Supported by the various economic policy packages that have been unveiled by the central government over the past couple of months, higher direct investment and optimized government spending, the economy of Indonesia is expected to expand in the range of 5.1 - 5.3 percent year-on-year (y/y) in 2016 (up from an estimated 4.7 percent y/y in 2015). Although there remain considerable threats - China's hard landing (including yuan devaluation) and more US interest rate hikes - controlled inflation in Indonesia could mean that Bank Indonesia can cut its key interest rate (BI rate) from 7.50 percent to 7.25 percent and to 7.00 percent later this year, provided the rupiah is regarded stable enough.

Property development is expected to be strong in the cities Makassar (South Sulawesi), Manado (North Sulawesi) and Samarinda (East Kalimantan) this year. On Java the cities Surabaya and Jakarta are expected to see a surge in property demand. The construction of the Jakarta light rail transit (LRT) that is to connect Jakarta with the surrounding suburbans (such as Bekasi and Bogor) will also boost property development in the areas around Jakarta. This LRT system is currently under construction and is scheduled to be opened to the public in 2018. Property companies that can benefit from improved infrastructure development in and around Jakarta are Bumi Serpong Damai, Summarecon Agung, Ciputra Surya, and Intiland Development. Bumi Serpong Damai in particular is expected to have room for growth as this company has plenty of commercial land reserves in and around Jakarta.

This year Bumi Serpong Damai cancelled development of two apartment projects in South and West Jakarta due to the continuation of Indonesia's economic slowdown up to 2015 accompanied by a fragile rupiah, implying that the company will only build one apartment complex in Jakarta in 2016 (this project is called "The Element" located in Kuningan, Central Jakarta). Due to the recovering rupiah, sales of this project are expected to be better than initially estimated.

Compared to other major Indonesian property developers, Bumi Serpong Damai has a lower debt ratio (at around 21 percent), whereas other property developers have a debt ratio that ranges between 30 - 40 percent.

This year the company's sales are expected to rise 8 percent to IDR 7.7 trillion, followed by a 15 percent rise in 2017.

Stock Quote Bumi Serpong Damai - BSDE:

Bumi Serpong Damai's Financial Highlights:

       2013      2014     2015F     2016F     2017F
Net Sales     5,871     6,025     6,727     7,742     8,601
EBITDA     3,165     3,216     3,326     3,620     3,984
Net Income     2,821     4,274     2,449     2,646     3,122
P/E Ratio (x)
    11,35     11,53     13,32     12,86     10,90
P/BV (x)      2,97      2,07      1,96      1,74      1,53

in billion IDR rupiah unless otherwise stated
Source: CIMB Securities

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