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Company Update March 26, 2014
Quality Houses
Buy (TP Bt3.74)
Cheap asset play with potential upside to earnings
Price Bt2.96
We expect QH’s norm. profit to dive by 8.5% in 2014 before recovering by 17.2% in 2015 on changes in CD transfers. Nevertheless, it should be noted that there is upside to 2014E low-rise transfers as low-rise presales rose very strongly in Jan-Feb 2014. We initiate coverage on the counter with a Buy rating and a TP of Bt3.74 based on RNAV. We believe that QH’s residential business is substantially undervalued as it is trading at only 1.7x 2014E PER. Revenue to dive in 14E before bouncing back in 15E We have 2014E revenue of Bt18.2bn (-7.7%) on the back of expected lower CD transfers and decelerating growth of low-rise transfers. Revenue should then recover in 2015E to Bt19.7bn (+8.4%) when the schedule of CD completion is heavier. Norm. profit to follow similar pattern in 14E-15E The GPM is expected to head downward to 31.6% in 2014 after reaching an abnormally high level of 32.4% in 2013, which was boosted by a one-off reversal of the contingency budget. SG&A to revenue is expected to rise slightly, mainly due to a lower revenue base, resulting in lackluster 2014E norm. profit of Bt2.9bn (-8.5%). Nevertheless, a 2015E revenue increase of 8.4% and expected NPM improvement should lead to a 17.2% increase in 15E earnings. More upside than downside risk We view our revenue forecast as a lower bound in 2014, and the revenue might move closer to the company’s target of Bt21.4bn (+8.6%) depending on the longevity of the political impact on presales. Also, we haven’t included the company’s planned sale of Centre Point Hotel Silom (Bt500m - Bt550m) to QHHR, which should fetch Bt52m – Bt86m realized gain on sale. Buy on latent asset value and potential earnings upside We initiate coverage on QH with a Buy rating and a TP of Bt3.74, comprising property development value and discounted fair values of investments in associates (HMPRO, LHBANK and two property funds). Even with the rather bleak 2014 outlook, we believe that the share price is overly discounted as QH’s residential unit is trading at an implied 2014E PER of only 1.7x. Financial and Valuation FY Ended 31 Dec Revenues (Btm) Net profit (Btm) Norm. profit (Btm) EPS (Bt) EPS growth (%) Dividend (Bt) BV (Bt)
2011
2012
2013
2014E
2015E
9,849 853 764 0.09 -60.7 0.12 1.43
13,077 2,450 1,239 0.27 187.3 0.01 1.72
19,699 3,307 3,154 0.36 34.9 0.16 1.88
18,181 2,887 2,887 0.31 -12.7 0.14 2.04
19,716 3,385 3,385 0.37 17.2 0.17 2.26
FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2011
2012
2013
2014E
2015E
35.6 30.5 2.06 4.05 6.43 1.62
21.9 13.0 1.72 0.31 16.92 1.31
8.6 10.6 1.57 5.47 20.00 1.08
9.4 12.6 1.45 4.78 16.05 1.11
8.0 10.2 1.31 5.60 17.14 0.84
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
Stock Performance (%) 1M
3M
12M
Absolute
9.62
12.12
-33.93
Relative to SET
5.56
7.54
-24.39
Share data Reuters / Bloomberg
QH.BK/QH TB
Sector
Property Development
Paid-up Shares (m)
9,183.77
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
27.00/835.00
Foreign limit / actual (%)
40.00/25.20
52 week High / Low (Bt)
4.54/2.28
Avg. daily T/O (shares 000)
99,568.00
NVDR (%)
6.56
Estimated free float (%)
62.98
Beta
1.82
Major Shareholders (13/03/2014) Land and Houses Plc.
24.98 %
GIC PRIVATE LIMITED - C
10.77 %
Thai NVDR Co., Ltd.
