Still the head of the pack in 2013 BUYSansiri Plc
Continue strong growth. We have adjusted SIRI's earnings forecast to incorporate
actual 2012 earnings and this reveals continued outstanding growth of 35% YoY in 2013
to Bt4bn, followed by a more normal 19% growth to Bt4.8bn in 2014. Our growth
forecast is based on 21% revenue growth, 30bps gross margin increase for 2013, and in
2014, 14% revenue growth with stable gross margin. The quarterly pattern this year is
expected to show earnings at their lowest in 2Q13 and at their highest in 4Q13.
High visibility. The recent success of its "Life Comes Home" property fair lifted 2M13
presales to Bt16.6bn, achieving 92% of 1Q13 target or 34% of full year and we thus see
it as highly like that SIRI will raise its presales target this year. Its backlog is now at a
record high of Bt56.4bn, securing 66% of our 2013 forecast and 42% of 2014. Backlog is
extended to four years from the usual three.
One of the major urbanization players. Of developers in our universe, SIRI has the
largest and broadest exposure to the Thai provincial property market, which
contributed 30% of its presales in 2012 and is expected to contribute the same
percentage this year. We see the provincial markets as offering the most exciting
growth prospects in the coming years. SIRI already has projects in Phuket, Chiang Mai,
Hua Hin, Pattaya, Khon Kaen and Khao Yai and will enter new provinces (Rayong, Udon
Thani, Korat, Maha Sarakham, Sriracha, Bang Saen and Haadyai) soon. It is also looking
into other provinces (Pitsanulok, Surat Thani, Ubon Ratchathani and Kanchanaburi),
where it may launch some projects in 2H13. Twenty-two percent of its Bt60.5bn in new
launches this year is in the provinces.
High gearing in line with high growth. We expect gearing to peak in 2Q13, raised
by the large amount of working capital required to finish its homes transfer to clients
in 2H13. By the end of 2013, its gearing will drop to 1.2x from 1.4x at end-2012.
SIRI-W1 provides lower entry point. The last close of Bt4/sh for SIRI-W1 against
the exercise price of Bt1.114/sh (exercise ratio 1:1.167), implies all-in-cost of Bt4.54/sh
or 6% cheaper than the adjusted last close of SIRI common shares of Bt4.83 (excluding
Bt0.17 DPS, XD March 13 from share price). Note that the next exercise date for SIRIW1
is by end-March. Assuming the 2bn outstanding warrants are exercised, SIRI would
be able to raise ~Bt2.6bn at the expense of a 23% dilution of EPS.
BUY: sector top pick. SIRI remains our favorite for its strong brand, good growth
outlook and high visibility. Its earnings growth is superior with a 3-yr CAGR at 34%, and
it is trading at an undemanding PEG of just 0.3x for 2013F. With attractive TTR of 35%,
we reiterate BUY and kept it as the sector's top pick.