Pruksa Real Estate

Pruksa Real Estate Plc (PS)  

 

 - 9M15 presales: 74% of 2015 target  

PS's presales fell by 6%qoq from B11.1bn in 2Q15 to B10.5bn in 3Q15, possibly a year's low. Due to deceleration of the property sector, only nine projects were launched in 3Q15, versus 13-14 projects/quarter on average in 1H15. 3Q15 presales of low-rise projects (70%) and condominiums (30%) were B7.3bn and B3.11bn, respectively, mainly from B2.3bn-worth The Plum Central Station Bang Yai launched in September 2015 (99% take up rate). 9M15 presales were B33.4bn, rising 10%yoy and accounting for 74% of the full-year target, reflecting that PS's 2015 presales target of B46.7bn (near our projection of B47bn) is possibly to achieve. 

- 3Q15 profit to drop  

3Q15 income from property sales is expected at B10.5bn, falling 25%qoq. Although four condominiums valued B8.76bn are ready to be transferred, they have started to generate income near the end of 3Q15 and customers put off their transfer and waited for the property stimulus measures to be implemented. Income from transfers of condominiums and low-rise projects is expected at B3bn (down 28.5%qoq) and B7.5bn (down 17%qoq). Although gross margin would rise from 32.4% in 2Q15 (because of price reduction to accelerate closure of outstanding projects) to 34% in 3Q15, SG&A/Sales would increase to 15.7% due to weaker income base. Overall, normalized profit is estimated at B1.5bn, falling 30.5%qoq, and normalized profit margin is projected at 14.3%. 

- Fully benefits from property measures. To grow remarkably in 4Q15  

2015 fair value (12x P/E ratio) is B34.46, showing 21% upside. Dividend yield can be expected over 3%. PS's profit is expected to peak in 4Q15 thanks to transfers of condominiums opened in 3Q15 and four condominiums valued B10bn that will be transferred in 4Q15. In addition, PS would benefit most from the property stimulus measures since housing products priced under B3m account for 55% of its portfolio and it has the highest available-for-sales product inventories of B80bn that can be transferred and generate income in 4Q15-1Q16 (the housing transfer tax and mortgage tax cuts are still effective). We reiterate BUY.