Supalai

Supalai Plc (SPALI)
In line with our model
SPALI reported a core profit of Bt351m for 3Q13, down 38% YoY but up 16% QoQ. The core number was in line with our estimate and the consensus.
Results highlights
The YoY dive was mainly due to a residential revenue contraction of 27% YoY to Bt1.9bn, as no new condos transferred during the quarter. Low-rise sales comprised 87% of the top-line (in 3Q12, condos comprised 40% of revenue). Housing GM slipped from 41.93% in 3Q12 to 40.1% in 3Q13, due to the changed product mix (SPALI’s condo GM is fatter than its low-rise GM). The SG&A/sales ratio jumped 4.5% YoY to 16.7%, due to the lower top-line. SPALI delivered slightly better earnings on a QoQ basis, led by 3% growth in residential sales and housing GM that rose from 38.4% in 2Q13 to 40.1% in 3Q13. The SG&A/sales ratio inched up 0.3% QoQ. Net gearing was stable at 0.5x at end-Sept.
Outlook
In 4Q13 SPALI will post all-time high revenue and earnings—we expect net profit to jump by 20% YoY and 400% QoQ and comprise 63% of our FY13 forecast. Three sizable condos will start transferring during the quarter—City Resort Ratchada-Huaykwang (Bt1.6bn; fully booked), Park Ratchapruek-Petchakasem (Bt1.7bn; fully booked) and Premier Ratchathewi (Bt3.2bn; 97% booked). The leverage ratio will decline substantially QoQ at YE13, thanks to the huge transference.
What’s changed? 
9M13 core profit comprises 37% of our full-year forecast, which we maintain unchanged.
We see scope for upside to our model for FY14-15 because SPALI’s presales backlog already secures 95% of our FY14 revenue projection and 74% of our expectation for FY15. Note that the backlog secures 74% of the consensus forecast for FY14 and 65% of its FY15 number.
Recommendation
We like SPALI in anticipation of a record 4Q13 profit and FY14 earnings growth leadership of our ResDev coverage. The stock trades at a low PER of 7.8x for FY14. The multiple would decline if earnings were to exceed our current model (which looks very likely at the moment). SPALI will outperform the rest of our coverage, as it has the clearest revenue visibility for FY14-15. Our YE14 target price stands at Bt22, pegged to a target PER of 10x (1.5x above the firm’s FY06-12 mean).