PROPERTYSECTOR：GROWTHTOCONTINUEIN0917

Nov-11Jan-12May-12Mar-12Sep-11Jul-12Sep-1240.030.0-10.020.010.00.0-20.0-30.0YtdThailandSector UpdatePOSITIVE (unchanged)14 September 2012Property SectorGrowth to Continue in 2013Sector Index :SET Index :204.881,259.96We maintain our positive view on the Thai property sector and upgrade our2012 housing registration expectations slightly to reflect 30% YoY growth.New house launches are expected to increase by at least 11% YoY. Theeight property firms we cover now have a total backlog of THB180b, whichTermporn Tantivivathttp:/www.maybank-ke.co.th(02) 658-6300will be recognised through 2016. 4Q12 earnings of SIRI, SPALI, LPN, andRML should reach record highs, driven by the condo backlog in 2H12. Werecommend investing in firms in a strong financial position, which willcontinue to post impressive growth in 2013, such as AP, PS, and QH.New housing registrations to grow by 11% YoY for 2012. The 8M12 newLHSPALIAPQHLPNSIRIRMLPSRatingHOLDHOLDBUYBUYHOLDHOLDT-BUYBUYTarget Price9.1019.9010.602.4819.302.542.2023.00Upside8%4%27%36%6%3%28%29%registrations amounted to 64,450 units (similar to 8M11). They are worthover THB178.356b (-10% YoY) at an average sales price of THB2.77m vs.THB3.07m/unit last year. Condos are still leading the pack at 64%. Later thisyear, more projects will drive yearly new housing upward and beat ourprevious target of 90,000100,000 units. We have thus upgraded our yearlytarget to 100,000110,000 units, up by 11% YoY, which total valuedlaunched of THB260b (+5% YoY).Condos are the key driver of 1H12 registrations; upgrade target. TheREIC (Real Estate Information Center) reported that new housingHistorical Chartregistrations in 1H12 are 53,736 units (+25% YoY) with a low rise:high riseratio of 40:60. AP, SPALI, SIRI, LH, and QH are preparing to transfer andrecognised many condo units in 4Q12. Thus, we believe that the 2012registrations will beat our previous estimate of 90,000 units, as the 1H12registrations already constitute 60% of our yearly target. We have thusupgraded our yearly registration target to 105,000110,000 (up by 3035%YoY).Strong backlog of over THB180b. The eight property firms we cover havea total backlog worth THB180b with THB70b to be recognised in 2H12 andPropSETthe rest through 2016. We expect the revenues of these eight firms to jumpto THB89b in 2H12 (+69% HoH and +51% YoY). We also expect SIRI,Performance52-week High / Low1-mth3-mthBt206.13 / Bt123.096-mth 1-yrsSPALI, LPN, and RML to post record earnings in 4Q12, driven by strongbacklogs.Maintain positive view on sector and invest in company with strongAbsolute (%)Relative (%)9.76.819.09.423.114.532.58.541.815.4backlogs and strong financial positions. We maintain our positive view onthe sector and believe that demand will recover in time, driven by improvedconsumer confidence. We have a forward view to 2013 performances andfinancial positions. Our choices are AP (TP Bt10.60/share), PS (TPBt23.00/share), and QH (TP Bt2.48/share): their valuations are below bookvalue, thus making them appropriate for accumulation over the long term.We recommend Hold on LH, LPN, SPALI, and SIRI, as their 2013 earningswill be impressive this year. As the markets have already absorbed theturnaround earnings issue for RML and the high deliveries and revenuerecognition pressure, we have downgraded our recommendation toSpeculate Buy.StockEPS(Bt)PER (Bt)Div YieldROE2012201320142012201320142012(%)LHSPALIAPQHLPNSIRIRMLPS0.511.830.710.251.600.330.3231.600.552.090.880.211.760.390.3351.920.592.361.000.231.910.390.3322.2116.4110.4011.837.2811.237.315.3211.2016.539.5411.998.8510.206.255.139.3015.348.4410.577.939.446.195.188.095.1%3.8%3.4%6.0%4.5%6.2%0.0%2.7%17.3%24.0%16.4%9.0%27.6%20.8%49.0%18.0%Source: Company reports and KELIVE Research estimates.SEE APPENDIX I FOR IMPORTANT DISCLOSURES AND ANALYST CERTIFICATIONS,PROPERTY SECTORIn August, both values and new home launches increased. TheAgency for Real Estate Affairs (AREA) reported that new home