Supalai

Supalai Plc (SPALI)

- 1Q14 profit drops qoq but grows yoy as expected
1Q14 net profit and normalized profit was reported at B736m,
falling 58%qoq but growing 56%yoy (as expected). SPALI
generated B3.1bn income from property business in 1Q14 (up
55%yoy; 46% from horizontal projects, 54% from condominiums),
mainly from Supalai Premier Ratchathewi condominium (continuing
from late-2013). SPALI's gross margin improved from 40.5% in
1Q13 to 41.9% in 1Q14, while SG&A/Sales remained as low as
11.5%. Thus, norm profit margin stayed at 22.6%, as high as in
2013. 1Q14 presales was B4bn, slipping 8%yoy. Condominium
presales dropped yoy to B1.84bn because only one project was
opened: Supalai Loft (75% has been sold from the total value of
B1.14bn). 1Q14 horizontal projects sales volume grew to B2.16bn
as SPALI has been expanding its business in other provinces. In
terms of financial structure, SPALI's 1Q14 net gearing was 0.61x,
which was still good.

- Profit to slow down in 2Q14 but prosper in 2H14
1Q14 net profit made up 26% of our FY2014 earnings forecast. We
project FY2014 net profit to grow by 40%yoy to B4bn. 2Q14 profit is
expected to slow down and make the bottom of 2014, but Supalai
River Resort condominiums might start to be transferred within
2Q14. However, net profit is expected to grow remarkably in 2H14,
as the construction of five condominiums would be completed. 1Q14
backlog was B38.6bn; B14bn of which would be transferred in 2014,
already making up 100% of our income target. There are 26 new
projects planned to be opened in 2014 with the total value of
B32bn. FY2014 presales are expected to reach the target of B22bn
(up 18%yoy).
-
Keep earnings forecast. Maintain fair value at B21.04
We maintain SPALI's earnings forecast. We also keep FY2014 fair
value at B21.04, with FY2014 P/E ratio of 9x. We expect SPALI's
earnings result to be strong this year owing to low debt burden and
good gross margin. We reiterate to buy.