Quality Houses

Quality Houses  Plc (QH)
- YTD presales Bt13.6bn, 68% of its 2013 target; upside from additional condo
- Backlog: Bt10.5bn, securing 71% of 2013F, 12% of 2014F and 16% of 2015F
- 2Q13A beat all forecasts, 3Q13 better QoQ, but 4Q13 lower
its full year target of Bt20bn. There could be upside to this as it is now planning to add
another condo to its launch plan in 4Q13, the Bt850mn The Trust Condo Amata
Nakorn, particularly since condo presales are already at 91% of its full year target. We
believe QH’s presales peaked in 1Q13, with a slide in 2Q13 and 3Q13, and will then creep
back up in 4Q13. As of June 2013, total backlog was Bt10.5bn, which secures 71% of our
2013 forecast, 12% of 2014 and 16% of 2015.
2Q13A beat all estimates. 2Q13A net profit was Bt1.1bn, +240.5% YoY and +87.9%
QoQ. Behind the rise QoQ was more deed transfers (+90% QoQ) and improved real
estate gross margin (32.3% in 2Q13 versus 31% in 1Q13) as a consequence of a smaller
portion of high-end SDH (18% in 2Q13 versus 29% in 1Q13), as these have a lower
margin. This brings 1H13 net profit to Bt1.7bn, +173.8% YoY, equivalent to 56% of our
full year forecast.
3Q13 better QoQ, 4Q13 lower. We expect QoQ growth in revenue in 3Q13 backed by
continued transfers for three condos – Casa Condo Asoke-Dindang, Casa Condo Chang
Pueak, The Trust Resident Ratchada-Rama 3. This will be followed by fewer transfers in
4Q13, hence lower revenue QoQ.
Upside risk – HMPRO setup of property fund. According to QH, HMPRO is planning
to sell its shopping mall in Hua Hin into a retail property fund by 4Q13. QH will benefit
in terms of higher equity income from HMPRO, in which QH holds 20%. At the same
time, QH itself is putting off the sale of Centre Point Silom to QHHR to next year. The
gain from this transaction is likely to be immaterial at less than Bt100mn. Neither one
of these items are in our forecast as yet.
Maintain BUY. In the near term, HMPRO’s property fund setup plus upside risk for
condo presales plus better performance in 3Q13 could be share price catalysts. Add to
this the fact that QH is trading at an undemanding PBV of 1.7x of 2013, it is clearly
worthy of a BUY in our view. As with all players in the sector, the sole concern is that if
banks become more restrictive on post-financing, take-up rate could slow.