Value Opportunity in Alam Sutera Realty
    Category: Column By : Teguh Hidayat Read : 366 Date : Friday, February 09, 2018 - 09:59:11

    One memorable experience was when property stocks, previously devastated in the 2008 crisis, gained in line with a property boom, with a return on equity above 20%. Back then, developers could purchase land at a bargain price, build high-end property on it, and then sell for handsome profits.

    Developer Alam Sutera Realty (ASRI) also enjoyed this boom, controlled by tycoon The Ning King. As the owner of township Alam Sutera in Serpong, it started growing rapidly in 2009 after an exit on the Jakarta-Merak toll road opened, providing a direct connection to Jakarta. Thus, ASRI posted a net income of Rp 94 billion in 2009, and by 2012 net income had already exceeded Rp 1 trillion.

    ASRI shares also skyrocketed at the same time, from a low of Rp 50 per share in 2008, then breaking Rp 1,000 in early 2013. I bought ASRI at about Rp 220 in 2010. In mid-2013, to dampen speculation, Bank Indonesia (BI) launched a loan to value (LTV) policy, requiring a down payment of at least 30% prinicipal to qualify for a property loan. This policy, along with higher rates, ended the boom, and ASRI’s net profit dropped to just Rp 877 billion in 2013. I sold my shares at about Rp 800.

    Since then, property has suffered as the economy slowed down with the commodity slump. ASRI had a decline in net income, booking only a net profit of Rp 519 billion in 2016. The stock dropped to only Rp 300 per share, or about 30% of its market value in early 2013.

    Now, growth and commodity prices are recovering, the rupiah stable, and inflation under control, while the BI said it would have a more flexible LTV policy. In the third quarter of 2017, ASRI’s net profit already surged to Rp 1.1 trillion. Thus, in August 2017, I decided to buy ASRI again. Just think: In 2013, ASRI was Rp 1,000 per share, with a book value of only Rp 5.1 trillion. Today ASRI’s shares are about Rp 370, or only a third, while the book value is Rp 8.2 trillion. Yes, ASRI’s equity has kept growing, and its outlook is good. In addition to Alam Sutera, the company has been developing Township Pasar Kemis in Tangerang, with 2,600 hectares, from 2013, as well as major assets such as Bali’s Garuda Wisnu Kencana Cultural Park and Jakarta’s Centennial Tower. So assuming normal growth of about 5%, and no tightening by the BI, ASRI should be able to book record profits this year, and its shares continue to rise.

    Disclosure: When this article was written, the author is in a position of ASRI at an average purchase price of Rp 358 per share. This position can change at any time without prior notice.