Property and construction sectors slow down

JAKARTA. Property and construction business in 2016 are slow down. This reflects on the movement of the shares of the issuers of the two sectors that grow by only single digit in this year.

The indexes of property, real estate, and construction sectors in Indonesia Stock Exchange (IDX) only grew by 8% on year to date (ytd) basis. This is lower than the performance of financial index, which grew by 14% (ytd), and even much lower than the mining index that has been skyrocketing by 75% along this year.

Analyst at Ciptadana Securities Maula Adini Putri said that the unrecovered economy in 2016 has caused the performance of property sector stagnant. “This is supposed to recover in the next year. But I am not sure,” Maula saud, Tuesday (13/12).

Maula said that domestic and foreign sentiments will affect to property sector in 2017. Those factors include installment of Donald Trump as the President of the US, and domestic economy stability after the concurrent local elections. Maula said that the price of property shares has even dropped amid the uncertain conditions.

The slow growth has led the issuers to revise down the performance target. Analyst at Kresna Graha Investama Fahressi Fahalmesta said that PT Adhi Karya Tbk (ADHI) has cut the target of contract from Rp 25 trillion to Rp 18 trillion. The delay in the acceptance of LRT contract has generated the negative perspective of market on ADHI.

The prices of property and construction shares were also restrained by the corporate actions of the issuers. For an example, the shares prices of PT Wijaya Karya Tbk (WIKA) and PT PP Tbk or PTPP have dropped after the issuers issued their rights at the end of this year. In addition, market negatively reacted over the issue of land acquisitions.

Incentive from government

The property and construction businesses were slower, despite the government has issued some incentives, such as the policy of loan to value or LTV on property credit, as well as tax amnesty program. These policies are supposed to be able to boost revenues.

Maula estimates that the LTV policy has affected only to the low-middle property segment, while the policy on property acquisition related to tax amnesty remains unclear. He admitted that the property sales in sub-urban area, such as Bekasi have increased in the fourth quarter of 2016.

Maula recommends BSDE as stock selection in the property sector of the next year with a price target of Rp 2,600 per share. According to Maula, BSDE has shown the positive performance and has a number of landed house projects, which are more attractive than the products are targeting the middle class segment.

Fahressi has optimistic prediction on the prospects of construction issuers in 2017. “I predict that it will be better in the next year. Let alone, the government conducted earlier tender,” Fahressi said. He added that the construction projects will have solid alternative funding sources and capital potentials derived from repatriation funds.
(Muhammad Farid/Translator)