Pruksa Real Estate

Pruksa Real Estate Plc (PS)

2Q12A net profit up 24% QoQ on higher revenue booked and better margin.
The story. We measure recovery for the market and PS by comparing presales in
4Q11-2Q12 with the pre-flood average of 1Q11-3Q11. This study suggests that PS’s
presales performance lagged the market in 4Q11-1Q12, but improved rapidly to
outperform the industry in 2Q12. PS’s TH presales were only 15% and 41% of pre-flood
level in 4Q11-1Q12, under industry average of 41% and 74% respectively. This changed in
2Q12 when PS’s presales reached 87% of pre-flood level vs. only 81% for the industry.
Though not yet back to normal, PS’s SDH presales were 76% of pre-flood level in 2Q12,
better than the industry average of 75%. We expect this to return to normal soon.
?Note that presales for non-flood-affected TH already exceeds the pre-flood level (103%
of pre-flood presales), while non-flood SDH is nearly back to normal (now at 97% of
pre-flood level).
Good visibility. PS’s current backlog is a high Bt34bn, with Bt16.8bn to be booked
this year, fully securing our forecast but 10% above consensus. The remainder will be
realized in 2013-2015 and secures 25% of our 2013 forecast and 17% of 2014. Of the
Bt34bn in backlog, 56% is condo, 29% TH, 12% SDH and 3% overseas.
Upside risk to consensus. The company maintains revenue recognition at Bt26bn,
though up to Bt28bn of its backlog may be transferred (as we forecast). Further upside
is sale of finished stock. It aims at a net margin of 15%, above our forecast of 13.9% and
consensus’ 13.8%. Achievement of its goals would give 10% upside to consensus but
bring it in line with our forecast.
2Q12A wrap-up. Net presales booked was Bt7bn, -23% YoY but +24% QoQ, bringing
1H12 presales to Bt12.7bn or 44% of 2012 target. The best presales came from its active
projects. It has lowered its new launch plan to 35-40 projects from the earlier 49 but it
maintains its goal of Bt29bn presales, supported by 24-29 more projects launched in
2H12 and 146 active projects worth Bt56.7bn.
Net profit was Bt1bn in 2Q12, flat YoY but +58% QoQ, improving QoQ thanks to a 46%
rise in revenue recognition and improved net profit margin to 14.7% in 2Q12 from
13.6% in 1Q12 due to lower SG&A to revenue. Gross margin slid to 34.2% in 2Q12 from
35.5% in 1Q12 due to flood-related expenses booked in the period. Margin should be
better in 3Q12 without the flood expenses. 1H12 net profit was Bt1.6bn, or 41% of our
full year forecast and 46% of consensus. We believe our forecast is achievable.
Reiterate BUY. We like PS’s turnaround and upside risk stories as a near term share
price catalyst. With little more slow-moving stock being added to the stockpile,
balance sheet and cash flow are better, helping ease concerns. With attractive ETR of
24% and limited downside risk, we maintain a BUY rating on the stock.