Moody’s-Indonesian property developers’ cash flow to improve amid uneven recovery across segments

27-Feb-2021 Intellasia | Moodys | 5:02 AM Print This Post

Office and retail segments are still affected by weak demand, but residential property can expect a recovery driven by demand for mass-market properties Developers’ credit metrics are not likely to recover to 2019 levels yet, given the time lag between

revenue recognition and marketing sales

Moody’s Investors Service says in a new report that demand recovery will be uneven across

Indonesian property segments, although cash flow is expected to broadly improve from low levels in


“Demand for residential property will recover the fastest among the property segments, where

pent-up demand and low interest rates will fuel a 10 percent growth in rated developers’ aggregated core

marketing sales,” says Jacintha Poh, a Moody’s vice President and Senior Credit Officer.

“In the retail segment, however, weak sales will hurt retail space demand, and occupancy and rents

are unlikely to return to pre-pandemic levels. And in Jakarta, the central business district remains

exposed to subdued office demand amid upcoming asset completions and telecommuting,” adds


Moody’s expects aggregated cash flow for the six rated Indonesian property developers will rise

in 2021 after dropping significantly in 2020 because of coronavirus disruptions. A normalisation of

rental income from retail malls and core marketing sales growth will lift aggregated operating cash


In particular, landlords Pakuwon Jati, Tbk. (P.T.) (Ba2 stable) and Agung Podomoro Land Tbk (P.T.)

(B3 negative), which generate over a quarter of their revenue from retail leasing, will benefit from

declining rent relief to tenants. And most developers, having refinanced their upcoming US dollar

debt and with no maturities through to 2023, will have adequate liquidity over the next 12-18 months.

That said, credit metrics will remain weaker than pre-pandemic levels, as rising cash flow will not

immediately improve credit metrics because of the time lag between revenue recognition and

marketing sales.

Aggregated leverage, as measured by debt to homebuilding EBITDA, will remain high at 5.1x in

2021, despite improving from 7.1x in 2020. Aggregated EBIT interest coverage, as measured by

homebuilding EBIT to interest expense, will remain low at 2.0x in 2021, versus 2.5x in 2019.


Category: Indonesia

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