4Q16E net profit to be flat QoQ
Land and Houses Buy (17E TP Bt12.1)
Company Update
Close Bt8.95
Property Development November 15, 2016
Earnings upgrade/Earnings downgrade/ Overview unchanged
4Q16E net profit to be flat QoQ; extra gain will support 2017E net profit Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
0.636
0.708
KT ZMICO vs. consensus Share data
11.6%
0.3%
Reuters / Bloomberg
LH.BK/LH TB
Paid‐up Shares (m)
11,786.55
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
105.00/2,974.00
Foreign limit / actual (%)
30.00/29.99
52 week High / Low (Bt)
10.40/7.55
Avg. daily T/O (shares 000)
22,124.00
NVDR (%)
18.51
Estimated free float (%)
42.24
Beta
1.04
URL
www.lh.co.th
CGR
Anti‐corruption
Worarat Powpaka Analyst, no. 17992 [email protected] 66 (0) 2624‐6248
n.a.
Switch to Buy with a new 17E TP of Bt12.1 We switch to a Buy rating from Outperform with the new 17E TP at Bt12.1 (17.0x) from Bt11.2 after we revised up 2017E net profit by 7.9% to Bt8.5bn, decreasing 0.6% YoY. However, we’re not including gain from selling assets of around Bt1.1bn and extra gain on the shareholding dilution of LHBANK, estimated at around Bt1.2bn in 2017E, which will help improve LH’s net profit from our current forecasts. 9M16 low‐rise market still grew; condo presales dropped on lower new launches LH’s 9M16 low‐rise presales were Bt16.1bn, increasing 21% YoY from Bt13.3bn in 9M15. However, Oct‐16 low‐rise presales dropped by 29% MoM to Bt1.4bn due to the market slowdown during the mourning period. Meanwhile, 9M16 condo presales were Bt2bn, decreasing 43% YoY and Oct‐16 presales were Bt290mn, still in line with monthly average presales of Bt230mn for 9M16. LH views that low‐rise presales will gradually recover in Nov and Dec. Revised up 2016‐17E net profit by 11.7%‐8.7%, respectively We revised up 2016‐17E net profit by 11.7%‐8.7%, respectively (see fig. 4). The upward revisions were mainly from 1) higher transfers from both low‐rise and condos along with 9M16 transfers; 2) a higher GPM to reflect the 9M16 GPM and 3) higher shared gain from associates as LHBANK’s earnings were better than expected. Managing growth by selling Investment properties LH normally divests its rental property projects when the selling values are appropriate and this should help support the bottom line when the residential business is unstable. For next year, LH plans to sell Grande Center Point Ratchadamri Hotel to LH Hotel Leasehold Real Estate Investment Trust (LHHOTEL) in 2Q17E with the value not exceeding Bt3.88bn. Based on LHHOTEL’s intended investment value and the Grande Centre Point Ratchadamri Hotel’s book value of Bt1.54bn as of 3Q16, we preliminarily estimate that LH will book gain on the sale after tax of around Bt1.1bn in 2017E. New rental businesses to start operating in 4Q16E and 2019E One of LH’s policies is investing in rental properties, such as hotels, serviced apartments and shopping malls. The rental business has contributed around 8%‐9% of revenue for the last four years. LH has two investment properties in the pipeline to operate in 4Q16E and 2019E, namely, the Grande Centre Point Hotel Sukhumvit 55 (project value of Bt2.2bn), which will start operating on Nov‐15, 16, and Terminal 21 Pattaya (Bt7bn), which will start operating in 2019E. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) EPS growth (%) Core EPS (Bt) Core EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) Normalized PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2013 25,075 6,478 0.65 14.0 0.65 12.5 0.40 3.48 2013 13.9 13.8 18.2 2.6 4.5 19.2 98.3
2014 28,317 8,423 0.77 18.7 0.63 (2.2) 0.65 4.03 2014 11.7 14.2 18.5 2.2 7.3 21.3 66.4
2015 26,260 7,920 0.68 (11.9) 0.58 (8.7) 0.60 4.00 2015 13.3 15.5 22.6 2.2 6.7 17.4 69.2
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2016E 31,530 8,501 0.71 4.6 0.60 3.2 0.55 4.22 2016E 12.7 15.0 20.9 2.1 6.1 17.4 75.8
2017E 35,507 8,587 0.71 1.0 0.71 19.7 0.55 4.40 2017E 12.5 12.5 19.4 2.0 6.1 16.6 74.8
Figure 1: Quarterly earnings review Profit and Loss (Btmn)
% QoQ
9M16
% YoY
2016E
% YoY
17.6 18.5 24.2
(13.1) (11.0) (6.9)
20,495 22,366 7,728
28.6 28.3 30.8
28,984 31,530 10,636
19.7 20.1 18.9
YTD (% 2016E) 70.7 70.9 72.7
24.9
(6.0)
5,412
34.2
6,991
15.1
77.4
(78)
15.6
(12.8)
(255)
21.4
(330)
8.3
77.1
108
(12.7)
2.8
355
(3.3)
497
24.8
71.5
(580)
(343)
31.1
(40.8)
(1,269)
64.7
(1,637)
2.2
77.5
1,240
78
N.M.
