Supalai

Supalai Plc (SPALI)
 

Investment thesis: Record presales in 4Q11 and 1Q12 have pushed up SPALI’s presales backlog to Bt25bn, which secures 73% of our FY12 revenue forecast, 36% for FY13 and 37% for FY14. The weak 1Q12 profit (a YoY and QoQ contraction) will present an opportunity to accumulate the stock in anticipation of unprecedented 2H12 earnings. We maintain our TRADING BUY rating and have upgraded our YE12 target price to Bt18 from Bt17.20, pegged to a re-rated target PER of 10x (from 9.5x), which factors in clearer long-term income visibility, due to the impressive presales.
Presales upgrade: FY12 bookings are set to hit a record high of Bt21bn (90% in Bangkok, 10% upcountry). Management upgraded its Bangkok presales target from Bt18bn to Bt19bn, because of better-than expected 1Q12 bookings (particularly areas that were flooded in 4Q11) and good responses to condo launches. SPALI’s low-rise presales in areas that were flooded improved to 70% of the pre-flooding level. The firm posted record bookings of Bt7.1bn for 1Q12 (74% condo) following record high presales of Bt6.3bn in 4Q11.
Upcountry expansion: Projects in the provinces present another source of growth. Among listed ResDev firms, SPALI is the most geographically diversified; it has developments in Had Yai, Khonkaen, Phuket, Chiangmai and Chonburi. The GM for upcountry projects is typically 1-2% higher than for Bangkok; note that SPALI has 10 years’ experience in property developments in Had Yai and Khonkaen. Provincial presales jumped from 10% in FY11 to 21% in 1Q12. Management plans to increase the ex-Bangkok proportion of presales to 25% within the next few years.
Strong earnings in 2H12: 1Q12 results will be the nadir of the year (we maintain our profit forecast of Bt306m, down by 58% YoY and 13% QoQ). SPALI’s 2Q12 earnings will post a YoY drop but QoQ growth, then 2H12 profits will jump YoY and QoQ (76% of FY12 profit) with 4Q12 being the best quarter of the year. The condos Supalai Park Asoke-Ratchada (Bt1.4bn; 99% booked) and City Home Srinakarin (Bt1bn; 17% booked) will start transfering in 3Q12. Two big condos, Park Ratchayothin (Bt2.3bn; 97% booked) and Park@Downtown Phuket (Bt806m; 9% booked) will transfer in 4Q12.