Most brokers like Amata despite negative climate

Eighteen brokerages that updated their research papers on Amata from August to September recommended "buy" for the stock, with target prices in the range of Bt13 to Bt20. Only two brokers recommended "hold".

CLSA, Kim Eng Securities (Thailand), Asia Plus Securities, Tisco Securities, KGI Securities (Thailand), DBS Vickers Securities and Bualuang Securities are among those in the bullish camp.

The stock has plunged more than 40 per cent so far this year.

Amata is Thailand's leading industrialestate developer. It has two Thai estates - Amata Nakorn, which covers 15,000 rai in Chon Buri province, and Amata City, covering 8,440 rai in Rayong - and Amata City Bien Hoa in Vietnam, in which Amata holds a 70percent stake.

The company last year had 35.66 per cent of the land sales in Thailand's industrialestate industry, with 1,716 out of the 4,812 rai sold.

Land sales contributed 69 per cent of Amata's secondquarter revenue, utilities income took 17 per cent and rental and other income accounted for 7 per cent each.

The company has three projects aimed at improving its recurring income stream. The first, OTA Techno Park, was launched in the second quarter with the target of attracting some of the 5,000 small and mediumsized businesses from the Japanese city of Ota.

Second, in the first half of next year Amata will launch Financial Street to bring banking services to the 120,000 inhabitants of its Amata Nakorn Industrial Estate.

Third, Amata has bought an 8percent stake in Amata Steam Supply, a 170megawatt plant that will feed power into the grid in 2012.

Risk factors are a slowdown in inflow of foreign direct investment due to negative economic or political factors and a substantially lower gross margin on bulk sales.

Tisco Securities has reiterated its "buy" rating on Amata's stock but lowered the target price from Bt18 a share to Bt16.40, in order to reflect a cut in its landsales estimate for this year from 1,500 rai to 1,100.

The lower target also takes into account Tisco's reduced earnings forecasts for the stock, by 7.8 per cent to Bt1.18 billion this year, 7.3 per cent to Bt1.24 billion next year and 7.5 per cent to Bt1.45 billion in 2010.

The broker believes Amata will not achieve its 2008 landsales target of 1,700 rai, as only 568 rai have been sold so far.

"Amata is presently holding negotiations with 30 potential customers, but we expect many of these to delay their land purchases until 2009, due to the current political crisis and the fact that production of ecocars won't be substantial until at least 2011," it said.

Despite strong foreigninvestment inflows into Vietnam, Amata has limited growth opportunities at its present location there, Tisco said.

The company originally received a 700hectare plot through a leasehold agreement from the Vietnamese government. However, it now has only 175 hectares of sellable land at its Amata Vietnam estate.

With the Vietnamese hesitant to grant more land to industrial parks, due to heavy pollution in Dong Nai province, Amata has decided to limit land sales to highpotential companies, where it can generate high margins. It will use its remaining land bank to develop readybuilt factories for rent.

The company's 2008 revenue should be supported by the booking of a large portion of its sales backlog of Bt1.1 billion, Tisco said. Of that, Bt400 million is from land sales at Amata Nakorn in Chon Buri and Bt700 million is from sales at Amata City in Rayong.

Amata expects its Financial Street project to boost annual revenue by up to Bt30 million by 2010. Phase one will be occupied solely by Siam Commercial Bank in a standalone structure of 1,410 square metres. The bank has signed a 30year lease and is expected to begin operations there in December.

Phase two involves construction of a 4,200squaremetre facility with space for six banks and two food shops and is expected to open at the end of next year.

DBS Vickers Securities recommends "buy" on Amata shares, with a 12month target price of Bt14.33 apiece.

Despite the political tension, Amata's management is cautiously maintaining its 1,700rai landsales target for the year, citing ongoing negotiations with more than 30 potential clients, mostly in the automotive sector.

DBS is maintaining its 900rai landsales estimate for Amata for the year.

"The political uncertainty is negative news for Amata, which relies heavily on foreign direct investment in Thailand. Nonetheless, we believe this piece of negative news has been largely priced in," it said.

The broker said Amata would focus more on recurring income through constructing more factories for rent and the Financial Street project.