Supalai

Supalai Plc (SPALI)

Investment thesis: Not only record high presales in 4Q11 (despite the flooding), SPALI posted a strong condo take-up rate of 80% at its last launch in early Jan. Ahead, the firm will unveil a sizable condo near Ratchadapisek Road in March; a strong take-up rate would present another trigger. SPALI’s FY12 Per is only 7.9x, far below the 11.7x sectoral mean. Our TRADING BUY rating stands and we have upgraded our YE12 target price to Bt16.20 from Bt12.50 to factor in an upward profit forecast revision and a PER target re-rating to 9x from 7x.
Earnings forecast upgrade: We have upped our core profit forecasts by 10% for FY11 and another 2% for FY12 to factor in expanded expectations for housing revenue. FY12 earnings visibility is clear—the presales backlog for transference in FY12 is Bt7.8bn (65% condo, 35% low-rise), which secures 58% of our revenue forecast. We conservatively assume a 1.4% YoY dip in housing GM for this year.
Record high 4Q11 presales, led by condos; momentum sustained QTD: Despite the flooding in 4Q11, SPALI will post record high presales of Bt6.3bn (up by 25% YoY and 175% QoQ), led by unprecedented condo presales of Bt5.3bn (up by 33% YoY and 358% QoQ). Three condos were launched in 4Q11, all with take-up rates exceeding 70%—Supalai Premier@Asoke (Bt2.8bn), Park Ekkamai-Thonglor (Bt2bn) and Park Kaerai-Ngamwongwan (Bt1.6bn). In Jan, City Resort Ratchada-Huaykwang (Bt1.6bn) achieved an 80% take-up rate at launch. We expect a YoY doubling of presales for 1Q12—Wellington Condo Ratchada (Bt4.3bn; Bt70k/sq.m.) will launch in March.
Weak 4Q11 results are behind us: We expect a 4Q11 core profit of Bt395m, down by 65% YoY and 39% QoQ. The transference of Tiwanon condo comprised 45% of 4Q11 housing revenue. Factoring in Bt80m in deferred tax expenses, net profit was weak at Bt315m.
Conservative FY12 revenue growth guidance: SPALI targets 8% housing revenue growth to Bt12.5bn for FY12—conservative guidance compared with other players, who mostly target double-digit expansion. The implication is limited FY12 earnings risk. SPALI anticipates record high presales of Bt18bn (up 13%) enabled by at least Bt16bn in new launches (the land plots are secured).