Supalai

Growth more interesting in 2014 BUY

Supalai Plc

Presales target raised by 8% to Bt26bn in 2013, +12% YoY

Raising provincial presales to 28-29%; adding Udorn Thani and Rayong

2013 earnings growth a moderate 16%, but to jump to 39% growth in 2014

Good backlog of Bt32.3bn secures 65% of 2013 and 56% of 2014 forecasts

Presales target raised. SPALI raised its presales target by 8% to Bt26bn, Bt24bn its

own and the rest from associated companies. This represents a 12% increase YoY and

lines up with its plan to add four projects worth a total of Bt4-5bn this year, bringing

total launches this year to 22 projects valued at Bt25bn, +20% YoY.

More provincial products. SPALI is moving into more urban areas in the provinces,

adding Udorn Thani and Rayong to the six provinces in which it already has projects -

Chiang Mai, Surat Thani, Phuket, Khon Kaen, Chonburi and Haad Yai. It plans to raise

the proportion of provincial presales to 28-29% this year from 25% last year, with

revenue portion rising to 25-30% this year from 20% in 2012. It will be boosting new

launches in the provinces to 40% of the total from 25% last year.

Earnings fine-tuned. We fine-tune 2013-2014 forecast and this gives earnings

growth of a moderate 16% to Bt3.2bn in 2013. This arises out of minimal growth in

condo revenue as the completion of Supalai River Resort slipped to 2014 as a

consequence of a delay in obtaining its EIA. Major condos turning in revenue will be

Supaliai Premier Ratchathewi, Supalai City Resort Ratchada-Huaykwang, and Supalai

Park Ratchapreuk-Petchkasem. This leaves growth in 2013 earnings in the hands of

low-rise housing and the provinces. 2014 should bring a jump in growth to 39% to

Bt4.4bn, driven largely by a sharp 60% YoY rise in condo revenue recognition to

Bt10.1bn, of which is 95% is secured. Our forecast is now 6% behind consensus for 2013

but 10% ahead for 2014.

Good visibility. As of December 31, 2012, SPALI had total backlog of Bt32.3bn,

securing 65% of our 2013 forecast and 56% of 2014.

2012 wrap-up. SPALI's presales hit a record high of Bt21.3bn, +34% YoY and above its

target of Bt19bn, brought by more condo presales than anticipated at Bt15.8bn

(target was Bt12.4bn). This more than offset the disappointing low-rise presales of

Bt5.5bn (target Bt6.6bn). Take-up rate for condos launched last year was impressive at

over 90%, indicating solid demand. It reported net profit of Bt2.7bn, a marginal growth

of just 7% YoY, bought by delays in condo deed transfers. Net profit margin increased

to 23.8% in 2012 from 20.2% in 2011 thanks to better gross margin of 43.9% in 2013

versus 42.3% in 2011 and a cut in corporate tax to 23percent from 30%.

Maintain BUY. We like SPALI's good visibility and superior profitability which provides

a cushion when costs rise. We maintain its PT at Bt27/share based on 3.5x PBV of 2013.

SPALI's earnings growth this year may look slow compared to peers, but its growth

will beat them next year. With attractive ETR of 30%, we reiterate BUY.