N.M.
1,328
480
1,328
(42)
100.0
FY Ended 31 Dec
3Q15
2Q16
3Q16
% YoY
Revenue from project sales Total revenue Gross profit
5,332 5,849 1,999
7,211 7,788 2,667
6,268 6,933 2,483
EBITDA
1,374
1,826
1,716
Interest expense
(67)
(89)
Other income
124
105
Income tax
(262) (0)
Other extraordinary Items
550
798
726
31.9
(9.1)
(2,178)
36.0
2,977
22.2
73.2
Net profit (loss)
1,482
2,631
1,993
34.5
(24.2)
6,620
46.1
8,501
7.3
77.9
Core net profit (loss)
1,470
1,391
1,916
30.3
37.7
5,289
22.9
7,173
5.9
73.7
Reported EPS (THB)
0.13
0.22
0.17
33.7
(24.3)
0.56
42.5
0.71
4.6
79.6
Core EPS (THB)
0.13
0.12
0.16
29.5
37.6
0.45
19.8
0.60
3.2
75.4
Gross margin – project sales (%)
34.2
35.3
36.1
35.2
34.5
Gn (Ls) from affiliates
Gross margin ‐ overall (%)
34.2
34.2
35.8
34.6
33.7
EBITDA margin (%)
23.5
23.4
24.7
24.2
22.2
Net margin (%)
25.3
33.8
28.8
29.6
27.0
Current ratio (x)
2.7
3.4
3.3
3.3
3.2
Interest coverage (x)
19.0
19.5
20.9
20.2
20.6
Debt / equity (x)
1.1
1.0
1.1
1.1
1.1
BVPS (Bt)
3.82
4.08
3.87
3.9
4.2
ROE (%)
17.4
19.4
21.4
21.4
17.4
Source: LH, KT ZMICO Research
Figure 2: Presales
Figure 3: Backlog at end 3Q16
Btmn 25,000
2018 251
20,000 15,000
2016 6,069
10,000 5,000
Bt17,621mn
High rise
10M15 10M16
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
‐
Low rise
Source: LH, KT ZMICO Research
2017 11,274
Source: LH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: Major forecast revisions Previous 2016E
New 2016E
% Change 2016E
Previous 2017E
New 2017E
% Change 2017E
Residential sales
25,862
28,984
12.1
30,998
32,859
6.0
Transfers increased along with upward revision of low‐rise transfers
Low‐rise
18,796
21,584
14.8
19,670
21,349
8.5
Low‐rise transfers increased along with higher low‐rise transfer trend
High‐rise
7,066
7,400
4.7
11,328
11,510
1.6
Condo transfers increased along with faster transfer trend
Residential GPM
33.5
34.5
1.5
33.5
34.0
0.5
GPM was better than expected
SG&A expenses
3,957
4,406
11.3
4,743
5,027
6.0
Increased along with upward revision of transfers
Share gained from associates
2,814
2,977
5.8
2,938
3,170
7.9
Higher‐than‐expected equity income from LHBANK
Net profit
7,607
8,501
11.7
7,897
8,587
8.7
Btmn
Source: LH, KT ZMICO Research
Figure 5: Earnings forecast effects from LHBANK’s shareholding dilution from 33.98% to 21.9% After shareholding Original dilution % Change Btmn 2017E 2017E 2017E Booking as an associate 3,170 2,768 (12.7) Gn (Ls) from associates 8,587 8,193 (4.6) Net profit 0.71 0.68 (4.6) EPS TP (Bt) 12.1 11.6
Source: LH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
