Raimon Land

Raimon Land Plc

Investment thesis
We model for record earnings for 2Q14 of Bt378m (up by 4% QoQ, 65% YoY), driven by the ongoing transference of the 185 Rajadamri and The River projects. We also expect a fatter GM for the quarter of 41.5% (36.2% for FY13). Meanwhile, 2Q14 presales of Bt1bn were better than we and the street expected, given the political chaos that prevailed during much of the period. We are confident that both presales and revenue will expand in 2H14, now that the political climate has calmed.
Record quarterly earnings for 2Q14
Revenue of Bt1.7bn is expected for 2Q14, which comprises Bt1.35bn from 185 Rajadamri and Bt350m from The River. GM is estimated at 41.5%, boosted by a fat margin at 185 Rajadamri. As such, we anticipate 2Q14 net earnings of Bt378m, up by 4% QoQ and 65% YoY. That would make for a 1H14 profit equal to 53% of our FY14 forecast. Proof of performance for 2Q14 would probably prompt us to upgrade our FY14 bottom-line projection, given that we now expect stronger numbers for 2H14 that we did at the start of May. 
Better presales support long-term revenue visibility
2Q14 presales were around Bt1bn, flat QoQ. But it was an impressive number because the firm did not launch any new projects during that period. We expect stronger presales in 2H14, now that the political turmoil has ended and consumer confidence has risen. Note that high-end condos in Bangkok and tourist towns, such as Pattaya, still attract high-end customers (foreigners comprise about 66% of RML’s clients). The firm has unsold condos valued at Bt7bn, which we estimate would be sufficient for about another year of bookings.
The majority of 2H14 presales will be at two projects—Unixx South-Pattaya and The Loft Ekkamai—which launched last year. Adding the Bt1bn in 2Q14 presales to the existing backlog, total presales come to Bt12bn, which secures revenue into FY16.
Scope for upside—FY14 GM could beat our assumption
We previously modeled for FY14 GM of 40.2% under the assumption that 73% of revenue would be from 185 Rajadamri and 27% from other projects. The GM at 185 Rajadamri is 42%, so if the project were to account for a greater proportion of the top-line than we currently assume, the bottom-line would exceed our expectation. Our sensitivity analysis indicates that a 1% fatter GM would boost net profit by Bt50m (4%) from our current projection. Note that GM in 1Q14 was 41.5% with 82% of revenue coming from the transference of 185 Rajadamri and the remaining 18% from The River and others.