Strong demand growth in the Indonesian retail sector could lead to a pricing power shift to property owners due to higher rental costs, Nomura Equity Research said.
"While demand for leased retail space has grown with the influx of retailers and existing retailers' aggressive expansion, supply growth has been slower. In Jakarta, leased retail space has grown 16 percent over the past three years as of 1H12, vs supply growth of only 11 percent. We expect this trend to push rental rates for leased retail space up further (especially in big cities) as pricing power shifts to property owners (landlords)," Nomura analysts Janni Asman and Wilianto Ie said in a note to clients on Tuesday.
"We expect strong growth in demand, along with likely limited supply upside, especially in premium areas, to lead to a shift in pricing power to property owners (landlords) and a higher increase in rental costs," they said.
The research house remained positive on Indonesia's consumption growth in the long-term, but said rising competition may affect corporate earningsperformance as the intensity of competition varies across sub-sectors.
Nomura's preferred company is departmental store chain Ramayana Lestari Tbk with a 'buy' rating, given its relatively more diversified revenue sources and greater resilience in facing rental cost increases.
The research house put a 'neutral' rating on commercial and industrial supplies company Ace Hardware Tbk and fashion retailer Mitra Adiperkasa Tbk, saying despite growth in lifestyle retail in Indonesia, the market is pricing in high expectations and it will be difficult not to disappoint.
By 0621 GMT, the Jakarta Consumer Index was up 0.03 percent, while the broader Jakarta Composite Index was up 0.06 percent.
(Reporting by Andjarsari Paramaditha in Jakarta)
STOCKS NEWS INDONESIA-Bumi Resources shares hammered on financial probe
Shares in Indonesia's Bumi Resources, Asia's biggest thermal coal exporter, dropped as much as 13.23 percent on Tuesday after parent company Bumi Plc launched an investigation into alleged financial irregularities at its subsidiaries.
Bumi said on Monday it had commissioned an independent investigation after allegations over the use of company funds at its affiliates, including 29 percent-owned PT Bumi Resources, which is controlled by Indonesia's influential Bakrie family.
Bumi Resources CEO Ari Hudaya stepped down from the London-listed parent company's board hours after the probe was announced. The stock was down 5.88 percent at 640 rupiah with 179.7 million shares traded, the highest turnover on the Indonesian stock exchange. The Jakarta Composite Index was up 0.10 percent. 1051 (0351 GMT) (Reporting by Andjarsari Paramaditha in Jakarta)
Source: Reuters
Source: Reuters
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