Hemaraj Land & Development

Hemaraj Land & Development Plc

2012 wrap-up. Achieving its thrice revised target, 2012 sales totaled 2,317 rai, +39%
YoY; original goal was 1,500 rai. Automotive investors remain its major clients thanks
to its strategic IE locations within the automotive production cluster. It has Bt3.3bn
backlog as of end-2012 which will be realized as revenue this year and next.

2013 outlook: rental factory and warehouse are key to growth. HEMRAJ guides
to 40% expansion in rental factories and a six-fold jump in its warehouse portfolio, and
these will provide sustainable recurring income. It has set a conservative land sales
target of 1,600 rai, a contraction of 31% YoY. We would not be surprised to see HEMRAJ
sell a big lot to Mazda, which, based on local newspaper reports, plans to build its first
transmission plant in Thailand. Since Mazda already has a plant in Hemaraj Eastern
Seaboard Industrial Estate (HESIE), we would expect it to prefer to buy from HEMRAJ;
we estimate the amount of land needed at ~200 rai. If this pans out, it would be a
magnet to attract companies in Mazda’s supply chain to relocate to Thailand.

Stand by cautious view for land sales this year. We expect Japanese investors to
continue to relocate their production lines, but demand will be weighted towards land
for SME supply chain producers, which require only small plots, unlike in the past, when
demand came from assembly plants, which require larger land plots. We believe land
sales hit a record high last year and could form the peak of a four-year upward cycle.
Since 1995, land sales have trended up for four years (1998-2001 and 2002-2005) and
then fall. The pattern was not seen in 2006-2009, as the crisis in the US pulled down
the global economy in 2008-2009.

Earnings revision. We cut forecast by 6.8% to Bt2.3bn for 2012, and 7.3% to Bt3.2bn
for 2013. We lower condo sales revenue and cut profit contribution from GHECO-1 to
reflect a drop in utilization rate in December 2012 and a shift in the major plant
shutdown to 1H13 from 2014. We also reduce 2014 earnings by 12% to Bt3.6bn as we
expect smaller IE revenue after land sales slow to 1,600 rai in each of 2013 and 2014.

Maintain BUY. We like HEMRAJ for its well diversified income base with ~40% of 2013’s
profit secured by recurring income, giving it better visibility than peers. Thus it is the
best pick in the current cautious industry outlook. We raise PT to Bt4/sh from Bt3.7/sh
as we roll over to end-2013 and raise IE selling price by 10% in line with the company’s
guidance. We maintain a BUY on the stock.