Amata Corporation

Surge in land price brings valuation upgrade BUY

Amata 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.