-2014 presales target achievable on better demand and more new launches
- Large backlog plus smooth transfers prompts a raise in 2014F of 11%, 17% in 2015F and 22% in 2016F
- Maintain BUY with new PT of Bt30/share based on 3.0x PBV
Pre-sales higher QoQ as expected. SPALI entered into Bt4.2bn in presales contracts in 2Q14, +8% YoY and +23% QoQ, backed by a 45% QoQ jump in low-rise presales to a record of Bt2.3bn, accounting for 54% of the total. This arose out of more low-rise launches in 2Q14 (four projects worth Bt2.9bn) compared to condos, where presales were essentially flat QoQ at Bt1.9bn as only one launch was made - Supalai Cute Phaholyothin – with take-up rate of 45%. This brings total presales to Bt7.6bn in 1H14, a marginal drop of 4% YoY, accounting for 34% of its full year target.
Full year presales target achievable. Presales will jump 90% HoH in 2H14 upon the launch of 17 projects with value of Bt22.7bn plus strong demand momentum. The company is thus well on its way to meeting its target of Bt22bn in 2014. Over the year, SPALI plans for 27 new launches with sales value of Bt31.3bn, up 71% YoY.
Earnings upgrade. We raise SPALI’s 2014F by 11% to Bt4.5bn, 2015F by 17% to Bt5.0bn and 2016F by 22% to Bt5.6bn to accommodate the higher low-rise presales than expected. We also raise our condo transfer rate to 90% from 80%, as better market sentiment should facilitate transfers. Current backlog is Bt38.6bn, securing 95% of our 2014F and 60% of 2015F. This will back superior growth of 56% YoY in 2014, followed by quieter growth of 11% in 2015 and 12% in 2016. Our forecasts now are ahead of consensus by 9% for 2014F and 5% for 2015F.
Weaker QoQ in 2Q14F, but better in 3Q14F and 4Q14F.
We estimate 2Q14 net profit at Bt515mn, surging 71% YoY but falling 30% QoQ without much condo revenue since Supalai River Resort only began transfers in late June. Gross margin will also narrow from a smaller portion of high-margin condo revenue (40% of total versus 60% in 1Q14). Earnings will be released on August 13 and we expect it to announce an interim dividend of Bt0.3/share or yield of 1.2%. We expect profit to rise QoQ in 3Q14F on continued transfers of Supalai River Resort and two additional completions (Supalai Park Kaerai-Ngamwongwan and Supalai Park @ Phuket City), peaking in 4Q14F when there will be three new completions (Supalai Premier @Asoke, Supalai Wellington and ASEAN City Resort Songkhla).
Maintain BUY. We continue to favor SPALI because of its superior earnings growth outlook and high visibility this year. We see a share price catalyst lying in the stronger presales HoH. We raise our mid-2015 PT to Bt30/share from Bt25/share following earnings upgrade and valuation re-rating to 3.0x PBV from 2.5x, in tune with the higher ROE forecast. With attractive TTR of 26%, we remain BUYers