Amata Corporation

Q4 2012 profit far above all estimates; FY13-14 earnings CAGR of 40%

Amata Corporation Plc (AMATA)



Above our estimate by 32%

AMATA reported a 4Q12 net profit of Bt667m, up by 49% YoY and 72% QoQ. The number beat our estimate by 32% and the consensus by 64%. Excluding a non-recurring item, core profit would be only Bt359m, down 20% YoY but up 28% QoQ. The core figure was 18% above our estimate because of fatter land GM than modeled.

Results highlights

Revenue from land posted a jump of 60% QoQ and 19% YoY to Bt1.5bn. Land GM softened, as we expected, due to a higher proportion of low-margin land transference (Amata City) in the mix. In 4Q12, AMATA transferred 640 rai—160 rai at Amata Nakorn and 480 rai at Amata City. However, blended GM expanded by 11% YoY and 2% QoQ to 54% with the booking of a reversal of the cost of offering factories for rent (it's not yet clear what prompted the reversal).

Utilities sales rose by 39% YoY and 10% QoQ to Bt301m (to comprise 16% of the top-line) on increased utilization rates among manufacturers in AMATA's estates. The firm also seized Canadoil's Bt248m deposit (for a land purchase that Canadoil failed to complete) and booked a gain on a fair value adjustment for investment property of Bt155m during the quarter.

Outlook

We are upbeat on the FY13 earnings outlook, due to anticipation of increasing land transfers. AMATA sold 2,835 rai during FY12 and had a backlog of land booked (but not yet transferred) worth about Bt6bn at YE12, to be recognized as revenue over the next 18 months. Demand for land remains strong this year, led by auto-parts makers. There were another 642 net applications for BOI tax privileges in December, bringing the total for the year to 2,584 projects. We expect management to set an FY13 land sales target in the region of 3,100-3,400 rai. Furthermore, AMATA is likely to raise its sales prices by 20% at Amata Nakorn and by 15% at Amata City, which should boost land revenue substantially in FY14.

What's changed?

We maintain our FY13 profit forecast and target price unchanged.

Recommendation

Despite its share price outperformance, we believe AMATA has further to run. Market sentiment toward the stock will remain strong in anticipation of exceptional profit growth (an FY13-14 earnings CAGR of 40%). The current valuation—a PER of 17.5 (0.8SD above its long-term average)—has yet to reflect the firm's earnings up-cycle. Note that AMATA's last valuation peak was in 2010 at 2.5SDs above its long-term mean. Our BUY rating stands with a YE13 target price of Bt28.