Hemaraj Land & Development

Hemaraj Land & Development Plc (HEMRAJ)

In line with our estimate
HEMRAJ reported a 1Q13 net profit of Bt902m, up by 4% YoY and 28% QoQ. The figure beat our estimate by 15% and was 2% above the consensus. The higher-than-expected net profit was because of a larger-than-modeled profit contribution from Gheco-One (a huge unrealized FX gain of about Bt210m on its foreign currency-denominated debt).
Results highlights
HEMRAJ booked 421 rai of land presales and transferred title deeds for around 550 rai in 1Q13. Income from land sales rose by 17% YoY and 30% QoQ to Bt1,342m because of a higher mean sales price and a greater area of land transferred (around 500 rai in 1Q12 and 450 rai in 4Q12).  Real estate GM was 47.2%, up from 46.3% in 1Q12. As of end-March, the firm had booked a presales backlog of around Bt2.8bn to be realized as revenue at transference over the next 3-24 months. Income from industrial estate utilities jumped 20% YoY (but was down 211% QoQ) to Bt387m, due to a maintenance shutdown at a petrochemical plant in Maptaphut.
Revenue from rental properties jumped by 53% YoY and 21% QoQ, driven by expanding factory and warehouse rental portfolios. Condo sales totaled Bt90m for the quarter—recognition of two units sold at the Park Chidlom. Blended GM was 45.8% against 46% in both 1Q12 and 4Q12. HEMRAJ booked equity income of Bt356m, mainly the profit contribution from GHECO-One (35% stake; COD in July 2012), both from operating results and an unrealized FX translation gain of Bt210m.
Outlook
Despite guidance for land GM expansion in 2Q13, we anticipate softer QoQ earnings, as equity income from a new SPP (126 MW; COD on May 2; HEMRAJ holds 25%) won’t be sufficient to offset the effect of a 4-8-week maintenance shutdown at Gheco-One (713 MW; HEMRAJ holds 35%). Moreover, the Revenue Dept demanded that Gheco-One pay tax of Bt623m on a reported unrealized FX gain during construction. As such, HEMRAJ’s liability is Bt218m (35% of Bt623m) to be paid in 2Q13. 2H13 earnings should rise HoH on further expansion of utilities revenue, rental income and equity income from the power business. For FY13, we anticipate earnings growth of 40% to Bt3.1bn.
What’s changed?
We have upgraded our FY13 profit forecast by 3.5% to Bt3.1bn to factor in the surprisingly good 1Q13 result. The first-quarter bottom-line represents 27% of our new full-year projection.
Recommendation
Our BUY rating stands with a YE13 target price of Bt4.9.