Residential Property

Residential Property

2012 was a good year; 2013 will be better

- Overall 2012 presales achieved record high off strong demand, low base

- SIRI did best: presales almost doubled YoY and beat market expectations

- LPN and SPALI transfers fell below forecasts

- 2013 should be even better

- Top picks: QH, SIRI and AP

Record high presales in 2012. Based on our survey, in 2012, presales for the top seven developers reached a high not seen since 2005 at Bt172bn, an impressive growth of 42% YoY. The share for low-rise and condos is estimated at 50:50. This was in part reflective of 2011's low base but also came from solid demand in Bangkok and a jump in provincial demand.

SIRI did best. Of the top seven, SIRI was outstanding, with presales growth of 95.5% to Bt42.6bn. This made it one of Thai's biggest developers, placing it in the top seven, with ~25% of the housing pie, followed by PS with 17%, LH 14%, AP and SPALI 12% each, LPN 11% and QH 9%.

Most developers' presales beat market expectations. Presales for LH, LPN, QH, SIRI and SPALI exceeded market expectations as well as their own original targets, which were conservative. SIRI raised its target three times last year while SPALI raised its target twice and in the end still beat. AP and PS achieved their original targets.

LPN and SPALI transfers to disappoint market. Despite the strong presales, LPN's revenue recognition in 2012 fell 5% below its target and market forecast due to the delay in completion of LPN CondoTown Ramintra-Lat Pra Khloa and the short period in which deeds could be transferred for other projects. We expect SPALI's revenue to come in 5-10% below our forecast.

Growth to continue in 2013. We believe housing demand momentum in Bangkok and vicinity will continue and demand in areas flooded in 2011 will continue to recover. Of key interest is the expected growth in demand for developer-built housing in the provinces, driven by urbanization. In our universe, only AP is still Bangkok-bound, with LH, LPN, PS, QH, SIRI and SPALI already taking a substantial presence in the provinces. AP will step into this battle with the launch of its first provincial project in 2013. All plan to raise their exposure to the provinces in 2013.

Sector picks: QH, SIRI and AP: QH remains our favorite based on its operational turnaround and recovery of presales in projects affected by the 2011 floods plus cheap valuation. SIRI is a growth stock with good visibility. AP is favored because of its better outlook for 2013 and visibility.