Pruksa Real Estate

Pruksa Real Estate Plc (PS)

- Income and presales meet target after 4Q13 profit makes new high
PS’s earnings in 2013 could meet the target. Presales are projected to
grow 40%yoy to B41.3bn, while income would be recognized at B38bn
or the growth of 43%yoy. 4Q13 income is projected as much as B13.7bn
from substantial condominium and horizontal project transfers. As a
result, the normalized profit would make a historical high of B2.36bn,
leaping 74%qoq and 86%yoy. For FY2013, the profit is estimated to
expand 51%yoy to B5.9bn. Moreover, due to the cash flow from project
transfers, net gearing would drop to 0.84x from 1.03x, which is lower
than the sector’s average and is sufficient for funding the land purchase
budget of B10bn this year and for paying dividend at the beginning of
the year with a payout ratio of 30% or B0.8/share. Dividend yield is
4.4% p.a. (paying annually).
- Cut 2014 forecast by 1.8%, down 7.6% from 2013 growth
For 2014, the company has targeted for presales of B41-45bn from
launching of 40-50 new projects worth of B40-50bn, down from 60
projects launched last year. The projects would comprise of horizontal
projects by 80% and condominiums by 20%. The company has also
planned to penetrate condominium markets in new provinces. FY2014
income is expected at B40-42bn. We revise down our profit forecast by
1.8%, based on a conservative assumption of income recognition of
B37bn, supported by end-2013 backlog of B37.8bn; B17.5bn of which
would be transferred this year, or 47% of the income target. Gross
margin is projected to stabilize at 34% because the company could
control the cost since launching the projects and raise the selling price
along with the market price. Overall, FY2014 profit is projected to
decrease 7.6% from 2013 (in which the net profit made a historical
high) to B5.45bn, still high though.
- Low PER, high dividend yield. 2014 fair value is B24.62
With its strong horizontal project customer base, the company’s
competitiveness enhancement through precast factory expansion by 480
units a month to the total capacity of 1,120 units, and adoption of REM
system to reduce cost and time for horizontal project construction, the
company would be able to keep its top position in the market share in
2014. The current share price has low PER of 7.3x, with attractive
dividend yield of 4.4% p.a. We reiterate to buy PS. 2014 fair value at
10x PER is B24.62.