Sinarmas Land

Sinarmas Land: ($0.595) Ambitious growth plans Highlighted in The Edge magazine this weekend, citing that the group is on a mission over the next few years to help investors understand the company better, unlock value of assets on its balance sheet, as well as to raise recurring income to create a sustainable business model. Briefly, a substantial portion of the group's land bank in Indonesia was acquired back in the 1980s, where values have appreciated significantly since then. The major property boom in Indonesia over the past five years saw selling prices of residential and industrial land doubled and tripled respectively. For FY13 revenue of $985m, the group derived 90% from its development projects in Indonesia, while the remaining 10% came from rental income from seven office buildings in Indonesia, 21%-stake in strata-owned Orchard Towers in Singapore, Le Grandeur Palm Resort Golf and Country Club in Senai, Johor and Palm Springs Golf and Beach Resort in Batam. Sinarmas Land intends to raise its recurring income base to 20-25% of overall sales going forward, particularly from the overseas market- citing Australia, US and London. Meanwhile, the company is also looking at ways to unlock value of some assets on its balance sheet. In Singapore, for instance, it sees potential to sell the units it owns at Orchard Towers, which it has a majority vote, in an en-bloc deal. Market watchers are citing that its stake in Orchard Towers are valued at an estimated $190m, compared to the $64m held in its books. With the group's effort to raise visibility, interest among the brokers are starting to gain traction. We do not rule out more coverage on the counter in the near term, which could mean a firmer stock price. At $0.595, Sinarmas Land is valued at 1.1x P/B. Bloomberg consensus has 2 Buys with average 12-month TP of $0.97.