Property development
Play
Profit to gradually grow in 2Q14 - 4Q14 Neutral
Property development
After rebounding in 2Q14 as expected, presales and income are likely to continue
recovering in 2H14 thanks to government policies, low interest rate and launching of
new projects. We reiterate NEUTRAL; top pick is SC.
-Pre-sales return to normal
Total pre-sales of the 15 companies under our coverage rebounded from
B38bn in 1Q14 (the bottom) to B57bn in 2Q14. The political situation has
stabilized, reviving consumers' confidence on property purchases and
benefiting pent-up demand. Also, new projects, especially condominiums in
Bangkok and vicinity, have been launched. 2H14 presales are projected to
remain above B50bn. New projects have been launched, and the
government's economic stimulus policies (namely double-track railways and
skytrain extension lines) have expanded new areas for new residential
projects. In addition, the policy interest rate would be kept as low as 2%
throughout 2014, boosting housing loan issuance. Land tax would have a
limited negative on property sector because housing companies have no
plan to keep lands for a long time.
- 2H14 condominium transfer to grow
2Q14 total normalized profit of the 15 companies under our coverage was
B7.4bn, growing 39%qoq and 6%yoy; transfer of both horizontal projects
and condominiums increased, boosting the sector's 2Q14 total income by
28%qoq to B57bn. According to the Real Estate Information Center, the
number of registered finished residence increased by 53%qoq to 39,000
units. End-2Q14 backlog stayed at B261bn, B56bn from horizontal projects
and B205bn from condominiums; over B100bn of which will be booked as
income in 2H14. 54 new condominiums will be transferred in 2H14,
increasing from 32 in 1H14, gradually boosting the sector's total income in
2Q14 - 4Q14. Property sector's FY2014 total normalized profit is estimated
to grow by 18%yoy.
- NEUTRAL. BUY SC
We reiterate NEUTRAL for property sector. Share prices of property stocks
have been rising continuously, raising P/E ratio over 12x. There are few
advisable stocks. Top pick is SC([email protected]) for its potentially strong earnings
in 2H14 and attractive upside.
