Land & Houses

Land & Houses Plc (LH)

Estimate presales at Bt6.5bn in 1Q14, implying a contraction of 28% YoY but growth of 7% QoQ; this accounts for ~20% of its full year target. Low-rise dominated, contributing more than 80% of total presales. Presales for both condo and low-rise were more than 10% below target. Condos failed to meet because there was no new launch in the quarter, so presales had to come from ongoing projects such as The Room Sukhumvit 69. According to the company, low-rise presales for ongoing projects in January 2014 was little changed from 1Q13, but was followed by sequential growth MoM in February and March.
New launches put off. The company opened just four low-rise projects (Bt6.2bn) of the planned seven (Bt10bn) in 1Q14. The three (Bt3.8bn) that were not launched in 1Q will be launched in 2Q. Full-year plan is still 21 new launches (Bt35bn). With the launch of three condos worth Bt11.5bn planned for 2Q14, we expect substantial growth in its presales QoQ – with 2Q14 being the year’s highest. The launches are: the Bt6.5bn 333 Riverside, the Bt3bn The Key Charoen Rat and the Bt2bn The Room Charoen Krung. 
1Q14F core profit of Bt1.5bn (EPS of Bt0.15), +5% YoY but -10% QoQ, to be reported on May 12. Low-rise housing continued to contribute the majority of the revenue; revenue from condos came from The Key Udomsuk, North 1 – Chiang Mai, on which transfers are continuing from 4Q13. We look for sequential growth QoQ to peak in 4Q14, on completion of The Key Sathorn Rajapruk in 2Q14, The Room BTS Wongwienyai and Wan-Way-La – Kao Tao in 4Q14.
Maintain a BUY with adjusted PT to Bt11/share (Bt7.2/share for real estate business and Bt3.8/share for investment) from Bt11.5/share as we lower PBV to 3.25x from 3.50x to reflect full dilution and lower RoE after the issuance of LH-W3 with an exercise price at a deep discount to current share price. We remain positive on the company’s business model, focusing on real and sustainable demand for low-rise housing. The recovery it has seen in February and March confirms our view. The expected higher presales QoQ in 2Q14 and better performance are near term share price catalysts. We maintain our forecast.