Sansiri

Sansiri Plc (SIRI)

Top management was recently reported as buying shares in SIRI at THB2.20 (vs. THB2.30 YTD peak). We take this as strong assurance of SIRI’s promising prospects and continued stock rerating on its solid fundamentals and highly successful foray into the Upcountry market. We keep our FY12 EPS estimates for now pending a review post 2Q12 results, but we see rising upside potential and stock rerating possibilities. Valuation is undemanding with an attractive 7% yield. Reiterate Outperform and target based on 7.5x CY13 P/E (+1SD above 5-year historical avg; premium for its dominant market position). 

What Happened
SIRI’s top management (President,
CEO and COO) was reported as
buying a total of 181m shares in SIRI
at THB2.20/share on 10 Jul 2012,
based on the SEC’s filing. This came
after SIRI reported favourable 1H12
presales of THB18.2bn (50% SIRI’s
FY12 target of THB36bn) with
meaningful contributions from the
Upcountry market (29% of 1H12
presales) and before the upcoming
2Q12 results announcement (slated
for 14 Aug).
What We Think
We view this move as highly positive
as the transaction price was close to
SIRI’s YTD peak of THB2.30. It also
underpins top management’s strong
commitment to turn SIRI around
from a company whose ambitious
business plans were once viewed
with some scepticism by the public,
to one of Thailand’s most trusted
housing developers with solid growth
prospects, and an attractive
investment proposition. We also
view SIRI’s achievements in the rural
market expansion as supportive of its
future growth. In less than a year,
SIRI has surpassed SPALI to become
the top listed developer in the
Upcountry by presales. We see
successful new market entries at an
unprecedented pace in almost every
segment (from condo to SDH/TH;
from high to low end; from BKK to
Upcountry) and yet its favourable
ROE above 20% is more than
justified by its relatively high gearing
of above 1.0x (SIRI’s debt covenant is
2.5x vs. peers’ 2x). Thus, rerating for
SIRI is undoubtedly in the making.
(Fig 1-7)
What You Should Do
SIRI remains our high conviction
BUY. Should the political uncertainty
from today’s Constitutional Court’s
verdict escalate, we see a great
opportunity to buy on weakness.