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4Q13 profit to make new high. Remarkable growth foreseen in 2014 BUY

Supalai Plc (SPALI)

- 2014 income target is B20bn or 58% growth. New projects to be launched

For 2014, SPALI still keeps its aggressive business strategy against other property

entrepreneurs, expecting income from property sale at B20bn or the growth of

58%yoy and new presales at B22bn or the growth of 18%yoy. The company has

planned to launch 26 new projects worth of B33bn in total (18 horizontals and 8

condominiums), additional to 16 projects worth of B17.7bn previously launched.

SPALI will expand its horizontal projects to new provinces e.g. Udon Thani and

Nakhon Ratchasima. At the same time, it would also launch condominium projects

near the mass transit lines in Bangkok and parameter, which are the company's

strong point for their lower selling prices than peers'. Backlog at end-2013 is

B39bn, which will be gradually booked as income in the next four years; B15.6bn

of which in 2014. In terms of a financial structure, net gearing is estimated below

0.6x because at the end of the year the company will have cash income from

transfers of many condominiums; the net gearing is lower than the sector's

average and sufficient for additional investment of B16bn this year (B5bn for land

purchase and B11bn for construction) and for paying dividend. In addition, the

company has got insignificant impact from the political turmoil, evident by sales in

January 2014 that dropped only 20percent from the same period last year, better than


- 4Q13 profit to make new high though lower than expected. 39% growth foreseen in 2014

In 4Q13, SPALI could recognize approximately B6.6bn in income from project

transfers (only the parent company), which is lower than the previous target since

the transfer of most Supalai Premier Ratchathewi comdominium had been

postponed to this year. However, 4Q13 profit would still be able to make a new

high at B1.77bn, beating 9M13 profit of B1.1bn. For overall 2013, we revise down

our forecast to be consistent with the company's data, resulting in a new profit

forecast of B2.9bn, down 12percent from previously but still up 5%yoy. For 2014, we

project the profit to grow notably to B4bn under a conservative estimate of selling

income at B17.2bn, which already has 90% backlog to support, mostly

condominiums that will finish the construction during the year (see table on next

page). Gross margin is projected to stabilize at 40% because the cost of

condominium projects had been locked before starting the construction.

Accordingly, normalized profit margin would be as high as 23%, the top of the


- Fair value at 9x PER is B21.04. 2H13 dividend expected at B0.4/share

With foreseen notable profit in 4Q13 and 2014 and attractive dividend, we

reiterate to buy SPALI. Fair value at 9x PER is B21.04. 2H13 dividend can be

expected at B0.4/share or a yield of 4.5% p.a.

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