Sansiri Public Co

Sansiri Public Co Plc (SIRI)

SIRI looks set to report 2Q robust net profit growth of c.37% yoy and 29% qoq, thanks to rising sales, sustained gross margin of 33%+ and

falling SG&A. We estimate 1H12 to come in at 28% of our FY12 estimate, mimicking FY11 when 4Q was the best quarter. SIRI stays as our top

pick given its strong commitment to restoring investors’ confidence through its improving fundamentals and proven growth strategy. The stock

is undeservedly cheap at 6.4x CY13 P/E. Maintain Outperform and 7.5x CY13 P/E-based target price, 1SD above the 5-year average of 5.4x for

its dominant market position.

What Happened
We expect SIRI to report a 29% qoq and 37% yoy rise in 2Q12 net profit to THB439m, thanks to (1) continued sales growth (+9% qoq, +29% yoy)

for semi-Ds/townhouses (SDH/TH) and condos, (2) sustainable gross margin of above 33%, and (3) falling SG&A in the absence of large-scale

marketing events. Despite an expected high effective tax rate of 30% because of income tax on cash-basis revenue from downpayments for

aggressive presales in 1Q12 and early 2Q12,

bottomline growth is expected to stay robust. 1H12 net profit is likely to come in at 28% of our FY12 forecast, which is the same pattern

witnessed in FY11 when 4Q11 showed the best performance, courtesy of substantial condo transfers.

What We Think
We remain bullish on SIRI because of (1) the 91% of our FY12 sales forecast that is secured by the backlog, (2) visibility from new sales

(two prebuilt condo projects to be launched in 3Q12, i.e. VIA 31 and Wyne) and quarterly average SDH/TH presale of THB3bn that will partially

be transferred in FY12, (3) continued recovery of SDH/TH presale, (4) sustained gross margin above 33% (higher than our FY12 estimate), and

(5) improving expense control. The outlook for FY13-14 is promising, supported by a solid condo backlog (50% secured for FY13 and 12% secured for FY14) and continued margin expansion.

What You Should Do Stay invested in SIRI for potential upside coming from its improving growth prospects and stronger
market positioning.

Its prospective dividend yield of 6.6% is also attractive.