Pruksa Real Estate

Pruksa Real Estate Plc (PS)
 

Investment thesis: PS’s strategic plan for FY12 (announced yesterday) will rebuild market confidence in its outlook. The key messages from the analyst meeting were positive: 1) realistic performance targets for this year, 2) clear revenue visibility secured by large backlogs, 3) anticipation of a moderate profit for 4Q11 (despite the flooding) and 4) a quick presales recovery in 1Q12. We have revised up our YE12 target price to Bt16 (from Bt12) to factor in expanded expectations for earnings and a PER re-rating from 7.7x to 10x (pegged to its FY06-11 average). Given forecast good 22% FY12 profit growth (from the low-base set by FY11), the stock price looks undemanding—an FY12 PER of 8.7x, a 15% discount to its mean.
Renewed optimism over 4Q11 numbers: PS now looks likely to post 4Q11 revenue of Bt4.6bn—far above our previous estimate of Bt3.4bn—driven by condos (50% of 4Q11 revenue). The Seed Memory Siam was transferred swiftly in Dec 2011. Thus, we now expect a 4Q11 core profit of Bt427m—down by 64% YoY and 44% QoQ, but much higher than we or the street earlier expected (just break-even, due to flooding during the quarter). The interest-bearing debt/equity ratio declined from 1.3x at end-Nov 2011 to 1.2x at YE11.
Profit forecast upgrade: We have revised up our core earnings projection by 17% for FY12 and another 4% for FY13 to factor in diminished expectations for the impact of the flooding on 4Q11 numbers and to fine-tune for PS’s FY12 revenue growth guidance. The current presales backlog (Bt37bn at YE11) secures 75% of our FY12 top-line forecast and 35% of FY13.
The most conservative FY12 targets since SET debut: Management offered cautious FY12 performance guidance—revenue growth of 13% (to Bt26bn) and presales expansion of 15% (to Bt29bn). PS will focus on the TH category, where it has the greatest competitive advantage. The firm target 27% growth in TH presales this year to Bt15bn, somewhat below the record of Bt17bn it set in FY10. In FY12, new launches will be flattish YoY—49 projects comprising 28 THs, 15 SDHs, four condos and a project each in Mumbai and Vietnam. The overseas business contribution is targeted at only about 3% of FY12 revenue and presales. PS guided that GM will decline from 37% in FY11 to 36% in FY12 (in line with our model) because of cost pressures.