Brief Consumer: Indonesia Property – In Search of the End of the Rainbow – Part 2 –  Bumi Serpong Damai (BSDE IJ) and more

In this briefing:

1. Indonesia Property – In Search of the End of the Rainbow – Part 2 –  Bumi Serpong Damai (BSDE IJ)
2. Jcontentree (2nd Largest Korean Drama Production Firm): Three Key Catalysts

1. Indonesia Property – In Search of the End of the Rainbow – Part 2 –  Bumi Serpong Damai (BSDE IJ)

In this series under Smartkarma Originals, CrossASEAN Research insight providers Angus Mackintosh and Jessica Irene seek to determine whether or not we are close to the end of the rainbow and to a period of outperformance for the property sector. Our end conclusions will be based on a series of company visits to the major listed property companies in Indonesia, conversations with local banks, property agents, and other relevant channel checks. 

The second company we explore is leading township developer Bumi Serpong Damai (BSDE IJ), with exposure ranging from landed housing, shophouses, condominiums, as well as the defensive and growing buffer of nearly 20% of revenues coming from recurrent rental income.

Bumi Serpong Damai (BSDE IJ) has one of the largest land banks of any developer, with a land bank of over 4,000 ha, more than half of which is in its flagship township of BSD City in Serpong.

Given its breadth of exposure to the property segment, the company has the flexibility to switch its exposure between different segments depending on the health of the overall market. 

Its projects are well connected by toll-roads and railway but it is well positioned to benefit from new infrastructure such as the new MRT, LRT, as well as new toll road extensions, which will enhance the attractiveness of its developments.  

Management suggests that they will take a cautious start to the year ahead of the election but see a window for a pick-up in marketing sales in May, with the potential for a much better 2H19. 

Despite a run-up in the share price since the start of the year, valuations do not look challenging from a historical basis especially looking at its PBV. It also trades at a significant discount to NAV of 67%, as well as being below its 5 yr historical mean on a forward PER basis.

Catalysts ahead include a post-election pick-up in activity leading to more project launches, completion of infrastructure projects, aggressive mortgage lending by the banks, and a more dovish interest rate outlook. Valuations are already attractive but a rise in property market activity should also lead to earnings upgrades, which if sustained, may lead to property prices moving upwards.

2. Jcontentree (2nd Largest Korean Drama Production Firm): Three Key Catalysts

Jcontentree Corp (036420 KS) is the second largest drama production firm in Korea after Studio Dragon (253450 KS). The company has three key catalysts that could positively impact its share price in the next 6-12 months:

• Expansion of OTT Service by the Global Giants – One of the most favorable investment themes in the next several years is the tremendous growth of the global OTT services by global giants such as Netflix, Disney, and Amazon. These giants want to provide the very best contents that could be popular on a global basis and the Korean dramas have been becoming increasingly popular all over the world and Jcontentree should also be one of the key beneficiaries of this trend. 
• IPO of Megabox – The company also has a controlling stake in Megabox Joongang, which is the third largest movie theater chain in Korea. On February 19th, 2019, Jcontentree sent a RFP to eight securities firms for the IPO of Megabox. The company will soon finalize the securities firms for the IPO and plans to complete the IPO in 1H 2021. Various media have estimated the value of Megabox to be around 700 billion won or more. 
• Korean dramas may be re-aired in China in 2019 – The Korean dramas were blocked in China in the past two years but there are some cautious optimism that the Chinese regulators will allow some of the Korean dramas to air in 2019.