Hemaraj Land & Development

Hemaraj Land & Development Plc (HEMRAJ)

Slightly below our projection
HEMRAJ reported a 3Q12 net profit of Bt629m, up by 307% YoY and 572% QoQ. The figure was 5% below our estimate because revenue recognition from land sales was a bit lower than expected.
Results highlights
HEMRAJ sold 505 rai of land and transferred title deeds for around 400 rai in 3Q12 (versus only 250 rai in 3Q11). Revenue booked from land, thus, rose by 68% YoY to Bt839m. The backlog, which at end-Sept stood at Bt3.5bn, will be booked as revenue at transference over the next 3-24 months.
Utility sales expanded by 23% YoY to Bt369m, due to a greater sales volume of raw water. Revenue from industrial properties for rent rose by a substantial 41% YoY to Bt151m, led by an expanded rental factory portfolio and new investment in the logistics park business.
HEMRAJ booked equity income of Bt298m for 3Q12, mainly from the profit contribution from GHECO-One (COD in July), both from operating results and an unrealized FX translation gain.
Outlook
Strong earnings growth momentum should be sustained into 4Q12 on a full-quarter profit contribution from GHECO-One. The land sales outlook is also promising, given the expansion of automakers in HEMRAJ’s estates. The firm should sell by another 400 rai in 4Q12. Management is confident that the FY12 land sales target of 2,300 rai will be achieved. Note that 9M12 land sales totaled 1,952 rai.
What’s changed?
Our forecast and target price stand unchanged.
Recommendation
HEMRAJ is our top pick in Industrial Property space. It has the leading earnings visibility and sustainability in the sector, thanks to a strong land sales outlook, a big backlog on-hand and substantial utility income.