Supalai

Supalai Plc (SPALI)
3Q13 profit grows 15.9%qoq, above expectation. 9M13 profit stays flat yoy
SPALI's 3Q13 net profit was B531m, rising 15.9%qoq but falling 46.4%yoy,
B37m higher than expected, due to higher profitability. SPALI's 3Q13 gross
margin rose to 40.2% and interest expense fell. Accordingly, 3Q13 normalized
profit margin increased from 16.1% in 2Q13 to 17.7%. Income from property
sale in 3Q13 was B1.86bn, staying flat from 2Q13 (87% from horizontal housing
projects and 13% from condominium projects). SPALI's 9M13 profit was
B1.12bn, staying flat yoy, making up 34% of FY2013 forecast. 9M13 presales
was B11.9bn (B5.8bn from horizontal housing projects, B7.1bn from
condominium projects), lower than expected. Thus, FY2013 presales target is
revised down from B26bn to B20bn. However, 4Q13 sales are likely to improve
as the SPALI is launching five new condominium projects; some of them have
been opened in October 2013 with positive feedback: City Resort Phranangklao-
Chaopraya that has been sold by 70% from the total value of B1.75bn and
Supalai City Resort Ratchayothin – Phaholyothin that has almost been sold out
with the total value of B740m.
- To make record high profit in 4Q13. Strong growth in 2014
4Q13 profit is projected to make a new high at B2.2bn, as income base would
skyrocket to B7.5bn, higher than 9M13 total income at B5.7bn. Three new
condominiums will be transferred in 4Q13: Supalai Park Ratchapruek –
Petchkasem, City Resort Ratchada-Huaykwang, and Supalai Premier Rachatewi;
the first two projects have started the transfer since October 2013 while the
other project will start the transfer from November on. In 4Q13, SPALI has the
backlog of B7.2bn, which is 97% of FY2013 income target. 2014 is likely to be
another year for SPALI’s earnings to grow notably to B18bn because there has
been B14.7bn combined backlog from five new condominiums, as well as
horizontal projects that would be continuously expanding due to opening of new
provincial projects.
- FY2014 fair value at 10x PER or B24.22. "BUY"
Current backlog at B39.2bn would help strengthen SPALI’s income growth until
2015. FY2014 fair value is at 10x PER or B24.22, implying 40% upside. We
reiterate "BUY".