6.51 % FY14
FY15
Consensus EPS (Bt)
0.326
0.375
KT ZMICO vs. consensus
-4.9%
-1.3%
Company Profile The Company engages in the residential and commercial property development businesses. Its businesses include land and house projects, residential projects, service apartment for rent,hotel,office building for rent, residential and commercial buildings management services, investment business and others. CGR 2013
Wasu Mattanapotchanart Analyst, no. 44357 [email protected] 66 (0) 2624-6268 page 1 of 18
Valuation Depressed valuation of residential unit QH has investments in four associated companies/funds, including Quality House Leasehold Property Fund (QHPF), Quality Houses Hotel and Residences Freehold and Leasehold Property Fund (QHHR), Home Product Center (HMRPO) and LH Financial Group (LHBANK). Based on their market capitalizations on 25 Mar 14, these investments in QH’s portfolio are cumulatively worth Bt24.2bn. The investment value is equivalent to 87.7% of QH’s market capitalization, implying that QH’s residential business is trading at only 1.7x 2014E PER. Even with the rather bleak 2014 outlook, we believe that the share price is overly discounted. Rich latent asset value with some earnings upside, initiate with Buy We initiate coverage on QH with a Buy rating and a TP of Bt3.74, using the RevisedNet-Asset-Value (RNAV) method. We estimate the value of investment in associates at Bt2.62 per share while using balance sheet data for Bt3.17 property development value and Bt2.04 net debt. There is also some earnings upside as evidenced in JanFeb 14 low-rise presales growth of 28.0% vs. our estimated increase of 5.7% for the whole year. Figure 1: Valuation as of 25 Mar 14
Property Development Value (work‐in‐progress and completed inventories) Revised value of investment in asso. (11.2% discount to fair value/NAV/market value) Net debt Number of shares (unit) RNAV
Btm 29,138 24,028 18,690 9,184 34,550
Bt per share 3.17 2.62 2.04 3.74
Source: QH, KT ZMICO Research Figure 2: Revised value of investment in associates
QHPF QHHR HMPRO LHBANK Total
Market Value 1,820 947 18,105 3,297 24,170
Fair Value/NAV 2,205 1,171 20,400 3,297 27,073
Revised Value 1,764 936 18,360 2,967 24,028
Remarks for Revised Value 20% discount to NAV 20% discount to NAV 10% discount to consensus' TP 10% discount to market price
Source: QH, KT ZMICO Research Figure 3: PER Band and sensitivity of market prices based on PER at different standard deviation levels
PER
Implied Market price
(x)
(Bt)
(%)
+2.0SD
18.6
5.84
97%
+1.0SD
14.4
4.52
53%
Upside/Downside
+0.5SD
12.3
3.87
31%
+0.25SD
11.3
3.54
19%
Average
10.2
3.21
8%
-0.25SD
9.2
2.88
-3%
-0.5SD
8.11
2.55
-14%
-1.0SD
6.01
1.89
-36%
Note: 2014E EPS = 0.31 Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 2 of 18
Figure 4: PBV Band and sensitivity of market prices based on PBV at different standard deviation levels PBV
Implied Market price
(x)
(Bt)
(%)
+2.0SD
2.1
3.93
33%
+1.0SD
1.7
3.20
8%
+0.5SD
1.5
2.84
-4%
Upside/Downside
Average
1.3
2.48
-16%
-0.5SD
1.13
2.12
-28%
-1.0SD
0.94
1.76
-41%
