Amata Corporation

Amata Corporation Plc
- Beating all estimates, 2Q13A net profit was Bt681mn, strong growth YoY and QoQ, bringing 1H13 to Bt815mn or 52% of our full year forecast
- Land sales remain sluggish at only 611 rai in 8M13 accounting for a low 20% of its full year forecast
- Additional investment in two power plants will raise ownership by 56% to 197MW and add contribution of ~Bt110mn  a year
2Q13 above all estimates. Net profit was Bt681mn in 2Q13, strong growth of 251% YoY and 423% QoQ, underwritten by: 1) higher portion of revenue from high-priced Amata Nakorn (130 rai in 2Q13 versus 10 rai in 2Q12) that raised revenue and reduced effective tax rate to just 9.2% from 18.3% in 2Q12 and 14.1% in 1Q13 due to tax holiday on land sold at Amata Nakorn; 2) solid gross margin of 61% on land sales (69% for Amata Nakorn and 56% for Amata City) after last year’s price hike; 3) growing income from utilities and property rental. This brought net profit to Bt815mn in 1H13, +61.4% YoY, accounting for 52% of our full year forecast.
Land sales remain sluggish. Land sales remain slow at just 611 rai YTD (193 rai in Amata Nakorn and 418 rai in Amata City). Though this is only 20% of its full year target of 3,000 rai, AMATA itself continues to be confident it will meet its target, since it is negotiating for the sale of another 2,000 rai.
Additional investment in power plant. AMATA will take a direct 20% stake in each of Amata B.Grimm Power 4 and Amata B.Grimm Power 5 with total investment of Bt256mn. This will raise its power plant holdings to 197MW from 126MW. We estimate annual equity income of ~Bt110mn from these two projects from 2016 onward.
Maintain BUY. We maintain BUY as we continue to expect a flow of good news to support share price. Among the news items could be sale of more land to its Thai-Chinese joint venture, listing of Amata Vietnam, sale of ready-built factories to a property fund and sale of power plants to an infrastructure fund. In our view, the recent cut in Thailand’s GDP forecast will have limited impact on foreign direct investment since investors use Thailand as a production base and the gateway to ASEAN countries.