Property: VAT Discount Extension As Expected, Yet Still Supportive for 2H25 Pre-Sales; Maintain OW (OVERWEIGHT)

Stock Code	Last Price	Change	Change %
DSSA	67,000	1,825	2.80%
SMAR	4,320	530	13.98%
INDF	8,775	400	4.78%
RATU	7,725	250	3.34%
PNGO	3,030	220	7.83%
UNVR	1,680	150	9.80%
DSNG	1,385	145	11.69%
PANI	16,150	125	0.78%

Property

VAT Discount Extension As Expected, Yet Still Supportive for 2H25 Pre-Sales; Maintain OW

100% VAT discounts for property <Rp5bn is extended until Dec25. We believe the policy is likely to be continued until 1H26F.
We see the policy could offer upside in 2H25 pre-sales from higher-than-expected VAT-exempted product demand.
Maintain our OW Rating with CTRA as our top pick, as it possesses key traits of winning developers.

Supportive Fiscal Policy, Possible Extension to 1H26F

The gov’t has extended the 100% VAT discount for 2H25 (previously 50% for Jul25–Dec25 handovers under PMK 13/2025). We had anticipated the extension earlier this year (refer to our FY25F outlook pg. 14), as the policy evidently supports affordability by cutting 11% from end-users’ upfront costs (Exhibit 2). This is reflected in VAT-exempted products’ share in FY24/1H25 pre-sales of 28/31%. Given the similarity to Aug24’s timeline (Exhibit 1), we believe a further extension to 1H26F is plausible if macro conditions remain soft.

Supportive for 2H25 Pre-Sales

While market reaction was modest (CTRA 0%, PWON 0%, SMRA +2%, BSDE +2%), we believe the policy could offer potential upside from higher-than-expected VAT-exempted product pre-sales. Additionally, we expect gov’t spending ramp-up in 2H25 to also help lift consumer confidence. Disruptions may arise from buyers who cancels their purchase in early Jul25 (with only 50% VAT discounts, and are now looking for other products with 100% discounts), but we see this as minor. Opex impact could also come from adjustments in marketing materials (though aggregate cost is relatively modest at ~5% of revenue per 1Q25).

Rp1-5bn Landed Developers with Diversified Location Remains Winner

CTRA has the largest VAT-exempt eligible inventory (Rp1.5–2.0tr), followed by PWON (Rp1.6tr), BSDE (Rp1–1.5tr), and SMRA (~Rp500bn). However, our broader sector pecking order also factors in: 1) Rp1–5bn pricing mix (reflects aspired pricing level of end-users demand), 2) landed-residential exposure, 3) location diversification, 4) retail asset strength to mitigate weak pre-sales. Based on these, our order remains: CTRA > PWON > SMRA > BSDE (Exhibit 5).

Maintain our OW Rating with CTRA as Top Picks

We keep our OW rating as sector valuations remain at deep discounts vs. 5Y average (Exhibit 8), with on-track FY25F pre-sales (at 49% run-rate), despite having growth subsiding from a record FY24 (1H25/1H24 at +1%/+3%yoy). Potential upside from stronger-than-expected VAT-driven pre-sales, coupled with potential catalysts from more BI rate cuts in late 3Q25/early 4Q25 and lower domestic positioning vs. Aug–Sep24 (Exhibit 7) could allow sectors’ re-rating. Downside risks: weaker pre-sales and limited rate-cut impact. Upside risks: 5% BPHTB abolishment to further aid affordability. Top Picks: CTRA/PWON, with +10% FY25F EPS growth.

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