Quality Houses (QH)

Quality Houses Plc (QH)

YTD presales meet targets for both horizontal and condominium
The property development business has been growing continuously.
Accumulated presales since the beginning of the year until 6 May 2013 were
B8.9bn (B3.9bn of horizontal projects and B5bn of condominium projects),
compared with FY2013’s target of B20bn, which was the growth of 20%yoy.
The most popular horizontal projects are medium-end and low-end brands
like Casa, The Trust, and Gusto which are the segment that has high
demands. The management has planned to adopt a pre-cast technology to
all single-detached houses of Casa in order to shorten the construction time
and ease labor shortages. For Gusto and The Trust, the company will
increase the product proportions according to the business plan in 2013. At
the same time, QH is trying to normalize the sales of high-end projects that
have still not shown impressive recovery. For the provincial market, the
company could increase the proportion of income from this sector to 15% of
total long-term sales from only 9% in the prior year, by focusing mainly on
low-end condominiums priced around B1m/unit near industrial estates as
well as vacation condominiums in Pattaya, Hua Hin, and Cha-am.
- B6.4bn backlog waiting to transfer this year, likely boosting profit in 2Q13-3Q13
As at 7 May 2013, total backlog of QH was B12.2bn; B6.4bn of which will be
recognized as income this year, mainly from condominiums that that will
start the transfers in 2Q13 by 3 projects, including Casa Condo Asoke -
Dindaeng, Casa Condo Changpuak - Chiangmai, and The Trust Residence
Ratchada - Rama 3 and The Trust Residence Central Pattaya that will be
transferred in 3Q13. Total condominium projects waiting to transfer are
more than B4.7bn. Accordingly, we project to see continuous growth in the
income and profit in 2Q13 - 3Q13, from the net profit of B590m and the
norm profit of B471m in 1Q13. We maintain our forecast for FY2013’s
income at B17.5bn or the growth of 34%yoy, and the norm profit at B2.5bn
or the growth of 47%yoy.
- Buy. Fair value, SOTP, is B5
With improving performance of the core business and profit from
subsidiaries like HMPRO and LHBANK, QH’s balanced portfolio of horizontal
and condominium products, and various product price levels to cover every
segment, we believe the share price has a chance to meet the fair value,
derived from SOTP method, at B5. Reiterate BUY.