Hemaraj Land & Development

Hemaraj Land and Development Plc (HEMRAJ)
 

Beat estimate: HEMRAJ reported a 1Q12 net profit of Bt861m, up 124% QoQ and reversal from the loss of Bt33m posted for 1Q11.
Results highlights: The strong earnings were boosted by a Bt270m after-tax payout for two months’ delay liquidate damages (DLD) and an FX translation gain of around Bt130m on the GHECO One project (booked as equity income). Excluding such items, profit would be Bt461m, still higher than our estimate of Bt303m, due to stronger-than-expected revenue from land transfers.
HEMRAJ sold 928 rai of land and transferred title deeds for around 550 rai in 1Q12. Revenue booked from land, thus, expanded by 716% YoY and 6% QoQ to Bt1.2bn. Land margin was 46.27%, up by 610 bps YoY and 591 bps QoQ.
Sales from utilities increased 13% YoY to Bt 322m on heavier industrial water usage. Total rental and service revenue rose 37% YoY to Bt172m.
Outlook: The 2Q11 net profit should be sustained strong, underpinned by solid land transfer momentum, equity income from GHECO-One (which will commence operating this month) and the booking of a payout for another month of DLD. At end-March, HEMRAJ had a backlog of Bt2.96bn, which is to be booked as revenue over the next 24 months.
What’s changed? We have upgraded our FY12 earnings forecast 27% to Bt2.5bn to reflect the DLD payout and the FX gain in 1Q12. Cash from the DLD claims adds Bt0.04/share to the firm’s value. We, thus, have raised our YE12 target price to Bt3.24 from Bt3.20.
Recommendation: HEMRAJ is one of the best plays on capacity expansion in the automotive industry along the Eastern Seaboard. Our BUY rating stands.