CNBC Indonesia Research
Photo: Aerial photo of the stalled construction of the Meikarta District 2 apartment project in Cibatu, Cikarang, Bekasi Regency, Wednesday (7/12/2022). (CNBC Indonesia/ Andrean Kristianto)
Jakarta, CNBC Indonesia – The case of the Meikarta megaproject, which recently surfaced again, has brought the Lippo Group into the spotlight. Was called as signature projectnow Meikarta leaves a conflict that has not ended.
In fact, the megaproject located in South Cikarang, Bekasi Regency, had become the big hope of the two Lippo Group property companies made by the Riady Family, PT Lippo Karawaci Tbk (LPKR) and PT Lippo Cikarang Tbk (LPCK) when they were launched in 2017.
“Meikarta is a real masterpiece to arouse buyer’s interest. Meikarta is the first giant project built by the Lippo Group after 67 years,” stated the optimism written in LPKR’s 2017 Annual Report.
In 2017, many pages in the national print media presented large-scale advertisements for the sale of apartments in the city of Meikarta. Likewise, if you visit malls owned by the Lippo Group, there will be sales counters in the city of Meikarta.
The marketing research institute Nielsen revealed that throughout 2017 advertising spending in Indonesia increased. One of them is thanks to Meikarta’s contribution, which reached more than IDR 1.5 trillion.
This optimism had spread among stock analysts. An equity research on LPKR published on 26 May 2017 stated that the Meikarta project – which is projected to be successful – could raise concerns over balance sheet or Lippo’s balance sheet eases.
rating agencies (rating) Fitch also mentioned in the announcement rating on November 30, 2017, Meikarta will make LPCK’s contribution to consolidated cash flow [dalam LPKR] will increase significantly in the coming years.”
It’s just that the ‘megacity’ project that targets the lower middle class has encountered many problems even a year after it was launched, starting from licensing and spatial planning issues, licensing bribery cases involving the Bekasi government, being sued by vendors, until the project has finally stalled to date.
Most recently, as many as 21 members of the Indonesian Parliament last Tuesday (14/2/2023) directly inspected Meikarta over complaints from consumers.
On that occasion, Deputy Speaker of the DPR, Sufmi Dasco Ahmad, who led the group, revealed that there were around 130 consumers who wanted their money back because the unit construction had not been completed.
For information, Lippo Karawaci had directly held 83.99% of the shares in Lippo Cikarang until the end of 2021, before in the first quarter of 2022 LPKR’s ownership in LPCK was transferred to LPKR’s subsidiary, PT Kemuning Satiatama (with an 80.83% share).
Temporary, PT Mahkota Sentosa Utama (MSU) is the developer of Meikarta. In the past, MSU was consolidated into the LPCK and LPKR financial reports, before finally LPCK released IDR 2.02 trillion of shares as the controlling shareholder of MSU in 2018.
Indeed, jIf you look at the May 2018 report, it is said that Meikarta is no longer included in the property development portfolio of the Lippo Group.
The financial report as of September 30, 2022 shows that LPCK stated that prior to the loss of control over MSU, the company recorded a difference in the value of investment in MSU of IDR 4.04 trillion as another component of equity for the disposal of its share of investment ownership in MSU.
After the divestment action, LPCK’s ownership in MSU reached IDR 2.01 trillion. However, LPCK’s ownership in MSU still remains 49.72%.
Along with the deconsolidation of MSU, LPCK also stated that it has no responsibility for Meikarta consumers.
“We can say that fulfilling the consumer rights of the Meikarta apartment and fulfilling the handover target are the full responsibility of PT Mahkota Sentosa Utama (MSU),” said LPCK Corporate Secretary Veronika Sitepu in an information disclosure, quoted Monday (18/2/2023).
Stock Drops, Chronic Loss
Meikarta, which was expected to become Lippo’s new milestone and be able to increase the company’s cash flow, ended up in a polemic. As liquidity and bribery dragged down in 2018, rating agencies such as Fitch and Mood’s also downgraded their ratings (downgrade) LPKR credit.
Moreover, the sluggish property market after the 2010-2013 property boom, the era of high interest rates in 2018, plus the 2020 Covid-19 pandemic, added to the blow to Lippo’s properties.
Like a ‘perfect storm’ alias perfect storm, it sent property stocks down into deep territory. Over the years, property share prices, including those of Lippo, have remained stagnant.
Property sector stocks (IDXPROPERT), for example, fell 8.00% throughout 2022, ranking the third worst stock index that year.
LPCK shares, in particular, had penetrated the Rp. 9,800 level in 2013 and Rp. 11,000 in 2015, now trading at Rp. 960/share, as of February 20, 2023.
Meanwhile, LPKR’s shares were at the level of Rp. 1,400 in 2013, now they have fallen far below the price of Rp. 80/share.
The debt ratio of the Lippo property duo, especially LPKR, is also worrying. The debt-to-EBITDA ratio or debt compared to earnings before interest, taxes, depreciation and amortization reaches LPKR 21.01 (annualized).
This figure is far above peers. The higher the ratio, the more likely the company will have difficulty paying debts going forward.
Meanwhile, LPCK’s debt/EBITDA reached 6.20 times (annualized).
In comparison, the debt/EBITDA of the property company PT Bumi Serpong Damai Tbk (BSDE) was 9.29 times, PT Pakuwon Jati Tbk (PWON) 2.94 times, PT Summarecon Agung Tbk (SMRA) 9.19 times, PT Intiland Development Tbk (DILD) 16.65 times, PT Agung Podomoro Land Tbk (APLN) 3.07 times, and PT Ciputra Development Tbk (CTRA) 6.08 times.
This in turn made investors think about investing in LPCK and LPKR shares.
CNBC INDONESIA RESEARCH
research@cnbcindonesia.com
Disclaimer: This article is a journalistic product in the form of the views of CNBC Indonesia Research, the research division of CNBC Indonesia. This analysis does not aim to persuade readers to buy, hold, or sell related investment sector products or assets. The decision is entirely up to the reader, so we are not responsible for any losses or profits that arise from that decision.
(trp/trp)
