Supalai

Supalai Plc (SPALI)

Investment thesis

We reiterate 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). The successful launch of Supalai Sathorn-Suanplu last weekend strengthens SPALI’s long-term revenue visibility—its presales backlog is now an impressive Bt33bn (revenue recognition in FY13-15). The clear visibility and cheap valuation more than make up for the fact that the firm’s FY12-14 profit CAGR is only a modest 16%.
The current share price presents a good entry point, particularly for long-term investors. SPALI’s FY13 PER is only 8.7x, deeply discounted to the 11.0x sector mean. The firm offers a good dividend yield of 4.8% for FY13. It leads the sector in the provinces (30% of total presales within the next couple of years), where there is strong demand growth. A short-term catalyst will be a record 4Q12 profit. All-time high revenue in 4Q12 (Bt7-7.7bn; 70% condo, the rest low-rise) will be generated with the transference of three condos—Supalai Park Ratchayothin (Bt2.3bn; 100% booked), Supalai Park Asoke-Ratchada (Bt1.4bn; 100% booked) and Park@Downtown Phuket (Bt806m; 92% booked).

Positive surprise at launch of Supalai Elite Sathorn-Suanplu
Last weekend, SPALI launched Supalai Sathorn-Suanplu, an upper mid range condo with a mean price of Bt100K/sq.m and a total project value of Bt1.2bn. The response was impressive—a 95% take-up rate at the launch weekend, thanks to the great location (convenient to Silom-Sathorn). Management had anticipated an initial take-up rate on only 60-70%.  

QoQ jump in 4Q12 presales
The additional presales of Bt1.1bn from Supalai Sathorn-Suanplu are expected to push total (condo plus low-rise) 4Q12 presales to Bt6bn (69% condo, the rest low-rise), up 80% QoQ. Condo-only presales for the quarter should increase 136% QoQ—in Nov, Supalai Monte Chiangmai (fully booked) and Supalai Lite Sathorn-Charoenrat (about 90% booked) were launched. However, on a YoY basis, 4Q12 total presales will fall 4%, due to the high base set by condo presales in 4Q11 (Bt5.3bn), following flooding in Bangkok. 4Q12 low-rise presales will recover—up by 80% YoY and 10% QoQ. Thus, total FY12 presales will set a new record of Bt20.6bn, up 29%.

FY15 revenue visibility boosted by 6%
Supalai Sathorn-Suanplu will recognize revenue in FY15. Thus, the presales backlog now secures 66% of our FY15 top-line forecast (from 60%). The condo presales backlog will yield revenue of Bt7bn in FY13, Bt9bn in FY14 and Bt13bn in FY15. The total presales backlog hit Bt33bn recently, securing 47% of our top-line forecast for FY13, 55% of FY14 and 66% of FY15 (details in Figures 1-2). As such, there appears to be scope for upside to our FY14-15 earnings forecasts.