Pruksa Real Estate
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Switch to use FY2015 fair value of B40.52. BUY
Pruksa Real Estate Plc (PS)
- 3Q14 slightly below projection from lower-than-expected pre-sales
3Q14 net profit and normalized profit was B1.84bn, dropping 1.7%qoq but
rising 35.5%yoy (B63m lower than expected) because SG&A was slightly
higher than projected. Income from property sales was B11.6bn (B5.7bn
from townhouses, B2.5bn from single-detached houses, B3.2bn from
condominiums and B108m from overseas business), rising 7%qoq. Gross
margin stayed at 36.8%, while SG&A/Sales increased to 16%, thus lowering
normalized profit margin to 15.8%. Net gearing dropped to 0.81x, lower
than the sector's average, thanks to customers' payment. 9M14 presales
was B31.3bn, making up 73% of our forecast of B43bn, slightly lower than
projected; 10 projects valued B9.6bn will be launched in 4Q14 (21 projects
were previously planned).
- FY2014-2015 profit to grow as expected
9M14 net profit was B4.77bn, growing 35%yoy, making up 74% of FY2014
earnings forecast. B12bn backlog will generate income in 4Q14, so PS's
earnings are likely to meet the target. FY2015 profit is projected to reach
B7.5bn because B16.3bn backlog will generate income in 2015, mainly
condominiums scheduled to be completed within this year (higher value
than condominiums launched this year). For horizontal projects, new
precast concrete factories (PCF6 and PCF7) with 480 units/month capacity
will be opened at the end of 2014, boosting PS’s production from
640units/month (113% of actual capacity of PCF1-5).
- Switch to use FY2015 fair value of B40.52. BUY
PS's profit is anticipated to grow well from both horizontal projects and
condominiums. P/E ratio of 9.8x is lower than PS's average P/E ratio. We
switch to use FY2015 fair value (under 12x P/E ratio) of B40.52, implying
23% upside. We upgrade our recommendation from HOLD to BUY.
