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4Q13 profit new high as expected. Best growth in sector in 2014 BUY

Supalai Plc (SPALI)

- 4Q13 profit leaps four folds qoq and 8.4%yoy, new high.

FY2013 profit grows 5%

SPALI’s 4Q13 net profit made a new high at B1.76bn, leaping four folds

qoq and 8.4%yoy as expected. Income from property sales was B6.7,

growing 2.5%qoq, as three condominiums were transferred as planned.

Overall, FY2013 net profit rose by 5%yoy to B2.88bn. SPALI’s gross

margin was 40.6% and normalized profit margin was 22.6%. SPALI’s

net gearing was as low as 0.53x (versus the sector’s average of 1.2x),

so SPALI had enough cash for dividend payment. 2H13 dividend is at

B0.4. XD date is 7 March 2014, and dividend will be paid on 6 May.

- FY2014 profit to grow best among medium and major property companies

SPALI’s FY2014 profit is likely to grow by 39%yoy to B4bn, the best

among medium and major property companies. We project income from

property business at B17.2bn, growing 40%yoy, more conservative than

SPALI’s target of B20bn. Backlog from 2013 already makes up 90% of

income target, mostly from condominiums scheduled to be finished

within 2014 with over 90% average sales volume. 26 projects are

scheduled to be launched in 2014, totaling B33bn, consisting of 18

horizontal projects and eight condominiums. SPALI has been focusing on

provincial horizontal projects, which are not likely to be affected by the

political turmoil as much as condominiums located close to BTS stations.

SPALI maintains its new presales target at B22bn, rising 18%yoy.

January presales were B827m (56percent from condominiums), 10-20%

lower than usual but still higher than expected (compared to peers,

SPALI focus more on expanding its project in provinces and suburbs).

- Maintain fair value at B21.04. 2H13 dividend at B0.4

SPALI’s FY2014 backlog is possibly healthy thanks to the policy of

collecting down payment by 15% of the selling price. Moreover, as

condominium price increases, customers can sell their purchase contract

or transfer their ownership. FY2014 earnings forecast might be revised

up in the future. We maintain SPALI’s fair value at B21.04 with 9x P/E.

2H13 dividend is B0.4 (4%p.a dividend yield).

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