- Expect 1Q14 presales to be this year’s lowest. SPALI’s presales were Bt3.4bn in 1Q14, a contraction of 15% YoY and 46% QoQ, blamed largely on poor market sentiment that resulted in a fall of 20% for low-rise (Bt1.6bn) and 10% for condo (Bt1.8bn) YoY. Presales account for only 15% of its full year target but we expect a sequential increase QoQ throughout the year, backed by more condo launches from 2Q14 (Bt5.9bn in 2Q14, Bt4.2bn in 3Q14 and Bt6.5bn in 4Q14 versus Bt1.1bn in 1Q14). Current presales bring backlog to Bt42bn, securing 95% of our 2014 forecast.
Favorable presales recovery trend. Presales have been improving MoM for low-rise houses, beginning at Bt353mn in January and then growing to Bt513mn in February and Bt698mn in March. This works out to an average of Bt521mn/month in 1Q14 –10% below last year’s average but 13-42% higher than in 2009-2012. If its low-rise presales stay at this level in 1H14, our full year revenue growth forecast of 41% is achievable. With rejection rate no changed from 2013, we see limited downside risk on this point. - Good take-up for new launches and ongoing projects. Supalai Loft Chaengwattana enjoyed a good take-up rate of 70%, above the 60% target, thanks to a good location and limited supply in the area. Presales also beat for three single-detached-house projects - Supalai Garden Ville Srinakarin-Bangna, Supalai Prak Ville Rayong and Supalai Garden Ville Udonthani; and met target for a townhouse project - Novo Ville Lumlukka Klong 2. It will launch Supalai Cute Phaholyothin on April 26-27; a good response could lift share price. Meanwhile, presales for ongoing condos were good, accounting for 75% of condo presales in 1Q14. According to the company, presales for ongoing projects in Greater Bangkok are back to normal, but presales in the provinces are down 10-15%. - Strong 1Q14F and sequential growth in 2014. We expect an impressive net profit of ~Bt700mn in 1Q14F, +51% YoY but -59% QoQ, driven largely by deed transfers for Supalai Premier Ratchathewi. For the remainder of the year we expect growth to rise each quarter to peak in 4Q14, in line with the completion schedule for condos. 1Q14F results will be released on May 15.
Reiterate BUY and sector top pick. SPALI remains our favorite stock, with a superior growth outlook, higher visibility than peers and limited earnings downside risk. With strong earnings growth, the stock is trading at a marginal premium to mid-cycle valuation despite the 35% rise in share price YTD. We remain BUYers.