Daily Brief Indonesia: Alam Sutera Realty and more

Alam Sutera’s (ASRI) FY 2022 results were surprisingly strong, particularly the Q4 numbers. We note the opportunistic nature of the company’s tender offer (at a discount) for its USD 2024 notes. Instead of reassuring noteholders of its improving performance, ASRI opted to take advantage of the market, apparently a typical move among Indonesian HY issuers. The financial risk profile improved significantly and is now quite modest. It is also much better than suggested by the ratings from the agencies (Caa1 (negative) and B- (stable) from Moody’s and Fitch, respectively). Liquidity is sound. The debt maturity profile has been lengthened substantially, with minimal maturities until 2025 (when the USD 241 mn 2025 notes will mature).

We move our recommendation to “Buy” from “Hold” on the ASRIIJ 8.25 25, which is trading at 83/85, yielding 20%/19.5%. The company’s debt maturity profile has been significantly extended following the tender offer in Q4/22, with minimal debt to mature before the 2025 notes. This could give ASRI time to weather the impending downturn. We foresee that the company will continue generating positive FCF, due to its low-cost land bank and high-margin sales of land lots.