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Beyond Boundaries

How often do you find yourself at the mall on weekends? Are you there for a shopping spree, or perhaps, like me, you've went to the mall simply in search of the perfect lunch spot?

Last weekend, when the familiar dilemma of where to eat struck, I decided to dine in a mall that the MRT passed through.

With the ease of MRT Jakarta, I stopped at Blok M station, which directly connects to Plaza Blok M. I was amazed to see how much has changed since the last time I visited. This mall, standing since 1990, has evolved into what locals affectionately call Jakarta's Shinjuku.

Source: MRT

Many of the old and outdated tenants have been replaced by younger ones. This is evident in the numerous new shops, cafes, and restaurants that have sprouted, adding vibrancy to the approximately 350 existing stores.

Ongoing renovations are evident in various parts of the building. For example, the lighting throughout Plaza Blok M's atrium has become more beautiful with its colorful illumination. The toilets are cleaner, and the access roads to Plaza Blok M have become more convenient.

Source: Sucor Sekuritas

Undoubtedly, the entity benefiting the most from all these changes is PT Pakuwon Jati (PWON), the retail mall developer, and owner of Blok M Plaza. During our recent visit with the company, they expressed similar sentiments about the positive state of their mall portfolio, particularly Blok M Plaza. Occupancy has increased, and the car park usage has surged 4x since the construction of the MRT.

According to them, their mall segment has shown the most resilient performance, especially for Kota Kasablanka and Gandaria City. As of now, 94% of their malls are occupied, and there are expectations for continuous expansion, with an anticipated increase of 34%, from the current 784,000sqm to 1,052,000sqm by 2029.

Source: PWON

The company shows no signs of slowing down. This established company, with over 40 years of experience, is currently in an aggressive expansion phase.

They recently launched the Bella and Dolce Vita Tower in Pakuwon Mall Bekasi, just a short 400-meter walk to the LRT heading to Jakarta.

Another exciting project is the Lancaster and Clayson Tower in Pakuwon Mall Surabaya, a mall which is a major revenue contributor, second only to Kota Kasablanka.

Source: PWON

In the hotel segment, PWON has recently acquired the Four Points by Sheraton Bali, Kuta, which has been performing exceptionally well with an impressive average occupancy rate of over 70%.

Looking ahead, PWON anticipates a substantial growth in their hotel portfolio, with the total number of hotel rooms expected to increase by 75%, rising from the current 2,284 rooms to 3,997 by the year 2030.

In the coming years, we can anticipate the expansion of PWON's presence across the nation. Batam and Semarang are set to be THE destinations, representing 6% of PWON's total land bank of 481.7ha.

Source: PWON

In Batam, where PWON has acquired 12.4ha, there are plans to build the largest mall in Batam covering 100,000sqm, along with hotels and residential developments. It's noteworthy that house prices in Batam are currently less than 10% of Singapore's property prices. With existing infrastructure and a cost of living that is generally affordable for residents, this situation presents significant growth opportunities for Batam in the coming years.

Meanwhile, in Semarang, with a land acquisition size and development plans almost parallel to those in Batam, PWON envisions transforming the area into the new CBD of Semarang.

Not to mention, PWON has secured ~7ha at the epicenter, Ground Zero, of the IKN project—a highly strategic location that they couldn't afford to miss. This significant move strategically positions PWON within the IKN development, and the project is expected to reach completion around 2027.

In terms of financial performance, during 3Q23, the company exhibited overall stability. It successfully generated revenue amounting to Rp4,569 billion, indicating a modest growth of 1.6% yoy, despite grappling with recognition issues.

However, the company continues to demonstrate positive performance, with a 2.7% increase in EBITDA and the maintenance of a robust EBITDA margin at 54.9%.

When compared to the figures from 2022, PWON's recurring revenue have experienced a significant surge of 23%, primarily driven by strong performances in retail leasing, hotels, and service apartments. The rise in business meetings in anticipation of upcoming elections and weddings has also played a positive role in the company's financial growth.

Source: PWON

To cap it all off, the company's positive performance is undeniably linked to the steadfast support from their tenants. Amid the challenges of the 2021 pandemic, PWON took a proactive stance by offering rental discounts to their tenants, recognizing them not just as occupants but as valued partners in their journey.

This gesture was particularly significant as tenants experienced a 30% loss in operational time, coupled with a 50% decrease in the number of persons allowed to sit at one table. It helped forge a strong bond between PWON and its tenants.

With the values that PWON upholds, along with the company commitment to continuously constructing, owning, and managing high-quality properties. We confidently believe they will continue to successfully provide appealing rental returns and ensure steady, long-term income.

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