Last week, we brought local institutional investors to meet Mr Nuttapong Kunakornwong, CEO, and Mr.Attapol Siriddipuntawat, CFO. The managers reaffirmed an impressive earnings growth outlook for FY14—record top- and bottom-lines. SC lags its peers at a YE14 PBV of 1.1x against a 1.8x coverage mean. Our TRADING BUY rating stands with an SOTP-derived target price of Bt4 (a residential business PER target of 10x and Bt1/share of rental market value).
Revenue growth of 20% for FY14
Management confirms 20% top-line expansion to a record of Bt12bn for FY14 (93% from residential sales, 7% from rental income). The driver is residential revenue growth of 21% (57% low-rise and 43% condo). The FY14 condo revenue target is a new high of Bt4.8bn, up 199% YoY, secured by presales (Bt4.9bn to transfer in May onward). Three sizable condos started transferring in 2Q14—The Crest Santora HuaHin, Centric Tiwanon and Centric Sathorn 11. SC expects a low-rise sales drop of 17% YoY to Bt6.4bn this year, due to weak sales in 1Q14. Low-rise sales normalized in April.
1Q14 profit was the nadir of the year. SC will report strong QoQ growth for 2Q-4Q14. The firm guides that one-third of its FY14 revenue target will be realized in 1H14, two thirds in 2H14. The seond-half profit is likely to rise by 70% YoY and 140% HoH.
Targets Bt20bn top-line in FY19
The CEO guides for revenue of Bt20bn in FY19, implying a 12% CAGR, FY14-19. SC will maintain its third place in the in upper-mid range to high-end segments. The firm will launch a new brand for the upper-mid range segment (unit prices of Bt4-5m) in FY15. It had a condo presales backlog of Bt12bn at end-March and plans to launch more high-rise projects in order to secure condo revenue of about Bt5bn per year. Low-rise sales normally grow at 5-10% per year.
To push NM to 14% over the long-term
NM dipped from 14.5% in FY12 to 10.7% in FY13, due to higher SG&A expenses tied to SC’s effort to boost condo presales (the backlog rose from only Bt3bn at YE11 to Bt12bn at YE13). The firm aims to expand NM by at least 1% in FY14 and eventually back to 14%. The SG&A/sales ratio will fall this year, as launch value will dive 49% to Bt10.6bn.
New office will add 11% rental space capacity—to open in 2017
SC owns five office buildings with 109k sq.m of space; they are almost fully occupied. Rental revenue is set to rise from Bt829m in FY13 to Bt840m in FY14. Thus, SC is building a new tower with 12k sq.m of space (an 11% addition). It is slated to open in Jan 2017 and with an occupancy rate of 100% would generate about Bt100m in rental income.