Bumi Citra Permai

The name of Bumi Citra Permai (BCIP) most probably doesn’t ring a bell, but the company just released its first half financial statements, which at a glance shows impressive results. The net profit increased more than twice, the annualized ROE 25.5%, and the PBV was just 0.5 times at the price of Rp125 per share. Is it a jackpot opportunity?

BCIP is a small-scale property company (if compared to other property companies on the IDX) with only one major asset, namely the 400 hectares Millennium Industrial Estate (MIE) in Cikupa, Tangerang, Banten Province, which is about 36 kilometers from downtown Jakarta. The estate sells industrial plots, office buildings, warehouses, and shop houses. As of the second quarter of 2017, BCIP posted a total asset of Rp830 billion (US$ 58 million), and still has 10 lots of land, and 3 units of building available for sale. BCIP also has one subsidiary engaged in clean water management, but its contribution to the company's total income is not significant, only a few billion Rupiah per year.

Since long ago, the common problem faced by property companies specializing in industrial estates is that their financial performance is not consistent from time to time. Because not like selling residential property where there will always be people who need a place to live, the sale of industrial lots is much more difficult because not even every year the developer could find a company that needs land to build a factory. This is also the same problem for BCIP, and as a result its earnings in the last five years were not stable at all. In 2013, BCIP posted a profit of Rp30 billion, which later dropped to Rp5 billion in 2015, before rising once again to Rp49 billion in 2016.

So even though the company successfully booked Rp44 billion in net profit in the second quarter of 2017, there is no guarantee that the profit will increase to Rp88 billion by the end of the year, instead it could be slightly reduced (due to operating expenses), ie if BCIP fail to find new buyers for its lots of land until the end of the year, and unfortunately the company does not have other sources of income, and the management also have no plan to diversify/develop business. For the long term, BCIP actually has a plan to add 200 hectares of land for MIE (the land already exists), but still waiting until lots in the original area were sold out, and that could take a long time.

So, if for serious investments in the long term, BCIP is not recommended. In addition, from the beginning of 2013 to mid 2016, BCIP also rose unreasonably from 200 to 1,300, before slashed to 100 in just four months (the movement is similar to pump and dump scheme of Trada Maritime (TRAM), and Sekawan Intipratama (SIAP)). There is also news that BCIP is involved in default case of medium term notes (MTN) which were issued by a company called PT Berkat Bumi Citra (BBC), with a guarantee of BCIP's industrial estate. And even though the management has denied that they have affiliation with the BBC, the case is still in progress. And finally, the company sometimes late in releasing its financial statements. In short, in terms of management credibility, BCIP is doubtful.

However, the fact is that BCIP's latest financial performance is quite good, and the stock valuation is low. I actually observed the stock since the beginning of 2017, when the decline was stopped at 106 (from 1,300’s), and later the stock bounced to 240 before drop once again, and eventually stable at the current price range. Normally, if there are small companies with illiquid stocks such as BCIP, the long term prospects are not clear, and the quality of management is also not convincing, investors will not be interested at all, and the price may go down until bottom price of Rp50 per share. But on the other hand, BCIP's latest earnings aren’t bad, while the stock valuation is also discounted. So I think, unless there is a certain force majeure, then BCIP will not drop to 50. Plus, don't forget that the sector that will be hot is property, and BCIP is indeed a property company.

So even though this BCIP, once again, is not recommended for serious investment for the long term, but the stock still offers short-term trading opportunities, of course with advice that you do not use too much funds (to put US$ 20,000 in the stock is already too big for BCIP, so you should use less than that). I myself once interested to buy the stock when it fell to 70s (probably because of invisible market correction, you can read the explanation here), because before that it was always sideways in the 100's (and that is a reasonable price range, because as mentioned above, BCIP does not have a reason to drop to Rp50 per share), but unfortunately it immediately flew to 130's, not long after the financial statements came out.

But by considering the market conditions etc., then I think the best price for BCIP is in the range of 100 - 110, or slightly below. And of course, you have to take a look at the financial statements, and let’s hope that in the next quarters, the company is able to maintain its earnings.

PT. Bumi Citra Permai, Tbk

Rating of First Half Performance: A

Rating of Stock Price at 125: A

Original article was written and published (in Indonesian Language) on October 6, 2017. Any inquiries contact the author (Teguh Hidayat) by email teguh.idx@gmail.com.