Land & House

Land & House Plc (LH)

- Normalized profit declines in 4Q13 but grows 23% in FY2013
LH posted 4Q13 net profit of B1.56bn. Excluding a non-recurring gain,
the normalized profit was B1.44bn, dropping 24%qoq and 10%yoy.
Income from property sale decreased 8%qoq because condominium
transfer in this quarter equated to B845m, lower than last quarter,
while horizontal project transfer stabilized at B5bn. For FY2013, total
income was B25bn, increasing 4%yoy. Gross margin improved to
36.2%, while shared profit from associates increased 20%yoy to
B2.1bn, thanks to growing earnings of HMPRO, QH, and LKBANK.
FY2013 normalized profit grew 23%yoy to B6.44bn, or a normalized
profit margin of 23.3%. Presales were recorded at B30.2bn or the
growth of 20%yoy from increasing horizontal and condominium
project sales. Net gearing shifted to 0.96x after LH has expanded
investment in property for sale and rent business.
- Home sales revive, 2014 target maintained. LH-W3 allocated at ratio of 5:1
LH home sales have begun to improve year on year in February. The
company maintains its presales target in 2014 at B32bn or the
growth of 6%yoy and income from sales target of B25bn or the
growth of 7%yoy, with B7.5bn backlog awaiting transfer this year.
Moreover, the company has planned to launch 21 new projects (16
for horizontal developments and 5 for condominiums) this year, worth
of B35bn or a decrease of 10%yoy. In addition, LH announced to
allocate LH-W3 for existing shareholders at a ratio of 5 existing
shares : 1 convertible securities (term of warrants is 3 years from the
issuance date), at an exercise price of B3.50/share and exercise ratio
of 1 warrant : 1 share. XW date is 29 April 2014. The warrant
issuance aims at preparing the company for the fluctuating property
market and increasing capital for future investment in property for
rent business as it would receive around B7bn from the conversion
within these three years, which would reduce its net gearing to 0.7x
from 0.96x at present. However, this would cause full dilution of
16.7%. Fair value of LH-W3, calculated by Black-Scholes Model, is
B5.11-5.81, under an assumption for the share price after XW of B8-
9.
- Fair value is B9.82 before XW and B8.76 after XW
Apart from the warrant issuance, the company announced 2H13
dividend at B0.15. XD date is 29 April 2014 (the same date as XW)
and the dividend will be paid on 22 May 2014, which is dividend yield
of 4.3%. Fair value is B9.82 before XW and B8.76 after XW.