Land & Houses

LH will deliver its FY14 business plan (targets of Bt32bn for presales and Bt25bn for residential revenue; residential GM will beat the firm’s earlier target). Our BUY rating stands, with a YE15 SOTP-derived target price of Bt12.20 (up from Bt12 to reflect an earnings forecast upgrade)—a housing PER of 20x (1SD above its FY06-13 mean) and Bt3.3/share of market value of investments. LH trades at FY15 PER of 16.0x, near its FY06-13 mean. 

Earnings forecast upgrades

We have revised up our core profit forecasts by 3% for both FY14 and FY15 on fatter residential GM assumptions (from 35.5% to 36.1% for FY14 and from 35.4% to 35.9% for FY15).  LH proved a high residential GM of 36.1% for 1H14 (up 0.6% YoY) that beat its earlier target (flat YoY). It will achieve its FY14 residential revenue target of Bt25bn, growth of 10%. Our model suggests record core earnings in FY14 (up 11% YoY) and again in FY15 (up 13% YoY).

Bt1bn in combined bookings for three new condos last weekend

Last weekend, LH soft-launched three condos to existing clients (details in Figure 12); The Key Charoen Rat (opened only 25% of a project value of Bt3bn), The Room Charoen Krung (opened 50% of Bt2bn) and The Room Sathorn 11 (opened 50% of Bt1.9bn). Presales totaled Bt1bn, which was in line with LH’s target. It implies a take-up rate of 15% of total project value and 37% of the proportion of the projects that launched. LH expects a further Bt1bn in bookings from the Oct 4 official launch. The Room Sathorn 11 will start transferring in FY16, the other two condos in FY17.

To post all-time high 3Q14 pre-sales

We expect record presales of Bt10bn for 3Q14 (the last record was Bt9.9bn in 3Q13), up by 1% YoY and 13% QoQ. SDH bookings should rise 8% YoY to Bt5.5bn. Condo presales are assumed of Bt4.5bn, up 43% QoQ, led by the successful launch of 333 Riverside (a 70% take-up rate for a project of Bt7bn). The FY14 presales target of Bt32bn (up 6%) looks achievable—9M14 presales will comprise 80% of the target. 

Weak 3Q14 numbers forecast, but potential record 4Q14 core profit 

LH is expected to post 3Q14 core earnings that are flattish YoY and down QoQ (a record was set in 2Q14 and no new condos started transferring in 3Q14). The 3Q14 bottom-line will decline YoY because of a Bt160m net extra gain from a land sale in 3Q13 (unlikely in 3Q14). The poor 3Q14 profit is behind us; we are looking to a record core profit for 4Q14 (preliminarily forecast at Bt2bn, up by 26% YoY and 18% QoQ). In 4Q14, we anticipate strong low-rise sales plus the start of transference of two sizable condos—The Room BTS Wongwienyai (Bt1.6bn; fully booked) and Wan Wey La-Kao Tao (Bt2.7bn; 65% booked). Two small condos (North 4 and North 5; Bt160m each) will transfer in 4Q14 as well.