Asian Property Development

Asian Property Development Plc (AP)
 

In line: AP reported a 4Q11 net profit of Bt349m, down
by 43% YoY and 42% QoQ. The result was in line with
our estimate, but 19% below the consensus (which
expected much higher housing revenue).
Results highlights: The unfavorable 4Q11 profit was
due to weak housing revenue, down by 33% YoY and
39% QoQ to Bt2.8bn (38% condo, the rest low-rise).
The key condo revenue contributor in 4Q11 was The
Address Sukhumvit 28. Housing GM declined from
42.3% in 4Q10 to 39.8% in 4Q11, due to a diminished
proportion of condo revenue (condos contributed 46%
of the top-line in 4Q10 but only 38% in 4Q11). However,
AP posted fat condo GM of 42.5% and sustained good
low-rise GM of 34%, led by Baan Klang Krung Rama III
(GM of 37%). The SG&A/sales ratio rose as scale
diminished. The net gearing ratio increased to 1.3x at
YE11 from 1.2x at end-Sept.
Outlook: AP will report strong YoY profit growth for
1Q12, due to the low base set by 1Q11 (the lowest
quarterly net profit in FY11 of Bt159m). On a QoQ
basis, we expect moderate earnings growth, led by the
transference of The Address Sukhumvit 28 (Bt2.3bn,
98% booked and 29% transferred in 4Q11).
What’s changed? We see scope for earnings upside to
our model, driven by a quick recovery in low-rise
presales. AP’s low-rise presales increased 10% YoY in
Jan-through-Feb 26, even though it didn’t launch any
projects during the period. Our FY12 housing revenue
forecast is 7% below management’s target. Current
presales secure 72% of our FY12 revenue forecast and
49% of our FY13 projection. We conservatively assume
a GM contraction from 37% in FY11 to 34% in FY12,
due to a diminished proportion of condo sales in the
revenue mix (condos normally carry fatter GMs than
low-rise sales).
Recommendation: Any share price weakness would
present an opportunity to accumulate the stock. We
maintain our TRADING BUY rating on AP. In the shortterm,
we expect YoY and QoQ growth in 1Q12 presales
and 1Q12 earnings are expected to outperform the
sector in YoY terms. For the time being, our YE12
target price remains Bt6, based on a sum-of-the-parts
valuation (target housing PER of 9.5x pegged to 10%
above its Y05-11 mean and Bt0.05/share of investment
value in PREB.