On April 1, President
Director of Agung Podomoro Land (APLN), Ariesman Widjaja, named as a suspect by
the Corruption Eradication Commission (Komisi Pemberantasan Korupsi, or KPK)
regarding the bribery case of Jakarta Bay Reclamation. The aftermath for
related stock is predictable: On Monday, April 4, APLN dropped from Rp300 to
270 per share, then sliding further to as low as Rp232 per share in mid-May. In
recent weeks, APLN slowly but surely recovering, and when this article was
written, the share price is stable at 248, where based on technical analysis,
it appears that it will go up, while on the other hand its PBV is only 0.7
times at the price. An opportunity?
Until first quarter of
2016, APLN hadd revenues of Rp1.18 trillion, up from the same quarter of previous
year of Rp995 billion, and the net income also edged up to Rp110 billion. Since
most of other property companies posted a decline in revenue and net income in
the same period, or the net income had increased but the increase is coming
from non-operating income (ie exchange rate profit), then APLN’ financial performance
is quite good. Historically too, the company’s net income always rise since
2013, where the annual EPS is consistent in between Rp41 - 42 per share (so
that the PER is only 6 times at the price of Rp250 per share), and the equity
of the company was now nearly Rp7 trillion. Given the property industry began to
slowdown since 2013, then the performance was, once again, quite good.
And if we look at its
balance sheet, there is an interesting fact: From APLN’ total liabilitie of
Rp16.0 trillion, Rp7.4 trillion of which are deposits from customers that will
be recognized as income when later the property has been handed over, and about
half of the amount will become revenue within the next year. In its public
expose, the management of APLN clearly describe its latest projects that are still
under construction, plus the progress of sales of property units in each of
these projects (as of November 2015), where the data is quite convincing. Here
are the details:
No.
|
Projects
|
Locations
|
Sales Progress
|
1
|
SOHO @Podomoro City
|
Jakarta
|
Apartment sold out,
Office 77%
|
2
|
Madison Park
|
Jakarta
|
Apartment &
Shop sold out, Kiosk 95%
|
3
|
Grand Madison
|
Jakarta
|
Apartment 35%
|
4
|
SOHO @Pancoran
|
Jakarta
|
Apartment 45%
|
5
|
The Pakubuwono
Spring
|
Jakarta
|
Apartment 51%
|
6
|
Metro Park
Residences
|
Jakarta
|
Apartment sold out
|
7
|
Harco Glodok
|
Jakarta
|
Kiosk 38%
|
8
|
Plaza Kenari Mas
|
Jakarta
|
Kiosk 49%
|
9
|
Pluit City
|
Jakarta
|
-
|
10
|
Podomoro Golf View
|
Depok
|
-
|
11
|
Grand Taruma
|
Karawang
|
Rumah 83%, Shop 91%
|
12
|
Podomoro Industrial
Park
|
Karawang
|
-
|
13
|
Vimala Hills
|
Bogor
|
Villa 85%
|
14
|
Parahyangan
Residences
|
Bandung
|
Apartment sold out
|
15
|
Bandung
International
|
Bandung
|
-
|
16
|
Indigo Hotel
Seminyak
|
Bali
|
-
|
17
|
Borneo Bay Residences
|
Balikpapan
|
Apartment 51%
|
18
|
Orchard Park
|
Batam
|
House 59%, Shop
78%, Apartment 0%
|
19
|
Podomoro City Deli
|
Medan
|
Apartment 61%,
Condo 41%, Office 8%
|
Well, from here we can
see that APLN revenue for 2016 will likely rise compared to 2015, and indeed in
the First Quarter the revenue rose 18.9%. Just like most of other large property
companies, APLN also has bonds debt, but the bonds are denominated in Rupiah
with low interest rate of 9.75% per annum, thus the company's net earnings is
not exposed by risks of Rupiah exchange rate or the cost of debt interests.
And while APLN’ ROE is
relatively low at 12 – 13%, thus the shares are not good enough for serious
investments (read: long term investment), but on the other hand the ROE is
fairly consistent from year to year, and obviously the book value of the
company continues to rise. So if we can buy the shares at bargain prices, say
at the current price which reflects PBV of 0.7 times, which is fairly cheap
considering fundamental aspects, liquidity of the stock, and the company's
reputation as one of the leading property developers in the country, then it
means? Opportunity, of course.