projectlaunches for August amounted to 8,208 units (+28% MoM and +82%YoY), led by condos at 51%, followed by townhouse units at 28%, andSingle Detached House (SDH) at 19%. The total project values forAugust were THB27.258b (+35% MoM and +92% YoY), led by condovalues at 47%, SDH at 32%, and townhouses at 19%. AP, LPN, PS,NUSA, PF, SENA, SIRI, QH, and NOBLE are the listed firms that willlaunch projects this month.For 8M12, new units launched were similar to last year but with alower volume. For 8M12, there were 248 new projects (-20% YoY)with the total number of 64,450 units (similar to last year) worthTHB178.356b (-10% YoY). The average sales price wasTHB2.77m/unit, lower than THB3.07m/unit last year. The largest groupwas condo projects at 64%, followed by townhouses (19%) and SDHs(11%). We believe that more projects will be launched later this year;thus, our estimate of 90,000100,000 units now seems tooconservative. We have upgraded our 2012 projection to 105,000110,000 (up by 3035% YoY). However, we maintain our yearly valueat THB260280b; the 8M12 value is already 66% of our yearlyprojection.Average sales price of THB3.32m highest for the year. Theaverage sales price in August was THB3.32m the highest this yearand higher than the average price of THB2.77m. This was due to theincreasing values of SDH and condo projects in the higher mid-scaleprice ranges. In August, 59% of these properties were valued at THB35m/unit and 16% at THB510m.Average sales ratio of 31%. The August average sales ratio was31%, falling from 37% last month. Despite the decline in the sales ratiofor all property types, the total number of units sold in August increasedslightly to 2,514 from 2,502. Sales increased for all property types,except for townhouses.Chart 1: Proportion of new units launched in Aug 2012Condominiums50.7%DuplexesChart 2: Proportion of new values launched in Aug 2012Condominium,47.4%2.5%Duplex , 2.2%Townhouses27.9%SingleDetachedHouses 18.9%Townhouse,18.6%SingleDetachedSource: Company reports and KELIVE Research estimates.13 September 2012Source: Company reports and KELIVE Research estimates.Page 2 of 11Jan-1Fe2b-1Ma2r-1Ap2r-Ma12y-Ju12n-1Ju2l-Au12g-121994199519961997199819992000200120022003200420052006200720082009201020118M121994199519961997199819992000200120022003200420052006200720082009201020118M12-PROPERTY SECTORChart 3: Total new launches, 19948M12Chart 4: Sales prices per unitUnits350,000300,000250,000200,000150,000100,00050,0000New units Launch (LHS)Value of Total Launch (RHS)Btmn450,000400,000350,000300,000250,000200,000150,000100,00050,0000Btmn4.03.53.02.52.01.51.00.50.0Source: Company reports and KELIVE Research estimates.Source: Company reports and KELIVE Research estimates.Strong sector backlog of THB180bAt the end of 2Q12, the eight property firms we cover AP, LPN, QH,SPALI, RML, PS, SIRI, and LH had a strong backlog total ofTHB181.519bn. SIRI led the pack at THB36.5b, followed by PS(THB34.16b) and AP (THB30.956b). The AP backlog has the longesttime span of revenue recognition until 2016.We estimate the backlog recognition duration as also important as thisstabilises revenue streams and lowers volatility of future revenue ineach company. Currently, AP, PS, and SPALI have backlogs that willbe recognised over the next 34 years.Chart 5: Revenue Forecast for 2H12FBacklogLPN2H129,87020137,72520142,38820152016Total19,983APPSSPALIRML8,82916,8217,2106,00010,1218,8166,0638,0008,0006,1138,7303,8473,8812,4125,86112530,95634,16227,86417,847LH3,9562,5426,498QHSIRI3,00014,5733,00017,3371,7004,5997,70036,50970,25963,60435,37712,154125181,519Source: Company reports and KELIVE Research estimates.Condo backlog supports revenue growth in 2H12The future backlog of the eight property firms we cover comes mainlyfrom the 25 condo projects that will be completed in 2H12 (tablebelow), which are worth over THB55b, with THB40b already sold andawaiting recognition. We thus believe that these projects will drive2H12 revenue further, with SPALI, SIRI, RML, and LPN