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Residential Property

Year of the Horse starting out at a slow walk Residential Property

Residential Property

- Pre-sales in January 2014 halved YoY: condo down 73%, low-rise a lower 13% on real demographic demand

- AP best on growing low-rise presales and low 2013 base; SIRI worst on

condo cancellations

- Neutral toward the sector; Top picks - SPALI and QH


- January's presales shrank by half YoY. Presales for the top seven developers

plunged 48% YoY to Bt5.7bn in January, representing only 3% of full year targets. This

arose out of weak interest and fewer new launches, particularly of condos, in the

period, in turn due to the poor environment created by the weaker economy and

political unrest. This pushed condo presales for the six condo developers down 69% YoY

to Bt1.5bn in January. At the same time, low-rise presales slipped only 13% YoY to

Bt3.3bn as they meet real demand.

- Expect backloaded pre-sales. We look for better pre-sales in 2H14 and on that basis,

maintain our view that though condo pre-sales will weaken YoY, low-rise will be able to

grow 5-10%.

- AP did best among peers. AP's pre-sales grew 34% YoY to Bt590mn. Low-rise presales

were Bt565mn in January 2014, up 9% YoY due to more available projects for sale.

Condo pre-sales were just Bt30mn in January 2014 as a result of large cancellations at

Rhythm Sathorn due to construction delay and Galerie rue de 39 after it closed the

project (it will re-launch sometime in the future). Still, this was better than the

contraction of Bt80mn in January 2013 brought by the cancelation of Aspire

Ngamwongwarn due to construction delay. After adjustment, AP estimates its

revenue from condo backlog this year at Bt10.3bn, in line with our forecast.

- SIRI looks worst. SIRI's presales contracted Bt15mn in January 2014 due to delays in

completion that forced cancellation of Baan Pleng Ploen, d'VIENG Santitham, dcondoo

Sukhumvit 109 and dcondo Sathupradit 49. This is far below the Bt3.2bn in January last

year, when condos contributed 77% of the total. Low-rise presales were Bt673mn in

January 2014, a marginal drop of 8% YoY. This has led to a reduction in estimated

revenue from backlog this year to Bt19.9bn from Bt22.7bn, accounting for 61% of our

forecast.

- QH did best in low-rise products, but PS did worst. QH's low-rise presales grew at

an impressive rate of 40% YoY to Bt7bn in January 2014, thanks to good sales of midend

SDH under the Casa brand. PS's presales shrank by 40% to Bt1bn in January 2014

making it a challenge to meet its ambitious target of 31-44% growth in low-rise house

pre-sales this year.

- Maintain Neutral - top-picks: SPALI and QH. We are Neutral towards this sector

and maintain SPALI and QH as top picks. We like SPALI for its large backlog that

secures its superior earnings growth and visibility this year and QH for its cheap

valuation.


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