, MNCS

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 EQUITY RESEARCH - MNCS SECTOR UPDATES
Property Sector - July 11, 2024

Exhibit 04. The trend inflation property rental index in FY21-1H24

3.0%

Starting from 2022, 2.5%

the property rental
inflation index has 2.0%
been increasing up to
1H24, prompting
consumers to prefer 1.5%
purchasing homes
instead 1.0%

0.5%

0.0%
Mar-21

Mar-22

Mar-23

Mar-24
Jul-21

Jul-22

Jul-23
Jan-21

Jan-22

Jan-23

Jan-24
Sep-21

Sep-22

Sep-23
Nov-22
Nov-21

Nov-23
May-21

May-22

May-23

May-24
Sources : BPS, MNCS

Exhibit 05. Trend of Monthly average occupancy rate (AOR) and asking base rent (per sqm) retail segment in FY16-FY26F

Sources : Colliers, MNCS

Exhibit 06. The trend of sales volume property in FY09-1Q24 (%)

60

40

20

-20

-40

-60
FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 1Q24
Sources : BI, MNCS

MNCS Research Division Page 3

 EQUITY RESEARCH - MNCS SECTOR UPDATES
Property Sector - July 11, 2024

MNC Research Industry Ratings Guidance

 OVERWEIGHT : Stock's total return is estimated to be above the average total return of our industry coverage
universe over next 6-12 months
 NEUTRAL : Stock's total return is estimated to be in line with the average total return of our industry coverage
universe over next 6-12 months
 UNDERWEIGHT : Stock's total return is estimated to be below the average total return of our industry coverage
universe over next 6-12 months

MNC Research Investment Ratings Guidance

 BUY : Share price may exceed 10% over the next 12 months
 HOLD : Share price may fall within the range of +/- 10% of the next 12 months
 SELL : Share price may fall by more than 10% over the next 12 months
 Not Rated : Stock is not within regular research coverage

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MNCS Research Division Page 4