Property

FY26 Outlook: Premium Residentials to Lead; Industrial Remains Pipeline-Driven

 

  • Residentials: Expect demand to shift to >Rp5bn segment, revising our pecking order to CTRA> BSDE> SMRA> PWON.
  • Industrials: With weak FDI catalysts, land sales hinge on company pipelines; SSIA remains better positioned than DMAS.
  • Maintain OW as valuations stay deeply discounted despite improving fundamentals. Top Picks CTRA and SSIA.

 

Residentials: Strength Shifting Toward >Rp5bn Segment

Our latest discussion with developers revealed that demand, which was previously driven by entry-level upper-middle class buyers in the Rp1–5bn segment (FY23/24: 69%/68% contr. to pre-sales), has started to slow (9M25: 66%), while the >Rp5bn market strengthened (FY23/ 24/ 9M25: 23%/20%/29%).  Developers plan to focus FY26 launches on this segment. This occurs despite the VAT incentives extension to FY27, which continues to support affordability, as reflected in rising pre-sales contribution (FY23/24/9M25: 5%/28%/33%). We remain positive on the policy extension supporting FY26F/ 27F pre-sales outlook (+4/4%yoy vs. FY23/24/25 at +9/+4/-3%), alongside liquidity injection, which historically moves in-line with pre-sales (Exhibit 3). Beyond macro factors, we continue to view sector re-rating still hinges on policy-rate direction. Nevertheless, for residential developer’s stock picking, we now assign heavier weighting to the >Rp5bn pricing mix in our catalysts scorecard, to capture purchasing-power shifts and future product launching strategies, hence we revise our pecking order from CTRA> PWON> SMRA> BSDE to CTRA> BSDE> SMRA> PWON (Exhibit 1). Risks: rising NPL in 21-70sqm houses, though contribution to pre-sales remains small (~<5%).

 

Industrial Estate: Less FDI Catalysts, Company’s Pipeline as Key Driver

With no recovery in FDI catalysts (i.e, improving talent competitiveness, legal certainty, fraud handling, incompetitive taxes rate (ID/TH/VN/SG 22/20/20/17%, only PH/MY higher at 25%/24%), we see no industry-wide driver, despite the China+1 Trend. Major land sales from global manufacturers which could draw multiple related tenants will depend on each company’s pipeline and competitive positioning. We prefer SSIA (Buy, TP Rp2,050) over DMAS (U/R, TP Rp190), given its intact LT story of EV-hub potential, ample low-cost labor (909k workers, UMR Rp3.5mn/ mo, ~37% below Karawang/ Bekasi), direct access to Jakarta market from Cipali-Patimban toll, resilient non-land business (~34% of gross profit), and larger Subang landbank (~1,500ha vs. DMAS at ~120ha) which position it to capture bulk sales. Risk: toll-road delays, competition with Kendal/Batang.

 

Maintain OW; CTRA and SSIA as Top Picks

More stable FY26 residential pre-sales should come from developers with an upper-class pricing mix, while industrial estate will hinge on each asset’s proposition. We maintain OW as valuations remain at steep discounts to its five-year average despite improving ROE, pre-sales, and B/S quality (Exhibit 8). Current valuations also offer a better entry point vs. our Sep25 call, when we flagged ST selling risks from peaking local-fund positions and fading rate-cut expectations (-8% sector perf. since Sep25). Risks: smaller FY26 rate-cut (50bps vs. 125bps in FY25), dampening sector sentiment.

 

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