Land & Houses

Land & Houses Plc (LH)

24 new projects in 2013 to boost presales growth, targeted at B30bn

In 2013, LH has aimed to make B30bn of presales or 20% YoY growth
by using aggressive strategy of 24 projects worth of B43bn or 69% YoY
increase. These projected could be categorized into 14 horizontal
projects and 10 condominium projects (LH aims to raise more
condominium sales). The Bangkok Sathorn condominium project (worth
of B7bn) with the average price of B14.5m/unit that has been
postponed from the prior year would be opened for sale in 1Q13. The
company expects 25% of condominium presales of the total sales in
2013. Considering location of projects, 15 projects would be located in
Bangkok while the rest 9 projects would be in other provinces,
spreading more aggressively outward provincial areas (Phuket,
Chiangrai, Udon Thani, and Hua Hin). Accordingly, sales in provincial
location would be raised to 15% from 12% in 2012. For the rental fee
income, the company targets 16% growth to B2.1bn. For the time
being, there are Terminal 21 project (both service apartment and
retail) and Grand Center Points at Witthayu and Ratchadamri which
contribute B9.9bn of book value. There is possibility that the company
might sell some assets into the property fund this year. For 2013
investment budget, LH has assigned at B10bn; B7bn goes to land
purchase, B3bn goes to property development for rental (of which
B2bn is local land, and the other B1bn is the US’s land). After 2012,
the company had bought an apartment worth of US$11m, currently
fully occupied (45 units).

2013 sales income projected at B25bn, increasing 12% YoY
LH’s target of 2013 revenue from property sales stands at B25bn
(increasing from 2012 projected at B22bn), which would mainly come
from horizontal products. In addition, new condominiums for transfer in
2013 tend to stabilize. For the accumulative backlog at end-2013, it
stands at B7.6bn of which revenue would be recognized by B4.4bn
within this year. In terms of the gross margin from sales, it is likely to
rise by 0.5% to 33.5%. Overall, we revise up our revenue forecast in
order to get in line with the company, resulting in new 2012 profit
forecast standing at B4.8bn. Accordingly, LH’s profit is projected to
grow continuously in 2013 to B5.66bn, increasing by 2% and 8%
respectively.

Fair value, using SOTP, is B9.69 (lower than current share price)
Although LH’s earnings result is likely to grow continuously, the current
share price at 20.4x PER is substantially higher than the sector’s
average at 9.3x. Therefore, we recommend “SELL”. Fair value, using
sum of the parts, is B9.69.