Ciputra Development has been releasing a stream of positive news: dividend payment, continuous high presales growth and last year’s RNAV which came in 40% above our expectation on higher ASPs and the inclusion of joint-operation inventories. Incorporating these, we raise our DCF-based target price to Rp500 (from Rp460) (WACC 12%). We also start to include joint operations’ market values in our RNAV estimate, which lifts our RNAV/share estimate to Rp841 from Rp656. Our new target price is now at a deeper 40% discount to RNAV (30% previously). No change to our earnings estimates. Catalysts are expected from its ability to execute marketing sales as well higher rentals for new retail space, on top of the appointment of an anchor tenant for its major project, and continued presales strength.
• First dividend in 13 years. Ciputra started to pay dividends this year on last year’s net profits after a good 13 years. Yield is about 1.4%. While retained earnings have turned positive, we previously didn’t forecast dividend payouts. Given its growth outlook and a steadier balance sheet, we have started forecasting 35% payouts (similar to FY10). • Potential gearing up of balance sheet. Ciputra Property has been exploring the possibility of gearing up its balance sheet, to some Rp1.5tr debt (withdrawal next year) to finance the remainder of Ciputra World Jakarta, a new condo project in the CBD and a new project in West Jakarta. With low interest rates and currently zero debt, we view the move positively.