expected toreach record-high earnings in 4Q12.13 September 2012Page 3 of 11PROPERTY SECTORChart 6: Condominium transfers in 2H12CompanyProjectValue (Btmn)% SoldValue Sold Btmn)Starting Transfers inSIRI123456789Wyne SukhumvitVia 49D Condo KrathuTEALPYNEKEYNED Condo Charun-BangkunnonBaan San KraamChelona Khao Tao1,7706036261,4862,0481,7875261,4271,13246%100%100%98%100%97%100%99%55%8146036261,4562,0481,7335261,413623AugSepOctNovNovNovNovNovDecTotal11,4059,842AP12The Address Sukhumvit 28The Address Sathorn 122,2604,10099%89%2,2373,6494Q124Q12Total6,3605,886LPN123456Lumpini Ville Pattanakarn-New PhetchaburiLumpini Park Riverside - Rama 3Lumpini Ville Phibuisongkhram-RiverviewLumpini Condotown Northern Pattaya-SukhumvitLumpini Condotown Ramintra-Lat Pla KhaoLumpini Ville Chaengwatthana-Pakkret1,6905,4009401,2709701,70070%80%100%100%92%79%1,1834,3209401,2708921,3433Q123Q124Q124Q124Q124Q12Total11,9709,948QH12The Trust Residence PonklaoCasa Condo Chang PuaK (Chiangmai)2,32442973%70%1,6973002H122H12Total2,7531,997SPALI1234Supalai Park RatchayothinSupalai Park Downtown PhuketSupalai Park Asoke-RatchadaCityhome Srinakarin2,3008101,4401,10098%90%99%20%2,2547291,4262202H122H122H122H12Total5,6504,629RML1The River15,00077%6,0062H12Total150006,006LH1The Key Chaeng Wattana1,86090%1,674TotalGrand Total1,86054,9981,67439,982Source: Company reports and KELIVE Research estimates.2H12 earnings to jump significantlyIn 1H12, the eight property firms had total presales of THB85b (+3%YoY and +3% QoQ). With the high backlog available in 2H12, all eightfirms should increase their revenue in 2H12 from 1H12.We expect 2H12 total revenue to beTHB88.657b, up by 69% HoH and51% YoY. RML will have the highest portion for 2H12, thanks to majorrevenue recognition from The River project, followed by LPN (revenuefrom six condos). If our revenue forecast is correct, RML will post thestrongest 2012 revenue growth of 551% YoY vs. SIRI at +38% and APat +22% YoY.However, apart from the backlog, we have also studied the securedrevenue of all eight firms. PS has the lowest possibility of missing thetarget with over 100% in secured revenue, followed by RML (97%) andAP (95%). The firms with less than 100% secured revenue will have toincrease sales to be booked this year, so that they can acceleraterevenue to meet their targets.Chart 7: Revenue forecast for 2H12F1H12% Rev 1H122H12F% Revenue 2H122012F2012 Rev. Growth2H11% Growth YoYLPNAPPSSPALIRMLLHQHSIRITotal3,2646,99711,4693,3161,31310,4365,02410,58652,40523%42%43%24%17%47%42%38%10,9589,64215,03710,4526,25911,7876,91417,60888,65777%58%57%76%83%53%58%62%14,22216,63926,50613,7687,57222,22311,93828,194141,06215%22%14%9%551%16%21%38%25%6,1267,38111,1175,37752610,7564,81212,65558,75079%31%35%94%1090%10%44%39%51%Source: Company reports and KELIVE Research estimates.13 September 2012Page 4 of 11PROPERTY SECTORChart 8: Revenue secured for 20121H12 Revenue2H12 Backlog2012F Rev.% Secured Rev.LPNAPPSSPALIRMLLHQHSIRI3,2646,99711,4693,3161,31310,4365,02410,58652,4059,8708,82916,8217,2106,0003,9563,00014,57370,25914,22216,63926,50613,7687,57222,22311,93828,194141,06292%95%107%76%97%65%67%89%87%Source: Company reports and KELIVE Research estimates.For 2013, we choose AP and PS as our top picksOur eight property firms have over THB64b that await recognition in2013. We expect the groups 2013 revenue to be THB160b (+14%YoY) with 40% in secured revenue.RML has the highest secured revenue (99%), as all its projectscomprise condos, followed by AP (52%), SIRI (52%), and LPN (51%).In terms of revenue, SIRI will likely post the highest growth at +19%YoY, followed by AP (+18% YoY) and PS (+17% YoY).AP (Buy), 2013TP THB10.60/shareExpect 2013 presales to expand by 20%. We estimate APs 2013presales to grow by at least 20% YoY to THB24b (from +39% YoY toTHB20b in 2012). In 2013, AP will launch two projects outsideBangkok. Currently, AP has developed land for at least 68 moreprojects. AP is a high-quality housing developer with great designs andstrong branding, especially