JAKARTA (TheInsiderStories) – Indonesian property issuer, PT Summarecon Agung Tbk (IDX: SMRA) prepared funds Rp1.8 trillion (US$89.65 million) to pay off maturing bonds in this year. The bonds issued in 2017 with total amount Rp800 billion and due on Nov. 28 and on Dec. 16, 2020 must pay Rp500 billion for matured bond issued in 2015.
According to the director, Lydia Tjio, to repay the obligation with internal cash but also opens up raises fresh funding from the capital market (including bonds).
President director of Summarecon, Adrianto P. Adhi, rated that this year’ property sales will be affected by the national economic slowdown during pandemic. Other negative sentiments are low oil prices, excess supply, as well as the tension between the United States and China.
Throughout 2019, the developer booked pre-sales marketing of Rp4.1 trillion and posted a revenues of Rp5.94 trillion, or up 5 percent from the previous year. While, net profit jumped 14.77 percent to Rp514.98 billion from 2018, which amounted Rp448.70 billion.
Summarecon was founded in 1975 by Soetjipto Nagaria and his partners to build and develop real estate. Starting with building 10 hectares of land in a swampy area in the Kelapa Gading area, the founders succeeded in transforming the area into one of the most prestigious residential and business areas in Jakarta.
Recently, Moody’s Investor Services, said the sharp deprecation in the Indonesian Rupiah against the US Dollar will weaken the debt servicing ability of property developers. According to tha analyst, Jacintha Poh, more than two-thirds of the companies’ aggregated debt is in US Dollars, while their revenue is earned in Rupiah.
“With the rupiah sliding about 15 percent to its weakest level since the 1998 Asian financial crisis, this high exposure to foreign currency debt is creating significant risk for the property developers at a time when the coronavirus outbreak is already weighing on earnings,” she stated.
While five out of the six rated developers have financial hedges to protect the principal sum of their US Dollar debt, these hedges only cover rupiah deprecation to certain levels, with around 57 percent of their American Dollar debt protected as of March 31. Moreover, the companies’ US Dollar interest expense is largely unhedged.
Combining the effects of weaker earnings and a higher debt burden, Moody’s expects the developers’ financial leverage – as measured by homebuilding debt or EBITDA – will deteriorate significantly in coming months. And if the Rupiah weakens further, only two out of the six developers would remain within the leverage thresholds for their ratings, namely PT Pakuwon Jati Tbk (IDX: PWON) (Ba2 stable) and Bumi Serpong Damai TbK (IDX: BSDE) (Ba3 stable).
The exposure among the property developers to the Rupiah’ weakness varies, with Moody’s sensitive testing showing that PT Alam Sutera Realty Tbk (IDX: ASRI) (Caa1 negative) and PT Modernland Realty Tbk (IDX: MDLN) (B3 negative) would be the most exposed if the Rupiah depreciates more.
The property sector has been one of the sectors affected by the shock given its sensitivity to consumer demand and sentiment.
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