Hemaraj Land & Development

Hemaraj Land & Development Plc (HEMRAJ)

Land sales on track. HEMRAJ has to date sold 1,925 rai, a record high and reaching
85% of its third upwardly revised target of 2,300 rai. Of the 87 contracts, 56 of these
represented new clients, surpassing 2011’s 49 new clients out of 74 new contracts. In
3Q12, it sold 505 rai, +14% YoY but -3% QoQ; the major client was Ling Long Tyres
(Thailand) Co., one of the world’s top 20 tire manufacturers. The company is certain it
will achieve its full year target in view of the number of clients already in the pipeline.
It has set a conservative target for 2013 land sales of 1,500 rai.

Adding to land bank. HEMRAJ has acquired 4,000-4,500 rai of land worth Bt1.7bn,
raising its sellable land bank to 8,500-9,000 rai, sufficient for four to five years of sales.
Though it is paying more for this land, the company is able to raise prices to the extent
that it will be able to sustain its gross margin at 40-45%. To date, HEMRAJ has bumped
up its selling price by 20% to about Bt2.5mn/rai pushing gross martin to ~45%.

Factory rental demand still growing. Ready-built factories (RBF) for rent continued
growing at good pace of 31% to 209K sqm in 9M12, close to doubling the 18% CAGR
during 2001-2011. Backing this is the expansion of the supply chains to meet demand
in the automotive and related sectors. Including preleases of 35.4K sqm, the company
has achieved 98% of our full year forecast. Its current occupancy rate is ~85% - but this
rises to 94% if preleases are included. HEMRAJ has no plan to sell any of these factories
to the tenants, but does see the possibility of setting up a property fund to which it
would sell the factories and thereby realize profit and get cash for reinvestment.

Q3 2012 better YoY, QoQ helped by Gheco-One. We estimate Q3 2012 net profit of
Bt550mn, +254% YoY and +485% QoQ, with contribution from Gheco-One supplying the
QoQ growth since revenue from core operations slipped to ~Bt330mn from Bt370mn in
Q2 2012 upon fewer deed transfers at ~400 rai vs. 450 rai in Q2 2012. We estimate it will
book Bt225mn profit (versus loss of Bt275mn in Q2 2012) through equity accounting,
mainly from Gheco-One, with profit plus FX gain more than enough to offset the
compensation paid to EGAT for delayed COD at ~Bt20mn. Results will be released on
November 13.

Growing backlog. HEMRAJ has Bt3.5bn backlog as of end-3Q12, up from Bt500mn in
4Q10. This will be realized as revenue this year and next. This supports the company’s
revenue growth forecast of 25% for 2013, implying upside risk to our forecast revenue
growth of just 17%.

Maintain BUY. We like HEMRAJ for its well diversified income base with more than
40% of 2013’s profit secured by recurring income, thus better visibility than peers. We
estimate impressive 3-year CAGR growth of 97% to Bt4.1bn in 2014 from Bt537mn in
2011. With attractive ETR of 30%, we remain BUYers.