Supalai
No surprise in Q2 2012 results TRADING BUY (maintained) Target Price: Bt19.80 Price (14/08/12): Bt18.50
Supalai Plc (SPALI)
In line with our estimate: SPALI reported a net profit of Bt304m for 2Q12, down 64% YoY but up 15% QoQ. The result was in line with our estimate, but 10% above the consensus (which had a slimmer margin assumption than us).
SPALI announced an interim DPS of Bt0.30 for 1H12 operations, a 3.2% annualized yield. XD on Aug 24; payment on Sept 10.
Results highlights: The YoY profit dive was due to a housing sales contraction, down 58% YoY to Bt1.7bn (78% low-rise, 24% condo)—no new condos started transferring in 2Q12. Housing GM dropped from 41.5% in 2Q11 to 40.3% in 2Q12 because of a lower condo revenue contribution (condos yield a fatter GM than low-rise). Note that condo sales comprised 70% of the top-line in 2Q11 and 40% in 1Q12. The SG&A/sales ratio increased from 10.2% in 2Q11 to15.4% in 2Q12, due to lower sales. QoQ earnings growth was driven by 12% higher housing revenue. The balance sheet remained strong; net gearing rose slightly from 0.43x at end-March to 0.53x at end-June.
Outlook: We expect YoY and QoQ profit growth for 3Q12, driven by revenue. Two condos will start transferring, Supalai Asoke Ratchada (Bt1.4bn; 99% booked) and Cityhome Srinakrin (Bt1.1bn; 20% booked). 4Q12 earnings will hit a new record with the transfers of another two condos—Park Ratchayothin (Bt2.3bn; 98% booked) and Park@Downtown Phuket (Bt806m; 90% booked).
What’s changed? Although 1H12 profit represents only 18% of our FY12 forecast and the consensus, we maintain our model unchanged because there is a Bt7.2bn presales backlog to transfer in 2H12. The total presales backlog at end-June of Bt28bn secured 75% of our FY12 revenue projection, 41% of FY13 and 47% of FY14.
Recommendation: Our TRADING BUY rating stands with a YE12 target price of Bt19.80, pegged to a target PER of 11x. Anticipation of a record profit in 4Q12 should catalyze the stock price. Long-term earnings visibility is clear. While, FY12 profit growth of 21% is comparable to sector, SPALI trades at an FY12 PER of 10.3x, a discount to the 11.8x sector mean.
