By SCB Securities
L.P.N. Development Plc
- Market overhang lifted by moving Lumpini Township Rangsit Klong 1 to next year
- Earnings raised 7-12% for 2014-2016F to factor in better presales than
expected and shift of Lumpini Township Rangsit Klong 1 to 2015 and 2016
- 2015 earnings growth expected to be a high 47%; current backlog of Bt23.5bn secures 96% of our forecast
- Raised PT to Bt23/share and upgrade rating to BUY from Neutral
Overhang lifted. The denial of the Environmental Impact Assessment (EIA) for
Lumpini Township Rangsit Klong 1 has been hanging over LPN. However, LPN is
determined to get the EIA by the end of the year, easing market concerns. It expects
to complete construction by mid-2015, though at a higher cost.
Earnings and valuation upgrade. We raise our earnings forecast by 7% to Bt2bn for
2014, 12% to Bt3bn for 2015 and 5% to Bt3.6bn for 2016. We have incorporated a better
presales outlook for 2014 to accommodate the restoration of consumer confidence
and shift revenue from Lumpini Township Rangsit Klong 1 to 2015 and 2016. We are
conservative and assume only Phase 1 is developed with a humble gross margin of
28%. With higher RoE next year, we raise our valuation to 3.0x from 2.5x PBV, which
raises PT to Bt23/share from Bt18.5/share.
Superior outlook for 2015. We estimate impressive earnings growth of 47% to Bt3bn
next year, driven by strong revenue growth and solid blended gross margin of 33.9%, a
high not seen since 2011. Backing this is the wide margin for The Lumpini 24, Lumpini
Place Srinakarin-Huamark Station, Lumpini Park Rattanathibet-Ngamwongwan,
Lumpini Park Rama9-Ratchada and Lumpini Place Borommaratchachonnani. These
projects were launched when the market was hot and LPN was able to price them
well. The Lumpini 24 is expected to bring a high margin of 38% because the land was
inexpensive. We note our forecasts are more conservative than guidance and below
consensus by 13% for 2014 and 5% for 2015.
Good visibility. LPN currently has total backlog of Bt23.5bn, securing 90% of our 2014F
and 96% of 2015F. With EIA permits already in hand for most projects and construction
in progress, delays are not a concern. Lumpini Township Rangsit Klong 1 does not yet
have its EIA, but it contributes only 6% of 2015F.
More new launches. Healthy condo demand has returned, going by the improved
take-up rate of 25-100% of LPN’s recent launches versus 20% for two projects in
January. This has encouraged LPN to add 4-5 projects worth ~Bt10bn in 2H14 to bring
total new launches to Bt21bn in 2014, 30% above our previous forecast. In our view, the
company could add more projects if market sentiment continues to improve, especially
condos in Cha-am and Hua Hin where it already has land.