LPN posted a net profit of Bt554m for 4Q13, down by 56% YoY and 10% QoQ. The result was 21% short of our estimate and 26% below the consensus, due to disappointing condo GM (29.5% in 4Q13, which was 4% slimmer than expected). Management announced a final DPS of Bt0.58 for 2H13 operations (in line with our preview), implying to a 3.6% simple yield (XD on Feb 27; payment on April 4).
The firm set records for both condo revenue and profit in 4Q12. Thus, 4Q13 revenue plunged 48% YoY to Bt4bn and NM fell from 17.9% in 4Q12 to 13.5% in 4Q13 (a 3% YoY drop in condo GM and a 2.9% higher SG&A/sales ratio). On a QoQ basis, condo GM declined from 34.3% in 3Q13 to 29.5% in 4Q13, but sales jumped 19%. Two major Condotown-branded condos transferred during the quarter in Chonburi amd Bangna, as did Ville Ramkhamhaeng 60/2. GM was weak because of a changed transference mix—Condotown is LPN’s low-end brand and yields the slimmest GM; it comprised almost 60% of condo revenue in 4Q13 versus 28% in 3Q13. The net gearing ratio was stable QoQ of 0.40x at YE13.
We expect 1Q14 profit to be flat YoY and down QoQ. Condo revenue of Bt2.5bn is assumed, up 6% YoY but down 39% QoQ. LPN will start transferring Condotown Ramintra-Lat Pla Khao 2 (Bt550m; fully booked) and the remaining units of Condotown Chonburi-Sukhumvit and Ville Ramkhamhaeng 60/2.
The firm will launch two condos in March—Condotown Romklao (Bt1.5bn) and Ville Jomtien (Bt1bn), despite a subdued mean 15% take-up rate for two condos that were launched on Jan 25—Condotown Onnuch 46 (Bt1.4bn) and Ville Onnuch-Pattanakarn (Bt2bn). LPN intends to start recognizing sales from the four projects in 4Q14. Note that only 59% of our FY14 revenue forecast is currently secured by presales.
We have trimmed our FY14 profit forecast by 4% to Bt2.5bn to fine-tune for new management guidance of condo GM of 33% (cut from 34%). We assume residential revenue growth of 7% for FY14, below LPN’s target of 10%. Our FY15 model stands unchanged for the moment, due to clear revenue visibility. Presales at end-January 2014 secured 71% of our FY15 top-line assumption.
A good entry level would be near Bt15/share, we believe, which implies a PER of 8.3x—LPN’s FY06-13 mean (the level that the stock traded at during the 2010 Red Shirt uprising). Our YE14 target price declines to Bt17.20 from Bt17.8 to reflect our forecast cuts. The stock currently trades at a stretched FY14 PER of 9.5x (the sector mean is only 8.6x).