Turnaround playAnanda Development Plc (ANAN)
Strong presales will boost the stock price in 1H13, as they are a reliable guide to long-term earnings. Our BUY rating stands with an upgraded YE13 target price of Bt5.40 (from Bt5), pegged to a re-rated PER of 12x (from 11x), which factors in expected presales expansion. Share price downside risk is limited, given ANAN's low FY13 core PER of 9.8x (net PER of 10.5x), the lowest of our ResDev coverage (a 13.2x mean).
FY13 bottom-line turnaround
The bottom-line will turn around from a net loss of Bt287m for FY12 to a net profit of Bt1.4bn for FY13 led by 90% revenue expansion (to a record high of Bt9.4bn) and a YoY dive in Purchase Price Allocation (PPA—non-cash expenses related to the leveraged buyout of 12 condos in FY10). The key revenue contributors will be four condos (73% of our FY13 condo revenue forecast)—Morph 38, Ideo Mobi Sukhumvit, Sathorn and Phayathai. PPA is expected to drop precipitously from Bt465m in FY12 to Bt110m in FY13. Unattractive 1H13 results are behinds us; ANAN will post record high earnings in 4Q13 (70% of FY13 profit).
Aggressive growth target
ANAN's FY13 business plan suggests that the firm will outperform its peers—69% presales expansion to Bt15bn (versus 17percent for our ResDev coverage) and a 300% jump in revenue to Bt12bn (our revenue forecast is 20% lower than management guidance) versus 25% revenue growth for our ResDev coverage. The Bt24bn launch schedule for FY13 (70% condo, 30% low-rise), up from Bt9.4bn in FY12, will drive presales.
Good revenue visibility
The presales backlog totaled Bt8.7bn at YE12, which secures 69% of our revenue forecast for FY13 and 19percent for FY14. ANAN ranks third in the sector for revenue visibility (after LPN and PS). Construction progress at the three Ideo Mobi condos (to transfer by YE13) has been good. As of March 5, civil work was 88% complete (up from 64% complete in early Jan) at Ideo Mobi Sukhumvit, 80percent for Sathorn and 50percent for Phayathai.
What to watch for in 1H13
The market will monitor the responses to launches in 1H13, as initial take-up rates are a reliable forward indicator of revenue and net margin. On March 9, ANAN will unveil the first project under its new brand, Elio Sukhumvit 64 (Bt4.6bn). In mid March, the firm will re-launch seven low-rise projects (fully acquired from its business partner in Dec 2012 and rebranded to Atoll). Morph 38 will be the subject of a final marketing promotion in late March. In 2Q13, two new Ideo Mobi condos (on planned BTS extension lines), together worth of Bt5.5bn, will launch.