Supalai

Supalai Plc (SPALI)  

 

SPALI’s earnings outlook for 2015 remains positive at 16% growth YoY, though lower than last year’s 55%. We see limited downside risk with current backlog securing a high 84% of our forecast. Presales are expected to grow 19% off last year’s low base and a jump in product available for sale. Valuations are undemanding at 6.6x 2015 PER and 1.7x 2015 PBV. After the recent share price correction and dividend of Bt0.65, the stock’s TTR is an attractive 59%. We reiterate BUY. 

2M15 presales recovered. SPALI’s presales were Bt2.4bn in 2M15, +42% YoY, with 56% low-rise (+54% YoY) and the remainder condo (+29% YoY). The good low-rise growth is a good response to projects launched late last year, i.e. Supalai Krungthep-Prathumthani, which targeted middle income earners. Presales to date account for 9% of its full year target of Bt23bn, +19% YoY, Bt10bn from low-rise and Bt13bn from condo. We expect presales to strengthen QoQ in 2Q15 on the launch of several new condos. Presales will be back-loaded with 55-60% occurring in 2H15. 

Record-high available stock supports presales growth. SPALI plans to launch at least 28 projects worth Bt31.1bn this year (+13% YoY). Of this, 19 projects valued at Bt16.1bn will be low-rise and nine (Bt15bn) condo. Land has been secured for all. Including the large stock of Bt41.2bn at end-2014, it has a record-high level of product available for sale this year at Bt72.3bn. The presales target of Bt23.0bn implies a conservative take-up rate of 32% compared with 35-55% over 2007-2014.   

Front-loaded revenue. We maintain our revenue forecast of Bt22.7bn (+24%) and net profit of Bt5.2bn, +16% YoY. Of our forecast, 84% is secured by current backlog of about Bt41bn. We expect 55-60% of the revenue will be booked in 1H15 from the transfer of five condos: Supalai Premier @Asoke, Supalai Willington 1, Supalai Park Ekkamai-Thonglor, Supalai Prema Riva and City Resort Passawang (Songkhla), against just one transferred in 2H15 – Supalai Lite Sathorn-Charoenrat.   

Weak 2016. Next year is less exciting, with a fall in revenue of 8% and earnings of 9% since fewer condos will be ready for transfer; we assume continued low-rise growth of 10%. Current backlog secures 46% of our forecast. There could be upside to our expectations if more condos are completed and transferred or if it sells more from inventory than we conservatively anticipate.  

Lower dividend payout. The company’s board has decided to reduce dividend payout ratio to a minimum of 35% of unconsolidated profit from the prior minimum of 45% in order to give it greater flexibility in terms of expansion. We have thus lowered our dividend payout ratio forecast to 35% for 2015, which gives a DPS of Bt1.06, +6% YoY, implying a dividend yield of 5.3% at last close.  

Maintain BUY. At last close, SPALI is trading at an undemanding 6.6x 2015 PER and 1.7x 2015 PBV, down from 7.7x and 2.0x respectively last year. The recent share price correction and Bt0.65 dividend gives a TTR of 59% and we still BUY.