Supalai

Supalai Plc (SPALI)
 

In line: SPALI reported a net profit of Bt350m for 4Q11, down by 69% YoY and 46% QoQ, in line with our estimate and the consensus. 
Results highlights: The poor earnings were due to a housing sales contraction, down by 50% YoY and 19% QoQ to Bt2.4bn (the lowest number of the year)—70% condo revenue contribution. Condo transference was dominated by Supalai Park Tiwanon. Housing GM dropped by 1.5% YoY and 0.6% QoQ to 41.0% in 4Q11, as GM for Tiwanon condo was slimmer than the GMs of other condo projects. The SG&A/sales ratio increased by 4% YoY and 1.7% QoQ to 11.9% in 4Q11, due to lower sales. The balance sheet remained strong with a low net gearing ratio of 0.41x YE11 (0.45x at end-Sept 2011). 
Outlook: 1Q12 profit is expected to weaken YoY but rise QoQ. We anticipate weak revenue contributions from low-rise projects for the quarter. Most of the condo backlog (four projects—City Home Srinakarin, Supalai Park Asoke-Ratchada ,Supalai Park at Downtown Phuket and Supali Park Ratchayothin) is scheduled to transfer in 3Q12 onward.
What’s changed? We maintain our forecast of strong FY12 profit growth of 21% YoY. Earnings visibility is good, as the presales backlog secures 60% of our FY12 revenue forecast.
Recommendation: Our TRADING BUY rating stands with an unchanged YE12 target price of Bt16.20, pegged to a target PER of 9.0x (1SD above SPALI’s FY09-11 mean). In the short-term, Supalai Wellington (Bt4.3bn in total project value) will launch on March 5. The stock trades at an inexpensive FY12 PER of 7.9x—a deep discount to the 12.1x of sector average—while its ROE ranks second-best among home builders.