Lippo Karawaci (LPKR IJ, BUY, TP IDR1,500) Corporate Newsflash: Delivery Is On Track - Daily Pack 28 April 2014

Good morning,

The key takeaways from the analysts’ meeting were: i) 1Q14 presales reaching IDR901bn (13% of internal FY14 presales target), ii) Lippo’s continued focus on residential and high-rise projects in Lippo Cikarang and Lippo Village to meet market demand, and iii) Siloam Hospital’s expansion  plan is on track to reach 40 hospitals by 2017. Maintain BUY with an unchanged IDR1,500 TP.

       1Q14 presales reached IDR901bn. This formed 13% of Lippo Karawaci (Lippo)’s FY14 target of IDR6.8trn and excludes an asset sold to a REIT. It is mostly from two new launched projects – St Moritz Makassar and Embarcadero Suites (South Jakarta) – that recorded a combined sales value of IDR575bn. Lippo is targeting on IDR1.45trn in presales from its new FY14 projects. It is confident of achieving this target as more aggressive launches are expected in 2H14.

       In-house instalments preferred. Due to the high mortgage rate, which is currently fixed at around 9.9% for two years with a high indicative floating rate, a lot of property buyers are now shifting towards using in-house instalments. St Moritz Makassar saw 76% of its buyers using such a scheme while mortgage buyers only accounted for 1% of the total. Meanwhile, 69% of Embarcadero Suites’ buyers have taken advantage of the in-house instalments while mortgage buyers account for just 18% overall.

       New USD150m global senior notes. Lippo guided that, due to the new mortgage regulations, cash collection was down to 50% of presales from 70% previously. This is equivalent to USD300m for FY14. Meanwhile, the additional cash inflow from the collection of the previous year’s presales and proceeds from Siloam Hospital (SILO IJ, NR)’s placement was USD170m. As a result, FY14F’s total cash inflow could be around USD470m vs the estimated capex of USD550m. As such, in order to manage Lippo’s balance sheet carefully, the company successfully issued a USD150m, 8-year global senior notes with a coupon rate of 7% and hedging fee of 1.2%. Taking into account this new bond, Lippo’s FY14 gearing level is expected to reach 0.6x.

       Maintain BUY with unchanged TP IDR1,500. We keep our forecast intact with an unchanged TP of IDR1,500. (Lydia Suwandi)

FROM TRADING DESK: JCI today is expected to be traded at 4,873.32 and 4.923.30.

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Best regards,

RHB OSK Indonesia Research Institute

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