2012 revenue recognition misses target, but urging 30% growth of 2013 profit HOLDSupalai Plc (SPALI)
2013 presales targeted at B22bn, aiming at B12.5bn of revenue
SPALI's 2012 presales have exceeded the target to B21.3bn or 34%
YoY increase, hitting the record high for both horizontal projects with
B5.5bn and condominium projects with B15.6bn. Moreover, there is
B2.16bn of sales from the affiliated company. For SPALI's target in
2013, it is still set on conservative method, aiming at B22bn for
presales and B12.5bn of income from property sales. The company
has a plan of 20-22 new projects worth of B25bn in total, aiming to
spread more into other provinces by 35-40%. There would be
horizontal projects for the first time in Udon Thani and Rayong, and
continuous projects in Chonburi, Phuket, Chiangmai, etc. (aiming to
expand more horizontal products with fewer risks). In terms of
international investment, it would be the recurring-income business
with the initial budget of B1-2bn. The company's total backlog at end-
2012 stands at B31.3bn, mostly from condominiums of which revenue
would be gradually recognized until 2016.
Q4 2012 transfer lower than targeted. 2012 profit forecast revised
down 10%, but maintaining 2013 forecast
According to the transfer of 4 new condominiums during 4Q12 that
hasn't been as planned, SPALI's revenue from property sales in 2012
has failed to hit the target, contributing only B10.6bn or 9% YoY
decrease (B800m of affiliated company's revenue not included).
However, 4Q12 was still the peak of the company's profit projected at
B1.57bn, increasing from B564m in 3Q12. According to FY2012
revenue forecast revised down to get in line with the company's
figures, 2012 profit would drop by 10% to B2.7bn. Nevertheless, the
transfer of some condominiums that has been postponed to this year
would support 2013 revenue to go as projected. We maintain our
revenue (from property sales) forecast at B13.2bn or 25% YoY
increase (B1bn from affiliated company not included), supported by
the backlog that would be transferred in 2013 by B7.8bn. Under an
assumption of gross margin at 42%, SG&A/sales at 11%, and effective
tax rate at 20%, the norm profit margin would stand at 24.3% or the
operating profit of B3.5bn (30.4% YoY growth).
Reiterate "HOLD". Fair value is B22.54 or 11x PER
We revise up the fair value, using 11x PER from 10x PER in order to
equate with big- and middle property stocks, to B22.54 with not-soappealing
upside from the current share price and dull dividend yield.
Accordingly, we reiterate our recommendation of "HOLD" for SPALI.