Pruksa Real Estate

Investment thesis

PS looks set to post record presales of Bt13bn and QoQ revenue expansion for 3Q14 (despite the high top-line base comparison set by 2Q14). The market doesn’t fully appreciate PS’s progress, so we expect a street earnings projection upgrade following the announcement of results. There may also be scope of upside to our model, as residential sales and GM in 3Q14 are likely to beat our previous forecast. Our BUY rating stands with a YE15 target price of Bt43, pegged to a PER of 13x (1SD above PS’s FY06-13 mean).  

Record 3Q14 presales will surprise the market

Among our coverage, we expect PS to lead presales with a new record of Bt13bn in 3Q14, up by 17% YoY and 33% QoQ. Our model indicates that low-rise presales will post a new high for the second consecutive. Condo bookings will jump QoQ from the low base of Bt1.6bn in 2Q14. Three sizable condos launched in 3Q14 and reported good responses—take-up rates of 70% for The Signature by Urbano (project value of Bt2.1bn), 47% for The Tree Rio Bangor (Bt3.6bn) and 34% for Plum Condo Park Rangsit (Bt3.1bn).

Proven strong transference

Revenue recognition in 3Q14 will be about Bt12bn (up by 23% YoY and 11% QoQ), far above our previous forecast of Bt10bn. The mean booking-to-transference interval will shorten from 96 days in 2Q14 to 90 days in 3Q14. Thus, 3Q14 profit will rise YoY and QoQ (we previously forecast QoQ profit slippage from the high 2Q14 base). Top-line expansion should push NM from 13.9% in 3Q13 to 16.2% in 3Q14.  

GM to hold firm on full utilization of prefabrication plants

GM will be sustained QoQ at 36.8% in 3Q14 (the fattest GM since 2Q11), we believe. The number is notably better than our previous forecast of 35% because of full utilization rates at PS’s prefabrication factories—production set new highs of 700 units in July and 731 in August (Figure 7). A further 43% expansion of prefab capacity to 1,120 units/month started test-running in late Sept.  

PS looks set to beat its FY14 business plan 

The firm’s FY14 performance targets (presales of Bt43bn and revenue of Bt42bn) are likely to be beaten. 9M14 presales are expected at Bt31bn (72% of PS’s FY14 target). The peak launch quarter of the year is 4Q14 (project value of Bt20-25bn), so we can also expect a surge in bookings. Posted 9M14 revenue will comprise 74% of PS’s FY14 target (72% of our full-year forecast). We anticipate a consensus earnings projection upgrade soon, as 9M14 revenue will achieve 76% of the street number. Our earnings model is 10% above the consensus, the revenue forecast of which is too bearish at Bt40bn, we believe—4% below PS’s target and 5% below our assumption.