Nawarat Patanakarn

Nawarat Patanakarn Plc (NWR)

Backlog update. Backlog is currently at Bt8.4bn (including Bt5.2bn from Mae Moh),
with backlog under unsigned contracts (high certainty) of Bt3.9bn, on which revenue
will be booked from 2013-2015. We expect NWR’s end-1H13 backlog to reach Bt12.3bn
(including Mae Moh). Adding Bt14bn to backlog this year will be Bt3bn from contracts
for the flood prevention system, Bt8-9bn from the Bt2trn government project budget
and Bt2-3bn from the private segment. It expects to recognize 14% of the backlog of
Bt14bn this year, with the bulk - 46% - in 2014 and the final 33% in 2015. NWR expects
to add Bt15bn in backlog in 2014, supported by the government’s Bt2trn infrastructure
plans and buoyant private construction investment.
Property development and supporting facilities. In 2013, it expects revenue from
the property business through a new wholly-owned company, “Mana Patanakarn Co
Ltd”, which will build low-rise single houses branded “Baan Baranee”. So far this year it
has sold 62 units or 29% of the total 211 units with total value of Bt523mn. It plans for
each project value at Bt600mn. NWR also has wholly-owned concrete product casting
factories with total capacity of 11,000 cum/month and a steel structure & fabrication
factory with total capacity of 1,000 tons per month. These investments should give
NWR competitive advantage in terms of cost and time control.
Better financial position after capital increase. We forecast sales growth of 30%
(the company expects >20%), gross margin of 9.3% with net margin of 4.2%, giving a
net profit of Bt372mn. The capital increase will dilute EPS to Bt0.17/share from
Bt0.31/share, but will put a far more solid foundation under NWR’s balance sheet and
cash flow. Net debt will shrink from 1.0x to 0.2x in 2013, book value increase from
Bt1.36 to Bt1.65, and net cash flow swing around from a deficit of Bt249mn into a
surplus of Bt1.1bn. Although ROE will decline from 18.4% to 13.3% and ROA from 4.5%
to 4.2%, we believe the capital increase is worthwhile in terms of strengthening the
balance sheet.
Capital increase. XD (Bt0.12/share) and XR (7 old for 1 new @Bt2.6) is today, April 3,
adding 222mn shares. 200mn shares have been allocated as PP, with 246mn for
warrant conversion. All told the company’s common shares will jump to 2,222mn
shares from 1,553mn. To factor in the dilution from the entire range of offerings, we
have reset our target price to Bt4.7/share from the undiluted Bt6.0/share based on
SOTP. We still recommend BUY.