• Keep BUY and IDR510 TP, 36% upside; the TP implies 12x FY24F P/E – at par with the 10-year mean. Finishing up the property tax incentive (Phase 1) – which ended this June – we believe Pakuwon Jati can close 1H24 presales stronger YoY and be at least in line with our expectation. The newest project in Bekasi is set to come alive by the end of this year. We also expect recurring income to be as solid post the recent long holiday. Our TP includes a 2% ESG premium, given PWON’s 3.1 ESG score vs the 3.0 country median.

• Expect to see improving presales in 1H24. The company still indicated recovering demand in its property portfolio despite the absence of new launches in 2Q24 – we believe this means PWON is able to optimise inventory sales. We initially estimated c.IDR800bn of its inventory as being eligible for property incentives this year. A landed house development in Surabaya, the Bella Tower condominium at Pakuwon City Mall Surabaya, Clayson Tower at Pakuwon Mall Surabaya, and One Icon Residence at Tunjungan Plaza 6 were among the major supporters of 1Q24 presales – we expect such projects to continue contributing further. We believe 1H24 presales can be closed – at the very least – at IDR700bn (+18% YoY), ie in line with our expectation.

• The Pakuwon Bekasi Superblock continues to contribute, as the project has started to come alive after years of being under construction. The company said it managed to sell c.30 units/month in April-May (mainly for the Bella and Amor towers). It is worth noting that PWON’s mall within this superblock is set to open in November, along with the handover schedule for one of its condominium residences, Amor Tower, which has been mostly sold (80% sold as of 1Q24). We also note that this superblock project is within walking distance to a light rail transit line, which connects suburban areas (including Bekasi) to Jakarta’s central business district. We see this as one of the advantages for both the mall and its residential areas.

• Solid recurring income is expected to continue. We see PWON as one of the beneficiaries of higher demand for leisure activities. We expect >70% of its revenue to come from recurring income businesses in FY24-25, particularly from its malls and hotels. The company said it has seen another higher growth in hotel revenue/available room or RevPar in 2Q24 after the long Lebaran holiday. We estimate 1H24 revenue to solidify as well, totalling an estimated IDR4.9trn in FY24 (+6.5% YoY).

• Risks to our call include lower-than-expected hotel traffic, mobility restrictions, lower-than-expected property sales, and changes in government regulations.

Source: RHB Research - 28 Jun 2024