Introduction

Indonesia’s real estate market is poised for significant growth in 2025, and this report by Maybank Sekuritas Indonesia takes a comprehensive look at the sector. The focus is on Pakuwon Jati (PWON IJ), a leading player in mixed-use developments. The analysis provides key insights into PWON’s strategies, financial performance, and future prospects, along with the broader market dynamics. The recommendation for investors is clear and actionable, making this an essential read for those eyeing opportunities in Indonesia’s property market.

Pakuwon Jati (PWON IJ): Leader in Mixed-Use Developments

Overview

Pakuwon Jati, established in 1982, is a prominent mixed-use developer specializing in high-rise properties in Greater Surabaya and Jakarta. PWON’s portfolio includes malls, hotels, offices, and residential projects, making it a leader in recurring revenue streams. In FY24E, 81% of its revenue came from investment properties, underscoring its strong position in the market.

Expansion Plans

Since 2019, PWON has added over 200,000 sqm of net leasable area (NLA) to its retail portfolio, reaching 841,000 sqm by FY24E. The company plans to expand further by developing malls in Batam, Semarang, and the new capital city (IKN), targeting a total NLA of 1,067,000 sqm (+21%) by 2029. Additionally, PWON aims to double its hotel rooms from 2,303 to 4,800 in the next five years.

Financial Highlights

• Revenue Growth: Expected to grow 11.5% in FY25E, reaching IDR 7,180 billion.
• Net Margin: Industry-leading net margins of 36-37% expected for FY24E-26E.
• Return on Equity (ROE): Projected at 11.4% and 10.2% in FY25E and FY26E, respectively, the highest among peers.
• Cap Rate: An impressive 15%, significantly higher than the regional average of 8%.
• Free Cash Flow: Forecasted at IDR 2.3 trillion in FY24E, sufficient to fund its ambitious capital expenditure plans.

Key Projects

PWON’s upcoming projects include:

• Bekasi Superblock: A project valued at IDR 2.6 trillion, featuring 43,000 sqm of retail space, 384 hotel rooms, and 100,000 sqm of residential space, set for completion between 2024-2027.
• Kota Kasablanka Expansion: Adding 42,000 sqm of NLA and 560 hotel rooms, valued at IDR 3.7 trillion, to be completed by 2028-2029.
• Batam Superblock: A mixed-use development with a mall (78,000 sqm NLA), hotels, and condominiums, valued at IDR 4.1 trillion, expected by 2029-2031.
• IKN Project: A mall (16,000 sqm NLA) and a 4-star hotel, with a project value of IDR 651 billion, slated for completion by 2026-2027.

Valuation and Recommendation

PWON is significantly undervalued, with the current market not fully pricing in its robust recurring revenue model and superior ROE. The target price (TP) is set at IDR 580, implying a 49% upside from its current share price of IDR 396. The recommendation is a strong BUY, backed by its leadership in mixed-use developments, high cap rate, and ambitious expansion plans.

Environmental, Social, and Governance (ESG) Initiatives

Environmental Commitment

• Implementation of a Zero Environment Claim Policy to reduce waste.
• Energy-efficient designs using insulated glass to minimize air-conditioning and lighting use.
• Commitment to water conservation and green open spaces, adhering to government regulations requiring 30% green space in developments.

Social Responsibility

• Increased female workforce representation to 26% in 2021, with 33% of board members being women.
• Investment in employee training and competency development, allocating IDR 1.2 billion in 2021.
• Regular community engagement through donations, SME empowerment, and health awareness campaigns.

Governance Practices

• Independent audit committee and a board structure with 67% independent commissioners.
• Total remuneration for the board was 3% of EBIT in 2021, on par with industry standards.
• Deloitte has served as the company’s auditor for over 11 years, ensuring transparency and reliability.

Conclusion

Pakuwon Jati stands out as a compelling investment opportunity in Indonesia’s thriving real estate sector. Its leadership in mixed-use developments, robust financial performance, and strategic expansion plans make it a top pick for investors. The company’s commitment to ESG principles further enhances its long-term sustainability and appeal. With a strong BUY recommendation and a 49% potential upside, PWON is well-positioned to deliver significant returns to its shareholders.