Pruksa Real Estate

Pruksa Real Estate Plc (PS)

In line with our estimate
PS reported a 2Q13 core profit of Bt1.4bn, up by 41% YoY and 82% QoQ. The result was in line with our estimate, but was 10% above the street number, led by stronger revenue than assumed by the consensus.  
Results highlights
The company delivered a strong top-line of Bt9bn for 2Q13, up by 33% YoY and 44% QoQ. PS has proved transference execution ability—revenue jumped by 177% YoY for condos, by 24% for THs and by 8% for SDHs. Housing GM dipped by 0.4% YoY and 0.5% QoQ to 33.8%—a little below our assumption (we had modeled for slight GM expansion). The SG&A-to-sales ratio plunged from 15% in 2Q12 to 14.4% in 2Q13 on a higher top-line. Core margin was 15.6%—PS’s best since 4Q10.
The QoQ profit growth was driven by revenue and a lower SG&A/sales ratio (down 4.2% QoQ from 18.6% in 1Q13). The net gearing ratio was stable at 0.9x at end-June.  
Outlook
PS will post YoY and QoQ earnings expansion for 3Q13, driven by the top-line. We expect revenue of Bt9.5bn, up by 30% YoY and 5% QoQ. The remaining units of the Seed Mingle (Bt1.7bn) and Fuse Mobius (Bt2.3bn) will continue to transfer in 3Q13. Besides, Urbano Absolute (Bt2.7bn; 91% booked) started transferring in July and The Tree Bangpoh (Bt1.4bn; 97% booked) in August. NM will fatten QoQ in 3Q13 onward on a greater proportion of high-GM condo sales in the revenue mix. The best earnings of the year will be in 4Q13, when Condolette Convent (650m; 74% booked) will start transferring.
What’s changed? 
1H13 core profit comprises 40% of our FY13 forecast (42% of the consensus), which we maintain unchanged. The end-June presales backlog fully secures our FY13 revenue projection. In the meantime, there is scope for top-line upside. Management guides that the firm could post FY13 income of Bt42bn under the best-case scenario (Bt34bn under the base-case scenario). Note that PS might upgrade our FY13 presales target from Bt35bn to Bt38-40bn if a planned line-up of condo projects goes ahead in 2H13 (all the land plots have already been bought).
Recommendation
PS’s valuation is compelling—an FY13 PER of 7.9x, a deeply discount to its FY06-12 mean of 9.2x (most of the other ResDev stocks under our coverage trade at above their long-term means). Our BUY rating stands with a YE13 target price of Bt28, pegged to a PER of 11x.