Singapore Equity: Sinarmas Land
Company Name: Sinarmas Land
Share Price: SGD 0.610
Market Capitalisation: SGD 1.84b
Sinarmas Land is the holding company of Bumi Serpong Damai, the largest property company in Indonesia by market cap and sales.
You can read up more in detail about the company here:
http://research.dmg.com.sg:9898/UploadPDF/SG_Initiation_Sinarmas%20Land%2020140704.pdf
The company structure is as follows:
The share prices of all the property companies in Indonesia have appreciated by between ~25% to ~30% since November 2014 and are now at 52 week highs due to:
1. The sharp fall in oil prices and in turn fuel prices (little risk of rate hikes unless there are severe capital outflows from a faster than expected Fed rate hike, long-term interest rates should trend down as President Jokowi’s economic reforms boosts Indonesia’s credit rating).
2. The cut in cement prices by Semen Indonesia (via moral suasion from the government) which was followed by Indocement today.
3. Increased demand for industrial land due to the push for more manufacturing activities to offset the current narrow commodities led export base and cutting of red-tape to facilitate manufacturing FDI.
The bulk of Sinarmas Land’s value (using Sum of the Parts Valuation) is driven by Bumi Serpong Damai hence the share prices should have a similar correlation as seen by the chart below (the blue line represents Bumi Serpong while the black line represents Sinarmas Land).
From the 6 month chart, Sinarmas Land has been a significant laggard especially in the last 3 months despite a stable SGD/IDR exchange rate during the latter period and should catch up with Bumi Serpong, no?
A sum of the parts valuation for Sinarmas Land yields a fair value of SGD 1.01 per share. Even after applying a holding company discount of 10% to 20%, Sinarmas Land should be valued at between SGD 0.80 and 0.91 per share.
Current share price seems unjustified especially in the face of the strong rally by the listed property stocks in Indonesia.
2 potential catalysts in the pipeline to unlock hidden value:
a. Potential listing of Kota Deltamas, its industrial estate property arm after listing was called off in 2013 due to weak market conditions.
b. Potential spin-off of its investment properties into a REIT.
Updated with more details including latest chart against Bumi Serpong Damai.
Have a nice weekend!
Another under-rated company.
I suspect it is also because there is no major analysts covering this stock.
Only RHB Research and Phillip Securities have coverage and both rate this stock a buy for target 1.01 and 0.96 respectively.
Strange since it is the parent of Golden Agri and listed in 1997.
You’re right, probably the lack of interest due to the stigma attached to the Sinarmas Group which isn’t known for the best of corporate governance (especially after the Asia Pulp & Paper (APP) debt default saga in 2001.
Nevertheless, the steep 40% discount is still unwarranted especially with its key subsidiaries are already valued at a 40% discount in the sum of the parts valuation.
Hope they unlock the hidden value for shareholders soon like what the rest of the property developers have been doing in Singapore.
Perhaps when equity coverage improves eventually. Otherwise this will be a long term investment that pays about 1% dividend.
Seeing that the share price has spiked, perhaps an equity linked note or option.
Oops…some news out of Indonesia today, but Bumi Serpong’s price not so badly affected, in fact it closed up 0.25% by the end of the day
Bahana Securities:
Property stocks were hit down in the am session with the concerns resurfacing of possible implementation of new additional tax regulation that might reduce the lucrative buying activity on higher higher taxation on high end apartments & housing.
The govt is reportedly planning to reduce the threshold for properties subject to an additional 5% income tax under Income Tax Article 22 to include houses over IDR2bn and 400sqm in building area, and apartments over IDR2bn and 150sqm in area. The current thresholds for the houses is IDR10bn in value with 350 sqm area and for apartments is
IDR10bn or 150 sqm area.
The sector fell led by Lippo Karawaci (LPKR -2.2%: IDR1100), Pakuwon Jati (PWON -4% : IDR484), Ciputra Property (CTRP -4% : IDR820), Ciputra Surya (CTRS -3% : IDR2955), Sumarecon (SMRA -3%:IDR1580), Alam Sutra (ASRI -3% : IDR585), Ciputra Development (CTRA -2.4% : IDR1440), Sentul City (BKSL -1.7% : IDR113), Agung Podomoro (APLN -1.4%: IDR415), Bumi Serpong Damai (BSDE -1.5% : IDR2030), Bakrieland and Modernland Realty were flat (ELTY @ IDR50 and MTLA @IDR457) while Duta Pertiwi bucking the trend (DUTI +2%:IDR5200)……mid-day price action.
In our view, the largest exposure to apartment projects is LPKR, PWON, CTRP and BSDE in 2015 with 3 new apartment projects.
They may just open up the market to foreigners then.
You’re right, that was one of Jokowi’s proposals before he was elected as President:
http://www.bloomberg.com/news/2014-07-04/jokowi-to-let-foreigners-buy-indonesia-property-in-bid-for-taxes.html
But not easy to push this through in Parliament given strong nationalistic sentiments in the country and his still minority coalition in Parliament.
Sinarmas Land has appreciated since I first wrote about it at 61 cents and touched a near term resistance at 69.5 cents today. Over a 1 year period, its share price performance has caught up with its key subsidiary Bumi Serpong.
Looks like a good time to lock in profits in the near term.
Meanwhile, if you have made some profit from this stock as a result of this posting, please consider contributing a small % of your profits to the running of this site 🙂
You can find out how to do so at the top left hand corner of the home page of this site, cheers!
Champion !!