Quality Houses

Quality Houses Plc (QH)

1Q14, a contraction of 43% YoY but growth of 15% QoQ. Behind the fall YoY is the sharp
78% plunge in condo presales to only Bt900mn, battered by poor market sentiment
plus no new condo launch in the period. Total presales now account for only 15% of its
full year target. Presales should, however, increase sequentially through the remainder
of the year in tandem with the scheduled new launches.
Good presales trend seen for low-rise projects. Despite the launch of only one
small TH project in 1Q14, low-rise presales were able to grow by 10% YoY to Bt3.2bn.
QH impressed with its strong MoM growth from Bt700mn in January to Bt900mn in
February and Bt1.6bn in March, backed by strong demand in the mid-end segment for
The Trust, Gusto and Casa brands. This gave a monthly average of Bt1.08bn for the first
three months, a high not seen since 2003. If this level can be sustained throughout the
year, our revenue forecast is achievable – but we note the company’s own target is
10% higher than SCBS.
Moderate take-up of new condo. QH launched the Bt850mn The Trust Condo
Amata Nakorn last month with take up rate of 20%, which it sees as satisfactory. It will
launch the Bt330mn Casa Condo at Chiang Mai University (CMU) in Chiang Mai on April
26 and soft launch Bt1.8bn Q Seaside Hua Hin on May 3.
1Q14F good YoY, with estimated recurring profit of Bt560mn (EPS of Bt0.06), up
19% YoY but down 27% QoQ. The favorable YoY growth was supplied by higher low-rise
revenue. Net profit will slip 5% YoY without the 1Q13 gain of Bt120mn from the sale of
Centre Point Saladaeng. It plans to sell Centre Point Silom but has put this off to 2H14
from 1H14 because of the unfavorable climate. We estimate a net profit of Bt50mn
from this transaction. We look for sequential growth QoQ, to peak in 3Q14 before
weakening in 4Q14, in line with condo completion and deed transfers.
Reiterate BUY with TP of Bt5. We like QH on undemanding valuation and the huge
value of its investments. It has a near term catalyst from its good 1Q14F, higher
presales QoQ in 2Q14; rumors of a purchase of LHBANK could also spur share price.
Though earnings will weaken in 2014F, growth will return in 2015F and 2016F. At last
close, the stock is trading at 3.8x and 0.6x adjusted 2014 PER and PBV (deducting
investment value from share price) respectively.