Expect sequential rise in presales through 2014, supported by more new launches each quarter, particularly condos. Though the company is postponing Supalai Park @ Pakked Intersection to 3Q14 from 2Q14, this will not change its presales trend. 1Q14 presales were Bt3.4bn, a contraction of 15% YoY and 46% QoQ, accounting for only 15% of its full year target. Of this, 46% was low-rise and 54% condo. It has seen strong recovery in low-rise presales in March, making it confident that low-rise presales will reach its full year target of Bt8bn (+13% YoY) and total presales of Bt22bn (+18% YoY). Current backlog is Bt41.7bn, 30% of which is low-rise and 70% condo. This secures 96% of our 2014 forecast and 76% of 2015.
A high 50-60% target condo take-up rate on launch date this year. This target is applicable to most condos, but 70-80% or more for the project on Sri Ayutthaya Road which will launch in 4Q14. Take-up rate for projects launched YTD is 70% for Supalai Loft Chaengwattana and 45% for Supalai Cute Ratchayothin.
Slight hiccup in revenue trend in 2Q14. This is a change from earlier view and comes from the later transfer of Supalai River Resort condo to clients in late June. This will cut revenue QoQ in 2Q14 but will be followed by a jump in 3Q14 (major condo transfers are Supalai River Resort, Supalai Park Kaerai-Ngamwongwan and Supalai Park @ Phuket City), and peak in 4Q14 (Supalai Premier @ Asoke, Supalai Wellington, Supalai City Resort (Songkhla)). We estimate an impressive net profit of ~Bt700mn in 1Q14F, +51% YoY but -59% QoQ, driven largely by deed transfers for Supalai Premier Ratchathewi. 1
Q14F results will be released on May 15.
Eased concern on sharp increase in construction cost. Delays in infrastructure construction and lower construction demand from the residential sector have eased concerns of contractor shortage and sharp cost increase. This is not yet being seen in margin, but we see it as a good sign.
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 with unchanged PT of Bt23/share.