Summarecon Agung (SMRA.IJ Rp412; BUY TP Rp800) Lowering Our FY25F Pre-Sales by -11%; LT Prospects through End-Users Targeted Product Remain Intact

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Summarecon Agung (SMRA IJ)

Lowering Our FY25F Pre-Sales by -11%; LT Prospects through End-Users Targeted Product Remain Intact

Management reiterates its long-term focus on existing projects and recurring assets monetization, also pushes pre-sales from Tangerang.
Incorporating risks of weaker market demand amid volatility, we trimmed our FY25/26F pre-sales by -11%/-12% to Rp4.05/4.19tr.
Maintain Buy on SMRA with an unchanged disc.to RNAV-based TP of Rp800; LT prospects lie on its end-users targeted product offerings.

Key Strategy Focus Remains on Monetizing Existing Projects

Management reiterates that its long-term strategy will remain focused on launching products within existing projects and pushing the sales from its new township (Tangerang) to reduce the risk of pre-sales overconcentration in Greater Jakarta. Additionally, SMRA continues to enhance its recurring revenue monetization through: 1) Expansion of Bekasi Mall NLA by 48k sqm, 2) New Makassar Mall (31k sqm NLA), and 3) Harris Hotel Serpong (Exhibit 11). SMRA is also realigning its product launching timeline to be more evenly distributed across all four quarters, as previously its FY24 pre-sales fell short of the target due to the postponement of launches to 2H24 in response to the election year.

Adjusting our FY25F/FY26F Pre-Sales by -11%/-12%

SMRA sees its Rp5tr target to be achievable, supported by VAT exemption incentives (VAT pre-sales contributed Rp580bn, 66% of 1Q25 pre-sales of Rp877bn), with current remaining eligible inventory ranging Rp400-450bn. To incorporate risks of weaker market demand amid volatility, also multiple holiday events which could delay potential product launches, we trimmed our FY25F/26F marketing sales by -11%/-12% to Rp4.05tr/Rp4.19tr. However, we adjust our property developments revenue recognition schedule to match with the company’s handover estimates, as well as adjusting our investment property revenue forecast to incorporate the expansion of malls and hotels, resulting in an upward revision of FY25/26F revenue by 18/19% to Rp8.67/8.74tr and net profit by 33/33% to RpRp1.14/1.05tr (Exhibit 1).

Maintain Buy with an unchanged TP of Rp800

We adjusted our RNAV calculation to include the new Tangerang township, yet assigned a slightly higher disc. to RNAV from 79% to 81% (+0.5SD of the 5-year mean), to incorporate risks of weaker asset monetization. Current price trades attractively at 90% disc. to RNAV vs. peers’ average of 78%. SMRA key story will remain on its product portfolios of Rp1-5bn landed houses around Greater Jakarta, which appeal to entry-level end-users and are supported by VAT incentives. Risks: Concentrated projects in the highly competitive Greater Jakarta (81% to 1Q25) might slow pre-sales.

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