Land & Houses

Land & Houses Plc (LH)

2012 presales beat target. LH’s presales reached Bt25.1bn, +30% YoY, 67% being SDH,
8% TH and 25% condo. Growth was backed by strong demand, as seen in the high takeup
rate for new launches (32% in 2012 versus 21% in 2011) as well as off the low base.
This is above its full year target of Bt22bn, but in line with our forecast. Its SDH market
share rose to 22.4% from 17.4% in 11M12 when competitors moved to condos.
2013 plan to provide solid growth. LH plans for solid presales growth of 20% to
Bt30bn, with revenue recognition growing above 10% to Bt25bn. It expects to widen
gross margin by half a percentage point this year by raising selling prices more than
the rise in costs. Given the conservative goal of Bt7.5bn or 39% take-up rate of its
condo launches, we see upside in condo sales given strong demand and good sites.
LH’s presales will shift to the higher-end market with products priced at Bt5-7mn/unit.
Rising provincial presales. Provincial presales stayed at 12% of total presales last
year and plans are to raise this to 15% this year. It has projects in Chiang Mai, Khon
Kaen, Hua Hin and Phuket and will expand to Chiang Rai and Udorn Thani this year.
Earnings revision. We fine-tune 2012 forecast and raise our forecast by 11.7% to
Bt6.4bn for 2013 and 15.2% to Bt7.7bn for 2014 to incorporate the guidance for higher
revenue and wider margin. We expect the market to do some fine-tuning as well.
Upside risks. 1) Further unlocking of assets with gain of Bt3.5-4bn, 55-60% of 2013
forecast, with targeted assets being CentrePoint Wireless, Grand CentrePoint
Ratchadamri and Grand CentrePoint Terminal 21; these are not in our forecast. 2) Sale
of its investment in QCON and Starmall (listed in the Philippines). 3) Earnings upside if
HMPRO should spin off assets to a property fund/REIT.
Flatly denies merge with QH. The management stated emphatically that this is not
even remotely a possibility. One of the constraints against the move is that LH’s D/E
would skyrocket after consolidating LHBANK. LH and QH hold a combined stake in
LHBANK of 55%.
Maintain Neutral. We raise PT to Bt12 from Bt9.5 after raising forecasts and rerating
our valuation to 4X from 3X PBV. LH’s 2013 growth outlook is better after the
earnings upgrade, but the stock’s valuation is tight, with adjusted PER of 16.8x for the
real estate business, versus its historical average of 15.4x PER during 2005-2011. Thus,
we maintain Neutral. In the near term, we suggest short-term trading on market
speculation on a huge gain from asset divestment.