after its rebranding moves in 3Q12.Secured revenue of 52% for 2013. AP has a high level of securedrevenue at 52% for the year 2013, supported by backlog recognitionfrom nine condo projects in 2013. Considering its strong presalesgrowth, a rising demand for low-rise properties with short constructionperiods of 67 months, and the great client response, we believe thatsome presales will be recognised in 2013. Hence, we have upgradedour 2013 revenue forecast by 9% to THB19.566b (+18% YoY) andmaintained our net profit growth estimate at THB2.492b (+25.2% YoY).Based on a forward PER of 12x, our TP for AP is THB10.60/share.PS (Buy) with a TP of Bt23.00/shareBacklog from 7 condos in 2013. In 2013, PS has a backlog from 7condos to be recognised at more than THB8bn. Moreover, there will bean additional upside, if the THB1.5bn backlog expected to berecognised in 4Q12 is delayed to 2013. PS has satisfactorily securedrevenue at 29%. With the increasing demand for low rise projects andthe shorter construction duration, we have upgraded our FY13 PSrevenue by 7% to THB30.912bn (+17% YoY) with a FY13 net profit ofTHB4.313bn (+18% YoY). Based on a forward PER of 12x, the PS TPis THB23.00/share.QH (Buy), 2013TP THB2.48/shareExpect mid- to high-priced low-rise projects to drive growth. QHhas 23% of secured revenue in 2013 or worth THB3b; this come fromcondo backlog only. As we see improvements in the mid- to high-scalelow-rise market, we expect 2013 revenue to be THB13.05b (+9.3%YoY), with an increasing profit share from affiliates such as HMPROand LHBANK. We expect a 2013 normalised profit growth of 24.8%YoY toTHB744b.Cheap valuation with upside from investments. QHs affiliate profitshares from HMPRO and LHBANK will help to support future net profitgrowth. QHs PBV valuation at 1x is the lowest in the sector. Thus QH13 September 2012Page 5 of 11PROPERTY SECTORis worthy accumulating as a long-term investment. Based on a forwardPER of 12x, the TP for QH is THB2.48/share.LPN (Hold), 2013TP THB19.30/shareLow secured revenue, with increases later from shortconstruction period. LPNs secured revenue is 51% for 2013.However, this was the figure shown at the end of 2Q12, while LPN is afast project developer with approximate construction duration periodsof only 1215 months for a 2530 fl condo. In 3Q12, LPN will launchthe Lumpini Ville Naklua-Wong Amat 2, worth THB2.36b, which will becompleted in 4Q13. The booking of this project will increase its securedrevenue. However, the risk lies in the demand. If demand for low- tomid-scale condos weakens and secured revenue does not increase,the firm could miss its 2013 revenue target of THB15.201b (+7% YoY).2013 net profit is expected to be THB2.604b (+10.1% YoY).LPNs strong point is the twice-yearly dividend of around 4.55.5%.However, we still maintain our Hold call, based on a forward PER of11x. Our TP for LPN is THB19.30/share.SPALI (Hold), TP THB19.90/shareDespite high secured revenue, low growth. SPALIs securedrevenue is 42% for the year 2013. We project 2013 revenue tobeTHB14.6b (+5.8% YoY). As SPALI has a low revenue contributionfrom backlog, revenue will come from low-rise properties and thecompleted condo projects; these projects will ensure that revenue in2013 will be significantly higher than in 2012. Although, low revenuegrowth expect, cost management has helped drive the 2013 net profit14% YoY.However, as SPALIs share price has been rising continuously to a newhigh, coupled with the facts that it has a higher PER and a lowerdividend yield, we recommend Hold on SPALI for dividends of around45%.Based on a forward PER of 10 x, our 2013TP for SPALI isTHB19.90/share.LH (Hold), TP THB9.10/shareDespite low secured revenue, there are positive signs. Although LHhas little secured revenue for 2013 with 10% from the condo backlog, itis higher than the average. and is also a good sign for their less volatilerevenue as LH has a pre-built project policy. We expect 2013 revenueto grow by 13.4% to THB25.2b and net