Sansiri

Sansiri Public Co. Plc (SIRI)

SIRI surprised the market by achieving 100% presales for The XXXIX luxury condo project within two weeks. At the same time, its lower-end the Base Kon-Kaen was all taken up. We cannot emphasise enough that SIRI’s focused SG&A spending in branding is a worthwhile investment. EPS estimates are unchanged, with 4Q12 forming 60% of our FY12 forecast. Given the on-track FY12 THB40bn presales target, solid backlog, and improving gross margins and gearing, we reiterate our Outperform call and target price (based on 9.5x CY14 P/E, +1SD above its 6-year historical average; with a premium assigned to Thailand’s number one residential developer by presales). SIRI remains our top pick. 
What Happened
SIRI’s luxury condo, The XXXIX, is priced above THB200k/sq m (or a unit price of THB10-80m) and has a total project value of THB2.6bn (178 units in total). It was 100% presold from 13-23 Nov 2012. This came as a big surprise vs. SIRI’s target take -up rate of 50% within 3 months. the
project is located in Sukhumvit 39, adjacent to the currently under-construction shopping
complex Emporium 2 and 250m away from the BTS station. At the same time, SIRI’s lower-end
THB2bn Base Khon-Kaen condo project (980 units in total, average unit price of THB2m) was also 100% taken up. These two projects alone generated presales of THB4.7bn.YTD presales stood at THB37 .7bn (94% of its FY12 target of THB40bn).
What We Think
The market is surprised by SIRI's ability to achieve strong presales for its projects that target disparate market segments. We believe this reflects SIRI’s strong brand equity, thanks to its focused SG&A spending in advertising and branding that is superior to that of other developers.
Its premium brand positioning for all its targeted market segments allows SIRI to enjoy natural market entry barriers. Banking on its strong branding, SIRI was able to command gross margins of up to 35% as at 3Q12, which also indicate its better pricing power.
What You Should Do
Stay invested. Valuations are undemanding at 9.4x CY13 P/E and 7.7x CY14 P/E vs. the peer average of 11.1x and 9.6x respectively. Its dividend yield is superior as well. Strong 4Q12 and 1Q13performance are the near-term catalysts.