Pruksa Real Estate

Pruksa Real Estate Plc

Investment thesis

Record high low-rise pre-sales in 2Q14 and an expected impressive profit for the quarter will prompt a street earnings projection upgrade, we believe. Furthermore, PS now looks set to outdo the record earnings it posted for FY13 by about 15%. As such, we have re-rated our PER valuation peg from 11x to 13x (1SD above its FY06-13 mean), which makes for a new YE14 target price of Bt39 (up from Bt32). 
Earnings forecast upgrade; consensus will follow
We have revised up our core profit forecasts by 5% for FY14 and by 3% for FY15 to reflect revenue assumption rises of 1% for FY14-15 and a 0.5% fatter NM assumption of 15.5% (and up 0.2% to 15.5% for FY15). Presales at end-June are estimated to have secured 81% of our FY14 revenue forecast and 30% of FY15. 4Q14 presales will enhance revenue visibility for FY15. A consensus earnings forecast upgrade will follow, we believe, as 1H14 profit will comprise 51% of the full-year projection. Our model is 19% above the street, which has lower top-line and net margin assumptions. 
Expanded expectation for 2Q14 earnings
Core profit is expected of Bt1.8bn for 2Q14, up by 30% YoY and 73% QoQ (we previously forecast only Bt1.5bn). We estimate Bt10.5bn in revenue, up by 16% YoY and 31% QoQ. The reported booking-to-transference interval will shorten from 112 days in 1Q14 to less than 100 days in 2Q14. GM will post a rise of 2.2% YoY to 36.2% (flattish QoQ) and NM an increase of 1.9% YoY to 17.5%. The squeezing effect of the slim-GM Chapter One Modern Dutch condo is less that we earlier assumed (Bt700m transferred in May-June out of Bt4bn in total value). Posted 1H14 profit will comprise 44% of our FY14 forecast.
Record low-rise presales for 2Q14 and strong 2H14 pre-sales outlook
Low-rise pre-sales set a new record of Bt8.1bn for 2Q14, up by 16% YoY and 32% QoQ. 2Q14 Condo pre-sales dived by 52% YoY and 24%QoQ on fewer launches. Total pre-sales were Bt9.7bn, down 6% YoY but up 9% QoQ. Low-rise presales growth will be sustained through 2H14 by a heavy launch schedule (80% of the FY14 launch plan of Bt50bn). PS targets Bt23-27bn in 2H14 pre-sales (up by 24-45% YoY & 29-51% HoH).
Positive surprise at response to new high-end brand The Palm
We took Thai fund managers to visit at The Palm Srinakarin (a new high-end brand)—project value of Bt1.9bn; 175 units; five house designs; sales prices of Bt9.2m/unit, Bt10.5m, Bt12.0m, Bt15.2m, and Bt25m. In a positive surprise, the units that launched on March 22 are now fully booked (Bt516m; 43 units). The construction period is only 70-80 days, due to the use of prefabrication technology. GM should be fat at 36-40%. The project will be completed by FY16.