Ananda Development

Ananda Development Plc (ANAN) 

 

Investment thesis

It is good time to load ANAN, as it is a contender for the FY16 earnings growth title under our ResDev coverage, with the second highest revenue visibility. Its joint venture (JV) condos will payoff big in FY16 leading to an equity income turnaround next year. ANAN trades at FY16 PER of 10.1x (near its mean since its IPO in Dec 2012)—and deserves a valuation re-rating on FY16 ROE accretion. Our BUY rating stands, with a YE16 target price of Bt4.80, pegged to 12x PER (0.5SD above its long-term mean). 

Aggressive launches in FY15 to support FY16-18 earnings 

Despite Bt1.5bn of project delay from 4Q15 to 1Q16, ANAN has aggressive launch value of Bt34.6bn in FY15, a jump of 131% YoY (91%, condos; 9%, low rises)—eight condos and three of Arden, its new TH brand. Two condos (Bt8.3bn) will launch in 4Q15 (Ashton Silom, a JV condo and Ideo Mobi Bang Sue Grand Interchange, owned condo).  The FY15 presales growth target is 13% to Bt24bn, which is achievable (79% achieved in 9M15). Its FY15 residential revenue target stands at Bt10.5bn, up 4% YoY. We conservatively modeled Bt10bn of that revenue in FY15 (96% secured by backlog at end-Sep). ANAN is likely to post the second quarter of best such revenue and core earnings in 4Q15. 

JV condo will start to pay off in 4Q16

At end-Sep 2015, ANAN has five JV condos (holding a 51% stake with Mitsui Fudosan on 49%) with total value of Bt29bn (five JV condos with a 79% take-up rate mean). The equity income from JV business is expected to contribute losses of Bt500m in FY15, but it is estimated to turn around to a profit of Bt59m due to start transfers of Ideo Q Chula-Samyan in 4Q16 (Bt6.8bn value, 90% booked). JV condos will entail high NM of 17%—above our FY15 NM forecast of 8.8% for ANAN’s firm-wide. 

Core earnings growth leadership in FY16

We forecast FY16 core earnings growth of 36% for ANAN, far above a 16% of our ResDev coverage mean. A new condo completion schedule will more than double from only Bt6bn for FY15 (only owned two condos) to Bt15bn for FY16 (four owned condos valued at Bt8.5bn and JV condos valued at Bt6.8bn, see Figure 1). The transfer risk would be low, as the five condos completed in FY16 have a high take-up rate mean of 78%). Modeled FY16 earnings growth is driven by 14% higher residential revenue and a 1.8% fatter core margin (on an equity income turnaround). 

Unveiled  conservative FY16 business plan 

ANAN plans FY16 launches valued at Bt22-23bn (88% condo, 12% low rises) versus Bt35bn in FY15. The FY16 presales growth aim is Bt21.5bn-22.5bn, down YoY, and FY16 residential revenue target is Bt12bn, up 14% YoY (Bt11.5bn in our model, 49% secured by presales backlog). The highest quarterly launch will be in 2Q16 (Bt10bn) and the best revenue in 4Q16. Total D/E is to gain from 1.7x at YE15 to 1.2x at YE16.