Pruksa Real Estate
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2H14 profit to grow further from 2Q14. HOLD Rec. : HOLD
Pruksa Real Estate Plc (PS)
We revise up FY2014 earnings forecast after 2Q14 net profit was
reported to grow by 76%qoq. PS is expected to grow further in
2H14 and 2015 thanks to B37bn backlog. New fair value is B35.11.
We recommend HOLD
- 2Q14 profit grows. To continue growing in 2H14
2Q14 net profit and normalized profit was reported at B1.87bn, growing
76%qoq and 33%yoy. PS generated B10.8bn income from property
business, increasing 35%qoq and 19%yoy; the business cycle of horizontal
projects dropped from 112 days in 1Q14 to 96 days in 2Q14, and more new
condominiums were transferred. Gross margin remained high at 36.8%,
boosting normalized profit margin to 17.2%. Overall, 1H14 net profit was
B2.96bn, growing 35%yoy, making up 45% of FY2014 earnings forecast of
B42bn. 2H14 income and profit are projected to improve. PS has B37bn
backlog; B16.1bn of which will be transferred in 2H14. In addition, PS has
projects valued B73bn currently available for sales, and 35 new projects
valued B41bn are scheduled to be launched. 1H14 presales were B18bn,
making up 42% of FY2014 presales target.
- Revise up FY2014 earnings forecast
We increase our projection on FY2014 total income by 12% to B41.6bn,
close to the company's target. We revise up PS's net profit by 19% to
B6.5bn (up 12%yoy) in 2014; normalized profit margin is projected at
15.6%, and gross margin is revised up to 36%. Still, we maintain our
FY2015 earnings forecast, projecting net profit to grow 16%yoy. PS's
income base from horizontal projects and condominiums has been widening.
It has B15bn backlog of condominiums, and its horizontal projects has been
expanding. In addition, its precast concrete factories (PCF6 and PCF7) with
480 units/month capacity will be opened in late-3Q14, boosting PS's
capacity from 640 units/month.
- Fair value is B35.11 with 12x P/E ratio
PS's financial structure is still strong, with 0.93x net gearing (lower than the
sector's average); it is still capable for aggressive investment. New fair
value is B35.11; its P/E ratio is revised up from 10x to 12x to reflect PS's
superior presales and income. We also upgrade our recommendation from
SELL to HOLD
