Ananda Development

Ananda Development Plc

Investment thesis
ANAN’s share price is now 8% below its IPO price, a good entry point, given its low FY13 PER of 9.2x (the lowest of the ResDev stocks we cover; the sector simple mean is 12.5x). Also, its PEG ratio is very low at 0.01x, against a sector average of 0.6x. In the short-term, the bottom-line will post a turnaround for 4Q12 (better than the street’s earlier forecast). Net proceeds from the IPO of Bt5.4bn will be used to accelerate launches this year (Bt24bn in launches in FY13 versus Bt9.4bn in FY12) and pay down Bt3bn in debt, sharply reducing interest expenses.
The 4Q12 bottom-line will be written in black ink
We expect a Bt32m net profit for 4Q12, following a net loss of Bt40m in 3Q12. Condo revenue should be Bt1.4bn, driven by the transference of Morph 38. We expect core profit to increase from Bt93m in 3Q12 to Bt173m in 4Q12. PPA (a non-cash expense) will remain high at Bt140m (PPA was Bt133m in 3Q12). For FY12, ANAN is likely to post net loss of Bt282m (slightly deeper than our earlier forecast of Bt262m). The FY13 bottom-line will turnaround to a profit of Bt1.4bn, led by 86% growth in condo revenue and lower PPA (from Bt497m in FY12 to Bt79m in FY13).
Good construction progress on 3 condos to transfer in FY13
As of Jan 5, 2013 construction progress for three Ideo Mobi condos (to transfer by YE13) was good. The civil work is 64% completed on Ideo Mobi Sukhumvit (Bt3.3bn project value), 53% for Sathorn (Bt1.9bn) and 44% for Phayahtai (Bt1.4bn). ANAN has changed the construction method for its Ideo Mobi condos, which will speed-up the time-frame for building by 30% (19 months from launch to transfer for Ideo Mobi Sukhumvit, Sathorn and Phayathai). In our model, the three condos will mostly be transferred in 4Q13, which would make for record revenue for that quarter.
Launch of Elio to secure FY14 revenues
ANAN will launch the first phase of a new brand, Elio, an 8-floor condo, 600 meters from Udomsuk BTS station in 1Q13. The total project value is expected at Bt4.6bn for this low-end brand with sales prices of Bt1.2m/unit up. The project duration is 12 months (revenue recognition in 2H14).
To re-launch low-rise projects in 1Q13
The firm has fully acquired ADO (a JV between ANAN and TMW Ananda GmbH), which owns seven land plots for low-rise projects (Bt7bn in project value). ANAN will re-launch the seven projects by 1Q13 at 10% lower sales prices, as the purchase price of ADO was a 63% discount to its BV. The projects should get good responses, as low-end supply is only modest in the environs of the seven locations (sales prices of less than Bt3m/unit). ANAN is likely to maintain a presales model for the low-rise projects in 1H13, then switch to the prebuilt model in 2H13.