Pruksa Real Estate

Pruksa Real Estate Plc (PS)

- 1Q14 profit drops 53% qoq but grows 38% yoy as expected
1Q14 normalized profit was reported at B1,065m, falling 53%qoq but
growing 38%yoy (as expected). PS generated B8bn income from
property business (B5.1bn from townhouses, B2bn from single-detached
houses, B803m from condominiums and B138m from overseas
business), dropping 42%qoq (many condominium projects were
transferred in 4Q13) but rising 27%yoy (transfers of townhouses
increased by 35%yoy). PS's gross margin was 36.4%, and SG&A/Sales
was 18.3% in 1Q14. Thus, 1Q14 normalized profit margin was reported
at 13.2%. In terms of financial structure, PS's 1Q14 net gearing stayed
at 0.8x, lower than the sector's average. PS's 1Q14 presales were
reported at B8.2bn, rising 9%qoq but dropping 34%yoy (B2.6bn from
single-detached houses, B3.6bn from townhouses, B2bn from
condominiums). 1Q14 presales have made up 18-20% of FY2014
presales target of B41-45bn (higher than our forecast at B38bn). PS has
maintained the plans to launch 30-50 new projects in 2014 (mostly
horizontal projects), totaling B30-50bn.
- Profit to rebound in 2H14
1Q14 net profit made up 19% of FY2014 earnings forecast. Profit is
expected to start growing strongly in 2Q14, and many condominiums
would be transferred in 2H14. End-1Q14 backlog was B38bn; B18.8bn of
which would be transferred in 2014, making up 72% of our income
target. We conservatively project end-1Q14 backlog at B37.2bn,
unchanged from 2013 (lower than PS's target of B40-42bn), so PS would
have a limited downside. Thanks to REM system and better supply chain
management, business cycle of horizontal projects dropped from 146
days in 2013 to 112 days in 2014 (counting from trading day until the
day of transfer). Moreover, PS has been using toilet partition technology
(starting in condominiums), thus minimizing construction time and
helping on designing.
- Keep forecast. Maintain FY2014 fair value at B24.62
We maintain FY2014 net profit forecast at B5.47bn. P/E ratio of 8.8x is
lower than the statistical average. At FY2014 expected P/E ratio of 10x,
FY2014 fair value is B24.62.