Hemraj Land & Development

Hemraj Land & Development Plc (HEMRAJ)

2012 sales likely to hit target at 2,300 rais. Revenue projected to grow 50% YoY

The executive is confident that land sales in 2012 would be as
targeted at 2,300 rais, increasing from 1,670 rais in 2011 (after
9 months of 2012, 1,9500 rias have been sold). Currently,
HEMRAJ has land in stock waiting for sale at 5,500 rais, while
some are being additionally bought. Accordingly, the stock at
end-2012 would increase to 10,000 rais which is enough for sale
in the next 5 years. This year, the company has revised up the
selling price by 3-10% and is likely to revise up continuously in
2013 since there’s still high demand. For 2012 revenue, it is
projected to grow by 50% YoY from the prior year at B4.3bn due
to B4.66 of revenue made in the first 9 months in 2012 which is
a result of the business expansion in the industrial estate (land
sale, public utility service, and rental factory/warehouse).
Moreover, the company would expand its investment in 7-8 SPP
power plants (120MW/unit), holding 25% stake. Accordingly, 1
power plant would begin commercial operation in 2013, as
others would gradually open in 2015-2017.


4Q12-13 profit projected to grow continually for both main business and investment in power plant
HEMRAJ’s earnings result tends to grow continuously since 3Q12
until 2013 due mainly to Gheco-one power plant with the
production capacity of 660MW (HEMRAJ holds 35% stake) that
would fully begin commercial operation. Likewise, the revenue
recognition of land sale is likely to grow due to backlog at end-
3Q12 by B3.51bn which would be transferred in 4Q12 by around
30% and more 70% in 2013. Furthermore, the company focuses
on the business with recurring income. In addition, the water
sale is projected to bring about B2bn of revenue in 2014 or an
increase of 1x from 2011. The rental factory and warehouse are
projected to grow 30% by year. Also, the investment in SPP
power plant is likely to grow. We maintain our 2013 profit
forecast, projecting to grow to B3.18bn, increasing from 2012
estimated at B2.19bn.


Maintain 2013 fair value, using SOTP, at B3.74… “BUY”
We maintain fair value, using sum of the parts, at B3.74 which
is equal to 2013 PER at 11.4x, higher than the current share
price by 9.6x. We reiterate our recommendation of “BUY” for
HEMRAJ.