LPN Development

Price Target : Bt12.63; LPN TB

At a Glance
·         3Q11 results beat expectations due to strong condo transfers

·         Although 9M11 profit represents 99% of our FY11F, our forecast is unchanged as heavy flooding could negatively affect transfers in 4Q11

·         Maintain BUY and Bt12.63 TP

Comment on Results

Condo transfer jumped 191% yoy and 40% qoq to as high as Bt5.1bn in 3Q11. Revenue was generated mainly from the transfer of three main projects including Lumpini Park Pinklao, Lumpini Place Rama IV-Kluaynamthai and Lumpini Place Ratchayothin.  SGA/sales dropped to 8.7% due to higher economies of scale from the strong transfers. Net profit rocketed to Bt873m in 3Q11, up 198% yoy and 51% qoq.

Backlog amounted to Bt10.9bn as at end-3Q11. Of the total, Bt815m is scheduled to be realized in 4Q11 and the rest in 2012.  LPN plans to launch 2 more projects with a combined value of Bt2bn in 4Q11, but this is still subject to the flooding situation.

Strong balance sheet.  With strong cash flows from transfers, LPN’s balance sheet turned into net cash of Bt1.4bn at end-3Q11. 

Recommendation

Maintain BUY.  No change to forecast as we believe the heavy flooding could negatively affect transfers in 4Q11.  LPN remains our top pick in the property sector, thanks to its strong balance sheet, clear earnings visibility and solid management.  The heavy flooding could lead to increased demand for condominiums, which should be positive for LPN.  We maintain BUY with TP of Bt12.63, based on 8.8x FY12 earnings.