Land & Houses

Buy; Bt6.15

Price Target : Bt6.52

3Q11 result with expectation; 9M11 profit is 84% of our FY11 forecast

4Q11F earnings could weaken due to floods, but condo transfers should cushion the impact

Maintain BUY and Bt6.52 TP, pegged to 15.7x PE, in line with its historical average

Projects affected by floods. As at 14 Nov, 6 out of LH’s 53 projects have been flooded. The remaining unsold value in these projects amounts to Bt4.3bn, or 10% of its total portfolio. There is flooding in surrounding areas at 18 other projects. Management estimates total flood-related, flood prevention and post-floods expenses at over Bt100m.

Potential catalyst: divesting assets into property fund. LH plans to sell perhaps 4 of its 6 serviced apartment assets to a property fund, possibly in 1Q12 or 2Q12. The estimated fund size is Bt5bn. The assets are now held under a 60:40 JV between LH and Government of Singapore Investment Corporation (GSIC). The successful divestment would unlock the value of these assets and bring in fresh funds for future expansion, and LH would also book a divestment gain.  However, we ignored this in our current forecasts because the timing and fund size are not finalised yet.

Maintain BUY. The stock is now trading at 14.8x FY12F earnings, below its historical average of 15.7x. Our target price remains at Bt6.52, pegged to its historical average PE. The stock now offers 6% upside to our target price plus relatively generous 5.7% dividend yield.