Residential Property

Low-rise pre-sales did well in July-August

Residential Property

Pre-sales for top seven QTD at Bt28.7bn, slipping 6% YoY, 59% low-rise and 41%

condo. This brings 8M14 presales to Bt100.7bn (63% low-rise houses and 37% condo).

This represents a contraction of 29% YoY but we do not see this as an industry

problem: breaking the data down shows that it arises largely from SIRI. it had fewer

launches plus large condo cancelations (from a delayed condo). Also, its presales were

largely from the provinces, where demand is still quiet. Excluding SIRI, presales for the

other six show a slip of just 4% YoY in 8M14. Presales have reached 54% of developers’

forecasts. Presales for LH (70% of target), LPN (66%), PS (63%), AP (57%) and QH (57%)

are ahead of industry average, while SPALI (50%) and SIRI (20%) are behind.

Good growth in presales for low-rise houses. QTD total low-rise presales were

Bt16.9bn, +21% YoY. This brings 8M14’s presales to Bt63.8bn, growth of 7% YoY, in line

with our view of 5-10% growth for this year. Growth was good at AP (+31%, Bt7.4bn),

QH (+22%, Bt9.3bn), SPALI (+14%, Bt5.3bn), PS (+12%, Bt20.0bn) and LH (+3%, Bt14.8bn).

Only SIRI’s presales fell and this was a large 26% to Bt6.9bn.

Condo momentum looking good. Condo presales were Bt11.8bn in July-August,

down 28% YoY, or about 66% of 2Q14, largely due to SIRI – who saw large cancellations

– and a 37% drop at LPN. Take-up rates were good at Supalai City Resort at Baring

Station (90% sold), Supalai Vista Pakkred (70%), LH’s 333 Riverside (60%) and PS’s Tree

Bang Or phase 1 (100% sold). PS’s management said the queue at the sales office for

Tree Bang Or began at 3 a.m., a phenomenon not seen for some time. We expect

presales momentum to continue strong in September, back by the launch of five new

projects worth a total of Bt10bn, all in good locations (see Figure 9).

Expect flat presales growth QoQ in 3Q14, jumping in 4Q14. This is a change from

our earlier expectation of sequential growth and is due to the move of a number of

new launches to 4Q14. The presales jump in 4Q14 will come from the launch of

Bt53.2bn in condos – more than double the Bt19.1bn in 3Q14. Condo presales in 2H14

raise backlog and secures earnings for 2016-2017; we do not expect any effect on 2014-

2015 earnings forecasts. We note that the 15-month high in the New Home Buying

Index to 82.4 in August as surveyed by the University of Thai Chamber Commerce

supports our expectation of better sales for all products as the year progresses.

EIA may be decentralized. The Office of Natural Resources and Environmental Policy

and Planning (ONEP) is considering allowing local administrations to handle the

Environmental Impact Assessments (EIA). This should shorten the approval period,

assisting margin, and ease concerns of condo construction delays.

Sector picks: QH and LPN. We choose QH on cheap valuation and good growth next

year, and LPN on superior earnings growth outlook for 2015F.