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Wild Wild West

The western corridor of Jakarta is a rapidly developing region, and its growth owes much to the collaborative efforts of property developers, with the Serpong area taking center stage in this transformation.

Nestled in South Tangerang, Banten, Serpong has undergone a remarkable metamorphosis, emerging as a thriving hub for upper-middle-class living.

What sets Serpong apart is its accessibility, robust infrastructure, and proximity to Jakarta. The area is seamlessly connected to the capital city via regular roads, highways, and a well-connected railway network.

As a result, it has become a prime destination for those looking to settle in a vibrant community while enjoying easy access to Jakarta's business and entertainment districts.

In July, Ciputra Development Tbk (CTRA) made a significant mark on the property market by launching the Diandre cluster in CitraGarden Serpong.

This venture achieved an impressive 75% take-up rate, with 383 units sold, amounting to a remarkable Rp356 billion in marketing sales. What's noteworthy is the strategic location of this project, situated just one minute away from the Cisauk railway station and a mere 10-minute drive from the Jakarta-Serpong toll road.

Source: Google Maps

CTRA's aspirations don't stop there.

The company recently revised its marketing sales target from Rp8.9 trillion to a record-breaking Rp9.8 trillion. This figure represents a 19% increase from the realized marketing sales of Rp8.2 trillion in 2022.

Notably, CTRA has already secured Rp5.1 trillion marketing sales in the first half of 2023, a 27% increase year-on-year.

Moreover, the company has an exciting lineup of five upcoming projects set to launch in the coming quarters, including CitraLand Sampali, CitraCity Sentul, Citra Garden Bintaro, CitraLand Gama City Medan, and CitraLand Tanjung Morowa, with a combined potential marketing sales value reaching Rp1.5 trillion.

It's worth noting that, based on our channel check, the NUP for Citra City Sentul has already exceeded 500. To put this in perspective, our last sales notes recorded 387 NUPs as of the second week of August. The expected launch for this project is slated for the end of this month, and the strong demand evidenced by the NUPs indicates a promising start for Citra City Sentul.

CTRA's projects in 2023 and its upcoming pipeline project to boost marketing sales

CTRA's strong performance in marketing sales over the past years sets the stage for a promising earnings outlook.

The company anticipates earnings growth at a CAGR of 15.2% over the next five years, reaching Rp4.2 trillion by 2028. This robust growth is attributed to several factors, including a strong recovery and growth in marketing sales, rebounding recurring revenue and margin recovery due to improved efficiency post-Covid.

Source: Sucor Sekuritas

In the short term, earnings are projected to reach Rp2.1 trillion and Rp2.5 trillion in 2023 and 2024, respectively, representing impressive year-on-year increases of 11% and 22%.

In light of CTRA's solid marketing sales, geographically diversified portfolio, and strong brand goodwill, we maintain our enthusiastic outlook.

Our TP of Rp1,815 is determined using a DCF model, implying valuations of 1.5x forward P/BV and 13.4x forward P/E. We assume a WACC of 12.9% and a terminal growth rate of 2%. Moreover, we expect FCFF to grow CAGR 9.0% from 2024 to 2034.

In conclusion, CTRA presents an attractive investment opportunity, especially considering the recent pullback in share prices.

We anticipate potential catalysts stemming from strong marketing sales and a bright earnings outlook. It's a compelling time to explore the possibilities in the dynamic world of property development with CTRA.


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