STOCK FOCUS
Land and Houses
Tisco Securities has maintained its "buy" rating on Land and Houses (LH) shares, with a 12-month target price of Bt6.50 apiece.
LH stands out among property developers for having the biggest market share in the single-detached house segment and the largest number of housing projects around Bangkok, as well as its economies of scale and speed of construction. But due to the prevailing negative sentiment, the broker thinks the company might be unable to raise its selling prices in the second half of the year as previously expected, and intense competition should mean higher selling and administrative expenses.The brokerage estimates sales revenues of Bt6.5 billion for LH in last year's fourth quarter, based on last October's successful "Land and Houses 2-Day Special". However, that sales promotion caused its gross margin to fall from 31 per cent to about 26 per cent. The broker expects the property developer to post a net profit of Bt743 million for that quarter. LH has cut this year's sales-revenue target 17 per cent to Bt23.8 billion - which is up 30 per cent year on year - and lowered its assumed gross margin from 33 per cent to 31 per cent, because selling prices cannot be raised in the second half of this year, due to current doubts regarding home sales. The company also lifted its ratio of selling and administrative expenses to sales to 12 per cent, from 9 per cent before. The broker has lowered its net-profit target for LH this year by 34 per cent to Bt3.8 billion.
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