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Italian-Thai Development

4Q13: Repeat of 4Q12, booked highest revenue BUY

Italian-Thai Development Plc (ITD)

4Q13: Repeat of 4Q12, booked highest revenue

Net profit was Bt452mn, +13.4% YoY, +1,803% QoQ, much higher than expected

because of booking the bulk of the year's revenue, plus higher gross margin and

lower SG&A expenses. Core profit was Bt472mn. 2013 net profit was Bt907mn with

core profit at Bt832mn, slipping 2.8%YoY but 18% higher than our estimate. This

pattern was a repeat of 2012, where revenue and net profit were highest in Q4.

4Q13 Highlights:

Revenue from construction work and services was Bt12.2bn, -5.2% YoY, +13.5%

QoQ, reaching Bt43bn in 2013, -5.1% YoY, from total backlog of Bt143bn (removing

water management projects). Proportionately, public works brought in 80% of

revenue, private 20%; half of revenue was from local jobs and half from overseas.

Gross margin was 11.1% vs. 10.4% in 3Q13 and 12.9% in 4Q12. This is believed to

reflect higher cost of goods sold in 9M13. SG&A expenses to sales was 5.3% versus

4.6% in 3Q13 and 5.5% in 4Q12. Net margin tripled QoQ to 3.9percent from 1.3% and rose

YoY from 3.5% in 4Q12.

New contracts: focused on Mozambique. Since the beginning of 2014 ITD reports

signing contracts for new projects valued at Bt1.9bn to add its current backlog of

Bt130-Bt140bn. The Bt350bn water management project remains in limbo. ITD won a

government contract to build and operate a port and rail system from Moatize to

Macuse in Mozambique, signing the contract on December 13. The project is valued at

US$4bn, with construction period of 4-5 years. ITD will have the right to operate the

project for another 30 years.

Upgrade to BUY with the same target price of Bt5.5. In the long term we believe

ITD's fundamentals remain strong and revenue will be provided by the project in

Mozambique and new contracts in the local private segment. Outlook for contractors

has been dampened by the lack of a sitting government. Our end-2014 TP remains at

Bt5.5, but we change valuation to 2.0x P/BV in 2014 from 2.5x P/BV in 2013.

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