Note: 2014E BVPS = 1.88 Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 3 of 18
Figure 5: Peer comparison Ticker
Yield (x) 13A
ROE (%) 13A
ROA (%) 13A
14.4 8.4
5.4 5.8
19.7 25.8
9.4 11.6
9.7
10.0
5.5
25.7
14.8
57.7 -8.5
10.4 8.6
6.6 9.4
4.0 5.5
21.6 16.1
10.6 7.9
-33.0
41.2
9.1
7.2
5.5
12.0
3.6
31.1
-2.3
-5.4
7.3
7.7
4.9
15.1
6.3
360 163 170
8.0 -36.9 0.0
-11.0 -92.2 8.7
44.9 2699 -17.8
11.2 192.7 14.1 28.6
7.7 6.9 17.9 9.6
3.8 0.0 2.9 4.3
10.8 0.5 9.4 15.6
4.3 0.1 2.8 7.2
-
9,292 6,755 1,141 3,921 1,522 1,108
-8.7 0.7 225.7 3.2 -36.7 101.8
-45.7 -1.5 227.3 16.6 -63.4 21.0
33.6 -3.3 -85.8 -22.8 220.6 -44.8
18.2 16.7 12.8 11.5 38.5 4.9 17.1
17.4 13.5 17.5 11.6 14.8 8.6 13.9
2.6 1.7 2.1 3.3 1.8 4.1 2.6
5.1 7.4 9.7 6.9 2.0 11.4 7.1
2.4 4.1 13.1 3.7 1.1 6.4 5.1
-
-
1,537 1,355 410 467 389
85.7 101.4 67.5 92.3 21.4
57.2 36.6 46.5 71.0 63.5
30.4 5.2 31.7 5.6 41.8
18.8 13.6 11.6 10.1 14.8 13.8
14.4 13.0 8.8 9.6 10.4 11.2
1.1 2.1 3.1 1.8 1.0 1.8
14.9 27.3 19.7 12.4 7.5 16.4
6.3 9.7 8.5 7.8 5.1 7.5
6.12 2.67 3.02 2.15 2.18
-
-
3,337 1,086 2,243 921 2,988
17.5 17.5 16.3 10.0 17.3
15.9 16.7 14.2 9.3 17.0
4.5 2.7 3.8 3.9 1.6
6.2 5.0 9.5 19.1 10.0
3.8 2.9 4.4 7.4 6.2
-
-
778
14.3 20.8 -12.7 3.4 27.9 272.1
-26.8 6.0 18.4 7.9 -3.8
1.56
-81.3 20.9 -12.5 3.5 27.6 #N/A N/A
154.1
15.7
39.0 18.7
1.0 2.9
-5.6 7.4
-1.5 3.9
7.49 6.11 3.06 19.46 16.32 21.35 43.3 14.56 92.5 11.04
-
-
8,621 2,742 7,281 20,502 12,267 12,328 15,065 6,518 32,250 8,512
28.7 22.5 22.6 23.1 38.6 -14.4 -22.5 28.3 -8.1 8.1
27.0 -5.2 22.3 20.0 15.6 -18.3 23.7 66.4 -15.7 23.4
25.2 11.8 20.4 23.2 33.1 13.8 -2.7 13.3 12.7 -27.0
5.0 3.7 5.4 8.1 10.5 19.9 14.4 6.2 12.4 10.3 9.6
4.0 3.3 4.4 6.8 8.2 16.6 13.3 4.9 11.6 13.5 8.7
3.9 6.7 6.7 2.4 2.4 3.5 2.5 4.9 3.6 4.5 4.1
20.3 16.3 20.2 21.0 12.9 4.2 3.8 16.8 5.8 6.9 12.8
3.8 4.9 5.5 8.1 4.0 3.0 2.8 4.8 4.2 5.3 4.6
Price (Local)
TP
Rating
THAILAND LH TB Equity PS TB Equity
9.35 20.20
22.50
LPN TB Equity
15.30
16.00
SPALI TB Equity QH TB Equity
17.50 2.96
22.50 3.76
SIRI TB Equity
1.90
2.00
AP TB Equity
5.15
5.32
SC TB Equity PF TB Equity NOBLE Equity AVERAGE
3.16 0.92 12.10
3.68 0.91 -
Buy Sell Into Strength Buy Buy Sell Into Strength Sell Into Strength Buy Sell -
2.77 9.43 2.17 3.22 1.615 1.79
-
1155 1070 2360 865 428
SINGAPORE CAPL SP Equity CIT SP Equity HOBEE SP Equity KPLD SP Equity WP SP Equity WINGT SP Equity AVERAGE INDONESIA CTRA IJ Equity SMRA IJ Equity CTRS IJ Equity CTRP IJ Equity DILD IJ Equity AVERAGE MALAYSIA KLCCSS MK Equity IGB MK Equity SPSB MK Equity MSGB MK Equity UEMS MK Equity MRC MK Equity AVERAGE CHINA & HONG KONG 600048 CH Equity 3383 HK Equity 2007 HK Equity 688 HK Equity 1109 HK Equity 101 HK Equity 12 HK Equity 813 HK Equity 16 HK Equity 83 HK Equity AVERAGE
Mkt Cap (US$m)
Norm. profit growth (%) 12A 13A 14E
Norm. PER 13A 14E
2,878 1,379
14.0 37.3
13.4 48.4
2.5 -8.6
14.8 7.7
693
12.8
8.2
-3.4
922 835
6.8 62.2
5.1 154.7
558
42.6
452
Note: Norm. PER and Yield are based on a fully-diluted number of shares Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 4 of 18
