Pruksa Real Estate

Pruksa Real Estate Plc (PS)

In line with our model: PS reported a 2Q12 net profit of Bt1bn, up by 3% YoY and 59% QoQ—in line with our estimate but 8% above the consensus, due to lower-than-expected SG&A expenses. 
Results highlights: The firm posted both YoY and QoQ profit growth for 2Q12 because low-rise housing transference normalized. Revenue was Bt6.8bn, up by 1% YoY and 46% QoQ as construction resumed a pre-flooding level of activity. However, GM slimmed QoQ which surprised us—from 35.5% in 1Q12 to 34.2% in 2Q12 (37.7% in 2Q11). The SG&A/sales ratio declined significantly, due to top-line expansion (15% in 2Q12 against 18.5% in 2Q11 and 18% in 1Q12). The effective tax rate jumped to 23% from 18% in 1Q12 (when PS used an investment loss in India as a tax shield).
The balance sheet strengthened—the net gearing ratio dipped to 0.99x at end-June from 1.04x at end-March.
Outlook: We expect 3Q12 profit to rise both YoY and QoQ, driven by expanding low-rise backlog transference (Bt17bn is scheduled to transfer in 3Q-4Q12). The 4Q12 bottom-line will be the best of the year, boosted by Bt3bn in condo transference.
What’s changed? 1H12 earnings represent 43% of our model, which we maintain unchanged. Earnings visibility is clear—the presales backlog at end-June 2012 fully secures our FY12 revenue forecast of Bt26bn. 1H12 net profit accounts for 47% of the FY12 street forecast. Note that our number is 8% ahead of the consensus.
Recommendation: PS’s share price has jumped 28% since we pushed the firm as the top pick for our theme call of a full recovery in low-rise presales (see our June 7 report). Despite the price rally during the past few months, the stock should build further—we expect a consensus profit forecast upgrade. Besides, its multiples are undemanding. PS trades at an FY12 PER of 10.0x (its FY06-11 mean is 10.2x) and an FY13 PER of 8.4x. Our BUY rating stands with a YE12 target price of Bt20, pegged to a PER of11.5x.