Amata Corporation

Amata Corporation Plc (AMATA)

Investment thesis
AMATA’s price surged recently on market anticipation that a one-off gain from the IPO of an infrastructure fund (ABPIF) will be booked in 3Q13. Our view is that the one-off gain might boost trading sentiment toward the stock, but there will be only a negligible impact on our target price, as the gain will come at the expense of lower equity income in the future. We expect AMATA to report FY14 core earnings growth of 29% YoY, based on a Bt5.6bn total presales backlog and Letters-of-Intent for a further 2,000 rai. However, there is no guarantee that the LOIs will be converted to presales by YE13. As such, slow YTD land booking progress of only 646 rai makes us cautious about FY14 earnings visibility.
ABPIF set an IPO price at Bt10.5
Than Setakij reported that Amata B Grimm Power Group finally set the IPO price of its infrastructure fund, Amata-B.Grimm Power Infrastructure Fund (ABPIF), at Bt10.50. The fund was 1.5x oversubscribed. ABPIF will invest in the future revenue generated by two cogeneration SPPs—AMATA B.Grimm Power I and AMATA B.Grimm Power II.
Share price surge on anticipation of one-off gain from ABPIF …
The share price outperformed recently in anticipation of a one-off gain to be booked in 3Q13. Given that Amata-B.Grimm Power Group (ABPG) holds 30% of the infrastructure fund, we roughly estimate that ABPG will book a one-of gain of about Bt2600m. As AMATA holds only 13.77% of ABPG, it may book equity income of Bt360m (24% upside to our FY13 earnings forecast). However, cash received from the IPO of the infrastructure fund will be reinvested in SPP projects. Note that ABPG plans to increase total group electricity capacity to 2,000MW (16 plants) by 2019 from the current capacity of 496MW (four plants).
…but gain to be booked at the expense of future equity income
Management guides for a net profit of Bt550-600m from AMATA-B.Grimm Power plants I & II. Given that that ABPG holds 30% of the infrastructure fund, AMATA’s annual equity income from the two projects will drop to Bt23-25m following the IPO from Bt76-83m in the absence of an IPO. We roughly estimate that the launch of the infrastructure fund would boost our YE13 target price by only Bt0.03.
Cautiously positive on presales outlook for 4Q13
AMATA reaffirmed an FY13 presales target of 3,000 rai (ours is 2,500 rai). We view that LOIs for around 2,000 rai might enable the firm to deliver a big chunk of land bookings by YE13—but there is no guarantee of that. Slow YTD land presales of only 646 rai indicate risk of insufficient LOIs being converted into presales by YE13. Weak presales this year would mean diminished FY14 revenue visibility. We would probably cut our FY14 earnings forecast by about 3% for every 100 rai that FY13 land bookings were to fall short of our current assumption of 2,500 rai.