LPN Development

LPN Development Plc (LPN)

Investment thesis
The market should react positively to two successful condo launches last weekend (combined value of Bt2.9bn; 83% blended take-up rate). LPN’s sharp stock price drop last week presents an opportunity to BUY. Further ahead, we expect record 2Q13 presales and the best earnings of the year in 3Q13. Our BUY rating stands with an unchanged YE13 target price of Bt26, pegged to a PER of 14.0x.
Two condos successfully launched last weekend
LPN launched Lumpini Place Suksawat-Rama II (Bt1bn; 750 units) and its first condo in Udornthani Province, Lumpini Place UD-Phosri (Bt1.9bn; 1,400 units). Presales were strong, Suksawat-Rama II was fully booked and the take-up rate for UD-Phosri was 72%. The key selling points were reasonable prices (Bt55K/sq.m) and locations—Suksawat-Rama II is near BigC Dao Kanong and UD-Phosri is opposite UD Town, Udonthani’s biggest shopping mall.
The two launches made for Bt2.4bn in additional presales, which pushed up secured FY14 revenue from 32% of our top-line forecast to 46%. The Lumpini Place brand normally yields GM of about 32%. But we think there is scope for GM upside at the two projects—given the strong demand at their launches.
Expect 1Q13 presales of Bt5bn and a new record for 2Q13
We anticipate that LPN will post 1Q13 presales of at least Bt5bn, up by 3% YoY and 25% QoQ, led by three condo launches during the quarter. Looking forward, the firm should report all-time high presales in 2Q13, due to a heavy Bt10bn launch schedule for the quarter. We preliminarily forecast 2Q13 presales of Bt6.6bn, up by 8% YoY and 30% QoQ, which would boost secured FY14 revenue.
Looks to beat FY13 presales target
LPN’s FY13 presales target of Bt20bn looks comfortably achievable, as 60% of that target is likely to be booked in 1H13. The firm may potentially beat that target, as the current FY13 launch schedule totals Bt25bn (13 projects).
The best earnings of the year in 3Q13
Quarterly revenue is set to increase by 6-10% YoY in 1Q13 (but drop QoQ, due to the high base set by record income in 4Q12). In 2Q13, LPN will report both YoY and QoQ top-line growth. Then in 3Q13 it will deliver its best revenue of the year (about one-third of the FY13 total), driven by the transference of four condos—Lumpini Mega City Banga, Lumpini Ville Sukhumvit 77, Lumpini Ville Naklua-Wong Amart, and Lumpini Condowtown Chonburi-Sukhumvit.