Land & Houses

Land & Houses Plc (LH) 

LH held a meeting to alert analysts that both presales and revenue will drop YoY in 2015 on the postponement of new launches, no condo launch and cancelations. It is looking forward to a better 2016 with mid-teens growth in presales and revenue. This is slightly below our forecast due to the delay in completion of The Bangkok Sathorn – which simply moves the growth to 2017. We expect at least mid-teen growth for earnings this year and 2017 should be even better. The 10% drop in share price over the past month gives an opportunity to BUY.

2015 wrap-up. LH closed 2015 with presales of Bt24.7bn, -22% YoY, missing its target because of large condo cancelations in December, no new condo opening and putting off new launches, which cut launches to Bt26.9bn, -35% YoY. Revenue recognition is in line with its revised target with 5-7% drop YoY to slight below Bt25bn.

Plans for mid-teen growth in 2016. LH targets presales growth of 13% YoY to Bt28bn, driven largely by condo growth of 56% to Bt6.9bn with low-rise growing only 4% to Bt21.1bn. This backed by a record high for active projects at Bt73.9bn and 14 new supply worth Bt23.5bn (-13% YoY), five of which are condo worth Bt7.5bn versus none for last year. It targets mid-teen growth for revenue to Bt28bn backed primarily by low-rise. It has backlog of Bt21bn, securing 32% of 2016 target.

Our view. 2015 transfers look likely to miss our forecast by ~5%, but this will be made up for by a higher gain than expected from spin-off Grande Center Point Terminal 21 Hotel at Bt960mn (we forecast Bt800mn). Its 2016 presales target is only 5% below us, but its revenue target is ~10% below partly due to putting off the transfer of The Bangkok Sathorn to next year. Despite this, we believe LH’s net profit will grow in the double digits this year and next. A recently acquired apartment in the US (cost US$100mn) will raise rental income and partly offset the lower real estate income. The Bangkok Sathorn raises next year’s visibility (backlog revenue up from Bt10.6bn end-September 2015 to Bt12.0bn, which fully secures our condo revenue forecast) and next year’s earnings growth outlook.

Focus is on high-end condo launches. LH will launch two high-end condos – the Bt1.5bn The Bangkok Sukhumvit 38 in March and the Bt4.0bn The Bangkok Thonglor in May. Selling price is expected to be more than Bt350K/sqm for Thonglor and Bt300-350K/sqm for Sukhumvit 38 or unit price >Bt20mn. Both of these compete directly with SIRI, which will launch Thonglor in May and Sukhumvit 38 in 2H16. In our view, there is indeed demand for high-end condos, but increasing the supply will cut the take-up rate for each project. We note that PS also has land in Thonglor area, but when it will open a project is unknown.

According to AREA, there has been little supply of high-end condo (>Bt20mn/unit) in Sukhumvit 21-Sukhumvit 63 area in the past few years. New supply is just now starting to come in, with 363 units in 2015. These saw a good take-up rate of 53%; total demand was 287 units (+130% YoY); and unsold stock was 276 units (+12% YoY).