Ananda Development

Ananda Development Plc (ANAN) 

 

Above our estimate

ANAN reported a core profit of Bt901m for 4Q15 (the second best quarterly core earnings in its history), jumping 39% YoY and soaring 461% QoQ. The result was 34% above our model due to fatter-than-expected residential GM (actual was 37.3% against the 34.5% of our forecast) and higher-than-expected other income. The result beat the consensus forecast by 28%. ANAN announced DPS of Bt0.068 for 2H15 operations, 2.0% simple yield, XD on 9 May and payment on 25 May. 

Results highlights 

Impressive core earnings expansion YoY and QoQ was due to residential income growth (climbing 28% YoY and flying 120% QoQ to Bt4.9bn for 4Q15—IDEO Mobi Charan-Interchange (Bt3.7bn in project value, 83% booked, transferred 70%). Residential revenue breakdown was 80% condos and 20% low rises. Residential GM slipped from the high base set at 38.5% in 4Q14 to 37.3% in 4Q15 but rose 0.4% QoQ. The SG&A/sales ratio fell from 17.6% in 4Q14 and 23.5% in 3Q15 to 13.5% in 4Q15 by top-line expansion. Commissions jumped 118% to Bt223m for Q15 from joint venture condos. Equity losses (JV condos) were flat YoY at Bt144m in 4Q15. Net gearing plunged from 0.9x at end-Sep to 0.4x at YE15.

Outlook 

ANAN will post YoY earnings growth in 1Q16 due to the very low base set by 1Q15 (lowest quarterly revenue and profit of FY15). But, 1Q16 profit should drop QoQ due to the lack of new condos to start transferring during the quarter. In 1Q16, ANAN will transfer the rest of its IDEO Mobi Charan-Interchange units and the backlog of TH Arden. The sizable condo, Ideo Q Ratchathewi (project value, Bt2bn; 99% sold) will start to transfer in 2Q16.  

What’s changed? 

There is scope of earnings upside to our model. Core margin upside exists after ANAN reported strong core margin of 11.2% in FY15, which beat our model of 9.3%. FY16 equity income will turnaround. A condo completion schedule will more than double from only Bt6bn for FY15 (only owned two condos) to Bt15bn for FY16 (Bt8.5bn from four owned condos and Bt6.8bn from JV condos. The transfer risk would be low, as the five condos completed in FY16 have a high take-up rate mean of 78%). Modeled FY16 earnings growth is driven by 20% higher residential revenue. 

Recommendation 

A sharp price correction (down 20% YTD), opens a good opportunity to BUY the stock. It is a contender for the FY16 earnings growth title under our ResDev coverage, based on its high visibility. Its JV condos will payoff big in FY16, leading to an equity income turnaround. ANAN trades at a FY16 PER of 8.4, below 9.6x of its mean since IPO in Dec 2012. Our BUY rating stands, with a YE16 target price of Bt4.80, pegged to 12x PER.