Residential Property

Residential property

 

Supported by real demand, low-rise presales are back up in line with last year’s average, but the strong YoY growth in condos is distorted by last year’s high cancelations. All stocks in our universe will post weak profit QoQ in 1Q15F on fewer deed transfers especially condos, but YoY will be mixed. We expect better presales and performance QoQ in 2Q15 to be share price catalysts. Our sector picks remain AP and QH.  

 

1Q15 presales grew YoY and QoQ. Aggregate presales of the seven lead developers was Bt37.8bn in 1Q15, +35% YoY off a low base caused by last year’s political mess and +9% QoQ. Of this, 65% is low-rise and 35% condo. PS took the largest share at 34%, followed by LH at 15%, QH at 13%, AP at 12%, LPN at 9%, SPALI at 9% and SIRI at 8%. 

 

Low-rise momentum on track. Supported by real demand, low-rise presales were Bt24.7bn in 1Q15, +17% both YoY and QoQ, aligning with last year’s average quarterly presales. This reached 23% of their combined full year target. Compared with last year’s quarterly average, stronger momentum was seen for SIRI (+18%), PS (+17%), AP (+8%) and SPALI (+5%) but weaker for LH (-15%), and QH (-4%). 

 

Condo presales jumped YoY, distorted by last year’s low base. With few new launches, condo presales were Bt13.2bn in 1Q15. This represents strong growth of 86% YoY, distorted by the high cancelations at AP and SIRI in 1Q14, but flat QoQ. This accounts for only 13% of their full year target.   

 

New supply shifted to high-end. According to AREA, new supply in terms of units fell by 15% YoY and 23% QoQ to 21,977 units in 1Q15. However, in terms of value, market size expanded by 32% YoY and 4% QoQ to Bt92bn as it shifted to the higher-end segment. Proportion of products priced at >Bt10mn/unit rose to 5% from 2% in unit terms and to 42% from 10-14% in value terms. With a several-year gap in high-end supply, take up rate was good at 20-70%. Projects included Four Seasons Private Residence from Country group, Diplomat 39 from KPN, Nimitr from PACE, and Q Sukhumvit from QH.  

 

Higher presales QoQ in 2Q15F. An expected jump in condo launches of Bt43bn in 2Q15 from just Bt15bn in 1Q15 will push presales up QoQ in 2Q15. Large supply will come from AP (six condos valued at Bt16.1bn), LPN (four condos at Bt8.4bn), SIRI (two condos at Bt6.7bn), and SPALI (three condos at Bt6.7bn). A greater number of launches in 2H15 is also essential if presales are to reach full year targets.   

 

1Q15 preview. All seven developers will report a weaker performance QoQ due to fewer deed transfers, especially condo, but results are mixed YoY. The highlight is the near doubling of AP’s profit YoY due to more deed transfers and higher margin plus good cost control. Aggregate net profit is estimated at Bt5.5bn, -45% QoQ but +4% YoY, which would bring those in our universe up to 17% of our full year forecast.  

 

Sector pick: AP and QH. AP will achieve its presales growth of 25% this year, with profit growing at a higher pace during 2015-2017. Strong presales and revenue in 2Q15 will be near term catalysts. QH is cheap and has a strong growth outlook plus upside risk from higher presales than expected.  

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