Nawarat Patanakarn

Nawarat Patanakarn Plc (NWR)
Bt1.1bn contract signed. NWR has signed a contract to build the bypass from Route #3 (Bangpu) to Ban Klong Krabue part 3 in Samut Prakarn. Construction will extend from September 24, 2013 to June 9, 2016. It will construct the 8-lane highway, sidewalks, foundations, eight bridges and build underground telephone conduits.
Current backlog Bt12bn. NWR gained ~Bt5bn in new projects in 9M13 and expects to add a total of Bt8bn in 2013, not including government megaprojects. The new project is its second biggest this year after contracting to build a drainage tunnel under Bangsue canal, valued at Bt2.4bn, on Sept 13; both have been in our backlog since 1Q13, but contract signing was delayed. Most of 2013’s new projects are in the public sector; in the private sector it gets most from its property business, with Bt500mn from Baan Baranee Romklao. Up soon may be a Bt2bn petrochemical project.
First income from property development. NWR expects to book ~Bt80mn in 2013 from a property project by wholly-owned subsidiary, Mana Patanakarn, down from the previous forecast of Bt119mn, first portion in 3Q13. Baan Baranee is a low-rise project on Klong 3, Pathum Thani. It has sold 62 units or 30% of the 198 units with total value of Bt600mn. The second project, the Bt800mn Baan Baranee Romklao, is expected to start selling units in early 2014. NWR expects to book revenue of Bt350mn in 2014 and Bt700mn in 2015 from the property business. NWR is buying the brand “Baranee” from related company Ruean Rapee Co. Ltd. for Bt50mn, with payment to be made in 3Q13.
Equity sharing from C.I.N. Issara Ladprao by C.I.N., in which NWR holds 40% and CI 60%, is expected to contribute Bt10mn in 3Q13. We estimate Bt36mn in 2013 with Bt19mn already booked in 1H13. C.I.N.’s new project is ISSI Condominium Suksawat, valued at Bt1.8bn, with 892 units; income will begin in 2015.
Possible Bt120mn windfall in 2013. NWR expects to book Bt120mn this year from the settlement of a lawsuit filed in Dubai for nonpayment of debt, and this money should more than offset the Bt50mn paid for “Baranee” brand in 3Q13. It has another court case for nonpayment, the Klong Dan motorway; it will be several years before this lawsuit is settled. It hopes for a Bt300-500mn settlement.
Recommend BUY, but cut target price to Bt3.8/share. 1H13 was disappointing at only 30% of our full year forecast of Bt350mn, and we have thus lowered our core profit expectations 20% to Bt281mn, with revenues cut by 14% to Bt7.5bn. NWR has a high backlog of ~Bt12bn and is likely to win some portions of the government’s megaprojects, supporting earnings from 2014. Property development and the condo projects (JV) will provide support in 2015. We believe NWR’s strategy to do its own property development is a good long-term move, though it may create bumps in annual earnings in line with project size. We assign fair value at Bt3.8/share, 2.3x P/BV (average of the long term P/BV band), equivalent to our valuation for STEC.