Amata Corporation

Amata Corporation Plc

BoI applications are the highest in the 50 years of its existence, underscoring the recovery of industrial land sales. This is excellent news for AMATA, which is ideally positioned to capitalize on this trend and we estimate a tripling of its land sales to 1,600 rai this year. It has other near term catalysts lying in the sale of assets and listing of Amata VN. AMATA is our favorite IE stock and despite the 11% rise in share price since our last report, valuation remains undemanding, at mid-cycle PER of 14.9x and -1SD PBV of 1.5x of 2015F. We reiterate BUY. 

 

BoI applications achieve new high. BoI applications reached Bt2.2trn last year, doubling YoY, as investors rushed to submit applications ahead of the new BoI rules, which took effect on January 1, 2015. Since these are not retroactive, all applications submitted prior to this date come under the old rules, where tax exemptions are better. The flood of applications is, in our opinion, a positive sign of FDI inflow and strong industrial estate demand in the near future and we continue to expect land sales to improve this year. Positioned to tap into this demand, AMATA’s land sales are estimated to jump to ~1,600 rai this year. 

 

Greater emphasis on utilities and overseas. AMATA CEO says the company will increase its investment focus on power, tap water, new innovations in environmentally friendly products, high-tech IE and overseas. It has expansion opportunities in Vietnam (Long Thanh and Quan Nin) and Myanmar. We estimate AMATA’s utility income will grow at a favorable CAGR of 15% during 2013-2016. It is currently getting equity income from power generation of 78MW, which will be raised to 259MW over the next five years, increasing contribution to net profit 20% from less than 10% now. 

 

Disappointing land sales in 2014. In 2014, AMATA sold only 383 rai: 176 rai from Thai-Chinese Rayong Industrial Realty Development (TC), 156 rai at Amata City in Rayong province, 42 rai at Amata Bien Hoa in Vietnam and just 9 rai at Amata Nakorn. This missed its target and our forecast of ~1,000 rai. Behind this is the political deadlock in 1H14 that led investors to take to the sidelines and though take-up rate has improved since political calm was restored, it remains slow. A second factor is the change at Amata Nakorn to leasehold rather than sales; activity there only came back in late 2014 after it returned to selling the plots. Finally, a big lot contract with Chinese investors was postponed to 2015.   

 

… But strong deed transfers. AMATA transferred 1,300-1,400 rai (50% Amata City, 37% Amata Nakorn, 10% TC and 3% Amata Bien Hoa) last year, above our forecast of 920 rai. To incorporate this, we raise 2014 forecast by 44% to Bt1.7bn (EPS Bt1.57), but cut 2015F by 16% to Bt1.2bn (EPS Bt1.13). Backlog shrank to ~Bt1.5bn at end-2014 from Bt5.1bn at end-2013. Our sum-of-the-parts PT is unchanged at Bt19.5/share. 

 

Multiple-share price catalysts. 1) Unlocking assets in 1Q15; 2) potential listing of subsidiaries Amata B. Brimm Power and Amata VN; and 3) expansion opportunities in Vietnam and Myanmar.