Modernland Realty recorded a very strong first quarter of 2013 results

Modernland Realty: Strong 1Q13 results booking Rp323bn net profit above both ours (32.2%) and consensus’ (35.7%) estimates (MDLN; Rp1,070 Buy; TP:Rp1,250)

MDLN has recorded a very strong 1Q13 results where they booked Rp323bn net profit (+258.5%yoy; +241.0%qoq) beating ours (32.2%) and consensus’ (35.7%) estimates. The company enjoyed margin growth across the board from the gross to net levels.

Operation wise, the strongest margin growth is seen from land sales where the margin is 87%, grew from 45% in 1Q12 or 58% in 4Q12. The significant margin growth is as a result of MDLN’s land sales to ASRI where the company booked Rp400bn of sales in 1Q13.

MDLN expects to book Rp1.18tn of sales from the land sales with ASRI for FY13. We believe that land sales with ASRI as well as the performance of the Modern Cikande Industrial Estate will be key catalysts for MDLN. Construction of the new toll road access to Modern Cikande is expected to have started and to be completed by May 2014 which should boost land value in the estate. We expected the land ASP at Modern Cikande to be Rp700,000/sqm  for FY13F, but as of this month the company claimed that their ASP is already at Rp950,000/sqm.

MDLN is currently one of our top picks in the property sector. The company is still one of the cheapest in the property sector trading at 6.7x FY13F PE vs sector average of 18.0x and industrial players of 9.9x; 23% discount to our RNAV. Re-iterate Buy.

for Indonesia Market Summaries 31 May 2013