Ananda Development

Ananda Development Plc (ANAN)
In line with our model
ANAN reported a net loss of Bt96m for 3Q13 following losses of Bt34m in 3Q12 and Bt94m in 2Q13. The result was in line with our estimate and the consensus. Excluding a Bt5m non-cash Purchase Price Allocation (PPA) expense for 3Q13, the core loss was Bt91m versus a core profit of Bt100m in 3Q12 and a core loss of Bt48m in 2Q13.
Results highlights
On a YoY basis, the core operational loss was due to a 31% residential revenue dive to Bt1bn and a high SG&A/sales ratio hike from 24% in 3Q12 to 41% in 3Q13 (on sharply heavier marketing expenses). GM was flattish YoY at 36.3%. The key revenue contributor was remaining units of Morph 38. Ideo Mobi Sukhuvmt A building started transferring in Sept. Core margin was negative in 3Q13 against core margin of 6.4% in 3Q12. PPA plunged from Bt134m in 3Q12 to Bt5m, due to lower condo transference tied to “leveraged buyout” projects.
On a QoQ basis, the deeper loss was mainly due to Bt43m in interest expenses (only Bt7m in 2Q13)—the first coupon payment was made on a Bt2.6bn debenture issue. The net gearing ratio rose from 0.4x at end-June to 0.7x at end-Sept. 
Outlook
The 4Q13 bottom-line will turn around. We anticipate a net profit of Bt1.5bn (a net loss of Bt33m in 4Q12), driven by record revenue of Bt6.9bn (triple YoY and double QoQ). The key contributors during the quarter will be three Ideo Mobi condos (Bt9.5bn in total value; almost fully booked)--Ideo Mobi Sukhumvit, Sathorn and Rama IX. Note that Ideo Mobi Phayathai (Bt1.5bn) will start transferring in 1Q14 instead of Dec 2013.
What’s changed?
We maintain our projection unchanged—an FY13 net profit of Bt1.4bn, a turnaround from a net loss in FY12. The presales backlog fully secures our FY13 residential revenue forecast, 77% of FY14, and 59% of FY15.
Recommendation
We reiterate our TRADING BUY rating on ANAN with an unchanged YE13 target price of Bt4.0, pegged to a target PER of 8x (a 15% discount to our mean ResDev coverage target). The stock trades at core PERs of 5.4x for FY13 and 4.4x for FY14, the lowest among our coverage (PERs of 10.4x for FY13 and 8.7x for FY14). The catalysts will be presales growth leadership in 4Q13 (we expect record high presales of Bt10bn, up by 600% YoY and 70% QoQ). FY13 presales will beat management guidance of Bt16bn—we assume Bt21bn (up 115% YoY).