Cowell and Summarecon Augment Land Banks

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PT Cowell Development Ltd (COWL) and PT Summarecon Agung Ltd (SMRA), both development companies, will allocate part of their capital expenditures (capex) to develop their land banks.

Cowell budgeted a capex of Rp 345 billion (US$ 40.36 million). Of this, Rp 235 billion will be used to complete the development of the WestMark apartment project at Tanjung Duren and Rp 60 billion will be used to add 80 hectares of to its land bank. Summarecon, meanwhile allocated a capex of Rp 1.5 trillion. Most of it will be used to acquire new land, including those around the Summarecon Serpong area.

Darwin F Manurung, Corporate Secretary of Cowell, said that Rp 100 billion of the capex will be obtained from bank loans and the remaining from internal capital. The company has acquired a loan commitment from PT BNI Tbk (BBNI), 10 billion of which was already used. “The four year loan has been approved by BNI,” Darwin said in Jakarta, Tuesday.

He added that the company is exploring the purchase of 20 hectares (ha) of land in Balikpapan, 40 ha from Serpong and 22 ha from Surabaya. Cowell's current land bank is around 90 ha.

Novi Imelly, Marketing Director of Cowell, said that by mid- 2011, the company will launch a new residential cluster, called the Blue Bells Resort, in the Borneo Paradiso project. The project's total investment is Rp 200 billion. This cluster is for the middle-to-upper class segment, priced at Rp 1 billion to Rp 4 billion per unit.

The company is also marketing its Maple Business District, 50 percent of which has been sold, from a total of 70 home stores. The price range is from Rp 700 million to Rp 1 billion, in Borneo Paradiso. She said that sales of the WestMark apartment has reached 50 percent of a total of 620 units.

The IFT Research Department predicts that this year, Cowell's revenue can exceed Rp 150 billion, or increase by a minimum of 50 percent from Rp 100 billion last year. The increase will be boosted by sales from its 18-ha land bank in Serpong and from the Borneo Paradiso project in Balikpapan City.

In the first quarter of 2011, Cowell's revenue increased 42.5 percent from Rp 19.4 billion to Rp 27.6 billion. The total units sold reached 143 units. The revenue increase was mainly boosted by the growth in residential and home store sales in Serpong Park which grew Rp 7.2 billion to Rp 15 billlion, and from residential and home store sales in Melati Mas Residence which increased from Rp 4.2 billion to Rp 8.8 billion. Residential sales from Serpong Terrace went down to Rp 3.9 billion.

The company's gross profit increased from Rp 9.6 billion to Rp 14.7 billion. The increase is followed by the growth of its gross profit margin from 49.8 percent to 53.2 percent. This was due to the company's ability to manage its operational cost.

Its profit before tax and net profit decreased 9.5 percent and 8.5 percent, respectively. The decrease in profit was due to the significant increase in costs, such as commission, advertising and promotion costs, as well as labor wages. The profit before tax margin and net profit margin decreased to 12.6 percent and five percent, respectively. With the price per share of Rp 118 on Tuesday, the trailing price earnings ratio (PER) of Cowell reached 10.4 times.

Operational Cost

Darwin Manurung said that the company's net profit in the first quarter decreased since the company could not include sales from the WestMark apartment project yet. The project was still considered an operational cost.

Based on the Equity Research conducted by PT Pefindo, the Westmark project is predicted to start contributing to Cowell Development's revenue in 2012 with a value above Rp 185 billion. If Westmark can finished by the end of 2012, then the company will book a high growth which could exceed 114 percent year-on-year.

It is seen that companies that focus more on small to medium housing projects have better prospects in the future, given the huge demand in both of these segments. Mortgage loans will increase 15 percent to Rp 170 trillion with banks racing to offer relatively lower interests due to tighter competition in the banking industry.

Based on this assumption, Perfindo projects that Cowell can book a revenue increase of up to 98 percent this year to around Rp 198 billion and a compound annual growth rate (CAGR) of 53.5 percent for the 2010-2014 period.

Meanwhile, Summarecon Agung aims to acquire land in South Jakarta or out of town, other than Serpong. It acquired 60 ha in Bandung, increasing the company's land bank to around 750 ha.

Johanes Mardjuki, Director of Summarecon, said that the company aims to generate revenues of Rp 2 trillion in 2011, up 20 percent from Rp 1.7 trillion last year. This will come from recurring income from house sales in the Kelapa Gading region.

In 2012, the company plans to build an office project and a middle-to-upper class apartment in the remaining seven ha in Summarecon Serpong. In the next five to 10 years, Summarecon will develop Summarecon Serpong into the largest superblock in West Jakarta.