Jakarta (Bisnis Indonesia) – Economic crises at the end of 1997, which affected Indonesia and a number of countries in Southeast Asia, has left stories with resonance felt even years after. One of these stories is negative retained earnings of many companies, one of which was PT Intiland Development Tbk.
This results led to the company being not able to share dividends to the shareholders. However, the company managed to achieve a better financial performance after the crises ended. It was not easy to turn the negative into positive retained earnings. There was a way a public company or an issuer could take to do this. It is quasi-reorganization.
It is this quasi-reorganization which PT Indofarma (persero) Tbk, PT Hotel Sahid Jaya International Tbk, and PT Bakrie & Brothers Tbk chose to take to solve the similar problem that Intiland also faced. After performing quasi-reorganization, Sahid Jaya and Indofarma managed to book positive retained earnings. Yet, this step is never the wonder drug ensuring a company to achieve a better financial performance . Bakrie & Brothers, which at the end of Q1/2011 managed to book positive earnings so that it could wipe out its IDR 35 trillion deficit, returned to recording a IDR 650.6 billion loss in its financial report of Q3/2011.
There are also issuers that aim at getting concession from Capital Market’s Supervisory Board and Financial Institution (Bapepam LK) despite their being in the stocks exchange for no more than a year, such as PT Garuda Indonesia (Persero) Tbk. Yet, Intiland Development opted not to take the benefit of quasi-reorganization to turn its retain earnings from negative to positive. This property issuer managed to record positive retained earnings after 12 years of inherent deficit balances.
In Q1/2011, for the first time since the 1997 economic downturn, the company, which was founded in June 1983, recorded its retained earnings at IDR 22.1 billion and this has continued to rise to IDR 39.9 billion in Q3/2011. The company’s negative retained earnings were wiped out by net profit from 2010 coming from the sales of company’s less profitable assets. Even though it was still difficult for the company to share dividends to its shareholders from 2011’s net profit, Intiland’s shareholders can hope to receive their deserved dividends in years to come.
Intiland’s competitive profit margin. During the first nine months of last year, the company, which recorded its shares on Indonesia Stocks Exchange (BEI) in 1990, booked gross profit margin and operating profit margin of 42.6% and 26.3% respectively. Profit margin did show a decline compared to that of 2010, but this was due to the company’s earnings coming mostly from new projects which required higher costs, especially the price of land and selling expenses. This required the company, with stock code of DILD, to maximize the use of debts in its new projects. In Q3/2011, Intiland’s short-term debts rose 179.5% to IDR 811.4 billion compared to its debts in Q2/2011.
This led to high interest coverage ratio of 6.15 times, and net debt to equity ratio of 1.2 times. Despite this, PT Pemeringkat Efek Indonesia (Pefindo) was convinced that the company would be able to maintain its financial health as the company managed to improve the advance payments of its customers.
Based on research by Pefindo, released in the middle of last month, this property issuer is feasibly expected by the market, as the company is seen as having potential growth in performance. By last September, the company did report an earning of IDR 714.6 billion, a decline of 11. 6% compared to the same period last year. Yet, the decline was due to the company’s finishing up its projects. Pefindo estimates that the company’s reported earnings for 2011 can improve 6.3 % to IDR 895.8 billion from IDR 842.7 billion in 2010. The improvement is due to the increase in earnings from the business segments of mixed-use & high rise building projects.
Pefindo even projects that this year, the company’s asset may see a 55% jump to IDR 1.4 trillion, with many projects the company is currently working on and is preparing. These help increase the number of sales of the company’s products, leading to high down payment rates.
Property Industry
The property industry shows a promising prospect following the increase in loans. As many are well aware of, the majority or 74.6% of total transactions in residential property are financed by credit. This is also spurred by the easy mechanism in getting loans and the declining of mortgage interest rates.
In the first nine months of 2011, loans from property sector being distributed reached IDR 297.9 trillion, or 14.4% of the total credit by commercial banks, surpassing the total loans from property sector in 2010 that reached IDR 241.7 trillion. Even though the value of property loans continued to rise, its ratio against gross domestic products was still lower than the value of property loans recorded in a number of other countries. This means that there are still opportunities for the industry to develop in Indonesia.
According to Pefindo, the yield of investments in property and real estate business is higher—with lower prices compared to prices of property in other countries in Asia-Pacific region. This provides room for Intiland’s earnings to grow 20% annually until 2015. According to Pefindo, a credit and investment instrument rating agency, at present the market has low expectation for Intiland’s profit growth, but high expectation for the company’s overall growth. Unfortunately, the market is more interested in shares of other property developers, such as PT Ciputra Development Tbk, PT Lippo Karawaci Tbk, PT Bumi Serpong Damai Tbk, PT Summarecon Serpong Agung Tbk and PT Pakuwon Jati.