Danareksa Equity Snapshot 

Yudha Gautama

We met with BCA’s consumercredit department (BBCA IJ; HOLD; TP Rp28,000)and discussed severalmatters concerning the Indonesian property market including the impact ofthe LTV relaxation rule and the reduction of property-related taxes on demand.In general, they think the national propertydemand is still soft pressured by political uncertainty, weak IDR and rising interest rates. Nevertheless, BCA still expectsgood mortgage growthin FY19 and thinks that the mid-low segment is still lucrative. Maintain Neutral.

Has the government stimulus helped to boost property demand? According to BCA’s consumer credit department, national property demand is still rather soft, despite government efforts to provide a stimulus to the sector through LTV relaxation and the reduction of some property taxes (i.e. the reduction of the super luxury tax (PPh22) from 5% to 1% and the increase in the threshold for sales tax on luxury goods (PPnBM) from Rp20bn/unit to Rp30bn/unit). The trend of rising interest rates, the weakening USD/IDR and political uncertainty related to next year’s presidential election have discouraged property purchases by both end-users and investors.

BBCA foresees its mortgages growth of 10-12% in FY19. Despite the rather soft appetite for property, BCA still expects its mortgages to grow by between 10- 12% to Rp87tn of mortgages outstanding in FY18 with another 10-12% growth in FY19. Mortgages extended for property purchases in the secondary market will contribute most of the growth. For BCA, political issues related to the presidential elections are not expected to have much impact on mortgages growth as BCA’s mortgages have always been supported by promotional events organized throughout the year. In addition, BCA’s focus is mainly the middle to middle-up segments (mostly existing BCA customers) with an average ticket size of around Rp1.2bn. These customers are less sensitive to changes in interest rates and have stronger purchasing power.

The middle-low segment is still lucrative. Nonetheless, BCA indicates that the middle-low mortgage market (ticket size of below Rp1.0bn) is still lucrative as these markets are still relatively underserved, as evident in the housing backlog despite higher default risk. BBCA’s NPLs are low at 1.3%, mostly comprising mortgages of below Rp600mn. BBCA requires a minimum down payment of 5% for first time buyers (relaxed from 15% previously) with a max tenor of 10-12 years, provided that the purchase is from a top-tier developer ranked by BBCA. Otherwise, the minimum down payment is 10-15%.

Maintain Neutral. At thisjuncture, we maintain our neutral recommendation on the property sector, withPWON as our top pick due to its high portion of recurring income and low netgearing. Despite the recent rally inproperty stocks driven by strengthening of the USD/IDR and the reduction inproperty- related taxes, we believe the fundamentals remain challenging givenuncertainty related to the upcomingpresidential elections, whichmay dampen demand, andvolatility caused by global uncertainty.


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