Pruksa Real Estate

Fully Valued – Downgrade form Hold; Bt11.00

Price Target : Bt 9.85(Prev: Bt12.40)

63 projects (45% of total) have been flooded;  18% of backlog - mostly low-rise houses – could see cancellation risk

Earnings will tumble in 4Q11 and 1Q12; cut earnings and TP

No near term catalyst; downgrade to FULLY VALUED

Presales and transfers will tumble in 4Q11 due to heavy flooding in Bangkok. Also, PS could see more cancellations in 4Q11. 63 of its 141 current projects (45% of total) have been flooded, and Bt6.7bn of its Bt37.2bn backlog is at risk of cancellations because they are low-rise housing projects that have been affected by the floods. With down payment for low-rise houses at no more than 5% of selling price, customers might walk away if the projects have been heavily flooded. New sales for such projects are also likely to be slow and PS may have to cut prices to attract buyers.

Investment in Maldives hit by Rufiyaa devaluation.  PS has one condominium project in the Maldives valued at Bt3.5bn. After the Rufiyaa devaluation, the project will suffer c.Bt90m loss because most of its costs are in USD while revenue is in local currency. PS has delayed its new project launch, new overseas investment projects, and new major capex. It will focus more on liquidity management and cutting unnecessary expenses.

Downgrade to FULLY VALUED. Our revised TP is now Bt9.85, pegged to 8x FY12F PE.