LPN Development

LPN Development Plc (LPN)

What’s new? Last weekend, LPN launched Lumpini CondoTown Chonburi (Bt2.5bn total project value; 4,000 units). It is the cheapest low-end condo that the firm has ever launched—a mean sales price of Bt28,000/sq.m or Bt625,000/unit. The response was strong. In two days 2,000 units worth Bt1.3bn were booked, a 50% take-up rate. 
The best unit presales since 2009; adds 8% to secured FY13 revenue: The response was better than management expected. The presales last weekend were the highest in terms of units booked since LPN launched Lumpini Park Pinklao in late 2009 (around 2,700 units were booked at launch). The additional Bt1.3bn in presales pushed up the secured proportion of our FY13 revenue forecast to 68% from 60%. LPN’s presales backlog has expanded another 6% to Bt22bn. The firm conservatively guides for GM of 27% for the CondoTown brand.
Looks set to beat FY12 presales target: We have no concerns about LPN’s presales, as the company achieved Bt16bn recently, hitting its FY12 target of Bt16bn. We think LPN may launch one more condo late this year (project value of Bt1-2bn). If that were to be the case, FY12 presales would exceed the target.  
To speed up transference in 4Q12: The company will push transference in 4Q12, following receipts of Bt2.8bn in 3Q12 (up 174% QoQ). In 4Q12, LPN will transfer six projects with a record high value in excess of Bt7bn—Rama III, Piboonsongkram, Pattanakarn, Northern Pattaya-Sukhumvit, Lad Pla Khao and Pakkred.  
Action: The strong response to the project launch in Chonburi last weekend should give a boost to LPN’s share price. The stock trades at an FY13 PER of 10.9x. We believe it deserves a further premium over its historical multiples in anticipation of a record high 4Q12 profit. Our YE13 target price is pegged to a PER of 12.5x, 2SDs above its FY05-11 mean. During its last peak in 2007, LPN traded at a PER of 13.6x.