Supalai

Supalai Plc (SPALI)
Investment thesis
The risk-reward trade-off is attractive. SPALI is now the cheapest ResDev stock we cover—an FY13 PER of 9.0x against an 11.9x sector mean. The firm now has a huge presales backlog of Bt32bn, which secures revenue through to FY15. We conservatively forecast top-line growth of 10% for FY13, 16% for FY14 and 14% for FY15. SPALI leads the sector in the provinces, where there is substantial demand growth. Furthermore, it offers a good dividend yield of 4.7% for FY13. A short-term catalyst will be a QoQ jump in presales in 4Q12 (also, SPALI will report a record profit for the quarter). We maintain our BUY rating with an unchanged a YE13 target price of Bt22.30, pegged to a PER of 11x (2SDs above its FY05-11 mean).
Successful launches in Nov
The responses to the launches of two new condos in Nov were impressive—Supalai Monte (Bt1.6bn) was fully booked and Supalai Lite Sathorn-Charoenrat (Bt1.9bn) was 83% presold. Good locations and inexpensive prices (around Bt70K/sq.m) were the key features of the two projects. In mid Dec, the firm will launch Supali Elite Sathorn-Suanplu (Bt1.2bn); management expects a take-up rate of at least 60%, which would boost 4Q12 presales to Bt5.4bn, up 58% QoQ.
Huge long-term backlog
SPALI’s presales backlog secures revenue of Bt9.3bn for FY14 and Bt11.7bn for FY15 (following Bt7bn for FY13). As such, 47% of our top-line forecast for FY13 is pledged, 55% of FY14 and 60% of FY15. The huge condo backlog for FY14-15 was built from 10 launches with a total project value of Bt24bn for which average presales stand at 75% (Figure 1).
4Q12 the best profit expectation
Supalai Park Ratchayothin (Bt2.3bn; 100% booked) is the biggest project transferring in 4Q12; revenue is almost fully recognized. Two other condos transfer in Nov-Dec—Park Asoke-Ratchada (Bt1.4bn; 100% booked) and Park@Downtown Phuket (Bt806m; 92% booked). Thus, SPALI will report record housing revenue in 4Q12 (70% condo; the rest low-rise) and an unprecedented 4Q12 profit.
Upcountry diversification
The firm is the obvious play on upcountry demand growth. SPALI has the biggest ex-Bangkok home-building operation in Thailand (not vacation
units) with projects in six provinces across the country, scheduled to expand to eight provinces next year. We forecast that the upcountry proportion of the firm’s presales will jump from 16% in FY11 to 25% in FY12 and hit 30% within the next couple of years. SPALI has secured 11 land plots in the provinces (10 low-rise and one condo) for projects worth a total of Bt8.3bn. Provincial projects represents 38% of the total value of projects (for which land plots have been secured) that SPALI plans to launch in FY13 onward.