Supalai

Supalai Plc (SPALI)

2012 wrap-up: presales beat but transfers disappoint. Presales hit a record high
of Bt21.3bn, +34% YoY and above its target of Bt19bn, brought by more condo presales
than anticipated at Bt15.8bn (target was Bt12.4bn). This more than offset the
disappointing low-rise presales of Bt5.5bn (target Bt6.6bn). Take-up rate for condos
launched last year was impressive at over 90%, indicating solid demand. However, deed
transfers came to just Bt11.4bn, 10-15% below SCBS and market forecasts. We believe
this arose out of lower low-rise presales than expected since these can often be
transferred in the same year as they are sold.
Fine-tune forecast. We cut 2012 forecast by 5.3% to Bt2.6bn due to lower than
expected revenue recognition, but maintain 2013 forecast. We raise 2014 by 5% to
Bt4.3bn to accommodate a wider margin. SPALI says its construction cost will rise by
6-7% due to cost push (higher labor and building materials costs) and a higher margin
given to contractors, but the strong demand allows it to pass these on to the buyers,
and thereby allowing it to keep gross margin stable at 42%. Our focus is on 2014, when
we expect outstanding growth of 38% backed by condo backlog which now is about
Bt31.3bn, securing 60% of our 2013 forecast and 58% for 2014.
The year ahead: revenue good but presales unexciting. Revenue growth in 2013
looks good at 18%, backed by a jump in low-rise presales. However, presales will take a
breather, with SPALI anticipating presales of Bt22bn this year, flat YoY, with Bt7bn
(+26% YoY) low-rise and Bt15bn (flat YoY) condo. At the same time, since it plans 20%
growth in new launches to Bt25bn, we see it as entirely possible condo presales could
beat its target. We do, however, see its 26% goal of low-rise growth as difficult to
achieve.
Focus more on provinces. SPALI will raise the proportion of provincial presales to 25-
30% this year from 25% last year, with revenue rising to 25-30% this year from 20% in
2012. It will be boosting new launches in the provinces to 40% of the total from 25%
last year, exploring new provinces Udonthani and Rayong and continuing in the six
provinces in which it already has projects (Chiangmai, Suratthani, Phuket, Khon Kaen,
Chonburi and Haad Yai).
Maintain BUY. We like SPALI’s good visibility and superior profitability which provides
a cushion when costs rise. We raise PT to Bt27/share as we re-rate multiple to 3.5x PBV
from 3x incorporate the solid industry outlook and bring it in line with peers. With
attractive ETR of 35%, we reiterate BUY.