Amata Corporation

Amata Corporation Plc (AMATA)  

 

AMATA’s share has underperformed the SET for the past 12 months as the market focuses on the disappointing land sales and overlooks its valuable land bank in very strategic locations in Thailand and Vietnam. The stock is dirt cheap, trading at an undemanding 1.0x PBV of 2015. We value the stock on sum-of-the-parts at Bt21/share, which gives a very attractive upside of 72%. We reiterate BUY. 

 

2015 a year of recovery. According to CBRE, industrial estate land sales grew 35% YoY to 2,121 rai but were still around half the 10-year average of 4,149 rai. This is in line with a rise of 11% YoY to Bt809.3bn for BoI-approved projects and a 20% increase in FDI inflow into the manufacturing sector. However, selling prices were largely flat with prices able to rise only in selective IEs where supply is cramped. The good news is we see a rise in asking prices at IEs in Rayong, Chachoengsao, Prachinburi and Ayutthaya provinces - the first rise for Ayutthaya since the widespread flooding in late 2011. 

 

2016 better. We expect IE land sales to grow 25% p.a. over next three years to 2,600 rai in 2016, 3,300 rai in 2017 and finally reach the 10-year average of 4,149 rai in 2018. In the near term, the auto sector will continue to fuel growth, particularly the continued production relocations from Japan and China. This latter is supported by confirmations from Toyota, Honda, Nissan and Isuzu that they will set up an automotive testing center in Thailand plus the recent investment of SAIC Motor-CP Co, which will draw in its supply chains. A bonus is government incentives to help expedite investment. 

 

Positive macro indicators. Externally, there are signs that world export growth has touched bottom and will move back up, backed by growing world GDP. Internally, the BoI has applications amounting to nearly Bt1trn waiting for approval. Auto production is back to growth, though slowly (2% in 2015 and 5% in 2016), driven by export growth. For the longer view, a new investment cycle into the auto sector will be undergirded by newcomers, new demand after the expiration of the first-car scheme and investment into Phase 2 of the eco car project. Lastly, Thailand’s utilization rate is good at 63.9% and there are signs of improvement in leading indicators - manufacturing production index and imports of capital goods. Continue improvement of these indicators will bring on a new investment cycle, which will drive industrial property demand.   

 

Forecast revision. We assume AMATA will keep its market share at 25% in 2016-2017. This leads to a 20% cut in land sales to 827 rai in 2016 and 7% to 1,150 rai in 2017. This in turn requires a 33% downward revision of 2016 net profit to Bt1.0bn and 14% to Bt1.5bn in 2017. This indicates a net profit drop of 17% YoY in 2016 since it will not be bulked up by 2015’s one-time gain from RBF spin-off. Excluding this from the comparative year shows core profit growth of 17% YoY. In 2017, profit will jump 48% YoY on stronger operations in both Thailand and Vietnam.   

 

Maintain BUY. Given its very good assets, AMATA is undervalued, trading at 1.0x 2015 PBV. We use SOTP of Bt21: RNAV for its IE business, the market value of investment in AMATAR, 12X PER for utilities, DCF for its power business and AMATAV and appraised value of its investment properties. This gives attractive upside of 72%. BUY.