The case of Pluit City
Reclamation?
But when we talk about
'reputation', how about the case of bribery where the company’s President
Director was the suspect? Yup, that would harm the company’s reputation a bit,
but the management immediately respond in which Mr. Ariesman resigns from his
position on May 25. Because Mr. Ariesman was not central figure in the Group of
Agung Podomoro (the central figure of the company is its owner, Mr. Trihatma
Haliman), then APLN would continue its business activities as usual. In this
regard I remember the bribery case of Sentul City (BKSL), also a large property
developer, where the president and owner of the company, Cahyadi Kumala, arrested by KPK in 2014. And since then the financial
performance of the company dropped, as the company lost its leader.
Meanwhile, when APLN’
subsidiary, PT Muara Wisesa Samudera (MWS) to stop the reclamation activities
on the G Island, which is part of the Pluit
City development project (read again the table above), then it has nothing
to do with the bribery case, but only because the reclamation project has not
obtaining ‘certificates of feasible’ from the Central Government, in this case
the Ministry of Environment and Forestry. Previously, after some research and
study, MWS obtained legal permission for the project from the Provincial Government
of Jakarta in November 2015, so that the company can start the project, but later
the Ministry of Environment stated that the reclamation project is still not
feasible. But currently the Ministry is studying the impacts that would arise
if the reclamation project is continued, whereby if the result is positive, MWS
will be free to continue its works.
While when Mr. Ariesman
bribed Muhammad Sanusi, the goal is not to gain the permission for the project
(because the reclamation project has obtained permission from the Provincial Government
since the very beginning), but to ‘leave a message’ to Mr. Sanusi as a member of
House of Representatives of Jakarta Province, so that the House could form
local regulations which lowers APLN obligations from previously to provide 15% of
reclamation area to the Provincial Government, to be 5% only. Previous the
Provincial Government, in this case Mr. Basuki Tjahaja Purnama (Ahok) as the
Governor, requires the quota of 15% before issuing the permit for the reclamation,
where the provincial government-owned lands will be used to build parks,
towers, etc., for Jakarta residents who work as maids, drivers etc. in the area
of Pluit City.
But for the reclamation
project itself, once again, there is no essential problem except it has not yet
obtain permission from the Ministry of Environment (or we could say, because of
lack of coordination between the provincial and central government), and even
Mr. Ahok himself is fully supporting the continuation of the reclamation,
though, of course, APLN must fulfil its 15% obligations that mentioned earlier.
But let's take the
worst scenario: What if the reclamation project is really stopped? Well, look
at the above table once again: APLN
still has eighteen other projects beyond Pluit City. So this problem of reclamation
problem is actually have no significant effect on the performance of the
company, only damaging the company's reputation for the short term. I said
short term, because Agung Podomoro has been well known as one of the most
prominent developers in Indonesia with products of premium quality properties,
so that when this reclamation story is forgotten after some time, the reputation
of the company would recover by itself. This is in contrast with Sentul City, for
example, that long before the owner was arrested, the company already had a lot
of bad stories, including involved in a legal case against their own customers.
Okay so what about the
stock? Well, in May JCI, in line with bear market period where the Jakarta
Composite Index (JCI) fell, APLN went down from the Rp500 to about 270 per
share in September of the same year. But the stock caught my attention only after
it was dropped further to as low as Rp210 per share, where the price reflected
PBV of 0.7 times, whereas the company's performance is still good. And indeed,
when JCI began to rise in year 2014, APLN also continue to rise to as high as 470
in February 2015, gained more than doubled in just about a year. And now, since
the PBV is only 0.7 times (again), and the company’s fundamentals are still good
in general, then what do you think?
PT Agung Podomoro Land,
Tbk (APLN)
Rating of Performance
at First Quarter 2016: A
Rating of Share at 248:
AA
Any inquiries about investment in Indonesia Stock Market, please send an email to teguh@averepartners.com
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