Sansiri

Sansiri Plc (SIRI) 

 

Investment thesis

Last week, we took Thai investors to meet Mr. Srettha Thavisin, President, Mr. Wanchak Buranasiri, CFO, and Ms. Varangkana Artkarasatapon, IR chief. Management aims to deliver strong presales and profit growth for FY15, and maintain its healthy balance sheet. Its FY15 business plan suggests a 9-20% earnings upside to our model, but we conservatively keep our model as is (23% core FY15 EPS growth). SIRI offers a high 7.4% FY15 dividend yield of (highest of our ResDev coverage) and low FY15 core PER of 7.7x. Our BUY rating stands at a YE15 target price of Bt2.50, pegged to 11x PER (1SD above its FY06-14 mean).  

Positive surprise in FY15 business plan upgrades

SIRI revised up its FY15 presales target by 10% to Bt33bn (up 277%) due to a positive surprise in 1Q15 presales (jump 730% YoY and 61% QoQ). FY15 residential revenue target is upgraded by 6% to Bt35bn (77% secured by backlog). SIRI confirmed its doubled new-launch figures to Bt37bn in FY15 (17 projects, 58% condo and 43% low-rise). The schedule is Bt5bn in 1Q15, Bt7bn in 2Q15 Bt9bn in 3Q15 and Bt16bn in 4Q15. 

Growth delivery with higher efficiency is first priority

The first priority in FY15 is that SIRI aims to deliver performance growth through top-line expansion and efficiency improvement. Its economies of scale boosted by top-line growth (29% residential sales growth target) and a lower SG&A/sales ratio (from 19.6% in FY14 to 17-18% in FY15) would drive a core margin that is fatter from 9.5% in FY14 to 10-11% in FY15. SIRI emphasized that the balance sheet is strengthening with Bt8bn cash at YE15 with net gearing ratio of 1.4x (1.7x peak of the year at end-June).  

To be 2Q15’s presales growth leader 

Of our coverage, SIRI will post the highest quarterly presales growth (YoY and QoQ) in 2Q15. We estimate 2Q15 presales of Bt8.4bn (57% condo and 43% low-rise), a jump of 116% YoY and 161% QoQ against 20% YoY and QoQ expansion for total presales of our coverage. The successful launches of two sizable condos in May will drive presales in 2Q15: fully booked on May 16 for The Monument with Bt1.5bn of total project value, and assumed 50% take-up rate for The LINE on May 30 (JV condo with BTS), with Bt5.6bn. We conservatively assumed a 10% YoY growth for low-rise in 2Q15 against proven low-rise presales growth of 35% in 1Q15. 

Backlog to drive quarterly residential revenue uptrend  

Mr. Srettha guided for a QoQ quarterly residential revenue uptrend in 2Q-3Q15. The quarterly residential revenue profile is estimated at Bt6.2bn in 1Q15, Bt7.5bn in 2Q15, Bt10bn in 3Q15 and Bt11bn in 4Q15. End-March, presales backlog of Bt27bn, which were scheduled to transfer in 9M15, are fully secured in its residential revenue model for 2Q15, 65% secured for 3Q15 and 59% for 4Q15. Residential GM hit the year’s nadir at 30% in 1Q15, gain slightly QoQ in 2Q15 and good in 2H15 (32% target in FY15).