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Industrial Estates

Government to appoint new BOI to revive investors' confidence Underweight

Industrial Estates

- Government to appoint new BOI committee for B600bn investment projects

After the cabinet meeting yesterday, the deputy government spokesman

revealed that the Council of State and the Election Commission have

allowed appointment of a new BOI committee after the former BOI

committee expired in October 2013. After the new BOI committee is

appointed, investment projects totaling B600bn can be approved and

supported.

The new BOI committee could not be appointed earlier; after the

parliament was dissolved, the caretaker government was not allowed to

appoint the new BOI committee, as it might leave an obligation to the

new government. However, after the Council of State and the Election

Commission discussed on the issue, the prohibition on the appointment

was lifted, and the new BOI committee could be appointed.

- FY2014 land sales to drop 13% but normalized EPS growth expected at 6.5%

As the new BOI committee has been appointed, approval-pending

projects can be processed, thus reviving investors’ confidence. This has

a positive sentiment on industrial estate sectors, as land sales for

investors makes up 38% of the sector’s total income. 1Q14 land sales

are expected to be low because investors have postponed their

investment plans. However, after the new BOI committee has been

appointed, total land sales are projected to rebound significantly

throughout the remainder of 2014. We project FY2014 total land sales at

2,800 rai, dropping 13%yoy (1,200 rai for AMATA, 1,200 rai for

HEMRAJ, 400 rai for ROJNA). B12bn total backlog from end-2013 has

already made up B11bn income (or 100% of our FY2014 total income

forecast), dropping 12%yoy. Still, recurring income and share of profit

from power plants are projected to grow and compensate for sluggish

land sales business. Thus, FY2014 normalized EPS growth is expected at

6.5%yoy.

- "Underweight". Buy only HEMRAJ

The sector’s profit is lower than the market profit. The sector’s current

P/E ratio is 11.6x, close to the statistical average and the fair value. We

reiterate "Underweight". We recommend buying only

HEMRAJ(FV@B3.68) for steady and well-balanced income base from land

sales, rental and utility businesses. Also, HEMRAJ would also recognize

share of profit from Gheco-one and SPP1 power plants for a full year. Its

dividend yield is 4-5%p.a.


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