Earnings and presales prospects Lofty targets from management The company set its performance targets in Nov 13; back then, management didn’t anticipate that the protests would have lasted this long, and it now admits that the political situation has to be monitored closely and that the targets will have to be reviewed on a quarterly basis. In 2014, QH aims for Bt21.4bn presales (+4.9%) and Bt19.4bn transfers (+5.0%). The most aggressive goals in 2014 involve Bt5.0bn TH presales (+72.4%) and Bt4.5bn TH transfers (+60.5%). Hence, we view the company’s targets merely as upper bounds. Lower revenue and profit in 2014E on light CD transfers The 8.2% YoY decline in 2014E residential revenue stems from forecasted lower CD transfers on a lighter completion schedule; this leads to 2014E norm. profit of only Bt2.9bn (-8.5%). CD transfers should come in at Bt4.3bn in 2014 (-34.0%) before rising to Bt5.2bn in 2015 (+21.1%). CD transfers in the respective years are already 100.8% and 81.3% secured. Figure 6: Transfer target by QH
Source: QH, KT ZMICO Research Figure 8: Revenue and norm. profit
Source: QH, KT ZMICO Research
Figure 7: Presales target by QH
Source: QH, KT ZMICO Research Figure 9: CD completion in 2014 Value (Btm) Q.House Sukhumvit 79 1,990 Casa Condo Ratchada1,500 Ratchapruk Casa Condo Campus 330 Choeng Doi Suthep The Trust Condo Hua-Hin 1,530 Total 5,350
Start of transfer 3Q14 2Q14 4Q14 4Q14
Source: QH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 5 of 18
Expected to stage a strong recovery in 2015 In 2015, we expect the 21.1% rise in CD transfers to push total revenue upward by 8.4% to Bt19.7bn. This, together with an expected lower SG&A-to-revenue ratio and 2015E share of profit on investment in associates of Bt1.2bn (+14.6%), is expected to lead to a 17.2% increase in 2015 norm. profit to Bt3.4bn. Backlog at record high after it penatrated CD market QH, always known for its luxury SDH, started entering seriously into the CD market in 2011, and its CD presales momentum has built up since then. At the end of 2013, QH had Bt9.0bn in presales, Bt8.5bn of which was high-rise properties while the remaining Bt500m was SDH and TH. Nevertheless, low-rise properties, the majority of which are pre-built, still dominate its portfolio, and the record-high backlog secures only 28.3% and 22.7% of 2014E and 2015E transfers. Figure 10: SG&A-to-revenue ratio
Source: QH, KT ZMICO Research
Figure 11: Share of profit on investment in associates
Note: HMPRO’s 2014E-15E net profits are based on consensus estimates Source: QH, KT ZMICO Research
Figure 12: Contribution of backlog as of 31 Dec 13
Source: QH, KT ZMICO Research
Figure 13: Breakdown of backlog by product type
Source: QH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 6 of 18
Continued expansion into provincial markets in 2014 Of the total of 26 projects (Bt22.3bn) to be launched in 2014, nine projects (Bt6.8bn) will be outside the Bangkok Metropolitan Region (BMR), reflecting QH’s bid to increase its upcountry presales from 10% to 14% of the total in 2014. Seven out of the nine projects will serve local demand while the other two will be vacation homes (CD), namely The Trust Condo North Pattaya and Casa Seaside Condo Rayong. Like other developers, QH is cautious about launching vacation homes and might decide to postpone the launches to next year. Figure 14: Project launches in 2014
