Latest / Investor Exchange / Sinarmas Land Limited FY2024 Results

Transcript

Sinarmas Land Limited FY2024 Results · Investor Exchange

• 0:02
  Time for another Investor Exchange podcast. Here are your hosts, Matt and Sally.
• 0:08
  Welcome to the Deep Dive. You've shared the Sonoma's Land Limited full-year results.
• 0:12
  For 2024, we've got the financials, the dividend news. That's right.
• 0:17
  So our mission today is really to dig into these documents.
• 0:21
  What were the key numbers, the wins, the maybe setbacks for Sonoma's Land last year? Exactly.
• 0:27
  And what's driving those numbers? What factors are behind the performance?
• 0:30
  And importantly, what are they saying about the future? What's their outlook?
• 0:34
  We'll cover revenue, profit, cost, all that good stuff. Yep.
• 0:37
  Got the detailed breakdown here.
• 0:38
  We can really dissect what worked, what didn't, and how they see things shaping up.
• 0:43
  Okay. Let's kick off with the big picture then. The overall financial performance.
• 0:47
  Revenue looked pretty solid. Yeah, definitely. A decent jump.
• 0:49
  Up 10.9% year over year. Which brought it to, what, S1,487.8 million dollars,
• 0:56
  compared to S1,341.3 million dollars the year before. Correct.
• 1:00
  A solid top-line increase.
• 1:02
  And that carried through to some other metrics, too. EBITDA, for instance.
• 1:05
  Right. Earnings before interest, taxes, depreciation, amortization.
• 1:08
  That key operating metric. That rose, too.
• 1:10
  714.2 million dollars, up from 674.6 million dollars.
• 1:16
  And profit before tax. That saw a really big jump. It did, yeah.
• 1:19
  A significant 19.0% increase.
• 1:22
  It's $518.7 million.
• 1:25
  So overall profit for the year followed suit. Up nicely. Up 20.9%. Yes.
• 1:30
  Reach $465.3 million.
• 1:34
  So looking good on the surface. But hang on. Here's something interesting I noticed.
• 1:37
  The profit attributable to the owners of the company actually decreased by 10.8%. Ah, yes.
• 1:45
  That's a really crucial distinction. It seems counterintuitive, right?
• 1:48
  Overall profit up, but owner profit down. It does, but it makes sense when you
• 1:52
  look at the non-controlling interest, the profit share going to minority shareholders
• 1:56
  and their subsidiaries. Okay.
• 1:57
  That part saw a massive jump, like 97.7% increase. Wow, 97%. Yeah.
• 2:03
  So it suggests some of their subsidiary companies where Sonarmas Land doesn't
• 2:06
  own 100% did really, really well.
• 2:08
  I see. So the group overall is more profitable, but a bigger chunk of that extra
• 2:12
  profit went to those minority partners, not the main Sonarmas Land shareholders. Exactly.
• 2:17
  So the pie got bigger, but the slice for the parent company owners actually shrank a bit. Got it.
• 2:23
  OK, so back to that overall revenue jump, that 10.9% increase.
• 2:27
  Where did most of that come from?
• 2:29
  The report points mainly to higher sales of industrial and commercial land parcels,
• 2:34
  particularly in their big Indonesian projects, BSD City and Kota del Tamas.
• 2:39
  Right. Those are huge township developments, aren't they? They are.
• 2:42
  So big land deals there can really shift the needle on revenue. Makes sense.
• 2:46
  And they also mentioned increased revenue from selling residential units and
• 2:49
  commercial shop houses, too.
• 2:50
  So it seems like broad-based strength in their property sales.
• 2:53
  Okay. Broad strength. Good to hear.
• 2:55
  Now let's dig into profitability a bit more. Gross profit was up, $944.9 million.
• 3:01
  How about the margin? Did they keep costs down relative to sales?
• 3:05
  Well, interestingly, the gross profit margins stayed pretty flat,
• 3:08
  really stable, actually.
• 3:10
  Yeah, 63.5% in FY 2024 versus 63.7% in FY 2023. Almost identical.
• 3:16
  So costs basically rose in line with revenue then. Seems like it.
• 3:20
  Their direct cost of sales kept pace with the sales growth.
• 3:22
  No major efficiency gain or loss there at the gross level anyway. Okay.
• 3:26
  Now, operating profit also increased for the full year, up 5.9% to S555.2 million dollars.
