Sansiri

Record Q4 2012 results, as expected; proven execution ability

Sansiri Plc (SIRI)

In line with our model

SIRI reported an all-time high core profit of Bt1.75bn for 4Q12, up by 64% YoY and 37% QoQ. The result was in line with our estimate and the consensus. Net earnings also set a new record of Bt1.84bn.

SIRI announced a DPS of Bt0.17 for FY12 operations, a 3.4% yield. XD on March 13; payment on May 17.

Results highlights

The solid 4Q12 numbers were driven by record residential revenue and a lower SG&A/sales ratio. SIRI delivered residential sales of Bt13.8bn (68% condo, the rest low-rise), growth of 83% YoY and 178% QoQ. The SG&A/sales ratio fell to 15.8% in 4Q12 from 19.2% in 4Q11 and 26% in 3Q12, due to revenue expansion. Housing GM declined to 32.7% in 4Q12, from 37.6% in 4Q11 and 34.7% in 3Q12—management claimed that the prefabrication plant hadn't yet achieved optimal efficiency. The effective tax rate resumed a normal level of 23percent from the extra-low 16% booked for 3Q12, when SIRI transferred Dcondo Rattanatibetr, which had a BOI-approved tax exemption.

The net gearing ratio dropped from 1.9x at end-Sept to 1.4x at YE12.

Outlook

We expect SIRI's 1Q13 earnings to deliver good YoY growth but a QoQ decline, due to the high base set by the record 4Q12 profit. Our model indicates that housing revenue will rise 20-30% YoY, given the Bt6.9bn presales backlog to transfer at YE12.

What's changed?

Our earnings projections rise by 14percent for FY13 and 19percent for FY14, which factors in lower SG&A/sales ratio assumptions—down by 0.6percent for FY13 to 19.2% and 0.9percent for FY14 to 19% (management guides for an SGA/sales ratio range of 18-19percent for this year). SIRI's huge presales backlog secures 64% of our FY13 revenue forecast and 41% of FY14.

Recommendation

We have upgraded our YE13 target price to Bt5.50 (from Bt4.20) to factor in our new model and a re-rated target PER to 14x (from 11.5x). Our TRADING BUY rating stands. A short-term share price catalyst would be the posting of record presales in 1Q13 (at least Bt18bn). SIRI may revise up its FY13 presales and revenue targets at some stage, which would boost sentiment toward the stock. The firm has become a good play on provincial demand expansion—30% of its portfolio is now ex-Bangkok. SIRI will deliver a record profit and an unprecedented ROE of 24.3percent for this year, we believe. It currently trades at an FY13 PER of 13.2x against a sector mean of 14.4x.