Industrial Estates
Government to appoint new BOI to revive investors' confidence Underweight
Industrial Estates
- Government to appoint new BOI committee for B600bn investment projects
After the cabinet meeting yesterday, the deputy government spokesman
revealed that the Council of State and the Election Commission have
allowed appointment of a new BOI committee after the former BOI
committee expired in October 2013. After the new BOI committee is
appointed, investment projects totaling B600bn can be approved and
supported.
The new BOI committee could not be appointed earlier; after the
parliament was dissolved, the caretaker government was not allowed to
appoint the new BOI committee, as it might leave an obligation to the
new government. However, after the Council of State and the Election
Commission discussed on the issue, the prohibition on the appointment
was lifted, and the new BOI committee could be appointed.
- FY2014 land sales to drop 13% but normalized EPS growth expected at 6.5%
As the new BOI committee has been appointed, approval-pending
projects can be processed, thus reviving investors' confidence. This has
a positive sentiment on industrial estate sectors, as land sales for
investors makes up 38% of the sector's total income. 1Q14 land sales
are expected to be low because investors have postponed their
investment plans. However, after the new BOI committee has been
appointed, total land sales are projected to rebound significantly
throughout the remainder of 2014. We project FY2014 total land sales at
2,800 rai, dropping 13%yoy (1,200 rai for AMATA, 1,200 rai for
HEMRAJ, 400 rai for ROJNA). B12bn total backlog from end-2013 has
already made up B11bn income (or 100% of our FY2014 total income
forecast), dropping 12%yoy. Still, recurring income and share of profit
from power plants are projected to grow and compensate for sluggish
land sales business. Thus, FY2014 normalized EPS growth is expected at
6.5%yoy.
- "Underweight". Buy only HEMRAJ
The sector's profit is lower than the market profit. The sector's current
P/E ratio is 11.6x, close to the statistical average and the fair value. We
reiterate "Underweight". We recommend buying only
HEMRAJ([email protected]) for steady and well-balanced income base from land
sales, rental and utility businesses. Also, HEMRAJ would also recognize
share of profit from Gheco-one and SPP1 power plants for a full year. Its
dividend yield is 4-5%p.a.