• 3:33
  But I think I saw something about the second half. You did. Yeah, that's important.
• 3:37
  While the full year was up, the second half of 2024 specifically saw operating
• 3:42
  profit fall. Fall. By how much? Quite a bit.
• 3:45
  Down 27.2% compared to the second half of 2023. Ouch.
• 3:50
  27% drop in the back half of the year. What drove that? Expenses picking up
• 3:55
  pace? That seems to be the main story, yeah.
• 3:57
  Both selling expenses and G&A general and administrative costs were up quite
• 4:01
  significantly for the full year. Right.
• 4:03
  Selling costs rose 17.2%. They link that directly to higher promotion,
• 4:08
  marketing commissions, you know, the costs of generating the higher revenue. Uh-huh.
• 4:12
  Necessary spending, I guess. And G&A went up 18.6%. That was things like higher
• 4:16
  salaries, related costs, IP maintenance expenses.
• 4:20
  So it sounds like the cost of doing business just climbed faster than income
• 4:23
  in that second half, squeezing the operating profit. That's likely a big part of it, yes.
• 4:27
  Spending more to get the sales, but maybe the operating leverage wasn't quite there in H2. Okay.
• 4:32
  What about things like finance costs, interim expenses, currency movements? Any help there?
• 4:39
  Actually, yes. Some good news on the finance front. Net finance expenses decreased.
• 4:44
  Oh, okay. Why was that? Two main reasons mentioned.
• 4:47
  One, they earned more interest income on their time deposits,
• 4:51
  likely thanks to higher interest rates globally. Right.
• 4:53
  And two, they had lower interest expenses because they repaid some bonds. That helps.
• 4:58
  And foreign exchange. Currency can swing things around.
• 5:02
  It did. Big swing this year. They recorded a net foreign exchange gain of $16.0 million.
• 5:08
  A gain. Nice. Wasn't it a loss last year? It was a pretty big loss last year.
• 5:12
  Yeah. S43.7 million dollar loss in FY 2023.
• 5:17
  So quite a turnaround. What caused the gain this year? They attributed it mainly to the U.S.
• 5:21
  Dollar and the British pound strengthening against the Singapore dollar.
• 5:23
  OK, so some definite tailwinds from finance and FX helping offset those rising
• 5:28
  operating costs. Definitely helped the bottom line. Yeah.
• 5:30
  Now, another piece of the puzzle is the income from investments in other companies,
• 5:35
  their associates in joint ventures.
• 5:37
  Those figures looked, well, quite different year on year.
• 5:40
  Yeah. Another area with a really significant shift. A big drop, actually.
• 5:45
  How big? Well, the share of profit from associated companies just plummeted,
• 5:49
  down to S1.6 million dollars from S60.6 million dollars the year before. Wow.
• 5:55
  S60 million dollars down to F1.6 million dollars.
• 5:59
  That's huge. What happened? Mainly lower fair value gains on their investments this year.
• 6:03
  Plus, in FY 2023, they had profits from actually selling some investments,
• 6:07
  which didn't happen in FY 2024.
• 6:10
  OK. And joint ventures. Similar story. Pretty similar, yeah.
• 6:13
  Share of profit from JVs also down substantially. S6.1 million dollars compared
• 6:18
  to S47.6 million dollars previously. Another big drop.
• 6:22
  Any reason given for that one? Lower sales of completed homes and commercial
• 6:25
  units in some of their Indonesian joint venture projects.
• 6:28
  Right. So these sharp drops in income from associates and JVs,
• 6:31
  That must be a key reason why the profit attributable to the owners didn't grow
• 6:36
  like the overall group profit did.
• 6:38
  Absolutely. It connects directly back to that point we discussed earlier.
• 6:41
  A big chunk of expected income just wasn't there this year from these partnerships.
• 6:45
  Makes perfect sense now.
• 6:47
  Okay, what about any other sort of unusual costs, impairments or exceptional items?
• 6:52
  Yes, there were a few things to note there. They took some impairment losses.
• 6:56
  Meaning writing down asset values. Exactly.
• 6:59
  S-44.1 million dollars right down on toll road concession rights and another
• 7:05
  S-23.2 million dollars on investment properties reflecting lower market values.
• 7:11
  How does that compare to last year?
• 7:12
  They had a bigger single impairment last year. 71.7 million dollars on one investment property.
• 7:17
  So impairments were still there, but maybe slightly less concentrated this year.
