Surge in land price brings valuation upgrade BUYAmata Corporation Plc (AMATA)
2013 plans. AMATA plans to expand land sales ~10% YoY to 3,000 rai this year (2,800
rai last year), 40% in Amata Nakorn and 60% in Amata City. It already has sale of ~2,000
rai in the pipeline or two-thirds of its full year target. Major clients remain automotive,
followed by agriculture & food and logistics. Japan and China producers continue to
relocate to Thailand. We are more conservative and forecast 2,500 rai sold.
Still considering land leasing at Amata Nakorn. AMATA desires to lease land in
Amata Nakorn instead of selling. This would raise earnings security and visibility, and
smooth out earnings. It has proposed this strategy to some new clients and they are
thinking about it. For now we assume land is sold, not leased.
Fine tune earnings for 2013-2014. We expect strong core earnings growth of 66% to
Bt1.6bn, driven by 42% growth in IE revenue, with stable gross margin at ~54% and an
increase in equity income from its power (132.5MW Amata B.GRIMM Power 3 started
up in late 2012) and natural gas businesses. Earnings growth will slow to 37% to
Bt2.1bn in 2014 off a high base. Backlog is Bt6bn, securing income for this year and
next. Our forecast behind consensus by 11% in 2013 but ahead by 4% in 2014.
PT raised to Bt34/sh from Bt22/sh after raising assumed selling price to Bt5.5mn/rai
for Amata Nakorn, a 10% increase from last year's average of Bt5mn/rai, but a sharp
increase from our previous forecast of Bt4-4.9mn/rai. Our assumption is still more
conservative than company guidance of a 17% YoY rise in list price to Bt6.9mn/rai. We
also raise selling price marginally to Bt2.2mn/rai from Bt2-2.1mn/rai for Amata City.
We raise NAV for rental factories by 75% to Bt5.9bn, in line with the balance sheet
value. Note that it books investment property based on market value not cost.
BoI change a concern. Based on the first draft of the BOI reform bill (targeted to
take effect mid-year), the changes will have little effect on foreign direct investment in
our view. What may happen, however, is that it will lessen the attraction of locating in
IEs since privileges will be based on industry rather than zone and the corporate tax
holiday incentive for those located in an IE is not attractive at just one year as an addon
privilege, falling far short of the current zone-based bonus ranging from a full
exemption for four years to a 50% reduction for five years. This could lead investors to
locate near but not in an IE to get cheaper land.
Maintain BUY. Despite the 35% rally in share price YTD, AMATA is still a favorite. We
expect several items of positive news to drive share price: sale of more land to its Thai-
Chinese joint venture, listing of Amata Vietnam and strong earnings growth outlook.
The stock is trading at 16X on 2013, falling sharply to 11.5x on 2014. With attractive TTR
of 47%, we reiterate BUY.