Nawarat Patanakarn

Nawarat Patanakarn Plc (NWR)
Delay of government projects no effect on 2013 revenue and profit. It now looks
as if the Bt350bn water management scheme might be delayed at least three months
from the original timetable and thus will add little to contractor backlog in 2013. NWR
is still positioned to be a subcontractor for ITD for a portion of its job. We now do not
expect the addition of large jobs from the Bt350bn water management and Bt2trn
infrastructure schemes until 2014, though bids for the MRT lines (Light Green, Pink,
Yellow and Orange) might open this year.
Current backlog Bt12bn. NWR gained Bt3.4bn in new projects in the first half of
2013; most of these are private sector jobs and includes Bt500mn from Baan Baranee
Romklao by Mana Patanakarn. This brings backlog to Bt12bn. NWR expects to add
Bt8bn in new projects in 2013, not including government megaprojects. It is now in
talks for a new Bt2bn petrochemical project.
First income from property development. NWR expects to book ~Bt119mn from a
property project carried out under wholly-owned subsidiary, Mana Patanakarn, this
year. “Baan Baranee” is a low-rise project on Klong 3, Pathum Thani. It has sold 62
units or 30% of the total 198 units with total value of Bt600mn. The second project
“Baan Baranee Romklao”, with value of Bt800mn, is expected to start selling units in
early 2014. NWR expects to book revenue of Bt350mn in 2014 and Bt700mn in 2015
from the property business. NWR is buying the brand “Baranee” from related company
Ruean Rapee Co. Ltd. for Bt50mn; its first payment of Bt30mn will be made in 3Q13.
Equity sharing from C.I.N. “Issara Ladprao” by C.I.N., in which it holds 40% and CI
holds 60%, is expected to contribute Bt12mn in 2Q13; we have raised our assumption
for profit sharing in 2013 to Bt36mn from Bt26mn. It already contributed Bt11mn in
1Q13. C.I.N.’s new project is ISSI Condominium Suksawat, valued at Bt1.8bn, with 892
units; NWR will start booking income from this in 2015.
Windfall of Bt120mn likely in 2013. NWR expects to book Bt120mn this year from
the settlement of a lawsuit filed in Dubai for nonpayment of debt. This will be a oneoff
extra and we do not factor it into our calculation of fair value. NWR booked the
litigation cost of this lawsuit in 1Q13. It has another court case for nonpayment, the
Klong Dan motorway; it will be several years before this lawsuit is settled. It hopes for
a Bt300-500mn windfall settlement.
Recommend BUY and adjust target price to Bt4.2. We reduce NWR’s target price
to Bt4.2 (dilution from NWR-W1 of 246.8 million units, exercise price at Bt2.2, included)
from Bt4.7. The valuation comes from sum-of-the-parts using DCF with Bt3.6 for the
contractor business minus debt by increasing beta from 1.5 to 1.7, equity risk premium
of 7% for seven years, risk-free rate (RFR) of 4.5%, and terminal growth of 3%, Bt0.39
for the property business and Bt0.24 for its holding in C.I.N.