Amata Corporation

Amata Corporation Plc (AMATA)

Land sales target slashed. Land sales YTD have reached just 667 rai and AMATA thus
slashed its 2013 land sales target to only 1,000 rai from 3,000 after the political unrest
caused clients to postpone contract signings. This has led us to cut our land sales
forecast to 1,000 rai for this year and to 1,500 rai for 2014-2015 from 2,500 rai in each
year. We expect these clients to sign the contracts next year after the political scene
stabilizes. A look back at Thailand’s three major political deadlocks in the past - Black
May (1992), the yellow-shirt rally (2008), and the red-shirt rally (2010) – shows that
each lasted 1.5-2.0 months. Since the current political crisis has been in place for about
a month, we believe it could end soon.
Earnings cut for 2014-2015... Following the cut in land sales forecast, we chop our
2014 forecast by 25% to Bt1.6bn for 2014 and 11% to Bt2.2bn for 2015 to reflect the
lower revenue from land transfers. In general, land is transferred about one year after
the sale, which means the drop in sales this year will result in smaller backlog at year
end and lower revenue next year. We expect the market to cut forecasts similarly.
…but raised for 2013. Despite the reduction in our land sales forecast, we raise our
2013 earnings forecast by 36% to Bt2.1bn. There are three factors behind this: it has
transferred more of the Bt6bn in backlog at the beginning of the year than expected,
utilities business has improved with both more revenue and a wider margin and finally,
effective tax rate has halved to 13% from our forecast of 25% this year (30% in 2012).
On the expense side, we also factored in Bt100mn extraordinary expense for flood
protection at Amata Nakorn, which will cut growth QoQ in 4Q13F.
Maintain BUY. In line with the burp in land sales, we cut our PT to Bt25/sh from
Bt34/sh based on sum-of-the-parts. At last close, the stock is trading at an
undemanding valuation of 7-10x PER and 1.3-1.6x PBV of 2013F-2015F, down sharply
from 17-18x PER and 1.8-2.2x PBV in 2011-2012. On this basis we maintain our BUY. At
the same time, the political unrest is likely to lead the share to underperform in near
term as investors in industries could take to the sidelines, weakening land sales. Once
politics has calmed down, AMATA’s land sales and share price should rebound,
repeating the 2010 pattern, when share price climbed after the end of the red-shirt
rally.