Pakuwon Jati (PWON IJ)
Recurring Revenue Growth Prospect is Intact
- 1Q25 earnings was supported by recurring revenue growth of 10% yoy, which we expect to remain stabledriven by Bekasi/Pakuwon City Mall.
- We adjusted our FY25F/26F Net Profit by -3%/+2%, reflecting higher non-core expenses and rental income from Bekasi/Pakuwon City Mall.
- Maintain Buy with a TP of Rp640; Stable CF shall support capex needs until FY29, giving PWON higher bargaining position for rental repricing.
1Q25: Recurring Revenue Provides Cushions Amid Weak Condo Revenue
PWON’s 1Q25 revenue of Rp1.5tr (+2% yoy) was supported by strong recurring revenue (+10% yoy to Rp1.3tr), which offset weak apartment revenue recognition of Rp129bn (-30% yoy). Recurring revenue growth was driven by service charges revenue (20% yoy to Rp252bn), boosted by contributions from Bekasi and Pakuwon City Malls, which added 66k sqm NLA (+8%) in 4Q24. However, higher opex rand non-core expenses weighed on PWON’s headline net profit (Rp302bn, only 13%/13% to our/cons. FY25F estimates). Going forward, management believes that the recurring revenue growth shall remain stable as rental contributions will ramp up from 2Q25 following the end of the three-month rental waivers at Bekasi and Pakuwon City Malls in Apr25. The space rental segment (35% of revenue) should benefit accordingly.
Adjusting FY25F/26F Revenue and Net Profit by +5%/+11% and -3%/+2%
We have revised our FY25F/26F forecasts for PWON, lifting revenue by +5%/+11% to Rp7.3tr/Rp7.4tr, and adjusting net profit by -3%/+2% to Rp2.3tr in both years. These changes reflect additional service charge and rental income from Bekasi and Pakuwon City malls. The downward revision to FY25F profit is primarily due to higher non-core expenses booked in 1Q25. We maintain our FY25F pre-sales estimate at Rp1.5tr, in line with the 1Q25 run-rate. For FY26F, we raised our pre-sales to Rp1.6tr, reflecting Kokas Phase 4, previously not factored into our model.
Maintain Buy with TP Rp640; Stable CF with Rooms for Rental Repricing
We maintain our Buy rating on PWON with an unchanged 58% disc.to RNAV-based TP of Rp640. We foresee stable operating cash flow of Rp2-4tr/year to be sufficient to support its estimated capex needs of Rp15tr for all its project up to FY29 (Exhibit 3). Thus, PWON is well-positioned to cater for tenants who are under NLA renewal cycle (Exhibit 4), considering also its strategic malls locations and high occupancy rate. That said, we expect FY25-29F recurring revenue to grow at a sustainable CAGR of 11%. Risks: Weak condo pre-sales, lower occupancy rate of malls.
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