FINANCIAL TABLE PROFIT & LOSS (Btmn) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Forex gain (loss) Extra Items Gain (loss) from affiliates Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btmn) Cash and equivalents Accounts receivable Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Total liab. & shareholder equity CASH FLOW (Btmn) Net income Forex and other extraordinary adjustments Depreciation & amortization Change in working capital Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2013 25,075 (15,990) 9,085 (3,436) 6,807 509 6,298 (570) 648 7,689 (1,102) 0 (166) 2,109 6,478 0.65 0.65 6,482 0.65 0.40
2014 28,317 (18,206) 10,111 (4,005) 6,886 391 6,496 (503) 390 11,393 (1,864) 0 3,113 2,210 8,423 0.77 0.77 6,947 0.63 0.65
2015 26,260 (17,313) 8,947 (3,574) 6,072 300 5,771 (305) 398 10,268 (1,601) 0 2,287 2,437 7,920 0.68 0.68 6,775 0.58 0.60
2016E 31,530 (20,894) 10,636 (4,310) 6,991 194 6,797 (330) 523 10,772 (1,637) 0 1,328 2,977 8,501 0.71 0.71 7,173 0.60 0.55
2017E 35,507 (23,593) 11,913 (5,027) 7,582 202 7,379 (300) 493 10,248 (1,487) 0 0 3,170 8,587 0.71 0.71 8,587 0.71 0.55
2013 1,216 136 38,496 8,501 1,357 75,369 8,836 26,621 40,526 10,026 34,843 75,369
2014 6,738 172 43,487 8,147 1,617 86,888 10,365 25,765 42,613 10,986 44,275 86,888
2015 10,159 184 48,118 10,823 1,921 98,070 9,799 32,805 51,175 11,730 46,895 98,070
2016E 7,948 203 47,892 17,685 2,146 105,647 11,150 35,247 54,908 12,031 50,740 105,647
2017E 2,873 230 48,853 17,407 2,433 104,682 14,150 28,265 51,798 12,031 52,884 104,682
2013 6,478 (1,549) 509 (4,776) 662 (3,632) 765 (2,867) 5,921 0 (3,977) 0 1,945 (260) (3,881) (0.39)
2014 8,423 (3,252) 391 (3,260) 2,301 (901) 6,537 5,637 616 1,858 (5,123) (1,538) (4,187) 3,751 (219) (0.02)
2016E 8,501 (3,084) 194 (301) 5,310 (200) 429 229 3,670 0 (6,452) (3,765) (6,547) (1,008) 5,208 0.43
2017E 8,587 (3,250) 202 (591) 4,949 (200) 0 (200) (4,000) 0 (6,617) 793 (9,824) (5,076) 4,847 0.40
2013 4.0 21.8 14.0 36.2 27.1 25.1 25.8 25.9 14.3
2014 12.9 1.2 18.7 35.7 24.3 22.9 29.7 24.5 16.4
2015 7,920 (3,160) 300 (18,434) (13,373) (2,810) 4,684 1,874 6,478 1,273 (8,504) 14,772 14,019 2,520 (1,923) (0.16) 2015 (7.3) (11.8) (11.9) 34.1 23.1 22.0 30.2 25.8 15.6
2016E 20.1 15.1 4.6 33.7 22.2 21.6 27.0 22.7 15.2
2017E 12.6 8.5 1.0 33.6 21.4 20.8 24.2 24.2 14.5
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, TPOLY, M‐CHAI, TFD, SUTHA, CI.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59)
Good (scores: 70 – 79) No Logo N/A (scores: below 50) Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws.
Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
Company Update
Close Bt8.95
Property Development November 15, 2016
Earnings upgrade/Earnings downgrade/ Overview unchanged
4Q16E net profit to be flat QoQ; extra gain will support 2017E net profit Price Performance (%)
Source: SET Smart
FY16
FY17
Consensus EPS (Bt)
0.636
0.708
KT ZMICO vs. consensus Share data
11.6%
0.3%
Reuters / Bloomberg
LH.BK/LH TB
Paid‐up Shares (m)
11,786.55
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
105.00/2,974.00
Foreign limit / actual (%)
30.00/29.99
52 week High / Low (Bt)
10.40/7.55
Avg. daily T/O (shares 000)
22,124.00
NVDR (%)
18.51
Estimated free float (%)
42.24
Beta
1.04
URL
www.lh.co.th
CGR
Anti‐corruption
Worarat Powpaka Analyst, no. 17992 [email protected] 66 (0) 2624‐6248
n.a.
Switch to Buy with a new 17E TP of Bt12.1 We switch to a Buy rating from Outperform with the new 17E TP at Bt12.1 (17.0x) from Bt11.2 after we revised up 2017E net profit by 7.9% to Bt8.5bn, decreasing 0.6% YoY. However, we’re not including gain from selling assets of around Bt1.1bn and extra gain on the shareholding dilution of LHBANK, estimated at around Bt1.2bn in 2017E, which will help improve LH’s net profit from our current forecasts. 9M16 low‐rise market still grew; condo presales dropped on lower new launches LH’s 9M16 low‐rise presales were Bt16.1bn, increasing 21% YoY from Bt13.3bn in 9M15. However, Oct‐16 low‐rise presales dropped by 29% MoM to Bt1.4bn due to the market slowdown during the mourning period. Meanwhile, 9M16 condo presales were Bt2bn, decreasing 43% YoY and Oct‐16 presales were Bt290mn, still in line with monthly average presales of Bt230mn for 9M16. LH views that low‐rise presales will gradually recover in Nov and Dec. Revised up 2016‐17E net profit by 11.7%‐8.7%, respectively We revised up 2016‐17E net profit by 11.7%‐8.7%, respectively (see fig. 4). The upward revisions were mainly from 1) higher transfers from both low‐rise and condos along with 9M16 transfers; 2) a higher GPM to reflect the 9M16 GPM and 3) higher shared gain from associates as LHBANK’s earnings were better than expected. Managing growth by selling Investment properties LH normally divests its rental property projects when the selling values are appropriate and this should help support the bottom line when the residential business is unstable. For next year, LH plans to sell Grande Center Point Ratchadamri Hotel to LH Hotel Leasehold Real Estate Investment Trust (LHHOTEL) in 2Q17E with the value not exceeding Bt3.88bn. Based on LHHOTEL’s intended investment value and the Grande Centre Point Ratchadamri Hotel’s book value of Bt1.54bn as of 3Q16, we preliminarily estimate that LH will book gain on the sale after tax of around Bt1.1bn in 2017E. New rental businesses to start operating in 4Q16E and 2019E One of LH’s policies is investing in rental properties, such as hotels, serviced apartments and shopping malls. The rental business has contributed around 8%‐9% of revenue for the last four years. LH has two investment properties in the pipeline to operate in 4Q16E and 2019E, namely, the Grande Centre Point Hotel Sukhumvit 55 (project value of Bt2.2bn), which will start operating on Nov‐15, 16, and Terminal 21 Pattaya (Bt7bn), which will start operating in 2019E. Financials and Valuation FY Ended 31 Dec Revenues (Btmn) Net profit (Btmn) EPS (Bt) EPS growth (%) Core EPS (Bt) Core EPS growth (%) Dividend (Bt) BV (Bt) FY Ended 31 Dec PER (x) Normalized PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2013 25,075 6,478 0.65 14.0 0.65 12.5 0.40 3.48 2013 13.9 13.8 18.2 2.6 4.5 19.2 98.3
2014 28,317 8,423 0.77 18.7 0.63 (2.2) 0.65 4.03 2014 11.7 14.2 18.5 2.2 7.3 21.3 66.4
2015 26,260 7,920 0.68 (11.9) 0.58 (8.7) 0.60 4.00 2015 13.3 15.5 22.6 2.2 6.7 17.4 69.2
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 1 of 5
2016E 31,530 8,501 0.71 4.6 0.60 3.2 0.55 4.22 2016E 12.7 15.0 20.9 2.1 6.1 17.4 75.8
2017E 35,507 8,587 0.71 1.0 0.71 19.7 0.55 4.40 2017E 12.5 12.5 19.4 2.0 6.1 16.6 74.8
Figure 1: Quarterly earnings review Profit and Loss (Btmn)
% QoQ
9M16
% YoY
2016E
% YoY
17.6 18.5 24.2
(13.1) (11.0) (6.9)
20,495 22,366 7,728
28.6 28.3 30.8
28,984 31,530 10,636
19.7 20.1 18.9
YTD (% 2016E) 70.7 70.9 72.7
24.9
(6.0)
5,412
34.2
6,991
15.1
77.4
(78)
15.6
(12.8)
(255)
21.4
(330)
8.3
77.1
108
(12.7)
2.8
355
(3.3)
497
24.8
71.5
(580)
(343)
31.1
(40.8)
(1,269)
64.7
(1,637)
2.2
77.5
1,240
78
N.M.
