Summarecon Agung (SMRA.IJ Rp595; BUY; TP Rp1,000) Inline 1H24 pre-sales; Potential one-off tax expenses in 2Q24 from MKG asset transfer

Stock Code	Last Price	Change	Change %
MFIN	4,600	920	25.00%
DCII	167,400	650	0.39%
GGRM	10,225	375	3.81%
FORU	1,690	335	24.72%
LIFE	6,600	300	4.76%
JSMR	4,590	250	5.76%
UNVR	1,725	230	15.38%
INKP	5,275	225	4.46%

Summarecon Agung (SMRA IJ)

Inline 1H24 pre-sales; Potential one-off tax expenses in 2Q24 from MKG asset transfer

SMRA’s 1H24 pre-sales of Rp1.72tr only formed 34% of its FY24F target, yet we deem this expected as it aims to backload sales in 2H24.
We estimate a one-off tax expenses of ~Rp600bn from the recent transfer of Kelapa Gading assets.
We maintain our Buy rating with TP of Rp1,000 (73% disc to RNAV) on SMRA’s attractive and strategically-located projects.

Weak 1H24 presales was expected as it shall backload into 2H24

SMRA booked marketing sales of Rp1.72tr (+7%yoy) during 1H24, bringing its run rate to 38%/ 34% of ours/ company’s FY24F target. While the Jun24 marketing sales weakened vs. May24, particularly for Bekasi and Serpong projects (-60%mom), overall 1H24 achievement from these two key projects remain on-track to co’s FY24F target (114% to FY24F for Bekasi, and 44% for Serpong) (exh.5). SMRA’s overall optically weak 1H24 achievement came as expected as the company aims to backload its marketing sales in 2H24 from new launches in Bogor, Bandung and the 100ha new Bitung project.

Potential one-off tax exp. in 2Q24 financials from MKG asset transfer

SMRA recently transferred its assets in the Kelapa Gading area (ie, SM Kelapa Gading and other related assets) into its fully owned subsidiary Summarecon Investment Property (SMIP). We see this reorganization as the final phase to complete SMIP, as the Kelapa Gading assets is the last one to be injected into SMIP, which contributed ~39% to SMRA’s Rp1.9tr recurring business revenue in FY24F. We estimate a one-off tax expense of around Rp600bn (7.5% from the Rp8tr asset value), representing 40% to our FY24F profit before taxes. For SMRA’s overall FY24F earnings, we expect ~61% of marketing sales to come from VAT-exempted products (~Rp1.05tr in 1H24), which we forecast to potentially translate into ~Rp400bn net profit (48% of our FY24F).

Maintain our Buy rating and TP of Rp1,000 for SMRA

We maintain our Buy rating with TP of Rp1,000 based on 73% disc. to RNAV. SMRA currently trades at an attractive 84% disc. to RNAV (cheapest in the sector vs. peers average at ~67%), with better trading liquidity of Rp26bn/day in the last 6-mo. (vs. peers avg. of Rp19bn/day). We believe SMRA’s strategic projects located in high-density areas should gradually translate into better pre-sales going forward. Key risks lie in short-term lower pre-sales realization, partly due to a limited project network in ex-Java (~17% to total projects) compared to CTRA (~32%).

… Read More 20240715 SMRA