Supalai

Supalai Plc (SPALI)

Investment thesis
It is now time to reload SPALI on anticipation of a record 4Q13 profit and FY14 earnings growth leadership of our ResDev coverage, which will outweigh the effect of a downsized FY13 presales target. The stock trades at cheap PER of 7.5x for FY14. There is also scope for earnings upside (presales secure 95% of our FY14 revenue forecast—the clearest top-line visibility of our coverage). Our TRADING BUY rating stands with an unchanged YE14 target price of Bt22, pegged to target PER of 10x.
FY13 presales target cut, but top-line outlook remains strong
In line with our expectation, SPALI has chopped its FY13 presales target from Bt26bn to Bt20bn. 9M13 presales comprise 59% of its down-sized number (46% of its old target). The firm has slashed its 4Q13 launch schedule from Bt15bn (six condos and five low-rise projects) to Bt7.7bn (four condos and two low-rise projects). Despite the sharply lower target, 4Q13 presales will double QoQ to Bt8bn, the best quarter of the year (flattish YoY; 4Q12 presales set a new record).  
However, the management maintains its FY13 residential revenue target at Bt13.5bn, up 16% YoY. We conservatively forecast FY13 residential revenue of Bt12.7bn—6% short of SPALI’s guidance, as 9M13 income comprises only 42% of the firm’s full-year target. 
Looking ahead to an all-time high 4Q13 profit
The unattractive 3Q13 profit is behind us (we estimate Bt372m, down 34% YoY but up 23% QoQ). We anticipate record 4Q13 earnings of Bt1.9bn (up by 20% YoY and 400% QoQ). Note that SPALI’s weakest quarter of the year was 2Q13. Fifty five percent of our FY13 top-line forecast is to be realized in 4Q13, led by the transference of three condos—City Resort Ratchada-Huaykwang (Bt1.6bn; fully booked), Park Ratchapruek-Petchakasem (Bt1.7bn; fully booked) and Premier Ratchathewi (Bt3.2bn; 97% booked).
The clearest revenue growth in FY14
In FY14-15, SPALI will outperform the rest of our coverage, driven by transference of its huge presales backlog, which stood at Bt39bn at end-Sept. Note that Bt7.2bn of the backlog is to be transferred in 4Q13, Bt14.7bn in FY14 and Bt13.3bn in FY15. Presales fully secure our revenue forecast for FY13, 95% of FY14 and 74% of FY15. Our FY14 revenue growth forecast is 22% (against a mean of 16% for our coverage). The ondos equal 18-20% of unit value (the sector mean is only 10%).
Scope for earnings upside, FY14-15
Better-than-expected revenue growth and/or a fatter net margin (economies-of-scale tied to top-line expansion) would make for upside to our model. SPALI guides that residential revenue will set a new record of Bt20bn in FY14 (up about 40% YoY); we assume only Bt15.5bn for FY14 and Bt17.8bn for FY15.