N.M.
1,328
480
1,328
(42)
100.0
FY Ended 31 Dec
3Q15
2Q16
3Q16
% YoY
Revenue from project sales Total revenue Gross profit
5,332 5,849 1,999
7,211 7,788 2,667
6,268 6,933 2,483
EBITDA
1,374
1,826
1,716
Interest expense
(67)
(89)
Other income
124
105
Income tax
(262) (0)
Other extraordinary Items
550
798
726
31.9
(9.1)
(2,178)
36.0
2,977
22.2
73.2
Net profit (loss)
1,482
2,631
1,993
34.5
(24.2)
6,620
46.1
8,501
7.3
77.9
Core net profit (loss)
1,470
1,391
1,916
30.3
37.7
5,289
22.9
7,173
5.9
73.7
Reported EPS (THB)
0.13
0.22
0.17
33.7
(24.3)
0.56
42.5
0.71
4.6
79.6
Core EPS (THB)
0.13
0.12
0.16
29.5
37.6
0.45
19.8
0.60
3.2
75.4
Gross margin – project sales (%)
34.2
35.3
36.1
35.2
34.5
Gn (Ls) from affiliates
Gross margin ‐ overall (%)
34.2
34.2
35.8
34.6
33.7
EBITDA margin (%)
23.5
23.4
24.7
24.2
22.2
Net margin (%)
25.3
33.8
28.8
29.6
27.0
Current ratio (x)
2.7
3.4
3.3
3.3
3.2
Interest coverage (x)
19.0
19.5
20.9
20.2
20.6
Debt / equity (x)
1.1
1.0
1.1
1.1
1.1
BVPS (Bt)
3.82
4.08
3.87
3.9
4.2
ROE (%)
17.4
19.4
21.4
21.4
17.4
Source: LH, KT ZMICO Research
Figure 2: Presales
Figure 3: Backlog at end 3Q16
Btmn 25,000
2018 251
20,000 15,000
2016 6,069
10,000 5,000
Bt17,621mn
High rise
10M15 10M16
1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16
‐
Low rise
Source: LH, KT ZMICO Research
2017 11,274
Source: LH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 2 of 5
Figure 4: Major forecast revisions Previous 2016E
New 2016E
% Change 2016E
Previous 2017E
New 2017E
% Change 2017E
Residential sales
25,862
28,984
12.1
30,998
32,859
6.0
Transfers increased along with upward revision of low‐rise transfers
Low‐rise
18,796
21,584
14.8
19,670
21,349
8.5
Low‐rise transfers increased along with higher low‐rise transfer trend
High‐rise
7,066
7,400
4.7
11,328
11,510
1.6
Condo transfers increased along with faster transfer trend
Residential GPM
33.5
34.5
1.5
33.5
34.0
0.5
GPM was better than expected
SG&A expenses
3,957
4,406
11.3
4,743
5,027
6.0
Increased along with upward revision of transfers
Share gained from associates
2,814
2,977
5.8
2,938
3,170
7.9
Higher‐than‐expected equity income from LHBANK
Net profit
7,607
8,501
11.7
7,897
8,587
8.7
Btmn
Source: LH, KT ZMICO Research
Figure 5: Earnings forecast effects from LHBANK’s shareholding dilution from 33.98% to 21.9% After shareholding Original dilution % Change Btmn 2017E 2017E 2017E Booking as an associate 3,170 2,768 (12.7) Gn (Ls) from associates 8,587 8,193 (4.6) Net profit 0.71 0.68 (4.6) EPS TP (Bt) 12.1 11.6
Source: LH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 3 of 5
FINANCIAL TABLE PROFIT & LOSS (Btmn) Revenues Cost of sales and service Gross profit SG&A EBITDA Depreciation & amortization EBIT Interest expense Other income / exp. EBT Corporate tax Forex gain (loss) Extra Items Gain (loss) from affiliates Net profit Reported EPS Fully diluted EPS Core net profit Core EPS Dividend (Bt) BALANCE SHEET (Btmn) Cash and equivalents Accounts receivable Inventories PP&E‐net Other assets Total assets ST debt & current portion Long‐term debt