profit to grow by 9% YoY toTHB5.519b. Note that LH has an extra gain of THB525m in 2012 froma property fund.LHs current valuation of 1617x is higher than the sectors average;however, we like its dividend payout policy of 80% twice a year at anaverage rate of 56%/year. We thus recommend Hold for thedividends. Based on a forward PER of 16x, our TP for LH isTHB9.10/share.SIRI (Hold), TP THB2.48/share2013 revenue and profit to continue their growth. For 2013, SIRIhas secured revenue at 52%; the average construction period for low-rise projects is 68 months. We expect the low-rise presales in 1H12and some from 2H12 presales to be recognised in 2013. We expect2013 revenue and net profit to be THB33.575b (+19% YoY) andTHB3.617b (+30% YoY), respectively.High debt and low liquidity. Although SIRIs projects have been verysuccessful it has the highest presales in the sector with a yearlytarget of THB36b, it is affected by low liquidity; it has the highest13 September 2012Page 6 of 11PROPERTY SECTORdebt/equity in the sector. We thus see a risk of a capital increase, if thewarrant exercise target does not goes planned in the next two years.We recommend Hold on SIRI. Investors should be aware of the dilutioneffect from the SIRI-W1 and ESOP 5-7, which could be a big downsidefor SIRI shares. Based on a forward PER of 6.5x (discounted on weakfinancial status), our 2013 TP for SIRI is THB2.48/share.RML (Speculation), TP THB2.20/shareThe highest secured revenue with high delivery pressure. As RMLproperties comprise medium to high condos, most have 2-yearconstruction periods. For 2013, RML has secured revenue at 100%.We believe that RML will be able to recognise revenue from The River(THB3b) in 1H13 with some revenue from 185 Rachadamri in 2H13.We project 2013 revenue and net profit to be THB8.101b (+7% YoY)and THB1.399b (+12% YoY). We also expect RML to turn around itsearnings significantly from losses in the previous years. However, thelong delivery time for 185 Ratchadamri units in 2013 remains a keyrisk: RML needs to accelerate construction to maintain its earningsgrowth.In 2013, the investing point for RML changed to growth maintenancefrom the turn around to profit in 2012. Investors need to considerRMLs earnings growth, revenue recognition, and debt repayments tolower the net debt/equity ratio. Based on the aforementioned factors,we lower our positive view on RML. Despite its low PER valuation,RMLs financial position is still of concern. Our rating is SpeculativeBuy. Based on a forward PER of 6.5x (discounted from weak financialstatus), our 2013 TP for RML is THB2.20/share.Chart 9: Revenue targets for 20132013 Backlog2013F Rev.% Secured Rev.2013F Rev. GrowthLPNAPPSSPALIRMLLHQHSIRI7,72510,1218,8166,0638,0002,5423,00017,33763,60415,20119,56630,91214,5978,10125,20013,05033,575160,20251%52%29%42%99%10%23%52%40%7%18%17%6%7%13%9%19%14%Source: Company reports and KELIVE Research estimates.Chart 10: ValuationsTargetP/BVEPS growthDiv YieldROEPER2012201320142012201320152012(%)LHSPALIAPQHLPNSIRIRMLPS16.0010.0012.0012.0011.006.506.5012.002.842.501.931.033.101.522.602.002.712.131.691.012.661.361.741.722.581.831.500.942.311.251.441.49-9.6%22.2%28.3%148.8%23.4%25.0%n/a27.3%8.9%14.1%25.2%24.8%10.1%17.0%4%20.4%7.8%13.0%13.4%11.6%8.1%0.9%-1%15.0%5.1%3.8%3.4%6.0%4.5%6.2%0.0%2.7%17.3%24.0%16.4%9.0%27.6%20.8%49.0%18.0%Source: Company reports and KELIVE Research estimates.13 September 2012Page 7 of 11PROPERTY SECTORRESEARCH OFFICESREGIONALP K BASURegional Head, Research & Economics(65) 6432 1821 pk.basumaybank-.sgWONG Chew Hann, CAActing Regional Head of Institutional Research(603) 2297 8686 wchewhmaybank-THAM Mun HonRegional Strategist(852) 2268 0630 .hkONG Seng YeowRegional Products & Planning(852) 2268 0644 ongsengyeowmaybank-.sgECONOMICSSuhaimi ILIASChief Economist Singapore | Malaysia(603) 2297 8682 suhaimi_iliasmaybank-Luz LORENZOEconomist Philippines | Indonesia(63) 2 849 8836 luz_lorenzomaybank-MALAYSIAWONG Chew Hann, CA Head of Research(603) 2297 8686 wchewhmayba