Supalai

Supalai Plc
Superior 2014 growth secured by current backlog. SPALI leads all of the top seven developers in terms of visibility and growth outlook, undergirded by a large backlog of Bt40bn. Of this, ~Bt13.7bn will be booked next year, ensuring 6% growth YoY. Adding in the Bt6.5bn revenue forecast for low-rise house and sales in the provinces, 8% YoY growth, we believe our 2014 revenue forecast of Bt20bn is achievable. This implies about 20% upside risk to consensus forecast.
Quality backlog = rejection rate not a concern. In our view, the quality of SPALI’s backlog beats competitors. With condo buyers paying a high 20-30% down payment, they are unlikely to forego their contracts. PS and SIRI have the lowest down payment at only 5-8%, meaning their clients have to take out loans for 92-95% of the cost, above the BoT’s LTV of 90%.
Presales and earnings to jump in 4Q13. SPALI’s presales and revenue are on track to reach record highs in 4Q13, with presales of ~Bt10bn and revenue of ~Bt7bn. Supporting our expectation is the launch of six condos (Bt10.8bn value) and five low-rise projects (Bt4bn) in 4Q13. Our revenue assumption is fully secured by backlog on hand, with three condos being completed: the Bt1.7bn Supalai Park Ratchapruek-Petchkasem (sold out), the Bt1.6bn City Resort Ratchada-Huaykwang (sold out) and the Bt2.6bn Supalai Premier Ratchathewi (84% sold). We were informed that all buildings are completed and in the process of final inspection and okay by the BMA. SPALI thus gives its clients more lead time in which to obtain their mortgage loan.
Reiterate BUY and sector top pick. We like SPALI for its large backlog and superior growth outlook for 2014. Current backlog already secures revenue growth of 6%; adding in low-rise sales gives an estimated earnings growth of 69% next year. At the last close, it is trading at undemanding valuation of 9.5x this year; this falls sharply to 5.7x 2014. With attractively TTR of 60%, we maintain our BUY rating and keep it as our top pick in the sector.