Total liabilities Paid‐up shares Shareholder equity Total liab. & shareholder equity CASH FLOW (Btmn) Net income Forex and other extraordinary adjustments Depreciation & amortization Change in working capital Cash flow from operations Capex (Invest)/Divest Others Cash flow from investing Debt financing (repayment) Equity financing Dividend payment Others Cash flow from financing Net change in cash Free cash flow FCF per share (Bt) PROFITABILITY Revenue growth (%) EBITDA growth (%) EPS growth (%) Gross margin (%) EBITDA margin (%) Operating margin (%) Net margin (%) Core profit margin (%) Effective tax rate (%)
2013 25,075 (15,990) 9,085 (3,436) 6,807 509 6,298 (570) 648 7,689 (1,102) 0 (166) 2,109 6,478 0.65 0.65 6,482 0.65 0.40
2014 28,317 (18,206) 10,111 (4,005) 6,886 391 6,496 (503) 390 11,393 (1,864) 0 3,113 2,210 8,423 0.77 0.77 6,947 0.63 0.65
2015 26,260 (17,313) 8,947 (3,574) 6,072 300 5,771 (305) 398 10,268 (1,601) 0 2,287 2,437 7,920 0.68 0.68 6,775 0.58 0.60
2016E 31,530 (20,894) 10,636 (4,310) 6,991 194 6,797 (330) 523 10,772 (1,637) 0 1,328 2,977 8,501 0.71 0.71 7,173 0.60 0.55
2017E 35,507 (23,593) 11,913 (5,027) 7,582 202 7,379 (300) 493 10,248 (1,487) 0 0 3,170 8,587 0.71 0.71 8,587 0.71 0.55
2013 1,216 136 38,496 8,501 1,357 75,369 8,836 26,621 40,526 10,026 34,843 75,369
2014 6,738 172 43,487 8,147 1,617 86,888 10,365 25,765 42,613 10,986 44,275 86,888
2015 10,159 184 48,118 10,823 1,921 98,070 9,799 32,805 51,175 11,730 46,895 98,070
2016E 7,948 203 47,892 17,685 2,146 105,647 11,150 35,247 54,908 12,031 50,740 105,647
2017E 2,873 230 48,853 17,407 2,433 104,682 14,150 28,265 51,798 12,031 52,884 104,682
2013 6,478 (1,549) 509 (4,776) 662 (3,632) 765 (2,867) 5,921 0 (3,977) 0 1,945 (260) (3,881) (0.39)
2014 8,423 (3,252) 391 (3,260) 2,301 (901) 6,537 5,637 616 1,858 (5,123) (1,538) (4,187) 3,751 (219) (0.02)
2016E 8,501 (3,084) 194 (301) 5,310 (200) 429 229 3,670 0 (6,452) (3,765) (6,547) (1,008) 5,208 0.43
2017E 8,587 (3,250) 202 (591) 4,949 (200) 0 (200) (4,000) 0 (6,617) 793 (9,824) (5,076) 4,847 0.40
2013 4.0 21.8 14.0 36.2 27.1 25.1 25.8 25.9 14.3
2014 12.9 1.2 18.7 35.7 24.3 22.9 29.7 24.5 16.4
2015 7,920 (3,160) 300 (18,434) (13,373) (2,810) 4,684 1,874 6,478 1,273 (8,504) 14,772 14,019 2,520 (1,923) (0.16) 2015 (7.3) (11.8) (11.9) 34.1 23.1 22.0 30.2 25.8 15.6
2016E 20.1 15.1 4.6 33.7 22.2 21.6 27.0 22.7 15.2
2017E 12.6 8.5 1.0 33.6 21.4 20.8 24.2 24.2 14.5
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 4 of 5
Note: KT ZMICO has two major shareholders, Krungthai Bank PLC (KTB) and Seamico Securities PLC (ZMICO). Therefore, prior to making investments in the securities of KTB and ZMICO, investors should consider the risk factors carefully. An executive of KT ZMICO Securities is also a board member of BCP, BTC, CI, CPI, KBS, MAJOR, MK, PACE, PSL, SVH, VNG, ZMICO, SAWAD, TFG. A management member of KT ZMICO Securities is also a board member of BTC and NFC. KT ZMICO is a financial advisor for U, LOXLEY, ZMICO, MAKRO, CPALL, SAFARI, PACE, TPOLY, M‐CHAI, TFD, SUTHA, CI.