• 7:20
  Got it. And the exceptional items, those one-offs. Yeah, quite significant ones
• 7:24
  in FY 2024, actually, with puts and takes.
• 7:27
  On the plus side, they recorded a very large negative goodwill amount.
• 7:31
  Negative goodwill. That sounds odd. It does, but it basically means they acquired
• 7:35
  some companies, P.T. Suriyama Zedutamaker and P.T.
• 7:38
  Wira Perkasa Agung, for less than the fair value of their net assets.
• 7:41
  It resulted in a gain of S-130.7 million dollars on paper.
• 7:46
  Okay, a gain from acquisitions. But that was partially offset by losses.
• 7:50
  A $50.2 million loss from deconsolidating, basically losing control of,
• 7:55
  sitting in Assets Limited, and another loss related to an equity interest in a joint venture.
• 8:00
  So a big gain from acquisitions partially canceled out by losses on disposals or JVs.
• 8:06
  Quite different from FY 2023. Very different.
• 8:09
  FY 2023 had gains from deconsolidation and selling subsidiaries.
• 8:13
  So these exceptional items really swing the final profit figure around year
• 8:18
  to year. Definitely adds noise to the underlying performance.
• 8:21
  OK, last bit on the profit side income tax. Edged up slightly.
• 8:25
  S-53.4 million dollar expense compared to S-51.1 million dollars.
• 8:30
  They just said it was in line with higher taxable income in some subsidiaries.
• 8:34
  OK, standard enough. So we've walked through the income statement pretty thoroughly.
• 8:38
  Let's pivot to the balance sheet, their financial position at year end.
• 8:42
  What did that look like? Assets and liabilities.
• 8:44
  Well, total assets increased. Not surprisingly, given they acquired those new
• 8:47
  subsidiaries we mentioned, P.T.
• 8:49
  Suryamas Dutamak Moore and P.T. Weira Prakasa Agung brought their assets onto the books.
• 8:55
  Right. Makes sense. And liabilities. Liabilities also increased.
• 8:58
  The main driver there was taking on new bank loans, although that was partly
• 9:02
  offset because some other payables decreased.
• 9:04
  So more assets, but also more debt overall.
• 9:08
  How about cash flow? How did the actual cash move during FY 2024?
• 9:13
  Hmm. Interesting picture there, too.
• 9:16
  Cash from their core operating activities actually went down.
• 9:19
  Down. Even with higher revenue. Yeah. The company explanation was lower advances
• 9:24
  in deposits received on their development properties compared to the year before.
• 9:27
  Less cash up front, essentially. Okay.
• 9:30
  What about investing activities? Acquisitions must have used cash.
• 9:33
  Oh, yeah. Significant cash used in investing activities.
• 9:36
  Big outflow. Driven by? Those subsidiary acquisitions, obviously.
• 9:39
  But also further investments into associated companies and JVs,
• 9:44
  capital spending, and buying some financial assets.
• 9:47
  So spending cash to grow and invest. Right. Some of that was offset by dividends
• 9:51
  they received from investments and some capital returns, but overall a net use
• 9:55
  of cash for investing. And financing activities. Yeah.
• 9:57
  Where they raise money or pay it back. That generated cash overall.
• 10:00
  A net inflow from financing.
• 10:03
  Mainly from? Those new bank borrowings we mentioned earlier.
• 10:05
  Plus, they got capital contributions from those non-controlling interests in the subsidiaries.
• 10:10
  That was partly offset by dividend payments they made during the year,
• 10:13
  presumably relating to the prior year's declaration. Right.
• 10:16
  Which brings us neatly to the dividend for this year, FY 2024.
• 10:21
  What's the verdict for shareholders? Yeah, perhaps disappointing news for income investors.
• 10:27
  No dividend declared for FY 2024. None at all.
• 10:31
  The board stated they're conserving cash for working capital needs.
• 10:34
  That's a change from FY 2023, right?
• 10:36
  Didn't they pay something small? They did. 0.00008 per share final dividend for FY 2023.
• 10:44
  So skipping it for FY 2024 definitely signals a more cautious approach.
• 10:49
  Yeah, conserving cash certainly points towards caution, which leads us perfectly
• 10:53
  into their outlook commentary. What are they seeing ahead? Sounds like maybe some clouds gathering.
• 10:57
  That's definitely the tone. Yeah, they seem to be bracing for tougher times.
