Pruksa Real Estate

Pruksa Real Estate Plc (PS)

What’s new? PS announced presales of Bt4.9bn for July-Aug 2012 (Bt2.7bn in July and 2.3bn in Aug), of which 81% was low-rise. Low-rise presales totaled Bt2.1bn in July (down 20% MoM) and Bt1.9bn in Aug (down 8% MoM). 
Disappointing July-Aug low-rise bookings: The weak presales constituted a negative surprise. Low-rise bookings for the last two months dropped below the pre-flooding level—a Bt2bn/month average for July-Aug versus a mean of Bt2.4bn/month for Jan-Sept 2011 (and significantly less than the Bt2.4bn/month posted for May-June 2012, when presales normalized). We think the low bookings are due to seasonality and launch delays at Pattanakarn.
Four new projects at Pattanakarn in Nov: PS plans to develop nine projects at a big land plot it has at Pattanakarn—five will launch this year. The first project, The Plant (SDH; Bt7m/unit) started in April and has a 70% take-up rate. PS has paused The Plant and postponed four launches at Pattanakarn from June to Nov, as it is waiting on the site entrance to be completed. So we expect strong low-rise presales to resume in 4Q12. 
Downside risk to FY12 presales target: 8M12 low-rise presales hit Bt13bn, 52% of PS’s FY12 target of Bt25bn. If we assume normalized low-rise presales in 4Q12, we see 3-5% downside risk to PS’s FY12 total presales target of Bt29bn.
No impact on revenue recognition: PS’s Bt34bn presales backlog at end-June—of which Bt18bn is scheduled to transfer in 2H12—fully secures our FY12 revenue forecast of Bt26bn (also PS’s target). Furthermore Bt8.8bn in condo bookings will transfer in FY13, guaranteeing 29% our revenue projection. 
Action: Slow QTD presales and downside risk to the FY12 presales target will generate negative sentiment toward the stock in the short-term. We anticipate a short-term price correction in the range of 5-7%, as PS’s multiples are moderate. The stock currently trades at an FY12 PER of 10.4x, slightly above its 10.2x long-term mean.