Land & House

Land & House Plc (LH)

- Q1 2013’s profit is B1.42bn, dropping 10.9%qoq but growing 48%yoy
LH posted a net and norm profit equally at B1.42bn, decreasing 10.9%qoq
but growing 48%yoy. Revenue from sale was booked at B5.3bn mainly
from horizontal projects, though decreasing 17.5%qoq. Gross margin
stabilized at 34.5%, while share of profits from subsidiaries fell 15%qoq to
B431m as a result of decelerated profit of HMPRO on a seasonal effect.
However, SG&A expense also decreased along with the revenue, so norm
profit margin in 1Q13 was still high at 22.4%. Presales grew 24%qoq to
B7.8bn, due mainly to the growth of both horizontal and condominium
projects. During the quarter, LH has opened 8 new projects worth of B19bn
in total. Bookings of the B7bn-worth Bangkok Sathorn, a high-end
condominium project, has already reached 25%, while bookings of the
B2.3bn-worth Wan Vayla condominium in Hua Hin has been 30%. For
single-detached houses, the company has opened the B7.5bn-worth
Nantawan Pinklao – Ratchapreuk project. As a result, total sales in 1Q13
have become more balance in every segment (a proportion of projects
priced between B7-15m increased to 23% while those priced between B3-
5m decreased to 25%, as shown in the table on page 2).
- Growth foreseen in 3Q13-4Q13. Up 2013’s profit forecast by 12%
The management has still maintained the presales target in 2013 at B30bn
or the growth of 20%yoy, with a plan to open 24 new projects worth of
B44bn, mostly in the second half of 2013. Backlog at end-1Q13 increased
to B10bn; B5.2bn of which will be recognized within this year. There are 5
condominium projects that will finish the construction by the end of this
year, namely the Room Sukhumvit 21, the Room Sukhumvit 40, North8
Chiangmai, North1 Chiangmai, and the Key Udomsuk; these projects will be
transferred in the second half of the year, so the profit growth is foreseen in
3Q13 and 4Q13. We keep our forecast for revenue from property sale in
2013 unchanged at B25bn or the growth of 12%yoy as the company has
targeted, but increase assumption for the gross margin to 34.5% from
33.5% and decrease SG&A/sales to 14% from 15%. Accordingly, new
2013’s profit forecast is B6.37bn, growing 12% from the previous forecast.
This has still not included an extraordinary profit from selling of Terminal 21
shopping mall to a property fund that might possibly occur in the second
half of this year.
- Raise fair value, SOTP, to B11.87. Upgrade to HOLD
After up revision of profit forecast for the core business and fair value of QH
and Q-Con, new fair value of LH is B11.87 (sum of the parts), which is close
to the current share price. Combined with the profit growth outlook, we
upgrade our recommendation from SELL to HOLD.