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Housing Sector

Decelerating pre-sales to press FY2014 profit by 7.4% Neutral

Housing Sector

Political unrest to press presales and new projects

The current Thai political conflict, started since November 2013, is

not likely to end in near future, pressing consumers’ confidence.

Moreover, household debt to GDP continues increasing, lowering

purchasing power and housing loan

The launching of new projects has been slowed down in late-2013

and early-2014, waiting for the political unrest to relieve. Thus,

presales of 15 companies under our coverage would make the

lowest in 4Q13-1Q14, after declining for two quarters (from B75bn

in 1Q13 to B61bn in 2Q13 and B56bn in 3Q13). However, housing

sector would benefit from inflation rate. As inflation rate is low, the

Bank of Thailand decreases policy interesting rate (currently

2.25%) to stimulate the economy, benefiting backlogs transferring

and reducing rejection rate.

- Revise down FY2014 profit forecast by 7.4%, especially from horizontal projects

We revise down FY2014 GDP growth forecast from 4.3%yoy to

3.3%yoy, likely to affect consumers’ decision on purchasing a new

house. For companies with small backlog to be transferred in 2014,

mainly those with most income from horizontal projects (e.g. LH,

QH, PS), their FY2014 profit would be affected severely, as they

would need to sell new houses to recognize income. Companies

with massive backlog to recognize income in 2014 are mostly those

with condominiums that were launched few years ago (e.g. SPALI,

AP). We revise down the sector’s FY2014 income forecast by 9.7%

to B218bn, cutting ready-to-be-transferred horizontal project sales

from the previous forecast. Thus, FY2014 net profit forecast is

revised down by 7.4% to B31bn, growing by 15.8% as B100bn

backlog from B280bn backlog needs to be transferred in 2014.

- "NEUTRAL". Top pick is SPALI for good profit and dividend yield

Most share prices have absorbed bad news from the political

unrest. Also, the sector’s PER is as low as 8.2x and the average

dividend yield is 5.3%. We reiterate "NEUTRAL". Top pick is

SPALI(FV@B21.04), as its 4Q13 profit is projected to make a new

high, and its current backlog is 85% of FY2014 target. Moreover,

SPALI’s dividend yield is as high as 6.6%.

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