On Monday, Bumi Serpong Damai (BSDE:IJ) (OTC: BSPDF) received an upgraded stock rating from a Citi analyst. The real estate developer's stock was raised from Neutral to Buy, although the price target was adjusted to IDR1,335.00 from the previous IDR1,500.00. The upgrade was influenced by several factors, including the completion of a significant acquisition and changes in the company's stock valuation.
The analyst pointed out the successful finalization of Bumi Serpong Damai's acquisition of a 92% stake in SMDM.JK at the end of October. This strategic move increased the company's land bank by 23% and boosted the estimated Real Net Asset Value (RNAV) by 21%. Additionally, a notable 25% decline in BSDE's share price since late August was highlighted as a contributing factor to the upgraded rating.
Another key consideration for the positive outlook was the significant foreign investment outflow observed over the past three months. This trend has reversed Bumi Serpong Damai's position to a net foreign outflow year-to-date. According to the analyst, these developments have led to BSDE trading at an attractive valuation, which is currently at a 78% discount to its RNAV. This valuation is said to be more than one standard deviation below the mean and is close to the company's bottom valuation during the pandemic.
In light of these observations, Citi has initiated a 90-day catalyst watch for BSDE, signaling a period during which the stock could potentially see significant movement.
The new price target reflects a 12% decrease from the previous target, which has been attributed to a rollover of the valuation base year to 2025. A higher discount rate has been applied to the RNAV to account for the slow sales churn from new townships and the anticipation of declining earnings and pre-sales growth for the fiscal year 2025.
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