October 31, 2024
Earnings Soar on Forex Gains

Market Commentary
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Last night, a friend told me about a dog accessory bazaar happening at Pakuwon Trade Center Surabaya.
 

They really know how I can’t resist those adorable accessories for my pup at home!


It seems like lately, Pakuwon has been hosting a lot of fun events.


Maybe it’s part of their strategy to boost their popularity while showcasing their ever-growing expansion.
 

Speaking of Pakuwon, they just released their 3Q24 financial report, showing a solid net profit of IDR 816 bn, a massive 110% yoy and 58% qoq increase!
 

There are two main drivers behind this growth:


First, they saw a foreign exchange gain of about IDR 375 bn, while last year, they actually recorded a forex loss of IDR 157 bn. 


The recent strength in the Rupiah really boosted their numbers.


Second, their recurring income jumped too, now reaching IDR 1.3 tn, up 12% yoy.
 

But here’s the kicker, if we exclude the forex gain, Pakuwon’s actual net profit for 3Q24 is IDR 441 bn, down 19% yoy. 


This dip is due to a significant drop in revenue recognition from their development business, with just IDR 170 bn reported, marking a steep 63% yoy decline. 


So, the impressive headline growth has some context underneath.


Still, Pakuwon’s total net profit for 9M24 stands at IDR 1.7 tn, up 12% yoy. 


This is on track with expectations, meeting 83% of their 2024 projection and 79% of analyst forecasts. 


They’re aiming for a full year profit of IDR 2 tn, although recent Rupiah weakening to IDR 15,714 may lead to a forex loss of around IDR 180 bn.


But there’s good news too! 


In 4Q24, Pakuwon has scheduled unit handovers, including the Amor and Bella towers in Bekasi, with a sales backlog of IDR 600 bn, 74% of that from condominium sales.
 

These upcoming handovers should help offset potential forex losses and keep them on track for their annual profit target.


So far, Pakuwon’s 9M24 marketing sales are impressive at IDR 1.1 tn, up 12% yoy, right on target. 
 

They’ve already hit 78% of their 2024 goal and 75% of management’s forecast.


Looking ahead, our analysts are highly optimistic for Pakuwon’s 4Q24 sales. 


Why? The government recently extended the 100% VAT incentive, previously only at 50%. 
 

This perk is a huge boost for Pakuwon, especially for condominium and landed residential projects.


With this incentive, more buyers can jump in, driving sales growth as properties become even more affordable.


This way, Pakuwon isn’t just relying on forex gains but pushing hard on direct sales from their core products. 


If all goes as planned, Pakuwon’s year-end performance could be truly outstanding!


As a result, we’re recommending a BUY for PWON, with a target price of IDR 570.
 

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