LPN Development

LPN Development Plc (LPN)

In line with our estimate
LPN posted a net profit of Bt800m for 2Q13, up by 440% YoY and 122% QoQ. The result was line with our estimate and 6% above the consensus. The firm announced a DPS of Bt0.26 for 1H13 operations, implying an annualized yield of 2.4% (XD on August 20; payment on Sept 4).
Results highlights
In 2Q13, LPN reported impressive condo revenue of Bt4.2bn, up by 310% YoY and 77% QoQ. During the quarter, the firm started transferring Lumpini Park Beach Jomtien Pattaya (39% of 2Q13 condo revenue) and Lumpini Mega City Bangna (38% of condo revenue). Condo GM rose from 32.7% in 2Q12 to 34.6% in 2Q13, led by GM for the Jomtien condo. Although 2Q13 presales set a record of Bt8.8bn, SG&A expenses were well-managed. The SG&A/sales ratio dipped by 7.9% YoY and 4.7% QoQ to 11.0%, the decline due to revenue expansion. The net gearing ratio diminished from 0.38x at end-March to 0.34x at end-June.
Outlook
LPN will report sharply higher YoY earnings for 3Q13 (and a moderate QoQ rise). Condo revenue is expected to jump 50% YoY on the realization of the remainder of the units at Jomtien Pattaya and Mega Bangna A, B, E and D buildings. Mega Bangna C building is now completed and likely to start transferring in Sept. Four projects are scheduled to transfer in 4Q13 (Bt8.3bn in total value, 82% booked), which will mean QoQ profit growth (but the bottom-line will drop YoY, due to high base set by 4Q12 earnings of Bt1.2bn).
What’s changed?
We maintain our projection unchanged. 1H13 profit comprises 43% of our FY13 forecast and 42% of the street number. The presales backlog of Bt23.4bn at end-June secures 89% of our FY13 condo revenue projection. Note that at end-June, LPN also had units worth Bt3.6bn available for sale. Additional sales at the Mega Bangna C building (project value of Bt1.2bn) will enable LPN to achieve our FY13 revenue forecast. A higher-than-modeled GM would mean upside to our earnings projection (GM was 34.2% in 1H13; we currently assume only 32.2% for FY13).
Recommendation
We prefer LPN for its clear revenue visibility (presales secure 56% of our FY14 revenue forecast and 33% of FY15). New launches in 2H13 (at least Bt12bn) will increase secured FY14 revenue. The stock price would get a boost from strong bookings for The Lumpini 24 (Bt3bn) in Sept—very fat GM, as the firm has held the land plot for a long time. LPN looks set to beat its FY13 presales target of Bt20bn by 15-20%, in our view. Our BUY rating stands with an unchanged YE13 target price of Bt26, pegged to an FY13 PER of 14.0x (2SDs above its FY06-12 mean). The stock currently trades at an FY13 PER of 12.0x and offers good dividend yields of 4.2% for FY13 and 4.9% for FY14.