Ananda Development

Ananda Development Plc (ANAN)
Investment thesis
Share price downside risk is limited, due to easing execution risk (Ideo Mobi start transferring in Sept) and a six-month share buyback program, starting Oct 1. ANAN is the cheapest stock in the sector at core PERs of 5.7x for FY13 and 5.0x for FY14. We have rolled over our investment horizon to a YE14 and arrived at a new target price of Bt3.40, pegged to an unchanged target PER of 7x (our YE13 target was Bt3). Our TRADING BUY rating stands.
Stock buyback limits downside risk
ANAN’s board approved a Bt500m stock buyback program, which starts tomorrow (Oct 1, 2013-April 1, 2014). The repurchase price on the date must not exceed 15% of the average close price for the five previous working days. Note that the firm has a Bt9bn presales backlog and four Ideo Mobi condos to transfer in Sept onward, so will have plenty of cash coming available.
Based on the Sept 27 close price of Bt2.44, ANAN would be able to repurchase 205m shares, or 6.1% of the total. If that were to be the case, our FY13-14 EPS forecast would rise by Bt0.03/share per year, or 6.6% (from Bt0.39 to Bt0.42 for FY13, and from Bt0.49 to Bt0.52 for FY14). The potential effect of the share buyback on EPS is detailed in Figure 1.
First tranche of  Ideo Mobi series started transferring in Sept
The first units of Ideo Mobi Sukhumvit, A Building, which was launched in Feb 2012, started to transfer in mid Sept. The project took 18 months to complete, one-month ahead of schedule. Management expects at least 70 units (about 8% of total project value) to have transferred by end-Sept.
Red ink in 3Q13 is priced in—looking for a turnaround in 4Q13
The loss in 3Q13 is behind us (net losses of Bt94m in 2Q13 and Bt40m in 3Q12). We are looking ahead to a bottom-line turnaround in 4Q13. We expect a net loss of Bt115m for 3Q13, followed by a profit of Bt1.5bn for 4Q13 (net loss in 4Q12). Condo revenue will hit a record of Bt6.9bn in 4Q13 (triple YoY and double QoQ). The key contributors in 4Q13 will be four Ideo Mobi condos (Bt9.5bn in total value; 92% booked).
Three new projects to kick off in 4Q13 to secure FY15 revenue
ANAN plans to launch three sizable condos in 4Q13 worth a total of Bt12bn—Ideo Charun (Bt3.6bn), Ideo Ratchatewee (Bt1.9bn) and Ideo Rama IV (Bt6.5bn; a JV in which ANAN will hold 48%). The locations are good—near BTS and MRT stations. Assuming a 50% mean take-up rate, they will secure 38% of our FY15 revenue forecast (up from zero as of now)—a Bt4.8bn backlog to transfer in that year.