Ananda Development

Ananda Development Plc (ANAN)

Investment thesis
Downside risk to the share price is limited, as ANAN trades near its BV for YE14. Its PERs are the lowest of our ResDev coverage at only 6.0x for FY13 and 4.8x for FY14. The firm will post a record net profit of Bt1.5bn for 4Q13, following a 9M13 loss. Our BUY rating stands with a YE13 target price of Bt4.20, pegged to a PER of 10x.
Unattractive 2Q-3Q13 numbers on the radar
ANAN reported a net loss of Bt94m for 2Q13 versus net profits of B38m for 2Q12 and Bt5m for 1Q13. The loss was deeper than our estimate of Bt72m, due to higher-than-expected SG&A expenses. The 2Q13 core loss was Bt48m (core profits of Bt219m for 2Q12 and Bt61m for 1Q13). PPA in 2Q13 dived by 75% YoY and 19% QoQ (lower condo transference at “leveraged buyout” projects). We maintain our model unchanged—an FY13 net profit of Bt1.3bn (against a loss of Bt287m for FY12). The presales backlog at end-June (Bt12bn) fully secures our FY13 revenue forecast and 24% of FY14.
The firm will post further red ink in 3Q13, as expected income of Bt1bn during the quarter won’t be sufficient to cover marketing expenses for project launches totaling Bt9.3bn and additional interest expenses tied to a Bt2.6bn bond issue (5.2% coupon; one-year tenor).
Promised to deliver impressive 4Q13 performances
ANAN will deliver its best presales and earnings of the year in 4Q13. Unit bookings are expected to triple YoY and double QoQ to Bt6bn, enabled by Bt13bn in launches during the quarter. The transference of Ideo Mobi condos during 4Q13 will make for record revenue of Bt7bn, according to our forecast (ANAN targets Bt9bn).
Launches in 2H13 will secure FY14-15 revenue
The firm plans to launch seven condos in 2H13 with a total value of Bt22bn (six land plots have been bought). The locations are near BTS and MRT (Wuthakat, Thapra, Charun, Ratchatevee, Rama IV) stations. Assuming a 50% mean take-up rate for the projects in 2H13, they will secure revenue of Bt7.4bn in FY14 and Bt4.7bn in FY15, equal to 66% of our FY14 top-line forecast and 38% of our FY15 projection.
Perpetual bond issuance will boost launch capacity
At an August 16 EGM, shareholders approved the issuance of perpetual bonds (no maturity date) to a value of US$200m. The bond issue will be treated as equity, but won’t be convertible to shares, nor will it be callable. It won’t have any effect on the leverage ratio and won’t dilute shares. The coupon payment is deductible from retained earnings only. But the bond reduces head-line ROE from 23% to 15% (assuming a US$200 issue), because it is classified at equity. The issuance timeline is late 2013. The bond will enable the launch of at least Bt15bn in new projects.