Sansiri

2012 beat all estimates; still growing in 2013 BUY

Sansiri Plc (SIRI)

2012 beat all expectations. Presales reached new high of Bt42.6bn, +95% YoY, making it one of Thailand's largest developers. This beats expectations and came partly off a low base but also from solid demand and its strong brand recognition. Though its goal for deed transfers was high, SIRI was able beat target with transfers of Bt28.8bn, +45.5% YoY. At end-2012, backlog is Bt40bn, securing 52% of our 2013 and 38% of 2014.

Up earnings. We raise our 2012 forecast by 11.4% to Bt3.1bn, 2013 by 7.5% to Bt4bn and 2014 by 7.7% to Bt4.8bn to factor in the higher deed transfers and expect the market to do likewise.

Growth to continue in 2013. 2013 presales target is Bt48bn, +13% YoY, based on 51 new launches (land secured) worth Bt60.5bn, +7% YoY, of which 58% is condo, 37percent SDH and 5% TH. Of the Bt60.5bn new launches, 22% is in the provinces. We see a good chance of upside as it could acquire more land for TH and condo. Growth is driven by:

• New market. "dcondo Campus" and "dcondo Old Town": It will launch three dcondo Campus projects to tap healthy demand around universities: in Salaya (Mahidol), Rangsit (Thammasat) and Bangna km 26 (ABAC). It will also launch dcondo in the older parts of Bangkok - Prannok (Siriraj Hospital), Charoen Krung and Bo Bae - where there are no modern condos but good demand.

• Urbanization upcountry. It will expand products and segments in provinces in which it already has projects and into new provinces (Rayong, Udon Thani, Korat, Maha Sarakham, Sriracha, Bang Saen and Haadyai). It is looking into other provinces (Pitsanulok, Suratthani, Ubonratchathani and Kanchanaburi) as well, in which it could launch some projects in 2H13. The provinces contributed 40% of presales last year and it expects 30% this year, with upside possible.

• More foreign clients. "Home for the Holidays", beginning in Hua Hin and Phuket.

• Raise share in high-end SDH. It will re-launch Bt8bn in Narasiri projects in four locations: Rama 2, Buddhamonthon, Srinakarin and Bangna. This product has been quiet since 2004 and serves the same market segment as LH, QH and SC. It expects to gain 10-15% market share in this segment.

• Tapping lower SDH (Bt3mn/unit) and TH (Bt1.5mn/unit). Competitors are Inizio and Indy by LH and The Connect by PS.

• Fully utilize precast factory. It will run its pre-cast factory full out and expand capacity this year to serve its large backlog of condo and SDH. This will help ease labor shortage concerns and speed up construction.

BUY: sector top pick. We raise TP to Bt4.7/share (fully diluted) after raising earnings and re-rating valuation to 2.5X PBV. We believe SIRI deserves re-rating due to its strong brands, growth outlook, and high visibility. We reiterate BUY rating sector pick.