WHA Corporation

WHA Corporation Plc (WHA)

Pre-lease and construction completion on track. WHA’s preleases grew 45.7K sqm
in 1Q14, ~15% of our full year forecast. This brings outstanding preleases to 237.8K
sqm, up 3% YoY and 15% QoQ. On the basis of company guidance of negotiations with
several clients, overseas expansion and a possible deal with a global warehouse/factory
developer, we maintain our full year pre-lease forecast at 300K sqm. Construction is
also on track, with 42.6K sqm completed, 14% of our full year forecast. This raises
WHA’s portfolio to 336.8K sqm. Occupancy rate saw its first drop in 1Q14, to 91%, as
~33K sqm was being modified for a build-to-suit (BTS) client. This will return to the
normal 100% in 2Q14.
Earnings upgrade from wider margin. We raise our 2014 forecast by 4% to Bt1.5bn
(EPS Bt1.5) and raise both 2015 and 2016 by 6% to Bt1.8bn (EPS Bt1.8) in 2015 and
Bt2.2bn (EPS Bt2.2) in 2016. The major factor behind this is a widening in margin to
36% from 33% on sale of assets: WHA plans to sell 167.1K sqm of warehouses into a
REIT by 4Q14 for Bt4.6bn. Sixty-five percent of the assets to be sold will be freehold and
the rest leasehold. Note that our forecast is about 20% above consensus.
Further upside risk from new value-added products. The company reports that
the rent on warehouses for e-commerce customers (Office Mate) and on warehouses
with cold storage (Unilever) is substantially higher than that of bare-bones
warehouses, implying rental and revenue upside to our current forecast of an average
Bt155/sqm/mth.
Look for better 2Q14. With its portfolio expanded by 60% YoY and 15% QoQ, we
expect WHA to have higher profit both YoY and QoQ in 2Q14, with sequential growth
each quarter in 2014. This means that with the sale of assets, 4Q14 will be the year’s
best quarter. In 1Q14, net profit was Bt32mn, a sharp drop of 74% YoY and 97% QoQ
both due to the absence of sale of assets.
Reiterate BUY on close ties to the expanding retailer sector. This is a growing
sector and least tied to FDI, which has been stumbling with the political unrest. In our
view, WHA deserves to trade at a premium to peers because of a stronger growth
outlook and high ROE of 34%. We maintain PT at a fully-diluted Bt40/share based on
sum-of-the-parts comprised of Bt38/share for its core business and Bt2/share for its
investment in WHAPF.