Two Raters Downgraded ASRI’s on Weak Presales and Elevated Leverage

On rating front, S&P cut Alam Sutera, Tbk (ASRI:IJ) rating from B+ to B with the outlook remains stable. The downgrade is driven by the expectation that ASRI’s leverage will remain elevated in 2016 – 2017 due to significantly weak property sales. The company’s EBITDA interest coverage is seen to stay below a downgrade trigger of 3.0x in 2016 and 2017. Likewise, Moody’s lowered ASRI’s outlook to negative underpinned by company’s weak presales as they reached only 33% of presales target. It was the weakest among other five developers at Moody’s coverage who had achieved c.60% – 70% of presales target. As a result of weak pre sales, ASRI’s revenue declined 23% yoy to IDR 2.2 billion in 9M15, slightly lower than IDR 2.8 billion in the same period last year. However, the outlook would be revised back to stable if ASRI could meets its 2015 presales target.

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