Gading Development

The market may not be friendly with the stocks in the property and construction sector, on the last few months. But what happened to the stock of Gading Development (GAMA) is really a special case. After from June to August it is completely untouched by IHSG correction or correction in the property sector itself, but only in a matter of two weeks, the stock was immediately dropped from 500 to position of 90! Thereby, for those who hold GAMA at the price of 500 and still holding it until now, they have experienced 81.2% of potential loss.

GAMA’s unnatural movement is caused by the stock maker, because if the shares’ movement is following the movement of the market, then from the valuation side, it is impossible for GAMA to rise up to 500 (we will discuss about it later). Anyway, let’s check this company from the beginning.

 

Logo PT Gading Development, Tbk

GAMA is a small property company that was established on 2003, initially was engaged in the construction of apartments and town houses (a small, exclusive residential complex by the small number of housing units). However, as the time goes by, the company started to engage in other property types. Currently, GAMA has at least three business units, namely the construction of residential apartments and town houses, hotels and resorts, and regular residential with more affordable price than town houses' residential types. Those projects are spread from Jakarta, Bekasi, Tangerang, Cianjur, Cirebon, until Solo. Besides that, GAMA also has some vacant lots (landbanks) in Sukoharjo regency, Central Java, with value of Rp629 billion, or more than half of the total assets of the company. However, up until today, the company has not specified what will they do with the landbanks.

Until the third quarter of 2013, GAMA was only capable to record Rp16 billion of net profit, which after divided the number of shares, then its EPS is only Rp1.55, very small. However, that profit was probably has not reflected the actual company’s performance potention. Throughout the year of 2013, there was only one project of GAMA that was able to achieve revenues, which is Gading Green Hill apartment in Kelapa Gading, North Jakarta, and even then it has not fully sold (approximately only 44%).

In addition, aside from Gading Green Hill apartement, the following are some other company’s projects, which in average, is residential project or townhouse. Until the latest published financial statements, the status of those projects is still under construction. The progress is per 30 September 2013.

Project’s Name	Progress (%)
Villa Permata Tambun, Bekasi	55
Grand Regency, Bekasi	47
Villa Permata Cikarang	38
Sindang Panon Regency, Tangerang	44
Senopati Estate, Bekasi	26
Botanical City, Solo	0
Green Land Resort, Cianjur	0
The Dome, Jakarta Barat	0

Unfortunately, besides Gading Green Hill and Sindang Panon Regency, the average of above projects is estimated to be done/starting generate income on the year 2015, which is still quite a long time. In fact, for the latter three projects, namely Botanical City, Green Land Resort, and The Dome, the construction completely has not begun yet, or in other words, it is still a plan. 

As for its recurring income, on 2013, GAMA started to build two hotels (Zest Hotel), each in Cirebon and Solo. However, there is still no information when will the hotel is to be completed, probably around the year of 2015, or even longer.

But the point is, for the next 2014, the company is probably can only rely its revenue from the Gading Green Hill apartment and Sindang Panon housing. It means that the profit also has not going to increase. So if the record of above projects is successful and the profit increase, then GAMA’s shares is probably suitable to be collected on the next 2015. If compared to other property companies in IDX that have achieved the results from the projects since last 2011, and some that are likely to achieve revenue in next 2014, then it can be said that GAMA has missed its start. We don’t know how the company’s performance in the next 2015, but certainly for 2014, GAMA’s performance is probably still the same as today.

One other important thing to note is that, of the many property projects that are being worked on or still planned, none of which is in Sukoharjo, the location of the company’s landbank. So, I wonder what will the company do with its landbank.

The conclusion is, when it comes to GAMA’s prospect, it still vague. However, this company is relatively clean of debt (there is only bank loan amounted to Rp160 billion), and certainly the price’s position is probably started to be interesting for some people. On the stock price of 90, PBV of GAMA is 0.9 times. Probably this valuation cannot be said as low, considering the company’s biggest asset, the landbank in Sukoharjo, likely will not be anything within a couple of years, because the company has not had any development plan for the landbank. So, unless later GAMA release announcement entitled ‘The Company will built integrated residential in Sukoharjo’, or such, then the vacant lot asset will mean nothing. It is also because the location is in the middle of nowhere (Sukoharjo is located in the south of Solo).

Related to its shares, when it rises up to 500, it seems that no one noticed. But as soon as the shares dropped, some of you may catch the ‘falling knife’. From the valuation side, GAMA’s shares price is considered not too high, although also cannot be said as undervalue due to the above reasons. To be able to increase to the mid term, let’s say, until the next 2014, the chance is also small. It is due to the company’s performance, as we’ve discussed, will not increase unless the Gading Green Hill apartment is immediately sold out.

But if we look at the shares’ movement that fell down drastically, then usually later there will be a moment to rebound. And that is, probably the time you can go out.

PT Gading Development, Tbk

Performance Rating on Q3 2013: BB

Shares Rating on 90: BBB

Original article was written on November 16^th, 2013.