ELTY : Bakrie Land Development

Acceleration of village development is expected lift economic growth up

Based on ministry of finance, one of factors which influenced the slowdown of economic growth was slow moving in absorbing budget. There is unused fund amounting to IDR 273.5 billion at BPD in each province.

That fund should be used for development of village as priority program of Jokowi administration. Jokowi in his campaign was promising special development program for villages across the country. He said that he would allocate IDR 1 billion for each village at entire nation.

Central bank expected the acceleration in absorbing budget could increase economic growth in second semester of 2015. It is predicted to reach 5 % growth.

Plan of revision in tax regulation for property: NJOP, BPHTB and price limit 

In order to get more tax revenue government plans to revise its tax regulation include for property’s sector. Government considers changing the price limit from IDR 10 billion to IDR 2 billion. If this new revision is implemented, there will be more people who pay tax for property. On other hand, government also plans to change taxable value of property (NJOP) which is used as guidance to measure how much land and building taxes (PBB) and land and building transfer fees (BPHTB) have to be paid. Government will use new system to measure land value which is called price zoning.

If those new regulations are approved, the consumer who purchase apartment valued 2 billon will be imposed more cost and the sale of this segment may be decline.

If the government changes the regulation, the developers may change its target for luxury segment as the cost increase. Developers are predicted to focus on property which is valued less than IDR 2 billion.

Tax paid on property: 5 % for Land and building transfer fee, 10 % for value added tax, 5 % for income tax and 20 % for luxury tax.

Company analysis: Purchase land bank in secondary city and expand in theme park segment

According to annual report the company experienced significant decline in revenue, the revenue of 2014 dropped about 50 %. Apartment was still the key driver with largest contribution to sales which was 21.6 % of total revenue and the second was housing with 13.6 % of total revenue. The significant decline of sales was occurred for sale of land, housing and apartments segments from about rp 1.042 in 2013 billion in to about 399 billion in 2014.Bakrie Swasakti Utama is the biggest revenue contributor which is more than 70 percent of total revenue. The decline in revenue was occurred due to strict regulation such as Loan To value and Tax regulation and happening because the slowdown of economic growth. It was reflected in sharply increase of inventory and receivable in period of 2013 until 2014.

In spite of decline in sales the company could increase its net profit and start new market in playground segment.

In 2014 the company purchased land bank in sidoarjo which was amounted to about IDR 500 billion as the company did acquisition of Mutiara Mahsyur Sejahtera. The company seems start to focus in secondary city as its strategic growth in 2014 due to removal of tax regulation for property and playground or theme park as its new market in challenging downturn of economy.

According to annual report the company has 1,030.18 ha as its land bank. The largest was located at bogor and the second was located in sidoarjo. In 2013 the company sold its several assets in golden triangle to pertamina and sinar mas teladan due to liquidity problem in paying its obligation

Meanwhile, capitalization of borrowing cost to inventory was amounted to Rp 115.5 billion and rp 501.51 billion until December 31, 2014 and 2013 respectively.

The largest share holder of the Bakrie land was avenue capital Luxembourg which was the part of Avenue Capital at New York, USA.  More than 75 % of total share is owned by Public. PT Asuransi Jiwa Sinar Mas MSIG own 5 % and Interventures Capital pte Ltd owns more than 8 %. 

The company has debt amounting to USD 155 million which would be matured in March 2015. The convertible bond has three monthly coupon payments with 8.625 % interest rate.

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