Asian Property Development Plc (AP)
- We retain our Outperform rating for AP and roll our target price over from Bt6.50 to
Bt7.0 for mid-2015. Last year, AP faced several problems
condo projects, causing its share price to underperform the sector and its peers. This
year, we believe its situation could turn around, with rising presale
control of finished units. This should be backed by synergy and knowledge
with its JV with Mitsubishi Real Estate. AP replaces PS as our second top pick in the
Thai property sector, after SPALI.
- Strong take-ups of three new condos. During May alone, AP achieved total
presales of Bt4.5bn (+281% YoY; +429% MoM). This
strong success of its three new condo openings under the JV with Mitsubishi Real
Estate. The three condo projects are well located, in the heart of central Bangkok:
Rhythm Sukhumvit 36-38 (Bt2.9bn, accumulated presale
Wongsawong (Bt2.8bm, presales of 30%); and Rhythm Asoke2 (Bt1.5bn, presale
- 5M14 presales up 26% YoY at Bt7.5bn. This is the strongest increase in the
sector in terms of YTD presales growth compared to last year. Of
presales, Bt4.1bn was from low-rises (+14% YoY) and Bt3.4bn from condos
(+45%). 5M14 presales accounted for 36% of the company’s own full
target of Bt21bn for 2014. According to management, client visits to sale sites
improved by about 10-15% after the coup.
- Two new projects in late June. In 2014, AP plans to open 19 new projects worth
Bt23.7bn. During YTD until mid June, AP had opened eight new projects worth
Bt11.8bn, including 2 SDHs, 3 THs and 3 condos. In late June, AP will launch another
two low-rise projects worth Bt3.3bn.
- Synergy with the JV will help. With improving knowhow and expertise sharing
under the JV, we expect better quality control and fewer defections of its finished
house units. If so, construction progress and delivery schedul
be a big concern for this year.
Earnings and target price revision
- No change in earnings. We raise TP to Bt7.00 as we roll over to mid
- 12-month price target: Bt7.00 based on a DCF methodology.
- Catalyst: Rising presales momentum, no transfer delay and sustainable GM.
Action and recommendation
- Investors’ fears that the company’s brand image and product quality are weakening
should eventually subside as AP reports a turnaround in presaleproduct quality.
AP’s valuation is among the cheapest in the sector, which we believe
warrants a re-rating. We retain our OP rating with a new TP of Bt7.0