Amata Corporation

Amata Corporation Plc (AMATA)

Guides to sell 2,700-2,800 rai this year. Management said it expected to sell 2,700-2,800 rai this year, up 70-80% YoY, slightly above previous goal of 2,500 rai which was cut from the original 3,000 rai. YTD contracts signed plus letters of intent (LoI) already cover 2,000 rai. It hinted at a surprise order for Amata Nakorn in 4Q12.
2013 sales growth target of 20%. AMATA has not given guidance for 2013 land sales, but its rule of thumb is for these to grow 20% p.a. This would work out to sale of 3,200-3,400 rai next year. Right now it has LoI for 700-800 rai next year (including ~400 rai carried over from 2012). However, we conservatively forecast 2,500 rai. It is now looking at Russia – whose presence now is small - to add to regulars Japan and China.

Raising recurring income. For the long term, AMATA wants to raise service revenue to 80% of total revenue from 20% now. This will secure income steam and give a more stable flow of revenue. It will do this by leasing land in commercial or prime areas instead of selling the land, gaining recurring income to add to the income from factory rentals. As a first step, it has a “Financial Street”, commercial buildings for financial institutions, and Tesco Lotus, in front of Amata Nakorn IE.

Raised 2012F. We raise 2012 net profit forecast by 7.3% to Bt1.6bn to factor in a non-recurring Bt108mn gain from a change in accounting policy to book investment properties on fair value from cost method. We maintain 2013-2014 forecasts.

Positive news stream. AMATA’s share price slipped 11% during the past month and we believe this is due to poor market sentiment – investor worries it will miss its target - and no real share price catalyst. However, we look for several positives soon:

A surprise order for high-margin Amata Nakorn in 4Q12.
Revenue booked for 1,100 rai raw land sold to Thai Chinese Rayong Industrial Realty Development Co (TCRIRDC), a joint venture between AMATA, and Holley. Profit is expected to be insignificant and is not yet in our forecast.
More raw land sales to TCRIRDC soon. TCRIRDC has sold 70-80% (600-700 rai) out of 825 rai sellable area to Chinese investors, meaning it will have to buy more raw land soon.
Listing of Amata Vietnam early next year.
AMATA will raise prices by 5-10% next year, which should widen gross margin.

Maintain BUY. In our view, the recent share price correction is an opportunity to BUY. Given the stream of positive news, share price should come back up. It has good visibility with total backlog of Bt5.8bn (Bt2.2bn Amata Nakorn and Bt3.6bn Amata City), securing income steam until 2013. ETR is an attractive 49%: Buy.