Land & Houses

Land & Houses Plc (LH)

- 1Q14 profit stays flat, 21% of full year forecast
LH reported 1Q14 net and normalized profit equally at B1.45bn,
stabilizing both qoq and yoy. Revenue from property sales was
B5.56bn or a decrease of 4.1%qoq, B4.36bn from single detached
houses (SDHs), B393m from townhouses, and B808m from
condominiums. Gross margin from sales decreased to 34.7% from
35.8% in 2013 because there were additional expenses from old
project repair. Rental revenue fell 18%qoq to B488m after the
occupancy rate of LH’s service apartments at Terminal 21, Wireless
Road, and Ratchadamri lowered as a result of the political unrest.
Shared profit from subsidiaries decreased 16%qoq to B470m due to
HMRPO and QH. 1Q14 profit accounted for 21% of FY2014 profit
forecast. In terms of a financial structure, net gearing stayed at
1.02x. Presales in 1Q14 were B6.56bn, recovering 26%qoq and
making up 21% of FY2014 target of B32bn.

- 52% backlog. Remaining available projects waiting to be sold
Backlog at end-1Q14 was B15.8bn; B7.7bn of which is going to be
transferred and recognized in the rest of the year. This means LH
will have to make additional sales to transfer of B12bn or 48% to
achieve its target of B25bn, representing an increase of 7%yoy,
which is hard to accomplish given the current situation. Regarding
new projects, LH still sticks to its plan to launch 21 projects (16
horizontal and five condominiums) worth of B35bn in total,
decreasing 10%yoy. We maintain our profit forecast for FY2014 at
B7bn or the growth of 8.3%yoy. However, a forecast cut is likely if
the sales and transfers miss the targets.

- Fair value is B8.76. Hold for dividend
After LH-W3 was allocated at a ratio of 5:1 and an exercise price of
B3.5, we change to use fair value after XW (sum of the parts) at
B8.76. It is recommended to hold LH for its dividend yield of 5.7%.
Short-term driving factor is speculation of profit from selling of its
subsidiaries.