Supalai

Supalai Plc (SPALI)

1st half 2013 pre-sales low, projected to rise in 2H thanks to 18 new projects

Q2 2013 pre-sales are still unchanged from 1Q13 at B4bn, making SPALI's
1H13 total presales at B7.9bn (B3.9bn from horizontal projects, B4bn
from condominiums), which is low compared to FY2013 target at
B26bn, as there are only 2 new condominiums opened in 1H13:
Pattaya Supalai Vista Mare, with total reservation over 33% from the
value of B2.2bn, and Hat Yai City Resort, with 31% total reservation
from the value of B1.24bn. In 2H13, however, SPALI has planned the
opening of 18 new projects at the total value of B20bn, consisting of 8
condominium projects which can boost presales. For portfolio at end-
2Q13, there are available-for-sales projects at the value of B22.5bn,
consisting of a finished condominium at the value of B1.3bn, which is
low. Total backlog of B37bn are mostly condominium under
construction at the value of B32.5bn, which income would be gradually
recognized until 2016. For recurring income extension plan, the
company has purchased 16 floors out of 44 floors of an office building
in the City of Makati, the Philippines, at B770m. Current occupancy
rate is 86% due to 14600 square meter rental space, projected to
make rental profit at B65m/year, or 8.4% yield, which is higher than
offices in Thailand, which grant only 5% yield per year.
- Q2 2013 profit year's lowest, rising in 2nd half 2013
SPALI's Q2 2013 income from real estate is projected at B1.79bn, falling
12% qoq, mostly from transferring horizontal projects. Gross margin is
projected to stay at 41%. According to our assumption at norm profit
margin of 18.8%, norm profit would be B352m, falling 25.4% qoq but
rising 15.7 yoy, projected to be the quarter with the lowest earnings
result. Recovery in profit is predicted in 3Q13 and maximize in 4Q13,
as 3 new condominiums - Supalai Park (Ratchapruek-Petchkasem),
City Resort (Ratchada-Huai Kwang) and Supalai Premier (Ratchadewi)
- would be transferred. We project FY2013 selling income at B14.2bn,
rising 26% yoy. Current backlog is B8.4bn, which is 87% of the
forecast.
- FV stays at 12x PER (B24.59), recommend "BUY"
Though housing loan from commercial banks has become stricter,
SPALI has a policy to collect down payment at 15-20% of the selling
price, higher than the average in the sector, lowering risk of down
payment cancellation. We keep FV at PER of 12x or B24.59, with 36%
upside and 4.5% dividend yield.