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Pruksa Real Estate

Record 4Q13 profit, as expected; weak 1Q14 outlook

Pruksa Real Estate Plc (PS)

In line with our estimate

PS posted a record 4Q13 net profit of Bt2.3bn, up by 83% YoY and 71% QoQ. The result was in line with our estimate, but was 22% above the street number, led by higher sales and GM than expected by the consensus. PS announced a DPS of Bt0.85 for FY13 operations (a 33% payout rate), a 4.3% yield (XD on March 11; payment on May 15).

Results highlights

The all-time high 4Q13 profit was led by record sales of Bt13.7bn (70% low-rise and 30% condo), up by 64% YoY and 40% QoQ. PS achieved strong transference for THs and condos—revenue jumped by 46% YoY for THs and by 45% YoY for condos, but dipped 3percent for SDHs. GM expanded from 32.3% in 4Q12 to 35.8% in 4Q13, driven by fat condo GM (the projects were launched in 2010). The proportion of condo revenue in the top-line rose from only 10% in 4Q12 to 30% in 4Q13. On a QoQ basis, the SG&A/sales ratio dropped from 16.5% in 3Q13 to 14.5% in 4Q13, due to top-line expansion. The balance sheet strengthened—the net gearing ratio declined from 1.0x at end-Sept to 0.8x at YE13 (the lowest since YE10).

Outlook

PS's earnings peaked in 4Q13. 1Q14 profit will decline YoY and QoQ. The firm has only one small condo—The Privacy Ngamwongwan A (Bt168m)—due to start transferring in March 2014. Management guides that Jan-Feb unit transference will be flat YoY. We expect GM to decline QoQ in 1Q14. The low-rise backlog (Bt10bn at YE13) will support revenue through 1H14. But if the political chaos were to persist into 2H14, PS's revenue target of Bt40-42bn would be at risk. New YTD presales are down about 35% YoY.

What's changed?

We expect a YoY profit contraction in FY14 because the firm set a high base comparison with its record FY13 profit of Bt5.8bn. The presales backlog of Bt38bn at YE13 secures 52% of our FY14 revenue projection and 30percent for our FY15 forecast. Note that our FY14 revenue assumption is Bt39bn, lower than management's target range of Bt40-42bn.

Recommendation

The 12% month-to-date share price rally may trigger profit-taking in the short-term. We are subdued about PS's FY14 earnings outlook (we model for a 1% growth versus 8% mean growth for our ResDev coverage). Our key concern is slimmer GM at the early stage of its precast factory expansion (precast capacity is to jump from 640 units/month to 1,120 units/month in late 3Q14). It will take time to ramp up the utilization rate to a high level of efficiency. Our TRADING BUY rating stands with an unchanged target price of Bt20.70, premised on a cheap FY14 PER of 7.6x, a 17% discount to the firm's FY06-13 mean.


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