Sansiri

Sansiri Plc
Presale and revenue guidance cut. As we expected, SIRI cut its presales guidance by 6% to Bt45bn for 2013, +5% YoY, and by 28% to Bt38bn for 2014, -15% YoY. YTD, it has reached presales of Bt40bn or 89% of its revised target. TH and SDH presales are not meeting expectations and this forced the cut. Presales of mid-end TH under the Town Avenue brand were disappointing, but it is because they are competing with low-end SDH where unit price is on par at Bt3-5mn. Its SDH presales target was originally too optimistic. The slowing growth in 2014 is largely due to a sharp drop in condo presales due to sluggish demand and a more conservative strategy that involves launching projects only after EIA approval to avoid risk of delay in completion. SIRI also cut its revenue guidance by 12% to Bt30bn for 2013 and 15% to Bt34bn for 2014.
New launches slowing. SIRI plans to launch 30-35 projects worth Bt40-45bn next year, a 25-35% drop YoY, half condo and half low-rise. It has already secured land for 26 projects worth Bt39bn (11 condos for Bt19bn and 15 low-rise for Bt20bn). It will reduce the portion of Town Avenue and raise the portion of lower-end TH, Met Town, priced at Bt1.5-2mn/unit. This product will complete with Indy from LH, The Trust Town from QH, Pruksa Ville from PS, and Supalai Ville from SPALI. Of the total new launches, those in the provinces will be cut to 25-30% from 40% and focus shift to low-rise from condo.
Earnings revised. We cut our 2013forecast by 28% to Bt2.4bn, 2014 by 19% to Bt3.2bn and 2015 by 15% to Bt3.6bn. This implies an earnings drop of 17% in 2013, but growth of 31% in 2014 and 13% in 2015.
• 2013: We lower real estate (RE) revenue by 9% to Bt30bn and net profit margin to 7.9% from 10% due to a mismatch between high marketing costs to generate high presales in 1H13 and booking of revenue some years from now when deeds are transferred.
• 2014: We cut RE revenue by 12% to Bt33bn partly due to construction delay at five condos (Bt1.9bn) and smaller low-rise sales. We also cut net margin to 9.6% from 10.4%. Despite this, there will be improvement YoY due to smaller mismatch between marketing cost and revenue, as revenue/presales ratio will rise to 85% in 2014 from 67% in 2013.  Note that our forecast is below SIRI’s Bt3.4-3.7bn.
• Based on our revised forecast, SIRI’s current backlog of Bt67.6bn secures 99% of 2013, 50% of 2014 and 46% of 2015.
Maintain BUY. We reduce SIRI’s PT to Bt2.9/share from Bt4/share after revising our forecast and lowering valuation to 1.5x PBV from 2x on weaker ROE. Despite this we maintain our BUY, as the share price correction of 60% from its peak in March already discounts its weaker than expected growth outlook. SIRI remains a good dividend play with attractive dividend yield of 5% for 2013.