• 11:00
  They note Indonesia's GDP growth slowed in 2024, and they see signs pointing
• 11:06
  to maybe more economic headwinds in 2025.
• 11:09
  Things like slowing manufacturing, exports potentially dipping,
• 11:13
  consumers getting a bit more cautious with spending. Any signs within their own business?
• 11:18
  They did mention their listed subsidiaries, BSDE and DMAS, only achieved slight
• 11:23
  improvements over their marketing sales targets for FY 2024.
• 11:28
  So hitting targets, but maybe not by much, could be an early sign of a softening market, perhaps?
• 11:34
  Could be. But their bigger concern seems to be the global picture.
• 11:38
  Right. They mentioned that specifically.
• 11:39
  Yes. They talk about a significantly weakened global economic outweigh,
• 11:44
  and they actually call out the Liberation Day tariffs announced by the U.S.
• 11:48
  President. Really? Naming specific policy? Yep.
• 11:51
  Saying it's led to fears of a global recession.
• 11:53
  And their concern is the knock-on effects. Exactly.
• 11:56
  Suppressed consumption, inflated costs, disrupted investment,
• 12:00
  all things that could hurt their operations.
• 12:03
  Did they mention anything else about market sentiment? They pointed to the Indonesia
• 12:06
  Stock Exchange crash back in March 2025, which actually happened before those
• 12:10
  tariffs were announced, suggesting maybe they were underlying jitters already.
• 12:14
  Hmm. So given all that pessimism, what's their strategy going forward?
• 12:19
  How are they planning to navigate this?
• 12:21
  The commentary really emphasizes being cautious and defensive.
• 12:25
  That's the key message. Defensive how?
• 12:28
  Prioritizing capital preservation, being very selective about where they deploy
• 12:31
  resources, holding back a bit, essentially.
• 12:34
  Which ties back to the decision not to pay a dividend.
• 12:37
  Precisely. It all paints a picture of a company hunkering down,
• 12:40
  wanting to make sure they have the financial strength to handle potential difficulties
• 12:44
  ahead because of this challenging macroeconomic environment.
• 12:47
  Okay, let's try and summarize this deep dive then. Sonarmas Land in FY 2024
• 12:51
  saw overall revenue growth, pre-tax profit growth too, driven largely by those
• 12:57
  big land sales in Indonesia.
• 12:59
  Right. BSD City and Coda del Thomas performing well on that front.
• 13:02
  But the profit actually flowing to the parent company shareholders went down.
• 13:07
  Key reasons seem to be those big drops in income from associates and JVs.
• 13:12
  Yeah, that was a major factor.
• 13:13
  And also rising operating expenses, especially in the second half,
• 13:16
  kind of squeezed things. Correct.
• 13:18
  Costs went up. and looking ahead, the outlook is decidedly cautious.
• 13:23
  Worries about the global economy, tariffs, potential slowing in Indonesia,
• 13:27
  leading them to conserve cash, skip the dividend, and adopt a defensive stance.
• 13:32
  That sums it up pretty well.
• 13:34
  Positive top-line momentum met with some underlying profitability challenges,
• 13:38
  and now a clear focus on navigating potential economic headwinds.
• 13:42
  It really makes you think, doesn't it?
• 13:44
  How vulnerable are regional property developers like Sonarmas Land to these
• 13:49
  big global economic shifts and, well, political decisions like tariffs?
• 13:54
  It's a key question. And for listeners wanting to track this,
• 13:56
  you could definitely dig deeper into the ongoing sales performance at BSD City
• 14:00
  and Coda del Tomas. See if that strength continues.
• 14:03
  Or maybe look into how those newly acquired subsidiaries are actually performing
• 14:07
  and integrating. Exactly.
• 14:09
  Or track the real impact of those tariffs, if any, on Indonesia's economy and
• 14:13
  specifically its property market in the coming months and quarters.
• 14:17
  Lots to watch. And maybe a final thought to leave folks with.
• 14:20
  In this kind of uncertain global climate, how does a company like San Armas
• 14:25
  Land strike that right balance?
• 14:27
  The balance between chasing growth opportunities versus just playing defense
• 14:31
  and making sure they're financially solid enough to ride out any storm.
• 14:34
  It's the classic dilemma, isn't it? Growth versus risk management.
• 14:38
  Their actions going forward will certainly be interesting to follow.
• 14:41
  Indeed. Well, thanks for joining us for this deep dive.