L.P.N. Development
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3Q14 presales so-so but transfers solid BUY
L.P.N. Development Plc (LPN)
Pre-sales at Bt2bn QTD. With no new launches planned in the quarter, presales QTD
are just Bt2bn, -20% YoY, bringing 8M14 presales to Bt12.1bn, -33% YoY and 60% of its
target. Backlog is now Bt26.9bn. This suggests a QoQ fall in presales in 3Q14 – but it is
already discounted by the market. We note that the presales are solely existing stock
since it made no new launches; this is not bad when considering that in 2Q14 presales
of existing stock amounted to Bt3.2bn and in the first two months of this quarter it
already achieved Bt2bn.
Look for stronger presales in 4Q14 on the launch of seven projects with sales value
of Bt9.2bn in the period. These projects will secure income for 2016. Four of the seven
already have their Environmental Impact Assessment (EIA), lowering construction and
revenue recognition risk. These are the Bt1.7bn Lumpini CondoTown Romklao-
Suvarnabhumi, the Bt1.1bn Lumpini Ville Onnut-Ladkrabang 2, the Bt1.1bn Lumpini
SeaView Chaam and the Bt410mn Lumpini Park Beach Chaam. Land for the other
three projects has been acquired; one is at Nakorn-In, another at Rattanathibet and
another at an undisclosed site.
Transfers on track. LPN plans to book Bt2.5bn in revenue in 3Q14, growth of 47% QoQ
and 5% growth YoY. Deed transfers started in August at the Bt2.0bn Lumpini Ville
Phongphet 2 and Bt1bn Lumpini Ville Onnut-Ladkrabang and started in September at
the Bt1.4bn Lumpini Ville Ounnut 46. We maintain our view of sequential revenue
growth to peak in 4Q14. It will release 3Q14 results on November 6.
The Lumpini 24 transfers likely to slip to 1Q16 from 4Q15. This leads us to cut
2015F by 13% to Bt2.8bn but raise 2016F by 11% to Bt4.1bn. Despite this, growth is still
good in 2015 at 36%, strengthening to 48% in 2016. Current backlog secures a high 93%
of 2015F and 13% of 2016F. Our 2015 forecast is 14% behind consensus. Visibility for
2016 will be increased by presales of the seven new launches in 4Q14. We did a ground
survey at Lumpini 24 and found that the project’s construction is moving well.
However, a sales officer told us that though construction will be completed by the end
of 2015, deed transfers are not expected until 1Q16.
Maintain BUY. We lower our mid-2015 PT slightly to Bt26.5/share from Bt27.0/share
after cutting forecast, but maintain PBV at 3.5x as 3-year average ROE is unchanged. In
the near term, we look for a stronger half in 2H14 than in 1H14 and better presales in
4Q14. LPN’s earnings remain strong (#1 in terms of growth next year) despite the
change in forecast. We see the 11% fall in share price over the past two months as an
opportunity to BUY and keep LPN as our top pick.
