Ananda Development

Investment thesis

Expectations that the soft launches of four condos this weekend will go well (official launches on Oct 16) will generate positive sentiment toward the stock. ANAN’s FY15 business plan (to be unveiled later this year) will be aggressive, we believe. We have a TRADING BUY rating with an upgraded target price of Bt4.50 (previously Bt4) to factor in a higher profit forecast and a re-rated PER target from 12.0x to 12.5x, pegged to its long-term mean since debuting on the SET in Dec 2012. 

Earnings forecast upgrade on proven SG&A expense control

We have revised up our core profit forecasts by 4% for FY14 and by 9% for FY15, due to lower SG&A/sales assumptions—down by 1.3% to 20.6% in FY14 and by 1.5% to 19.9% in FY15—after ANAN reduced the ratio from 23.7% in FY13 to 21.2% in 1H14. A lower SG&A/sales margin should push up NM to at least 10% (10.0% in our model). Presales secure 86% of our FY14 residential revenue forecast and 48% of FY15.

ANAN will resume strong earnings growth of 23% in FY15, due to the low base set by FY14. We forecast residential revenue growth of 23% to Bt11.2bn in FY15 (77% condo, 23% low-rise). ANAN will transfer remaining units at Elio Del Ray (Bt3.2bn; 55% booked; to start transferring in Nov 2014), Ideo Sathorn ThaPra (Bt3.8bn; 47% booked; to start transferring in Nov 2014) and will start transferring Ideo Wutthakat in 2Q15 (Bt2.2bn; 42% booked) and Ideo Mobi Charun-Interchange in 4Q15 (Bt3.7bn; 63% booked). The firm will also unveil a new TH brand in 1H15 to boost low-rise sales.    

Four condos will boost 2H14 presales and FY16 revenue visibility

This weekend, ANAN will soft-launch four condos worth a total of Bt15bn to existing clients (details in Figure 10). The official launch date is Oct 16. The locations are all handy (within 29-390 meters) to BTS/MRT stations. Assuming that Ashton Asoke and Ideo Q Siam-Ratchathewi are fully booked and Ideo Mobi Sukhumvit Eastgate and Ideo Mobi Wongsawang-Interchange are about 40% booked, presales would jump from Bt4bn in 1H14 to Bt14bn in 2H14, boosting revenue visibility for FY16-17. Note that ANAN’s current backlog secures 43% of our FY16 residential revenue forecast. 

YoY turnaround in 3Q14; the best quarter of the year in 4Q14

The bottom-line will turn around YoY in 3Q14 from a core loss of Bt91m in 3Q13, led by residential revenue (up from Bt1bn in 3Q13 to Bt2.2bn in 3Q14 with the transference of remaining units of Elio Sukhumvit 64).  Earnings will peak in 4Q14. We expect 4Q14 residential revenue growth of 24% QoQ to Bt2.7bn, as Elio Del Ray and Ideo Sathorn ThaPra will start transferring in Nov. Management fees in 4Q14 will bounce QoQ, due to commission charges from JV condo presales. However, 4Q14 profit will dive YoY from the high base set by record 4Q13 earnings.