Amata Corp.

Amata Corp. Plc

 

We reiterate BUY on AMATA seeing current valuation as dirt cheap at only 0.9x PBV of 2016. With its good properties, we value it via sum-of-the-parts at Bt21/share. We estimate EV/rai at Bt1.0mn/rai for its land in Amata Nakorn and Amata City, a 51% discount to the average appraisal value by the Treasury Department and 76% below prices for undeveloped land re-sold nearby. 

 

Maintains land sales target at 1,000 rai. AMATA has sold 250 rai YTD or 25% of its full year target. Of this, 104 rai was in Amata Nakorn, 100 rai in JV Thai-Chinese, and the remaining 46 rai in AMATAV. Its major customers continue to be those in the automotive supply chain. It expected to close 2Q16 at 300-350 rai. The company is negotiating with big customers for several hundred rai of land. This deal would make it possible to reach its full year target of 1,000 rai. We more conservatively forecast sale of 827 rai and we leave this unchanged.  

 

Guides to better revenue. The company maintains its 2016 guidance of 5-10% revenue growth YoY in 2016, with land sales revenue growing 5-15% and recurring income rising 12%. It says revenue is backloaded, with only 30-35% to be realized in 1H16, with fewer transfers leading to a 15% drop YoY. As of March, backlog is Bt1.6bn and it expects 50-60% to be booked this year. This suggests backlog secures 30-38% of its target and that the rest of its revenue target will come from new land sales – implying a higher forecast risk.  

 

… and improved gross margin. AMATA expects gross margin to widen because of a change in product mix, with a higher portion from high-margin (60-65%) Amata Nakorn and AMATAV. Plus, it will not have last year’s cost adjustment at AMATAV. It is investing in improving its water business and this should cut chemical cost and raise gross margin. It recently raised its list price by 19% to Bt3.8mn/rai for Amata City and 13% to Bt8.5mn/rai for Amata Nakorn. If this results in higher execution prices, it will also give a higher gross margin, seen most materially next year. 

 

1Q16 met our forecast. AMATA reported net profit of Bt80mn (EPS of Bt0.08) in 1Q16, -40% YoY and -56% QoQ. The poor showing was due to two factors. 1) A 61% YoY and 67% YoY plunge in real estate revenue due to fewer deed transfers of ~56 rai (~28 rai at JV Thai-Chinese, 16 rai at Amata City Bien Hoa and 12 rai at Amata Nakorn) in 1Q16 versus 223 rai in 1Q15 (32 rai at JV Thai-Chinese, 38 rai at Amata City Bien Hoa and 153 rai at Amata City) and 264 rai in 4Q15 (146 rai at JV Thai-Chinese, 26 rai at Amata City Bien Hoa and 92 rai at Amata City). 2) A fall in profit contribution from associates to Bt24mn from Bt47mn in 1Q15 and Bt64mn in 4Q15 due to lower contribution from Amata B.Grimm Power (FX loss) and Amata NGD (lower oil price). The positive was an improvement in gross margin to 66% from only 41% in 1Q15 and 48% in 4Q15 on a better product mix and no repeat of the one-time development cost adjustment for Vietnam operations booked in 4Q15.