Supalai

Supalai Plc (SPALI)
Earnings in line with our model
SPALI announced a 3Q12 net profit of Bt565m, down by 13% YoY but up 86% QoQ. The result was in line with our expectation and the consensus. 
Results highlights
The YoY earnings decline was led by a 13% housing sales contraction to Bt2.5bn—condo sales recognition dived. 3Q12 housing revenue comprised of 60% low-rise and 40% condo. In Sept, Supalai start transferring City Home Srinakarin and Park Ratchayothin. Housing GM inched up from 41.6% in 3Q11 to 41.9% in 3Q12.  The SG&A/sales ratio increased from 10.2% in 3Q11 to 12.2%, due to lower sales. The strong QoQ earnings rise was driven by a 51% jump in housing revenue (no new condos transferred in 2Q12) and 1.5% fatter GM. The balance sheet remained clean—net gearing was stable QoQ at 0.52x at end-Sept.
Outlook
We expect SPALI to post a record profit for 4Q12, as Bt6.2bn in presales will transfer (mainly three condos—Park Ratchayothin, Park Asoke Ratchada, and Park@Downtown Phuket). We expect a surge in revenue to a new all-time high of Bt7.7bn for the quarter. Management guides that Park Ratchayothin (Bt2.3bn) has been almost entirely transferred already.
What’s changed? 
Although 9M12 core profit represents only 37% of our FY12 forecast and the consensus number, we maintain our model unchanged, due to clear revenue visibility. The total backlog of Bt29bn at end-Sept secures 90% of our FY12 top-line projection, 47% of FY13 and 58% in FY14.
Recommendation
We maintain our BUY rating with a YE13 target price of Bt22.30, pegged to a housing PER of 11x (2SDs above its FY05-11 mean). SPALI now looks very cheap—an FY13 PER of 8.9x, the lowest of any ResDev stock in the SET50. A short-term catalyst will be a QoQ leap in presales in 4Q12 (led by the successful launch of Supalai Monte Viang @ Chiangmai and two new launches, Elite Sathorn-Suanplu and Lite Sathorn-Charoenrat). Also, SPALI will report a new record profit for the quarter. The dividend yield for FY13 is good at 4.7%.