Pruksa Reall Estate

Pruksa Reall Estate (PS)

2Q12 profit at B1bn or 58% QoQ increase, exceeding projection 5.7%
PS has announced its net profit and norm profit from operation at
B1,002m or an increase of 58% QoQ which is higher than projected by
5.7%. as a result of transfer and income recognition that has increased
by 46% QoQ mostly from horizontal projects. The factor that has
boosted the profit higher than projected is the company’s capability in
controlling selling and administrative expenses, pushing SG&A/sale to
fall to 15% compared with our forecast at 17%. Presales in 2Q12 stands
at B7,019m, urging 1H12’s total presales to B12,688m. In the
mentioned period, there have been openings of 14 new projects, divided
into 7 projects for each quarter. At end-2Q12, there were 146 projects
in total that were in process. The projects left for sale is worth of
B56.7bn as backlog at end-2Q12 is B34.1bn (as shown in a graph on
page 2). PS’s financial structure at end-2Q12 has developed as 0.97x of
net gearing has declined from 1.02x in the previous quarter.

Revise up 2012 and 2013 profit forecasts by 15% and 6% respectively

With presales that have risen especially ones in the horizontal projects,
PS has been able to recognize income from sales earlier. The
abovementioned backlog is projected to be recognized in 2H12 by
B16.8bn while there is a stock of houses ready for sale-transfer worth of
B5,286m that PS is projected to transfer and recognize income in 2012
by B26.9bn. We revise up 2012 profit forecast by 15% with income
recognition from sales revised up to B28.9bn while SG&A/sale is
decreased from 18.6% to 17%, urging net profit margin to rise from the
former forecast to 13.75%. 2013 forecast is revised up by 6% with
income recognition from sales revised up along with the increasing
number of horizontal projects, so income recognition might be come
earlier. Recently, the executive has announced that it will take 144-150
days for the horizontal projects in the period since customers buy
houses until the transfer.

Maintain fair value, using 12x PER, at B21.59

We maintain our forecast and reiterate recommendation for “BUY”, as
fair value maintained, using 12x PER, as usual. However, the
abovementioned revisal has brought about new fair value at B21.59.
We’re convinced that the vivid recovery of the earnings result will bare
profit at not lower than B1.1-1.2bn/quarter during the rest of 2012.
Combined with the return of aggressive strategy for horizontal projects,
the share price will be boosted significantly from the time being onward.
Preliminary, the share price is likely to rebound to the position before
the flood crisis in 2011 at B18-21.