Amata Corporation

Amata Corporation Plc (AMATA) 

Investment thesis

We have upgraded our AMATA rating to TRADING BUY with a target price of Bt20.10, pegged to a PER of 14.8x, slightly below its long term mean of 15.3x. Although FY15 will be a slow year for industrial estates and the firm’s core earnings growth may weaken, its share price looks set to rise in the short term. We see three event-driven catalysts during 1H15. First, a positive earnings surprise for 4Q14—a 2,049% YoY jump that would beat the consensus estimate by 45%. Second, top-up income from AMATA’s first asset sale to a REIT in 2Q15. Third, the upcoming IPO of Amata VN (also due in 2Q15) will unlock the value of its Vietnamese subsidiary.

4Q14 bottom-line to post a 2,049% YoY jump—truly a surprise! 

AMATA will post record earnings of Bt1bn for 4Q14, we believe, up by 627% QoQ and 2,049% YoY. The driver was the late transference of about 400 rai of land in the Amata Nakorn estate. As Nakorn has the fattest GM (62%) of AMATA’s estates, we expect overall 4Q14 GM of 53%, significantly above the long term mean of 49%. That implies an FY14 bottom-line of Bt1,559m—22% above consensus estimate. Such a positive shock in the midst of a weak environment should spark a short-term stock price rally.

Core business sluggish—recovery in 2H15, at earliest …

In FY14, AMATA achieved land transference of about 1,200 rai, but its presales were disappointing at just 380 rai. Hence, the backlog to transfer this year is modest. Even though AMATA should be the first land sales-driven industrial property operator to recover (supported by its Long Thanh estate in Vietnam, which will start marketing in 4Q15), we don’t think it will generate enough presales for the firm to achieve YoY profit growth in FY15. Assuming land transference of 1,200 rai for FY15, we expect a 6% contraction in AMATA’s core earnings. Under the worst-case transference scenario of 900 rai, a 25% YoY earnings dive would be assumed.

…but value upside from asset sales to its REIT & IPO of Amata VN

Although not yet included in our valuation, our ballpark estimates suggest that the REIT sale (now expected in 2Q15) would add roughly Bt1bn to FY15 non-core income—68% upside to our current FY15 forecast. The plan is for the REIT to buy 160.6k sq.m of rental factories with an estimated value of Bt4,750m at 22% leverage and a freehold/leasehold ratio of 30:70. 

We also believe that Amata VN’s IPO would unlock hidden value and add to AMATA’s own value. We estimate that it could boost AMATA’s market capitalization by 11% as a result of the market re-rating Amata VN’s PBV from AMATA’s FY15 PBV of 1.5x to a multiple in line with the mean for Vietnamese industrial estate counters of 2.6x.