SC Asset Corporation

SC Asset Corporation Plc (SC)
Investment thesis
We brought institutional fund managers to visit SC’s low-rise projects last week. We were pleasantly surprised at the strong demand for the firm’s products, given the economic slowdown. Our theme call—demand sustainability at the high-end of the market—would appear to have been confirmed. Among our coverage, SC ranks in the top-three for its FY14 profit growth profile. The firm will build a fourth office building (near a BTS station), prompting a long-term profit forecast upgrade. We maintain our TRADING BUY rating with a YE14 target price of Bt5 (SOTP; target housing PER of 9x and Bt1.2/share of net rental market value).
Strong responses to low-rise projects
We visited four low-rise projects, which were launched in August 2013—Life Bangkok Boulevard Pharam 5 (Bt6m/unit for standard SDHs; Bt5m/unit for small SDHs), Vista Park Sathorn-Pinklao (Bt4-5m/unit for THs) and Grand Bangkok Boulevard Sathorn-Pinklao (Bt30m/unit for SDHs)—and one launched in Nov 2012—Boulevard Petkasem-Pinklao, (Bt35m/unit). Take-up rates ranged 11-19% for the three aforementioned projects and 50% for Boulevard Petkasem-Pinklao. GM ranges 33-34%.
To post record low-rise sales for two straight quarters
The firm will post an impressive low-rise performance for 2H13 (it uses a prebuilt model for low-rise). We expect record low-rise sales of Bt2.5bn for 3Q13, up by 50% YoY and QoQ, beating the Bt2.1bn in sales reported for 2Q11. Furthermore, the firm should deliver new record low-rise sales for 4Q13, boosted by another big low-rise project launch at Cha-am (Bt1.8bn). In sum, we anticipate unprecedented low-rise revenue of Bt8.2bn for FY13, up 35% YoY. However, because of the high base set by condo presales in 3Q12 (Bt2.5bn) and 2Q13 (Bt2.9bn—a record), 3Q13 presales are expected to decline by 4% YoY and 13% QoQ.
Full confidence in the FY14 revenue growth outlook
SC will post outstanding residential revenue expansion for FY14 (our model indicates 24% to Bt12bn), led by a big jump in condo income (double YoY). Management conservatively forecasts 5-10% growth in low-rise sales in FY14. SC has a Bt3.4bn condo presales backlog to transfer next year (starting 1Q-2Q14)—Chambers Ramintra transfers in 1Q14 (Bt460m, 50% booked), The Crest Santora Hua Hin in 1Q14 (Bt1.6bn, 50% booked), Centric Tiwanon Station in 2Q14 (Bt2.6bn, 98% booked), and Centric Sathorn Saint Louis in 2Q14 (Bt1.7bn, 92% booked). Management guides for good condo GM of at least 34% for FY14.