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Amata Corporation

Bad news prices in with some positives ahead BUY

Amata Corporation Plc (AMATA)

Positives in pipeline = share price catalyst after dust has settled. Amata Ready Built, in which AMATA holds 49%, plans to set up a REIT in 2Q-3Q14 in which to inject its ready-built factories (RBF), with an estimated one-time gain of Bt700-750mn (not yet in our forecast). It also expects to list Amata Vietnam (AVN) on the SET in 3Q14. It is also adding two new IEs in Vietnam: 8K rai in Long Thanh, in which it will take 70%, and a giant IE in northern Vietnam, for which no details have been provided.

To hang on to land, may shift to leasehold from freehold land sale where competition is low, expansion difficult; decision in a few days, implemented earliest in 2H14. We see the only target of this plan as Amata Nakorn in Chonburi. The implications are: a) lower revenue, profit and cash flow booked each year and b) rise in D/E ratio. This should have no effect on our asset-based valuation. AMATA's land bank now stands at 14,400 rai, of which 64% is at Amata Nakorn in Chonburi and 36% at Amata City in Rayong.

AMATA says no target: Weak industry outlook this year. The lengthy political unrest is negative to foreign direct investment for at least the near term. We thus take the view that IE land sales will be in a steady decline this year. Investors are sidelined and AMATA's management has decided not to set a target despite having several big clients together wanting over >2,000 rai.

Earnings and PT cut. We cut our land sales forecast to 1,000 rai this year and next, from 1,500 rai in each year. This reduced 2014 forecast by 7% to Bt1.5bn and 2015 by 16% to Bt1.8bn and our PT to Bt20 from Bt25. It has backlog of Bt5.2bn, which will supply most of this year's revenue.

2013 below all expectations on extra expenses. AMATA posted a poor net profit of Bt75mn in 4Q13, a sharp drop of 88.6% YoY and 88.1% QoQ, due to Bt166mn one-time expenses for flood protection at Amata Nakorn and major maintenance at Amata Water. This brought 2013 profit to Bt1.5bn, flat growth YoY.

Maintain BUY on good properties and undemanding PBV of just 1.3x of 2014F. Though the industry outlook is poor, the plunge in share price over past months has already priced this in. After the dust is settled, we expect the good news to take over and lead to share price outperformance.

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