Corporate Governance Report (CGR) Source: Sec, Thai Institute of Directors Association (IOD) Excellent (scores: 90 ‐ 100) Very Good (scores: 80 – 89)
Satisfactory (scores: 60 – 69) Pass (scores: 50 – 59)
Good (scores: 70 – 79) No Logo N/A (scores: below 50) Anti‐corruption Progress Indicator Source: Sec, Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) Level 1 (Committed) : Organization’s statement or board's resolution to work against corruption and to be in compliance with all relevant laws.
Level 2 (Declared) : Public declaration statement to participate in Thailand's private sector Collective Action Coalition Against Corruption (CAC) or equivalent initiatives Level 3 (Established) : Public out preventive measures, risk assessment, communication and training for all employees, including consistent monitoring and review processes Level 4 (Certified) : Audit engagement by audit committee or auditors approved by the office of SEC, and receiving certification or assurance by independent external assurance providers (CAC etc.) Level 5 (Extended) : Extension of the anti‐corruption policy to business partners in the supply chain, and disclosure of any current investigations, prosecutions or closed cases Insufficient or not clearly defined policy Data not available / no policy
DISCLAIMER This document is produced using open sources believed to be reliable. However, their accuracy and completeness cannot be guaranteed. The statements and opinions herein were formed after due and careful consideration for use as information for the purposes of investment. The opinions contained herein are subject to change without notice. This document is not, and should not be construed as, an offer or the solicitation of an offer to buy or sell any securities. The use of any information contained in this document shall be at the sole discretion and risk of the user.
KT ZMICO RESEARCH – RECOMMENDATION DEFINITIONS STOCK RECOMMENDATIONS
SECTOR RECOMMENDATIONS
BUY: Expecting positive total returns of 15% or more OVERWEIGHT: The industry, as defined by the analyst's over the next 12 months coverage universe, is expected to outperform the relevant OUTPERFORM: Expecting total returns between ‐10% primary market index by at least 10% over the next 12 months. to +15%; returns expected to exceed market returns NEUTRAL: The industry, as defined by the analyst's coverage over a six‐month period due to specific catalysts universe, is expected to perform in line with the relevant UNDERPERFORM: Expecting total returns between primary market index over the next 12 months. ‐10% to +15%; returns expected to be below market UNDERWEIGHT: The industry, as defined by the analyst's returns over a six‐month period due to specific coverage universe, is expected to underperform the relevant catalysts primary market index by 10% over the next 12 months. SELL: Expecting negative total returns of 10% or more over the next 12 months
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES page 5 of 5
KT ZMICO Securities Company Limited Head Office
WWW.KTZMICO.COM
8th, 15th‐17th,19th, 21st Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok, Thailand 10500 Telephone: (66‐2) 695‐5000 Fax: (66‐2) 695‐5173 KT ZMICO Connect 662 695 5555
