Sinarmas Land's 3Q16 net profit tumbled 62.6% to $17.4m, due to negative leverage as well as absence of negative goodwill.
Revenue fell 23.6% to $145.9m, from lower commercial and industrial land sales. This was partially offset by leasing income from Alphabeta building in London (acquired 4Q15), as well as higher leasing income from Indonesia investment properties.
Gross margin inched up 0.1ppt to 72.5% on the back of lower industrial land cost.
Despite the revenue decline, operating expenses rose 5.2% to $61m, weighing on bottom line. This was exacerbated by the absence of $30.6m negative goodwill as well as a 85.6% reduction in FX gain to $1.6m.
But contributions from JVs and associates jumped to $5m (3Q15: $0.3m).
Net gearing stood at 15.8% (-2.8ppt q/q).
Sinarmas Land is a proxy to the favourable long-term outlook of the Indonesia property sector.
Subsidiary Bumi Serpong Damai will be jointly developing a 19-ha mixed use project in BSD city in West Jakarta. The project is expected to commence in FY17 and will comprise 1,000 landed houses and shop houses.
Maybank KE notes that investor interest has been building up for JSE-listed Bumi Serpong Damai given government and central bank support to drive pre-sales for low-to-mid end properties in the longer run.
Meanwhile, Sinarmas' projects would also likely be a beneficiary of the Indonesia tax amnesty programme, as repatriated assets can be invested in land and buildings, with the exception of subsidised housing.
Sinarmas Land is currently trading at 1x P/B.