Amata Corporation

Amata Corporation Plc (AMATA)

Core operational numbers in line with our model
AMATA reported a 3Q12 net profit of Bt388m, up by 123% YoY and 102% QoQ. Excluding a gain from a fair value adjustment on factories for rent, core profit would be Bt280m, in line with our estimate and the consensus. 9M12 profit accounts for 66% of our FY12 forecast.
Results highlights
In 3Q12, AMATA transferred 230 rai of land—200 rai at Amata Nakorn (AN) and 30 rai at Amata City (AC). Because land at AN is much higher priced and carries a fatter margin than land at AC, land revenue rose by 184% YoY and 11% QoQ to Bt936m and land gross margin expanded to 58.9% from 55.8% in 3Q11 and 48.9% in 2Q12. Note that AMATA transferred 95 rai (60 rai at AN and 35 rai at AC) in 3Q11 and 410 rai (10 rai at AN and 400 rai at AC) in 2Q12.
The firm has changed the accounting method it uses for its property-for-rent business from the cost method to fair value. As a result, it booked a non-cash gain of Bt108m for the quarter.
Outlook
We expect a stronger profit in 4Q12, due to more land transfers. However, historical data indicate that AMATA’s share price has a stronger correlation with land sales than with earnings. As such, 4Q12 land sales should either trigger a share price rise (if the target is met) or bring on downside pressure (if the target is missed). In 3Q12, the firm sold 244 rai, making for 9M12 land sales of 1,325 rai. That means it must sell another 1,200 rai to meet its FY12 target of 2,500 rai (excluding the 1,000-rai plot to Holly). Recall that AMATA cut its FY12 land sales target from 3,000 rai to 2,500 rai last month (our assumption is 2,400 rai).
Management reaffirmed during a conference call last night that the firm will achieve its target—it has letters of intent (LOI) from customers intending to buy around 800 rai by YE12.
What’s changed?
Our forecast and target price stand unchanged.
Recommendation
Our regression model—share price against land sales expectation—suggests that AMATA is trading on the expectation that it will sell only 1,500 rai this year. We, thus, believe share price downside risk is limited, as the firm should close most or all of the deals it has with customers that submitted LOIs. We maintain our BUY rating with YE13 target price of Bt20.20.