Supalai

Supalai Plc (SPALI)

- 2014 income target is B20bn or 58% growth. New projects to be launched
For 2014, SPALI still keeps its aggressive business strategy against other property
entrepreneurs, expecting income from property sale at B20bn or the growth of
58%yoy and new presales at B22bn or the growth of 18%yoy. The company has
planned to launch 26 new projects worth of B33bn in total (18 horizontals and 8
condominiums), additional to 16 projects worth of B17.7bn previously launched.
SPALI will expand its horizontal projects to new provinces e.g. Udon Thani and
Nakhon Ratchasima. At the same time, it would also launch condominium projects
near the mass transit lines in Bangkok and parameter, which are the company’s
strong point for their lower selling prices than peers’. Backlog at end-2013 is
B39bn, which will be gradually booked as income in the next four years; B15.6bn
of which in 2014. In terms of a financial structure, net gearing is estimated below
0.6x because at the end of the year the company will have cash income from
transfers of many condominiums; the net gearing is lower than the sector’s
average and sufficient for additional investment of B16bn this year (B5bn for land
purchase and B11bn for construction) and for paying dividend. In addition, the
company has got insignificant impact from the political turmoil, evident by sales in
January 2014 that dropped only 20% from the same period last year, better than
expected.
- 4Q13 profit to make new high though lower than expected. 39% growth foreseen in 2014
In 4Q13, SPALI could recognize approximately B6.6bn in income from project
transfers (only the parent company), which is lower than the previous target since
the transfer of most Supalai Premier Ratchathewi comdominium had been
postponed to this year. However, 4Q13 profit would still be able to make a new
high at B1.77bn, beating 9M13 profit of B1.1bn. For overall 2013, we revise down
our forecast to be consistent with the company’s data, resulting in a new profit
forecast of B2.9bn, down 12% from previously but still up 5%yoy. For 2014, we
project the profit to grow notably to B4bn under a conservative estimate of selling
income at B17.2bn, which already has 90% backlog to support, mostly
condominiums that will finish the construction during the year (see table on next
page). Gross margin is projected to stabilize at 40% because the cost of
condominium projects had been locked before starting the construction.
Accordingly, normalized profit margin would be as high as 23%, the top of the
sector.
- Fair value at 9x PER is B21.04. 2H13 dividend expected at B0.4/share
With foreseen notable profit in 4Q13 and 2014 and attractive dividend, we
reiterate to buy SPALI. Fair value at 9x PER is B21.04. 2H13 dividend can be
expected at B0.4/share or a yield of 4.5% p.a.