Supalai

Supalai Plc (SPALI)

At the SPALI analyst meeting yesterday it confirmed our surmise, saying it will beat its targets for both presales and revenue. We expect presales to pick up in 2H16 as it makes more condo launches. This will pull 2016 presales growth up to 18% YoY and revenue up 11% YoY, ahead of consensus by 6%. The high backlog supports a strong 3-year earnings CAGR of 18% for 2016-2018. Our unchanged TP of Bt28/share implies attractive TTR of 19%. We remain BUYers.

 

Presales upside risk: low-rise is catalyst. SPALI reports presales of Bt10bn in 1H16, +20% YoY, reaching 41% of its full year target (Bt24.5bn). Provincial presales contributed 29% of this, exceeding its 2016 target of 26%. More than half (Bt6.5bn) of this was low-rise, making 52% of its full year target. Presales have been better than anticipated and it expects low-rise presales to beat its target, as it has 14 projects worth Bt11.4bn to be launched in 2H16. The take-up rate at the recent launch of Supalai Bella Chiangmai, which we visited last month, was as good as expected at 20%. We recently raised our low-rise presales forecast by 5% to Bt13.4bn, +18% YoY, and see it as achievable.  

 

Condos to speed up presales in 2H16. Condo presales were only Bt3.5bn in 1H16,  -9% YoY, and only 29% of its full year target. This is not a concern as the launch of four new condos worth Bt15.5bn in 2H16 will bulk up presales. The company expects a high take-up rate for two condos being launched today: Supalai City Resort Rama 8, which already sold almost 50% during the soft launch and sales are expected to go up to over 80% and Supalai Park Ratchavipha, which almost 15% was sold during the soft launch. Note that since the project is large, the percentage take up rate will look lower. In 4Q16, it will launch Supalai Veranda Rama 9 and Sukhumvit 39. We estimate it will need average take-up of 40-45% to reach its target. These condos will secure revenue from 2018 onward.  

 

2Q16F to miss our preview, but full year achievable. We lower our 2Q16 net profit expectations by 7% to Bt1.44bn due to lower-than expected title deed transfers. Profit still looks good, however, with 50% growth YoY. Meeting our estimates would put 1H16 at 57% of our 2016F. We expect SPALI to achieve our 2016F of Bt5bn, +15% YoY, which would beat consensus forecast by 6%.

 

Good visibility. SPALI has backlog of Bt34.5bn, securing 85% of 2016, 42% of 2017 and 29% of 2018. There is limited downside risk to our forecast, with revenue secured by: 

 

1) the earlier completion of Supalai Monte Chiangmai late this year - which is not counted in this year’s backlog revenue; and 2) it needs to sell and transfer only Bt590mn/month of low-rise units to achieve our forecast, which works out to 50-60% of average monthly presales. The change from “raw” low-rise presales to presales of partially built units has cut business cycle to 2-3 months from the previous six months. 

 

Reiterate BUY. SPALI remains our favorite stock on its strong growth outlook for the next three years, backed by condo backlog. We look for attractive 3-year CAGR of 18% during 2016-2018. We remain Buyers with unchanged TP of Bt28/share.