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L.P.N. Development

Overhang lifted, look for outstanding 2015 BUY

L.P.N. Development Plc

- Market overhang lifted by moving Lumpini Township Rangsit Klong 1 to next year

- Earnings raised 7-12percent for 2014-2016F to factor in better presales than

expected and shift of Lumpini Township Rangsit Klong 1 to 2015 and 2016

- 2015 earnings growth expected to be a high 47%; current backlog of Bt23.5bn secures 96% of our forecast

- Raised PT to Bt23/share and upgrade rating to BUY from Neutral


Overhang lifted. The denial of the Environmental Impact Assessment (EIA) for

Lumpini Township Rangsit Klong 1 has been hanging over LPN. However, LPN is

determined to get the EIA by the end of the year, easing market concerns. It expects

to complete construction by mid-2015, though at a higher cost.

Earnings and valuation upgrade. We raise our earnings forecast by 7% to Bt2bn for

2014, 12% to Bt3bn for 2015 and 5% to Bt3.6bn for 2016. We have incorporated a better

presales outlook for 2014 to accommodate the restoration of consumer confidence

and shift revenue from Lumpini Township Rangsit Klong 1 to 2015 and 2016. We are

conservative and assume only Phase 1 is developed with a humble gross margin of

28%. With higher RoE next year, we raise our valuation to 3.0x from 2.5x PBV, which

raises PT to Bt23/share from Bt18.5/share.

Superior outlook for 2015. We estimate impressive earnings growth of 47% to Bt3bn

next year, driven by strong revenue growth and solid blended gross margin of 33.9%, a

high not seen since 2011. Backing this is the wide margin for The Lumpini 24, Lumpini

Place Srinakarin-Huamark Station, Lumpini Park Rattanathibet-Ngamwongwan,

Lumpini Park Rama9-Ratchada and Lumpini Place Borommaratchachonnani. These

projects were launched when the market was hot and LPN was able to price them

well. The Lumpini 24 is expected to bring a high margin of 38% because the land was

inexpensive. We note our forecasts are more conservative than guidance and below

consensus by 13percent for 2014 and 5percent for 2015.

Good visibility. LPN currently has total backlog of Bt23.5bn, securing 90% of our 2014F

and 96% of 2015F. With EIA permits already in hand for most projects and construction

in progress, delays are not a concern. Lumpini Township Rangsit Klong 1 does not yet

have its EIA, but it contributes only 6% of 2015F.

More new launches. Healthy condo demand has returned, going by the improved

take-up rate of 25-100% of LPN's recent launches versus 20percent for two projects in

January. This has encouraged LPN to add 4-5 projects worth ~Bt10bn in 2H14 to bring

total new launches to Bt21bn in 2014, 30% above our previous forecast. In our view, the

company could add more projects if market sentiment continues to improve, especially

condos in Cha-am and Hua Hin where it already has land.






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