Pruksa Real Estate

Pruksa Real Estate Plc (PS)
3Q12’s profit stands at B1bn, up 31%yoy. Financial status is strong
PS’s earnings result in 3Q12 was in line with our projection. Net
profit and norm profit stood equally at B1bn close to 2Q12’s but
increasing 31%yoy. Sales income was recognized at B7.2bn, around
B994m of which came from condominium projects while the rest
were SDHs and townhouses. In terms of profitability, norm profit
margin equated to 13.89%, dropping slightly from 14.71% in the
prior quarter, due mainly to selling and administrative expense
which increased as a result of new project opening. For financial
structure, there were significant changes. Net gearing decreased to
0.85x, lower than the industry’s average because of positive cash
flow from operation (CFO in 9M12 stood at B4.13bn). In addition,
presales in 9M12 grew to B20.7bn, while in October there were
additional presales of B3bn, making backlog at end-3Q12 stand at
B35bn, B19.4bn are condominium projects while the rest are
horizontal projects.

Up 2013’s forecast 15.66% for both income and profit margin
Profit in 9M12 accounts for 67.6% of FY2012’s forecast, while we
are convinced that in 4Q12 the company would be able to generate
profit close to our projection. However, we have changed our
assumption for the forecast by decreasing sales income recognition
due to the management’s strict policy about the quality of the
project transferred, making some backlog that has already finished
the construction still could not be transferred to customers until
they are sure about their quality. At the same time, we revised up
our forecast for profitability in 2012 according to situation, so profit
in FY2012 did not change significantly from our previous forecast.
For 2013, we raised our profit forecast by 15.66% through an
increase of income recognition to B34.6bn after believing that PS
would be able to transfer 7 condominium projects worth of almost
B10bn in total. The condominium projects that will be transferred
have gross margin of around 40%, which is higher than the current
average gross margin of 34-35% of other projects. After the
forecast revision, net profit and norm profit in 2013 is B5.18bn,
increasing 32.75%yoy.

2013’s fair value at 12x PER is B28.08
We keep PS fair value at 12x PER, which results in a new 2013’s fair
value of B28.08. The factor to drive share price is positive
development in presales, income recognition, profit, and stronger
financial status. Buy.