Pruksa Real Estate

FY 2013 presales & profit growth leader

Pruksa Real Estate Plc (PS)

Investment thesis

We maintain our BUY rating on PS with an upgraded YE13 target price of Bt31.50 (from Bt28) to reflect an expanded expectation for earnings and a re-rated target PER to 12.6x (from 12x), 1SD above its FY06-12 mean. Despite its recent rally (up 26% in one week), the stock price will continue to rise in anticipation of sector-beating earnings growth (40percent for PS versus 25percent for the sector) in FY13. We expect ROE of 25% this year—the best since FY08. PS currently trades at an FY13 PER of 10.6x (11.4x for the sector).

Confident in PS's FY13 targets

FY12 presales beat PS's target by 1% and revenue by 4%. For FY13, the firm aims for growth of 21% in presales to Bt35bn (following a 15% rise in FY12) and 26% in revenue to a new record of Bt34bn (up 16% in FY12). Management guides for presales of Bt25bn for low-rise and Bt9.4bn for condos this year. PS plans to launch 78 projects in this year worth Bt55bn; in FY12 it launched only 30 projects worth B22bn. The firm will expand across all three main categories—TH, SDH and condo.

In our view, the low-rise presales target of Bt25bn for FY13 (up 13% YoY) is too conservative—it implies only Bt6.4bn per quarter, which would be far below PS's actual low-rise presales of Bt6.8bn/quarter in 3Q-4Q12. Although condo presales are expected to jump 40% to Bt9.4bn this year, that would still constitute only 27% of total bookings, versus a peak of 32% in FY10 (the net gearing ratio peaked at 1.1x at YE11). PS should post a YE12 net gearing ratio of 0.9x.

Profit forecast upgrades

We have revised up our net earnings projections by 3% to Bt3.9bn for FY12 and by 6% to Bt5.5bn for FY13 in order to factor in an expanded expectation for revenue in FY12 and impressive condo NM in FY13. Revenue visibility is high—the current backlogs secure 73% of our FY13 top-line forecast. We have upgraded our FY13 NM assumption from 15.3% to 16.2% to fine-tune for fat condo NM of 18.3% (seven condos to transfer—Bt10.5bn in total project value; 87% booked). Our model is currently 7% ahead of the consensus forecast for FY12 and 17% ahead for FY13; a street upgrade is very likely.

Resuming position as sector presales growth leader

PS's official FY13 presales target of 21% is far above the Residential Developer mean of 13%. The firm's revenue growth profile for this year is also ahead of the sector—26% versus 23%. Most important, there is scope for upside to its FY13 revenue profile, as under management's best-case scenario, the top-line could hit Bt40bn (unprecedented expansion of 47% YoY).