Record 4Q13 profit, as expected; weak 1Q14 outlook
Pruksa Real Estate Plc (PS)
In line with our estimate
PS posted a record 4Q13 net profit of Bt2.3bn, up by 83% YoY and 71% QoQ. The result was in line with our estimate, but was 22% above the street number, led by higher sales and GM than expected by the consensus. PS announced a DPS of Bt0.85 for FY13 operations (a 33% payout rate), a 4.3% yield (XD on March 11; payment on May 15).
The all-time high 4Q13 profit was led by record sales of Bt13.7bn (70% low-rise and 30% condo), up by 64% YoY and 40% QoQ. PS achieved strong transference for THs and condos—revenue jumped by 46% YoY for THs and by 45% YoY for condos, but dipped 3% for SDHs. GM expanded from 32.3% in 4Q12 to 35.8% in 4Q13, driven by fat condo GM (the projects were launched in 2010). The proportion of condo revenue in the top-line rose from only 10% in 4Q12 to 30% in 4Q13. On a QoQ basis, the SG&A/sales ratio dropped from 16.5% in 3Q13 to 14.5% in 4Q13, due to top-line expansion. The balance sheet strengthened—the net gearing ratio declined from 1.0x at end-Sept to 0.8x at YE13 (the lowest since YE10).
PS’s earnings peaked in 4Q13. 1Q14 profit will decline YoY and QoQ. The firm has only one small condo—The Privacy Ngamwongwan A (Bt168m)—due to start transferring in March 2014. Management guides that Jan-Feb unit transference will be flat YoY. We expect GM to decline QoQ in 1Q14. The low-rise backlog (Bt10bn at YE13) will support revenue through 1H14. But if the political chaos were to persist into 2H14, PS’s revenue target of Bt40-42bn would be at risk. New YTD presales are down about 35% YoY.
We expect a YoY profit contraction in FY14 because the firm set a high base comparison with its record FY13 profit of Bt5.8bn. The presales backlog of Bt38bn at YE13 secures 52% of our FY14 revenue projection and 30% for our FY15 forecast. Note that our FY14 revenue assumption is Bt39bn, lower than management’s target range of Bt40-42bn.
The 12% month-to-date share price rally may trigger profit-taking in the short-term. We are subdued about PS’s FY14 earnings outlook (we model for a 1% growth versus 8% mean growth for our ResDev coverage). Our key concern is slimmer GM at the early stage of its precast factory expansion (precast capacity is to jump from 640 units/month to 1,120 units/month in late 3Q14). It will take time to ramp up the utilization rate to a high level of efficiency. Our TRADING BUY rating stands with an unchanged target price of Bt20.70, premised on a cheap FY14 PER of 7.6x, a 17% discount to the firm’s FY06-13 mean.