Daily Brief Indonesia: Alam Sutera Realty and more

We view Alam Sutera (ASRI) as “High Risk” on the LARA scale, given the company’s refinancing risk amid the challenging financing environment. ASRI’s pre-sales have been soft, which is a concern for rating agencies. We also note the group’s asset concentration and cash-flow volatility. The company was highly reliant on land sales to key partner CFLD until 2021, when CFLD defaulted on debt. Execution risks are increasing due to ASRI’s shift away from developing townships to high-rise buildings.

The company has very low recurring income compared to peers. That said, it has a large and low-cost land bank that is bigger than most peers’. The land bank has high potential value, and could be a source of liquidity, supporting high margins for the business. Positively, ASRI’s successful cash tender offer in October 2022 has alleviated refinancing risk. It now has no significant maturities until 2025.

We maintain our “Stable” Credit Bias, as we expect the company’s operations to remain satisfactory, with some positive FCF, and no significant maturities until 2025.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”.