Target price : Bt5.10
Recommendation : BUY
Closing Price (18 March 09) : Bt4.00
SDH/TH Presales beat our forecasts but weak condo presales
- SDH/TH presales beat our forecasts as presales from townhouse projects price range Bt1-2m stepped up offsetting weak presales in low end townhouse project (under 1m). Meanwhile sluggish presales on new
condo projects at Chinatown, Thonglor and Pinklao would impair revenue prospects in 2010.
- Better-than-expected SDH/TH presales 1Q09 would prompt us to lift our projected SDH/Th presales to Bt11b from Bt10b. Considering with backlog carried from 2008 of Bt7.6b, we see revenue 2009 to grow by 17%. With softened margin and hefty SG&A expenses, profit 2009 would decline by 10%.
- Better presales in 1Q09 from Dec 08 would be key drivers of leading property share prices lately as it would not be weak as market expected. Meanwhile, current P/E of PS is just 4x so we still reiterate BUY with fair value of Bt5.10, based on discount of historical average low P/E (2005-2008) of 6x P/E-2009 to 5.5x to mirror weak condo presales.
SDH/TH presales 1Q09 beat our estimates but condo presales looks weak and may shade difficulty to propel revenue in 2010.
Total presales 1Q09 recovered from deep low in 4Q08. SDH/TH presales dropped by 10% YoY but rose 72% QoQ to Bt3.4b while townhouse presales surprisingly stabilized YoY but rose 64% QoQ while SDH presales dropped by 24% YoY and rose 89% QoQ. TH presales momentum was better than we projected. This may result from the strategy to shift TH projects toward Bt1-2m segment to compensate the vulnerability on price segment under Bt1m. Meanwhile, SDH presales unfolded as expected. In the quarter, number of site visits improved to 3-4 thousands from 2.5 thousands in 4Q08. Also, the delayed buying decision from 4Q08 as well as tax deduction of Bt300k for homebuyers who get transferred and use mortgage loan would be another drive of presales in 1Q09. Nonetheless, we still concern on economic stances to affect purchasing power. Although we raised SDH/TH presales 2009 to Bt11b from Bt10b on the back of better townhouse presales, our forecasts would still retreat by 10% YoY.
On the contrary, presales on new condo projects launched since late last year (Pinklao, Thonglor and recently at Chinatown) have not been quite pleasant due to market condition, overestimated demand and lofty selling price. This weak sales would need to fix later on as project size of them amounted to Bt4b is scheduled to hit the books in 2010. Condo backlog to 2010 may not match that to 2009 of Bt3.5b. Then revenue 2010 may not be secured as it is in 2009.
Huge Backlog from 2008 would support revenue growth this year but relatively high operating expenses would drive down profit to fall 10%.
From recognition table, PS has revenue on hands of Bt11.08b, accounted for 73% of our forecasted sales realized 2009 of Bt15.1b. Just as margin would wind down from 37% to 34% on cost adjustment gain booked in 4Q08, SG&A expenses would stay high on marketing expenses to spur sales. Profit 2009 would dip 10% to Bt2.1b or Bt0.93 from Bt2.3b or Bt1.08.
In essence, we see quarterly earning momentum to be volatile. 1Q09 profit would be robust around Bt508m, up 65% YoY down 41% QoQ as revenue would shoot up to Bt3.6b from huge backlog from 2008 of Bt4b, relative to sales realized in 1Q08 and 4Q08 of Bt2.2b and Bt4.2b. Then in 2Q09-3Q08, revenue would fall back to Bt3.-3.4b along with presales in the year. With recognition of condo IVY River of Bt3b, we see revenue to rise back in 4Q09 of Bt5b, thus maximizing profit 4Q09 to be at peak of Bt600-700m of this year.
By Phillip Securities (Thailand) Plc. on Mar 19, 2009
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