AP (Thailand)

AP (Thailand) Plc 

 

AP’s 2015 presales and revenue recognition are on track to meet its guidance and our forecasts. AP posits a net profit growth of 3% for 2015 and 6% for 2016, but strong growth of 33-38% for 2017. We maintain our net profit forecasts with 2015-2016 growth of 7% each year, similar to guidance, but leave 2017 forecast at a more conservative 25% growth. Share price YTD has outperformed the SET by 6%, but valuation remains undemanding, trading at a deeper discount than peers at -0.5SD for PER and -1.0SD for PBV. We look for a stronger performance in 2H16 continuing into 2017 and this will bring on a share price rerating. With attractive TTR of 52%, we maintain BUY. 

2015 presales on track... AP’s presales reached Bt27.1bn (54% condo and 46% low-rise) in 11M15, up a good 23% YoY and 96% of its full year target of Bt28.3bn. Condos provided the greatest impetus with growth of 37% YoY; though this was partly off the low 2014 base, a large part was due to a high take-up rate for Rhythm Rangnum, Life Asoke and Aspire Ladprawo 113, launched in 2Q15. Note that 78% of condo presales are from condos developed under JVs.  

… as is revenue. AP has Bt15.2bn in backlog (65% condo and 35% low-rise), which secures 98% of our 2015 forecast and 19% of 2016. This implies 4Q15 will be the year’s highest in terms of revenue recognition, with favorable growth of 25% YoY and 40% QoQ. AP estimates net margin at 11.6%, implying net profit of Bt2.7bn in 2015.  

Guides to marginal growth in 2016 followed by a strong 2017. AP expects presales growth of 11% to Bt31.5bn in 2016, supported by new launch growth of 16% YoY to Bt33.4bn (60% condos, up 15%, and 40% low-rise, up 18%). It has already secured the land for 90% of its planned launches. It will continue to focus its condos on the mid-end (brands Aspire and Life) with selling price of +/-Bt150k/sqm. It guides to small revenue growth of 6% to Bt24.6bn with a stable net margin of 11.6%. This implies net profit of Bt2.9bn next year. Outlook is excellent in 2017, backed by profit sharing from JVs, which it expects to jump to Bt1.0-1.1bn. This will pull net margin up by 250-300bps, implying a net profit of Bt3.8-3.9bn in 2017. 

Our view. AP’s net profit guidance is slightly below our forecast (4% for 2015 and 5% for 2016) but 5% above our forecast for 2017. We leave our forecasts unchanged. With low condo backlog of only 34% of our 2016 condo revenue forecast, meeting forecasts depends on the sale of finished condos. Key projects are re-launching two condos – the Bt3.2bn Galerie rue de 39 with CBRE as a selling agent and the Bt2.6bn Aspire Ngamwongwan, which has no competitor in the area.  

Maintain BUY. At last close, AP is trading at undemanding valuation of 5.7x PER and 0.9x PBV of 2016, about -0.5 SD and -1SD respectively to its historical trading and a deeper discount than peers. We look for a strong 2H16, continuing into 2017, and this will support share price. With attractive TTR of 52%, we BUY.