LPN Development

LPN Development Plc (LPN)

What’s new? LPN will launch two projects on Saturday 18 worth Bt4.1bn in total—Mega City Bangna II (three high-rise buildings; Bt3.3bn; average sales price of Bt1.1m/unit and Lumpini Ville Sukhumvit 109-Bearing (a low-rise building; Bt830m average sales price of Bt1.0m/unit).
Comment: We anticipate good responses to the launches, due to cheap pricing. Starting prices are expected at below Bt1m per unit, or Bt44K per sq.m. We expect presales at Mega City Bangna II to be good, as the take-up rate for Phase I (launched in 4Q11) is now 70%. The location of Lumpini Ville Sukhumvit 109-Bearing is good—800 meters from the Bearing BTS station.
Assuming a 50% take-up rate of Mega City Bangna Phase II (equal to the initial take-up rate for Phase I) and an 80% take-up rate for Lumpini Ville Sukhumvit 109-Bearing, the additional presales are expected at Bt2.3bn, which would push up the secured proportion of our FY12 revenue forecast to 94% from 76% currently. LPN’s presales backlog would expand another 17% to Bt16bn. Both projects will transfer in 4Q12, as construction of Mega Bangna Phase II started in 4Q10 and Lumpini Ville Sukhumvit 109-Bearing has only eight floors.
In March, LPN will launch a low-end condo near Sukhumvit Road with an expected value of Bt1bn. So we anticipate strong 1Q12 presales in the range of Bt4.3-4.4bn, up by around 10% YoY and flat QoQ. 
Action: The stock price is likely to rise in anticipation of good responses to the launches on Saturday. LPN’s presales from the weekend will cement its FY12 earnings visibility leadership of the Residential Developer sector. The stock deserves a re-rating, we believe, as our FY12 revenue forecast will probably be secured by the launches this weekend. The historical record shows that LPN has generally traded 1SD above its average in the wake of successful launches. Its current FY12 PER of 9.6x is 1SD below its 10.3x FY05-11 mean. We maintain our BUY rating, a YE12 target price of Bt16, pegged to a PER of 11x.