Property
FY24 Pre-Sales Summary: Intact Strategy Amid Industry Challenges
- FY24 pre-sales grew only 4% yoy vs. FY18-23 CAGR at 8%, yet we believe still reflecting intact marketing strategies amid affordability challenges.
- Potential VAT-incentives continuation shall aid affordability and support FY25F pre-sales which we estimate to continue growing by 4%.
- We maintain our OW rating on the sector as it trades at a sharp discount with improving pre-sales. Top picks: CTRA> PWON> SMRA> BSDE.
FY24 Pre-Sales: Still Reflecting Intact Strategy despite Slowing Growth
Aggregate Indonesia’s property developers grew +4% yoy during FY24, relatively in-line at 101%/98% to our/co’s expectation. Achievement to the company’s target was slightly higher vs. historical average at 97% (Exhibit 2), yet growth slowed if compared to FY18-23 CAGR at 8%. Several big names (e.g. CTRA, BSDE), however, recorded an all-time high sales. While growth is decelerating, in our view overall achievement shows developers’ intact marketing strategies to push their products (i.e., location and launch timing), amid affordability challenges. Product mixes, continues to be dominated by landed houses (70% contribution) at Rp1-5bn (69%), with greater Jakarta as major contributors (63%). This reflects the product preference of Indonesia’s urban population demand which we think will continue, based on our FY25F outlook. VAT Pre-sales contributed 28% on aggregate, reflecting the significancy of the initiatives. Meanwhile, the mortgage-dominated payment options (70%) should translate to a healthy FY24F/25F operating cashflow and balance sheet.
Healthy Pre-sales Shall Lead to In-Line Financial Results
Our historical review shows that the company’s property development revenue results are relatively aligned with its 3-yr. historical average of pre-sales (Exhibit 4). While the actual achievements might differ as there are possibilities of inventory sales, accelerated development and handovers due to VAT incentives and the varying recognition assumptions on each company, we believe that the overall FY24F pre-sales still signal a positive trajectory of all developers’ financial results.
Potential Continuation of VAT Incentives Shall Aid Affordability Challenges
In our discussion with DPP REI, the association revealed that they are currently studying to propose the extension of VAT-initiative until FY26, which will allow under-construction properties to qualify for incentives. We believe this is a possible scenario to be approved by the gov’t given the sector’s multiplier effect on economic growth, and execution could begin as early as 2H25, considering the latest MoF regulation was only signed in early Feb25 (Exhibit 15. VAT Discount Scheme According to PMK No.13/2025Exhibit 15). The incentives will provide buyers with more product options while also lowering buyers’ initial investment by up to 11%.
Maintain OW as Healthy Sector’s Profitability Continues; Top Picks CTRA
Overall, we remain OW on the sector as all developers' valuations are trading at a steep discount vs. historical five years (Exhibit 18), despite showing improved profitability, pre-sales performance and balance sheet quality. We maintain our Top Picks in CTRA as it matches perfectly with the market product preferences (Exhibit 17), meanwhile valuation stood at -1.7SD of 5-yr. mean of its disc.to RNAV. Risk: weak pre-sales growth.
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