Pruksa Real Estate
Q4 2012 profit was in line with our estimate, but beat the consensusPruksa Real Estate Plc (PS)
In line with our estimate
PS reported a 4Q12 net profit of Bt1.25bn, up by 270% YoY and 25% QoQ. The result was in line with our model, but 9% above the street number, due to higher revenue and lower SG&A expenses than assumed by the street.
The firm announced an FY12 DPS of Bt0.50, as expected (a 1.5% yield). XD on March 12; payment on May 17.
PS was the worst affected by the 4Q11 flooding of the ResDev stocks we cover. As such, the strong YoY earnings growth for 4Q12 was flattered to some extent by the low base comparison. Nevertheless, housing revenue jumped 79% YoY to Bt8.4bn, the firm's best top-line since 4Q09, while the SG&A/sales ratio dropped 8.4% YoY to 11.2%. Housing GM declined by 2.8% YoY to 32.3% in 4Q12. On a QoQ basis, earnings growth was led by housing revenue, which rose 16%, and a lower SG&A/sales ratio fall of 4.5%. However, housing GM fell from 34.1% in 3Q12 to 32.3% in 4Q12. The balance sheet strengthened—the net gearing ratio dipped from 0.90x at end-Sept to 0.84x at YE12 (the lowest leverage since YE10).
We expect 1Q13 net profit to post YoY growth but a QoQ decline. Low-rise revenue will dominate the top-line for the quarter. PS will start transferring Plum Nawamin (Bt632m; 91percent sold) and Condolette Light (Bt650m; 81percent sold) in March 2013. Management guides that the NMs for the two condos are strong at 16.3percent for Plum and 17.2percent for Condolette.
We maintain our projection unchanged. Revenue visibility is clear—the presales backlog at end-Jan 2013 secured 78% of our FY13 forecast. Low-rise presales were strong in January at Bt1.7bn, far above the monthly low-rise presales for 1Q12 of Bt1bn. Our FY13 model is 9% ahead of the consensus. Proof of a low-rise presales recovery should prompt a consensus earnings forecast upgrade.
Our BUY rating stands with a YE13 target price upgrade to Bt38 (from Bt31.50), as we have re-rated our PER peg to 15x from 12.5x (1.7SDs above its FY06-12 mean). PS trades at cheap FY13 PEG of 0.3x (0.6x for the sector). The scope for a valuation re-rating is wide open, as the stock previously traded at a PER of 17.8x (2SDs above its mean) in 2010. This year, PS will resume strong presales growth of 21% and revenue expansion of 26%. Profitability ratios will improve with high condo NM (an 18.3% mean) to be realized in FY13. Besides, low-rise margin should improve this year, as PS offered price promotions last year in order to clear inventory following the 4Q11 flooding.