Land & Houses

Land & Houses Plc (LH) 

LH’s share price has corrected almost 20% during past four months from its peak, an unjustified underperformance to peers and the SET. At last close, LH is inexpensive trading on par with its historical average PER of 13.2x and PBV of 2.4x, while peers are trading at a premium to their historical average. In our view, the current share price does not reflect two positives in the near term – a large gain of Bt1bn and extra dividend. Thus, we see this as an opportunity to BUY.  

Asset sale successful. L&H Property Co. (LHP), in which LH holds 60%, successfully set up LH Shopping Center Leasehold REIT (LHSC) and raised Bt6.06bn last week. The proceeds will be used to purchase Terminal 21, a shopping center located at the corner of Asoke and Sukhumvit roads, from LHP by December 26. This will give LH ~Bt1bn profit in 4Q14. Factoring in the sale of this asset raises our 2014F by 14% to Bt8.4bn (EPS Bt0.69). We also fine-tune 2015F to a profit of Bt7.9bn (EPS Bt0.73) and 2016 to Bt9.8bn (EPS Bt0.9). Our forecasts are now ahead of consensus by 20% for 2014 but in line for 2015.  

Look for extra dividend. We raise 2014 DPS forecast by 14% to Bt0.62, good yield of 6.9%, following the earnings upgrade, based on unchanged payout ratio of 80%. Note that LH already paid an interim dividend of Bt0.25 so we expect a final dividend of Bt0.37 (yield of 4.0%), XD in April 2015. 

Presales to meet its target. LH’s presales were Bt30.3bn in 11M14, marginal growth of 3% YoY and accounting for 95% of its Bt32bn full year target. With only two SDH projects launched in 4Q14, we estimate December’s presales at Bt2.0bn, similar to November. This implies LH will reach its full year target of Bt32.0bn, but will miss our forecast of Bt35.0bn, largely due to slower than expected condo presales. Note that the company launched only two SDH projects worth Bt5.0bn in 4Q14 and has put off the B1.7bn Seewalee Maha Sarakham to next year. This gives total 2014 launches of 21 projects worth Bt41.3bn, +9% YoY. 

Revenue may beat its target. As of end November, we estimate LH has total backlog of Bt25bn (80% condo and 20% low-rise). This will allow revenue recognition to reach its 2014 full year target of Bt25bn with good potential to beat it and to reach our forecast of Bt27bn.  

Irrational share price performance, underperforming peers and the SET. LH’s share price has corrected almost 20% over the past four months, trading at a historical average at 13.2x PER and 2.4x PBV, while peers are trading at a premium. We view this as irrational, as LH’s operations are good, meeting its target for presales and potential beat on revenue. We expect the share to respond positively to the large extraordinary gain to be booked in 4Q14 plus extra dividend. We maintain our PT at Bt12/share on sum-of-the-parts. Note that the extra gain does not affect our PT, as we already use the market value of Terminal 21 in our calculations.