Amata Corporation

Amata Corporation Plc (AMATA)

Investment thesis

AMATA’s slow presales and land transference have intensified our concerns about the achievability of FY13 and FY14 earnings targets. As such, we have conservatively cut our FY13-14 forecasts by 9% and 7%, respectively, to reflect lower assumptions for land bookings and sales. But the stock’s 28% price retreat during the past three months has already priced in our concerns—AMATA currently trades at an FY13 PER of 13.3x, in-line with its long-term mean of 13.5x. Due to our forecast cuts, our target price drops to Bt22 (from Bt28), still pegged to a PEG ratio of 0.5x.
Targeted presales of 3,000 rai looks unachievable …
Management reaffirms an FY13 land presales target of 3,000 rai, despite 1H13 bookings of only 350 rai. The firm guides that its presales are typically back-loaded, so should improve substantially in 2H13. We expect bookings to rise in 2H13, as BOI data show that investment flows remain strong. But we doubt the achievability of AMATA’s presales target. Even under the best-case scenario where LOIs for 2,000 rai are converted to presales contracts this year, AMATA is likely to book only 2,500 rai. As such, we have cut our presales assumption from 3,000 rai to 2,500 rai. AMATA will eventually also cut its target, we believe.
2Q13 revisited—lower expectation for profit, but still up YoY & QoQ
We have cut our 2Q13 core profit estimate to Bt320m from Bt450m previously (which still represents a jump of 67% YoY and 145% QoQ). The downgrade was prompted by a lower expectation for land transfers. We now assume that AMATA transferred 420 rai in 2Q13 (120 rai at AMATA Nakorn and 300 rai at AMATA City); we previously anticipated 550 rai. However, revenue from land should rise both YoY and QoQ on greater land transference and GM expansion brought about by a bigger proportion of high-margin land (Amata Nakorn) in the sales mix.
FY13-14 earnings forecast cuts, but 2H13 still higher HoH
We have revised down our FY13 profit forecast by 9% to Bt1.3bn to factor in a diminished expectation for land transference (from 2,100 rai to 2,000 rai). We have also cut our FY14 earnings projection by 7% to bt1.9bn, due to a lower presales assumption for FY13 (presales in FY13 to be transferred in FY14). Despite the adjustments to our model, we still expect core earnings to sustain both QoQ and YoY growth momentum till 4Q13, due to rising land transference and utilities sales in 2H13.
Risks have been priced in
Under the worst-case scenario where AMATA achieves FY13 presales of only 1,500 rai, we believe that it would still deliver earnings growth of 14.4% for FY14 (against an FY14 PER of 10x), backed by its huge backlog on-hand. As such, downside risk from the current stock price appears to be only modest.