Supalai

Supalai Plc (SPALI) 

 

Outcome in line with estimates 

SPALI reported a core profit of Bt1.46bn for 4Q15, a dive of 10% YoY but a dive of 42% QoQ. The result was in line with our estimate and the consensus forecast. The developer announced final DPS of Bt0.5 for 2H15 operations, implying to a 2.8% simple yield and 5.5% annualized yield, which will XD on 7 Mar and payout on 10 May. The final DPS is slightly below our estimate of Bt0.56 due to the lower payout rate (actual: 40% for FY15 against 42% of our model) and below the consensus view of Bt0.74. 

Results highlights 

The profit plunge YoY was due to residential sales slippage (down 6% YoY to Bt6.4bn—53% condos and 47% low rises), a slimmer residential GM (down 2.0% YoY to 37.8% in 4Q15 from condo). Efficiency was impressive, as SG&A/sales ratio dipped from 9.1% in 4Q14 and 10.7% in 3Q15 to only 8.8% in 4Q15 (the lowest since 4Q13). On a QoQ basis, strong earnings growth was driven by 38% residential sales growth. Net gearing rose QoQ from 0.9x at end-Sep to 1.0x at end-Dec. 

Outlook 

Earnings in 1Q16 are expected to jump YoY boost by residential revenue expansion. SPALI will transfer two condos in Bangkok—Supalai Vista@Tiwanon (Bt1.5bn of total project value, 97% booked) and Supalai City Resort Ratchayothin-Phaholyothin 32 (Bt770m, 99% booked). Residential GM is expected to drop YoY to a new norm of below 40%. On a QoQ basis, we conservatively assume core profit contraction in 1Q16 because of top-line slippage.  

What’s changed?  

We maintain a 6% core profit growth for FY16 because condos scheduled for completion in FY16 is flat YoY at Bt9bn. Our modeled residential revenue growth is 3% YoY to Bt22bn (in line with the company target), of which 62% is secured by presales backlog at YE15. Residential GM would be a new normal, as we expected at 38% in FY16, below its 42% historical 10-year mean due to product mix—higher low-rise revenue, on lower GM than condos (37-40% low-rise GM against 39-42% for condos). Its low-rise sales portion will jump from 40% in FY15 to 50% in FY16.  

Recommendation 

FY16 performance is quite far from promising, with single-digit growth in presales and earnings with margin pressure. SPALI set a conservative business plan for FY16, with launches of Bt37bn (low rises, 51%; condos, 49%), up 8%. Its presales target is Bt24.5bn (low rises, 55%; condos, 45%; Bangkok, 75% provinces 25%), up 6%. Its low-rise and condo presales growth target is 11% and 2%, respectively.  Despite unexciting story this year, SPALI trades at a cheap Y16 PER of only 6.7x (near its FY06-15 mean) and good dividend yield of 6.2% for FY16 (twice payment a year at 40% payout rate of our assumption). Thus, our HOLD stands, at a YE16 target price of Bt20 pegged to its FY06-15 mean.