Pruksa Real Estate

Pruksa Real Estate Plc (PS)

Recovery reaffirmed. We hosted an NDR for PS in Hong Kong last week, where
management confirmed that operations have recovered faster than earlier expected.
Backing this is the June transfers of Bt950mn for its flood-affected TH, exceeding the
Bt900mn transfers for TH not affected by floods. Both reached 18-month highs. This
echoes PS’s view that buyers prefer to buy close to familiar areas and to live near the
workplace and has eased our concern of demographic change after the floods. PS looks
for sequential presales and revenue growth QoQ to peak in 4Q12 and is confident it will
achieve its presales target of Bt29bn and revenue recognition of Bt26bn.

Upside risk. I: PS is likely to achieve its full year revenue target of Bt26bn if the
amount of transfers seen in July continues throughout the rest of the year. II: There is
upside risk that revenue will reach Bt28bn or more, 8% above current target and 12%
above consensus forecast, based on backlog of Bt16.5bn being transferred this year
plus 1H12 revenue. Sale of completed stock will provide further upside risk as income
from these can be booked immediately. We see our forecast of Bt28bn as achievable.

Focus on turnover – rise in inventory has stopped. PS’s strategy is to focus on
turnover, rather than presales, and low-rise houses rather than condo, meaning it will
not launch condo after condo as others do. Since these take far longer to build, there
is time risk of construction delay especially in the current climate of labor shortages
and contractors overloaded with jobs. This focus has proved fruitful, with active stock
declining ~8% to Bt56.7bn as of June while finished stock fell by 12% to Bt5.3bn. This
confirms an end of the rise in unsold finished stock and a consequent strengthening in
its balance sheet and cash flow.

More launches in Pattanakarn in 2H12. PS has been successful in its entry into the
mid to high end SDH segment, as seen in the rapid sell-out of The Plant Pattanakarn
phase 1 in just a few days. All signs point to a similar success for the remaining eight
projects worth Bt11-14bn on the same piece of land as they are launched over time.
This will keep it busy for the next 3-4 years. Over the remainder of this year PS plans to
launch another 3-5 TH and SDH projects on that land.

Reiterate BUY. We like PS’s turnaround and upside risk stories as a near term share
price catalyst. The sale of inventory will help improve the balance sheet and cash flow,
and ease our concerns. With attractive ETR of 22%, we maintain a BUY rating on the
stock.