AP (Thailand)

AP (Thailand) Plc 

 

Though not boasting the highest yield, we select AP as a dividend play among residential property developers on the expectation of a DPS of Bt0.27 on 2015 operations, implying an attractive dividend yield of 4.8%. It also has solid earnings growth outlook of 13% for this year and 25% in 2017, which translates into rising DPS and yield. The stock is trading at an unjustified low valuation of -0.75SD for PER and -1.00SD for PBV of 2016, lower than during the flood in late 2011-early 2012. We BUY.  

 

Attractive dividend yield. We estimate AP’s 2015 net profit at Bt650mn, up 7% YoY on higher revenue recognition, but down 13% QoQ without the Bt124mn gain from sale of its 49% stake in AP Ekkamai to MJR Investment of Singapore (a subsidiary of Mitsubishi). Excluding this gives a core profit growth of 5% QoQ. This will bring full year profit to Bt2.6bn on which we expect it to pay a DPS of Bt0.27, yield of 4.8%, based on its usual 33% payout ratio. We look for further growth in DPS to Bt0.32 (yield 5.6%) in 2016 and Bt0.40 (yield 7.1%) in 2017, in line with our profit growth forecast. 

 

Look for 13% growth in 2016 with a jump in 2017. By our estimates, AP’s net profit will grow 13% YoY to Bt3.0bn this year, backed by more low-rise revenue. This arises out of a 15% rise in new launches to Bt33.1bn, of which 43% is low-rise (+22% YoY) and the rest (57%) condo (+10% YoY). It also has large ongoing projects amounting to Bt38.9bn (60% low-rise and 40% condo). We estimate 10% growth in low-rise presales and in revenue to a 2017 net profit of Bt3.8bn, superior growth of 25% YoY.   

 

JVs paying off. Profit sharing from JVs will play an increasing role in growth this year and next. Apart from growing its own business, it will begin to its first profit from JVs this year at ~Bt90mn, turning around from a net loss of ~Bt250mn last year, followed by strong growth to Bt698mn in 2017; we are more conservative than the company, which guides to contribution of ~Bt1.0bn. If it achieves its target, there would be 8% upside risk to our current 2017 forecast.   

 

2015 presales achieved target. AP’s presales reached Bt28.2bn (53% condo and 47% low-rise) in 2015, up a good 24% YoY. Condos provided the greatest impetus with growth of 37% YoY to Bt15.0bn thanks to solid take-up rate for Rhythm Rangnum, Life Asoke and Aspire Ladpraw 113. Note that 77% of condo presales are at condos developed under JVs. Low-rise presales grew 13% YoY to Bt13.2bn. 

 

Maintain BUY. At last close, AP is trading at undemanding valuation of 5.9x PER and 0.9x PBV of 2016, about -0.75 SD and -1SD respectively to its historical trading and below valuation during the severe flood in late 2011-early 2012. We view this as unjustified given the outlook for better growth ahead. Thus, we remain BUYers with PT of Bt8.0/share.