Central World Branch
Amarin Branch
22nd Floor, Amarin Building, 496‐502 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 018‐6200 Fax: (66‐2) 018‐6298, (66‐2) 018‐6299
8th Floor, Ton Son Tower, 900 Ploenchit Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 626‐6000 Fax: (66‐2) 626‐6111
Phaholyothin Branch
Sindhorn Branch
Viphavadee Branch
2nd Floor, Sindhorn Tower 1, 130‐132 Wireless Road, Lumpini, Pathumwan, Bangkok 10330 Telephone: (66‐2) 627‐3550 Fax: (66‐2) 627‐3582, 627‐3600
G Floor, Lao Peng Nguan 1 Bldg., 333 Soi Cheypuand, Viphavadee‐Rangsit Road, Ladyao, Jatujak, Bangkok 10900 Telephone: (66‐2) 013‐8600 Fax: (66‐2) 618‐8569
BangKhae Branch
Chiang Mai Branch
Pak Chong Branch
999/9 The Offices at Central World, 16th Fl., Rama 1 Rd, Pathumwan, Bangkok 10330 Telephone: (66‐2) 264‐5888 Fax: (66‐2) 264 5899
1291/1, Shinnawatra Tower II, 3rd Floor, Phaholyothin Road, Phayathai, Bangkok 10400 Telephone: (66‐2) 686‐1500 Fax: (66‐2) 686‐1666
Ploenchit Branch
518 The Mall Group Building Bangkhae Branch, 6th Floor, Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Telephone: (66‐2) 454‐9979 Fax: (66‐2) 454‐9970
422/49 Changklan Road, Changklan Subdistrict, Amphoe Meuang, Chiang Mai 50100 Telephone: (053) 270‐072 Fax: (053) 272‐618
173 175, Mittapap Road, Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Telephone: (044) 279‐511 Fax: (044) 279‐574
Korat Branch
Khon Kaen Branch
Chonburi Branch
624/9 Changphuek Road, T.Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171
5th Floor, Charoen Thani Princess Hotel, 260 Srichan Road, T. Naimuang, A. Muang, Khon Kaen 40000 Telephone: (043) 389‐171‐193 Fax: (043) 389‐209
4th Floor, Forum Plaza Bldg., 870/52 Sukhumvit Road, T. Bangplasoy, A. Muang, Cholburi 20000 Telephone: (038) 287‐635 Fax: (038) 287‐637
Pattaya Branch
Chachoengsao Branch
Hat Yai Branch
Easy Point 2, 392/65 Moo.9, T.Nong Prue, A. Bang Lamung, Chonburi 20260 Telephone: (038) 420‐965 Fax: (038) 420‐968
108/34‐36 Mahajakkrapad Road, T.Namuang, A.Muang, Chachoengsao 24000 Telephone: (038) 813‐088 Fax: (038) 813‐099
200/301, 200/303 JULDIS HATYAI PLAZA Floor 3 , Niphat‐Uthit 3 Rd, Hatyai Songkhla 90110 Telephone: (074) 355530‐3 Fax: (074) 355534
Phuket Branch
22/61‐63, Luang Por Wat Chalong Road, Talat Yai, Mueang Phuket, Phuket 83000 Telephone: (076) 222‐811, (076) 222‐683 Fax: (076) 222‐861
Phitsanulok Branch
227/171 Borom Trilokkanat Road, Muang, Phitsanulok 65000 Telephone: 055‐219‐255 to 8 Fax: 055‐219‐259
Nakhon Pathom
Cyber Branch Ayutthaya
Cyber Branch @ North Nana
Cyber Branch Chiangrai
KrungThai Bank, Rojana Branch 253 Moo 5, Rojana Road, Phai Ling, Phra Nakhon Si Ayutthaya, Phra Nakhonsi Ayutthaya, 13000 Telephone: 035‐242‐477 Fax: 035‐242‐476
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd., Klong Toey Nua Subdistrict , Wattana District , Bangkok 10110 Telephone: 083‐490‐2871
River Hotel (Building 3rd),1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
KrungThai Bank, Hayaek Phokhun Mengrai Branch 116/19 Moo 19, Highway 110 Road, Rop Wiang, Mueang Chiang Rai, Chiang Rai, 57000 Telephone: 053‐715‐067 Fax: 053‐715‐068
