Land & Houses

Land & Houses Plc (LH)

2013 operational wrap-up. In 2013, presales were Bt30.2bn, +20% YoY, in line with
LH’s target. Of this, 61% was SDH, 34% condo and 5% TH. Condo presales were very
good at Bt10.4bn, well above its target of Bt7.5bn. However, SDH (Bt18.2bn) and TH
(Bt1.6bn) presales came out below its target of Bt20bn and Bt2.3bn respectively
because of slow presales for high- and low-end SDH and the postponement of The
Landmark TH launch to this year. This led to low revenue growth of below 10% versus
its original forecast of 12%.
2014 business plan. LH’s targets assume an end to the political unrest in mid-2Q14,
and thus only marginal growth in both presales and revenue in the whole of 2014. Its
presales goal is 6% growth to Bt32bn in 2014, made up of 9% growth in SDH to
Bt19.9bn, 29% in TH to Bt2bn and a 3% contraction in condo to Bt10bn. LH estimates a
take-up rate of 45% for condos available for sale (active projects plus new launches) in
the year. We believe this is achievable as the assumption of a 45% take-up rate is
below its historical 51-94% for 2009-2013. Our conviction is further upheld by the good
locations for several of its projects - 333 Riverside in Kiak Kai area, The Key Charoen Rat
and The Room Charoen Krung.
Earnings revision. We reduce our 2014 forecast by 15% to Bt6.6bn and 2015 by 20% to
Bt7.6bn after adopting more conservative assumptions: revenue growth of 2-5% for
low-rise houses and the transfer of 80% of condo backlog due this year. We expect no
price cuts and thus raise gross margin by almost a percentage point to 35-35.5% in
response to the solid margin in 9M13. We do not include gain from sale of assets in
our forecast as this has been put off and is not likely in the near term. Current backlog
of Bt14.8bn secures 25% of our 2014 forecast. Our forecasts are now 4-7% below
consensus for 2013-2015.
Reduce PT, maintain Neutral. The reduction in earnings assumption and assigning a
lower value to its investment in associated companies leads to a reduction in our PT to
Bt10.0/share (52% for real estate business and 47% for investment) from Bt12.8/share.
We leave our PBV of 3.5x for real estate business unchanged. Despite the premium PBV
assigned to LH as an index play, the TTR of 20% is unattractive compared to peers.
Without the sale of assets to a fund in the near term, we see no other catalyst to
boost share price. Thus, we maintain Neutral rating.