LPN Development
Growth to beat peers in 2015 BUY
LPN Development Plc (LPN)
Pre-sales at Bt2bn QTD. With no new launches, presales were just Bt2bn in July-
August, -20% YoY, bringing 8M14 presales to Bt12.1bn, -33% YoY and 60% of its target.
This suggests a QoQ fall in presales in 3Q14. At the same time, this isn’t a bad showing
since, without new launches, presales are solely from existing stock. The Bt2bn in the
first two months of 3Q14 compares favorably with 2Q14 when presales of existing
stock amounted to Bt3.2bn.
Pre-sales to surge in 4Q14 on the launch of seven projects with value of Bt9.2bn. 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. These projects will secure income for 2016.
Transfers to jump in 3Q14 and peak in 4Q14. LPN expects to book revenue of
Bt2.5bn in 3Q14, growth of 47% QoQ and 5% 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.
Good growth next year. LPN is poised to report earnings growth of 36% to a record
of Bt2.8bn in 2015. We see very limited risk to earnings, since current backlog of
Bt26.9bn already secures 93% of our forecast. It will also have a higher gross margin of
33.1%, rising 120pbs due to a change in product mix. Four of the six projects to be
completed have a very good margin of 34-35%: Lumpini Place Srinakarin-Huamark
Station, Lumpini Park Rattanathibet-Ngamwongwan, Lumpini Park Rama 9-Ratchada
and Lumpini Place Borommaratchachonnani.
Maintain BUY. We like LPN on its solid growth outlook next year with high visibility.
At last close, it is trading at 15.4x PER and 3.0x PBV, but its strong growth next year will
cut this to 11.3x PER and 2.6X PBV. In the near term, seven new launches in November
and good profit in 3Q14 and 4Q14 will provide share price catalysts. With an attractive
TTR of 28% and high ROE of 24.8% next year (rising to 30.9% in 2016), we maintain BUY
and keep LPN as our top pick.
