Amata Corporation

Amata Corporation Plc (AMATA) 

 

Investment thesis

As AMATA’s asset divestment to its REIT is nearing its conclusion, we now expect a higher-than-anticipated one-off gain from the sale—a massive Bt617m. Our 2015 presales outlook for the firm has also, after discussions with management, improved to 1,100 rai. We believe that this upgraded outlook should at least provide limited downside on its stock performance. The stock currently trades at 13.8x PER against its core EPS, which is 0.5SD below its long-term average at PER 15.1x. This is a considerably cheap valuation, even as we have excluded one-off income for this year. Our TRADING BUY rating stands.

REIT size and timeline confirmed

The company’s rental-factory spin-off has now been given the green light by the SEC and the REIT is now set for IPO in early June. The trust will purchase 160,579 sq.m-worth of fully occupied ready-built factories from Amata Summit Ready Built (ASRB), a 49%-owned subsidiary of AMATA. The purchase will cost Bt4,750m and the REIT’s freehold-to-leasehold ratio will be 30:70. Although the divestment space and size is as per our expectation, we now expect the net profit contribution to the firm’s 2Q15 bottom line to be Bt617m as its book value is lower than our previous estimation, slightly higher than our previous assumed Bt572m gain. 

Better hope for core business recovery 

AMATA has already secured 100 rai in presales so far for 2Q15 and we expect another 210 rai to be sold for 2Q15—an improvement QoQ and YoY. We also anticipate the similar amount of 330 rai in land transfers to be recognized this quarter. However, we believe rental and service revenue will decline 4% QoQ, mainly due to the loss of revenue from rental space that will be divested to the REIT. For the year, we are now slightly more optimistic about presales and have adjusted our estimate to 1,100 rai, which is still, however, 175 rai below the firm’s long-term average presales number. We maintain our transfer target of 1,200 rai—which is actually above management’s minimum target of 1,000—1,100 rai.

Bt885m net profit expected from 2Q15 bottom line

As the Bt617m gain from the asset divestment is now expected, we now anticipate the 2Q15 bottom line to increase almost sevenfold QoQ and YoY. Core profit is also expected to double from the previous quarter as we start to see some of the higher-margin Nakorn estate transfers this year and the average land transfer GM should also normalize to around 50%. Power income is also expected to increase 18% QoQ as its power plants run a full quarter after the planned maintenance in 1Q15.