Amata Corporation

Amata Corporation Plc

Investment thesis
Although we fundamentally like AMATA, we have tactically adopted a negative bias toward the stock for the moment. 1Q13 land bookings are likely to disappoint the market; that would constitute a near-term headwind to the share price and would probably prompt a consensus FY14 earnings forecast downgrade. But we expect land bookings to strengthen in 2H13. As such, our FY13 land booking assumption of 3,000 rai and our FY13-14 earnings projections stand unchanged.
What’s new?
We talked with management yesterday, who told us that land bookings as of the first week of March totaled only 5 rai—far short of the trend necessary to achieve our FY13 assumption of 3,000 rai and the consensus expectation of 2,500 rai.
No impact on FY13 earnings forecast …
AMATA’s huge land bookings backlog of about Bt8.5bn, which translates into around 3,200 rai, will mostly transfer during this year. As such, our FY13 land transference assumption of Bt5.5bn (2,000 rai) stands. We expect revenues to increase across all business units, especially factories-for-rent—up 20% YoY in FY13, driven by rental factory portfolio expansion of 30-40%. So, we maintain our FY13 core EPS growth forecast of 43% (to Bt1.4bn) unchanged.
…but some concerns about the outlook for FY14
Weak land bookings in 1Q13 would intensify market concerns about the top-line prospects for next year. Our sensitivity analysis indicates that for every 100 rai that land bookings fell short of our FY13 assumption (3,000 rai), our FY14 earnings forecast would be squeezed by 2%. Regardless, we maintain our FY13 land booking assumption unchanged—typically, a lot more deals are signed in final six months of the year than in the first-half. AMATA holds letters-of-intent for 2,000 rai (from two big players).
Listing the holding firm may push-up valuation—but not just yet
The stock would come under selling pressure if the consensus were to cut its FY14 earnings forecast. Furthermore, our regression analysis indicates a close positive correlation of 70% between AMATA’s share price and market expectations of forward land bookings. Weak land bookings in 1Q13 may lead the street to cut its land booking assumption. If that were to happen, the firm’s PER would be at risk of being de-rated to a lower band.
AMATA’s plans to launch an IPO and list its holding company (AMATAV) on the SET sometime around mid-year, which should generate positive sentiment toward the stock, but mid-year is three months away. After listing, we roughly calculate that its SOTP valuation will increase in the region of Bt1.6-Bt1.8 (based on IPO and PP prices equal to a PBV of 1.5-2.0x).