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AP (Thailand)

Pre-sales recover to beat on the upside BUY

AP (Thailand) Plc

- Presales: 2Q14 beat at Bt5.4bn: lift 1H14 to Bt7.5bn, 42% of AP's 2014 target

- Surprisingly strong response to both condo and low-rise launches

- Upside risk from additional Aspire condo launch in 4Q14

- Maintain BUY and sector pick on cheap valuation


Stronger than expected presales in 2Q14. AP's presales jumped to Bt5.4bn in 2Q14, +17% YoY and +148% QoQ, bringing presales to Bt7.5bn in 1H14. Though this is a contraction of 11% YoY, it is essentially in line with AP's own expectations, accounting for 42% of its full year target. Backing the growth are three factors. Response was better than expected to three condos - Rhythm Sukhumvit 36, Rhythm Asoke 2 and Aspire Ratchada-Wongsawang; presales of all three have already reached the full year target of Bt3.5bn. The second factor is the elimination of the large cancelations for Rhythm Sathorn seen from December 2013 through March 2014. Finally, its new low-rise projects have also met with good response.

Good response to new low-rise projects. Response has been good to recent TH launches, with presales at 10-16% of total units almost immediately upon launch. These include Pleno Srinakarin (13%), Baan Klang Muang Ratchayothin (16%), and Baan Klang Muang Suksawat (10%). This shoved monthly presales up to Bt1.0bn in May (from Bt680mn in April) and Bt1.3bn in June. This brought total low-rise presales to Bt5.4bn in 1H14 or 60% of its full year target, reducing the risk of disappointment.

Will make and may even exceed target. Encouraged by restoration of consumer confidence plus positive momentum, we look for presales to build HoH in 2H14. Assuming a conservative take-up rate of 30% of available stock (outstanding unsold stock end-2013 plus 2014 launches) for each of low-rise and condo - well below historical average of 40% and 57% respectively in 2008-2013 - AP will make its full year target of Bt18bn, solid growth of 19% YoY. Upside lies in the addition of a condo launch in 4Q14, a Bt3bn condo under the "Aspire" brand. Assuming a 30% take-up rate suggests upside risk of 5% to presales this year.

Sequential revenue growth QoQ to peak in 4Q14. We estimate revenue growth of 45% QoQ in 2Q14 backed by completion of Life Ratchadapisek (backlog of Bt2.7bn). Completion of Aspire Rama 9 (Bt2.2bn) will underwrite growth in 3Q14, which will be followed by four more condos in 4Q14 - Rhythm Sathorn-Narathiwas (Bt1.5bn), Rhythm Sathorn (Bt2.0bn), Aspire Sukhumvit 48 (Bt1.3bn) and Aspire Rattanathibet (Bt900mn). AP currently has total backlog of Bt24.9bn, securing 83% of 2014F.

Reiterate a BUY and sector top pick. In our view, AP is cheap, trading at 7.4x 2014 PER and 1.2x PBV - the lowest of peers and at a discount to its mid-range valuation. Presales recovered strongly in 2Q14 and this plus sequential earnings growth are near term share price catalysts. We continue to Buy with PT of Bt8.5/share based on its mid-range valuation of 1.5x PBV.




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