SC Asset Corporation

SC Asset Corporation Plc (SC)
 

Beat consensus estimate: SC reported a core profit of Bt162m for 4Q11, down by 65% YoY and 45% QoQ. The result was 18% below our estimate, as housing revenue fell short of our model, but beat the consensus projection of only Bt97m. Factoring in a Bt31m negative fair value adjustment for a property investment, net profit was Bt130m, down by 72% YoY and 56% QoQ.
SC announced a DPS of Bt0.65, a 4.3% yield. XD on April 27; payment on May 17.
Results highlights: The unfavorable 4Q11 earnings were caused by a housing revenue slump to Bt1.4bn, down by 47% YoY and 24% QoQ. Bookings were slow and transference was delayed by the flooding in Bangkok during the quarter. Housing GM was good at 34.6% versus 32.6% in 3Q11, but down from 35.7% in 4Q10 (when fat-GM condo Centric Scene Ratchavipa transferred). Net gearing inched up from 0.52x at end-Sept to 0.68x at YE11, due to a Bt2bn debenture issue during the quarter. Note that SC posted record quarterly presales of Bt2.4bn in 4Q11 (despite the flooding) led by three condos—The Centric Tiwanon, The Crest Sukhumvit 24 and The Crest Sukhumvit 49.
Outlook: We expect the firm to post better YoY and QoQ earnings for 1Q12. Four prebuilt low-rise projects (together worth Bt2.7bn) will launch in 1Q12 (postponed from 4Q11), boosting revenue. The Crest Ruamrudee condo (Bt287m) will continue to transfer in 1Q12 (started transferring in Dec 2011). We expect strong FY12 presales (following record presales of Bt8.1bn in FY11). The FY12 launch schedule of Bt16bn comprises 12 low-rise projects and four condos.
What’s changed? We maintain our FY12 forecast unchanged—strong profit growth of 23% YoY.
Recommendation: Our BUY call stands, premised on a cheap PER—the deepest discount to its mean in the sector (an FY12 PER of 7.5x versus an FY05-11 mean of 11.7x). We have revised up our YE12 target price to Bt17 from Bt16, as we assume a narrower discount rate for investment properties (from 50% to 25%); there is Bt5.47/share of investment value in our target price and an unchanged target housing PER of 8x (down 1SD from SC’s FY05-11 average).
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