Nawarat Patanakarn

Nawarat Patanakarn Plc (NWR)

Backlog update: expect Bt11.2bn by the end of 1H13, with Bt14bn from
government megaprojects added in 2013
Windfall of Bt120mn likely in 2013
Maintain BUY and target price of Bt4.7/share

1Q13 recap. Net profit was Bt55mn +8% YoY and -82% QoQ. Total revenue in 1Q13 was
Bt1.6bn +29%YoY and -28%QoQ. Its lead projects are the construction of power plants
at Wang Noi and Chana and the tank farm building for Singha Beverage and the design
and construction of TS Tech Thailand’s new factory. Backlog at end-1Q13 was Bt7.7bn
(Bt2.9bn construction backlog, Bt4.8bn Mah Moh mine backlog).
Bt3.9bn backlog expected to enter in 2Q13. NWR is likely to sign Bt3.9bn in
contracts this quarter: Bt2.5bn in jobs for the BMA and Bt1.4bn for private clients. We
estimate end-1H13 backlog at Bt11.2bn (including ~Bt4bn from Mae Moh).
Funds ready to add Bt14bn in backlog. The company raised Bt1.5bn through a
capital increase to back up its expected new backlog of Bt14bn from the government
megaprojects; this includes the Bt350bn flood protection system projects as well as
the Bt2trn infrastructure projects. It expects bidding to open before the end of this
June and expects to book 14% of the Bt14bn backlog n 2013, with the bulk - 46% - in
2014 and the final 33% in 2015.
Property development and profit sharing to boost revenue. In 2013, it will book
property business revenue through a wholly owned subsidiary that is building low-rise
single homes branded “Baan Baranee”. So far this year it has sold 62 units or 29% of
the total 211 units with total value of Bt523mn. Gross margin is estimated at 15% with
net profit contribution of Bt15-20mn in 2013. Charn Issara Ladprao is expected to
contribute Bt26mn in profit sharing in 2013, a sharp fall from the Bt130mn
contribution in 2012. It already contributed Bt11mn in 1Q13.
Windfall of Bt120mn likely in 2013. NWR expects to book Bt120mn in extra income
this year from the settlement of a lawsuit filed against a condominium project in
Dubai for nonpayment of debt. This will be a one-off extra. Though it will brighten
sentiment towards the stock, we do not factor it into our calculation of fair value.
NWR reportedly booked the litigation cost of this lawsuit in 1Q13.
Maintain BUY. Our target price is Bt4.7/share based on SOTP valuation from its
construction and property businesses. We still believe the industry is travelling an
uptrend, though there may be some bumps in the near term from struggles to get
the government’s megaprojects going. At the same time, we do not expect a delay in
the bidding from the initial deadline of June 2013. We note that as a contractor it has
a high beta and swings deeper and steeper in a volatile market. It is also now trading
at a steep discount to our fair value. We continue to recommend BUY.