Rojana Industrial Park

Rojana Industrial Park Plc (ROJNA)

Investment thesis: ROJNA’s story is getting more exciting. The company is likely to post series of record land sales through to at least FY13. Although we have yet to factor in potential sales at the new park in Prachinburi, particularly big-ticket sales, our earnings forecasts still point to record profits for both this year and next. We maintain our BUY rating with a YE12 target price of Bt10.50.
Series of record land sales underway: ROJNA’s land sales visibility is now much clearer since it took delivery of a new location in Prachinburi with its purchase of Prosperity Industrial Estate Co Ltd. It now seems unlikely that ROJNA will sell part of the new raw land to a group of customers (as we noted in a July 3 report), but will instead develop all the land into an industrial estate before selling the plot to them. We heard from a reliable source that the land area may be 1,500 rai and the potential customers are a group of automotive manufacturers. If the deal were to be sealed, ROJNA would post a series of record land sales—1,000 rai in FY12 and more than 1,500 rai in FY13.
Two near-term catalysts; good 2Q12 profit and big-ticket land sales: We expect the firm to report 2Q12 earnings of Bt217m, up 22% YoY, led by the transfer of 300 rai to Gulf JP (but profit will dive 36% QoQ because in 1Q12 there were extra gains on remitted debt). With regard to a pending big-ticket land sale of more than 500 rai at its new park in Rayong, management told us that a deal should be signed by 3Q12.
Ramping up power capacity: ROJNA intends to restart its electricity generators in late 3Q12. They should run at full steam by late 4Q12. Also, a new 55MW generator will start up in 2Q13 and another 110MW (SPP) will go on-stream in 3Q13. Most of the new power capacity has been booked, so we expect electricity revenue to jump by 214% in FY13 and another 24% in FY114.
No concerns about high gearing: At end-March, ROJNA’s gearing was 2.0x; it is expected to rise further with the construction of two new industrial estates. But gearing should remain below the bank covenant of 2.75x, then decline late next year after the firm transfers Bt1bn back from China following the closing settlement of its condominium phase 1.