Amata Corporation

Amata Corporation 

 

Investment thesis

As per our sector view, we believe that it is not yet time for any significant industrial expansion in Thailand due to the low utilization rate (the Oct figure was below 60% again) and declining export numbers (US$17.6bn for Oct). Though we believe AMATA VN is a vast growth opportunity, we view that 2016 may be too early to realize its full potential. There is the risk over its Long Thanh project’s remaining permits (Service and Mega townships) in Vietnam being delayed. Nonetheless, the Bt7.0bn market capitalization of AMATA VN at IPO is larger than our anticipated Bt5.9bn, which may lead to a corresponding increase in AMATA’s market capitalization in the short term. We maintain our HOLD rating at a target price of Bt13.50.

Management tones down 2015 target

As customers are still taking a wait-and-see stance and presales for 3Q15 were small, management have now toned down their 2015 presales target of 1,000 rai to the same level as ours at between 600-700 rai, while management’s 2016 target is still maintained at more than 1,000 rai. For us, we still maintain our industrial view that land sellers will continue to recover at a slow pace into 2016 and thus maintain our target of 850 rai. 

BOI new incentives welcome

AMATA will form a joint venture with one of its partners to establish Science City next year—a 30-year leasehold 1,000 rai cluster based in Amata Nakorn, in response to the new activity-based BOI incentives. The facilities will help the company focus on research & development and innovation investments. Despite that, AMATA’s backlog will most likely reach its bottom in 2015 as the result of improving presales outlook and new presales from Science City in 2016. We view that its early development will be as yet insufficient to drive up AMATA’s valuation.

Long-awaited Vietnamese debut …

Dubbed as the only SET-listed stock with Vietnamese industrial exposure, the long-awaited AMATA VN will trade on the SET this month. AMATA VN’s outlook and long-term business plan has ample potential to fully leverage Vietnam’s demographics and economics to capture foreign direct investment at an early stage. Its ready-built factories are always fully occupied and will also provide the firm with a great opportunity to divest into a REIT. Management has also shown full confidence in its growth, having allocated 90% of the firm’s Bt5bn 2016 CAPEX budget to Vietnam.

… may not shine until 2017

Although the firm expects to launch its facility in Long Thanh and its Commercial Complex in Bien Hoa (both in the southeastern province of Dong Nai, the latter is the provincial capital) both in presales in 4Q16. We believe that these projects along with its Long Thanh service and mega township licenses could possibly face delays into 2017—as we have seen with Long Thanh Hi Tech Industrial Park.