Residential Property

3Q14 to show improvement QoQ and YoY. We estimate overall profit growth of 18% QoQ and 44% YoY for the seven lead developers on higher condo transfers, payoff from the large backlog of Bt202bn (as of June). Meeting our estimates would bring 9M14F growth to 26% YoY and account for 69% of our full year forecast and 72% of consensus. Results will be out November 10-14.

SPALI strongest growth QoQ, followed by LPN and AP. The completion of new condos and economies of scale will shove SPALI’s revenue and net profit to an impressive growth of 133% and 160% QoQ respectively. Similarly, LPN’s growth will be a hefty 55% and AP’s will be 44%. 

LH and PS weak QoQ. LH did well last quarter, but fell back to the end of the line 3Q14. We expect profit at LH to drop 11% QoQ without a condo completion in 3Q14. PS should see some small revenue growth driven by four small condos, but this will be insufficient to offset the higher marketing expenses brought by launches of new condos worth Bt9bn in the period. 

Best quarter for AP and QH. Managements had earlier expected the earnings peak for AP and QH to be in 4Q14, but more rapid transfers than expected for condo units moved peak up to 3Q14. LH, LPN, SIRI and SPALI will still see their peaks in 4Q14. We expect PS to show flat earnings QoQ in 4Q14. 

Sector top picks: LPN and QH. We like LPN for its superior earnings growth in 2015, with current high backlog securing 100% of our forecast. Valuations will drop substantially as earnings growth rises. QH is cheap and has a strong growth outlook, with positives lying in the possibility of HMPRO’s unlocking of assets and a partner for LHBANK.