Asian Property Development
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Growth under JV a wild card Outperform
Asian Property Development
Event
- After the strong success and synergy with its JV partner, Mitsubishi Estate, which
resulted in solid condo presales in 2014, we believe AP will have to consider its next
move carefully, specifically which new projects should be done under the JV to
enhance growth for itself, not the JV alone.
- Next year, pre-sales growth will be judged by its upcoming launch strategy, which has
not yet been announced, but its revenue growth should be well
its strong backlog on hand. While its future presal
continue to like AP for its cheap valuation and good secured revenue growth for
2015. Maintain OP and TP of Bt8.00.
Impact
- Proven successful JV; solid YTD presales. All four new condo projects launched
under the JV with Mitsubishi Estate have proven successful, with strong presales of
45-95% on average. This drove AP’s 10M14 presale
think there is a high probability that AP will beat its
- Moderate growth targets for 2015. For 2015, AP has provided tentative guidance
for growth of 10% for both presales and revenue. New launch value is likely to be
slightly higher than this year, with a greater focus on low
condo projects, AP is studying how many should be launched under the JV structure
in following years.
- Focus on operating profit and quality control. We believe quality control for
condo units should improve on the back of JV synergies with its Japanese partner,
which is an expert in smaller-sized condo units. Also, AP is focusing on better cost
control and managing its SG&A expenses. This seems to be working, with SG&A
sale ratio dropping 100bp to 17.5% in the first nine months of 2014.
- Backlog vs secured revenue. At end-3Q14, AP had a backlog
Bt3.6bn was from low-rises and the rest from condos. Of this Bt18.2b
be realised in 4Q14, Bt8.3bn in 2015 and Bt3.5bn in 2016. This means our revenue
forecasts for AP have been secured to the extent of 100%, 35% and 13
16, respectively.
Earnings and target price revision
- No change.
Price catalyst
- 12-month price target: Bt8.00 based on a DCF methodology.
- Catalyst: Rising presales momentum, no transfer delay and sustainable GM.
Action and recommendation
- Current valuation is inexpensive at 8.3x 2015E PER, vs the long-term
mean of 9.4x. We maintain our 'outperform" rating and target prices of Bt8.00.