No
Low‐rise projects
1 Casa City Nakhon Prathom Total projects to be launched in 1Q14 2 Casa City Ratchapruk‐Pharam 5 3 Casa City Outer Ring Road ‐ Lamlukka 4 The Trust Ville Rungsit 5 The Trust City Sukhumvit 6 The Trust Town Rungsit 7 Gusto Teparak Total projects to be launched in 2Q14 8 Casa Grand Ratchapruk ‐ Pharam 5 9 Casa Presto Phraram 5 ‐ Ratchaphruk 10 Casa Ville Don Muang 1 11 Casa City Outer Ring Road‐Lamlukka 3 12 Casa City Pracha Uthit 90 13 The Trust Town Bor‐win 14 Gusto Don Muang 2 15 Gusto Bangna‐Suvarnabhumi Total projects to be launched in 3Q14 16 Laddarom Villa Mee‐Chok City Hall 17 Casa Premium Pharam 2 18 Casa Premium Outer Ring Road ‐ On Nuch 19 The Trust Ville Mithsamphan Total projects to be launched in 4Q14 Total (19 projects: SDH = 7 , TH = 12) No 1 2 3 4 5 6 7
High‐rise projects Casa Cond Campus Choeng Doi Suthep Q Seaside Cha‐Am Q. House Condo Phahon Yothin‐Chiang Rai The Trust Condod Amata Nakorn The Trust Condo North Pattaya Casa Seaside Condo Rayong The Trust Condo Rattanatibet Total (7 high‐rise projects) Grand Total (26 projects)
Location TYPE Nakhon Prathom TH Bangkok TH Pathumthani SDH Bangkok TH Samutprakarn TH Bangkok TH Bangkok TH Bangkok SDH Bangkok SDH Bangkok SDH Pathumthani TH Samutprakarn TH Chonburi TH Bangkok TH Bangkok TH Chiangmai DH Bangkok DH Bangkok DH Chonburi DH
Location Chiangmai Petchaburi
Type CD CD
Chiangrai Chonburi Chobburi Rayong Bangkok
CD CD CD CD CD
Value (Btm)
Unit
329 151 329 151 1,230 401 280 80 547 171 943 229 627 274 652 269 4,279 1,424 846 118 2,432 385 671 114 300 120 939 280 413 222 803 313 1,060 407 7,464 1,959 686 195 847 116 1,000 144 585 213 3,118 668 15,190 4,202 Value (Btm) Unit 330 201 1,803 207 483 850 1,250 378 2,000 7,094 22,284
358 518 585 152 1,030 3,051 7,253
Launch date
Start of transfer
1Q14 2Q14 2Q14 2Q14 2Q14 2Q14 2Q14 3Q14 3Q14 3Q14 3Q14 3Q14 3Q14 3Q14 3Q14 4Q14 4Q14 4Q14 4Q14
2Q14 2Q14 3Q14 3Q14 3Q14 3Q14 2Q14 3Q14 3Q14 4Q14 4Q14 4Q14 3Q14 4Q14 3Q14 1Q15 4Q14 4Q14 4Q14
Launch date 1Q14 2Q14
Start of transfer 4Q14 2016
2Q14 2Q14 3Q14 4Q14 4Q14
2016 2015 2016 2016 2016
Source: QH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 7 of 18
Figure 15: Upcountry projects 2014 (old + new)
Source: QH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 8 of 18
Investing in precast factory to support future growth QH plans to invest Bt175m in a precast factory this year; the factory will have production capacity of 1,000 low-rise residential units per year and support 30% of the necessary precast materials to be used by QH. As mid-segment SDH and lowend TH have become a large part of QH’s revenue stream, a reliable source of precast materials is needed. Figure 16: Transfer breakdown and QH’s forecast by segment
Source: QH, KT ZMICO Research
Figure 17: Transfer breakdown and QH’s forecast by product
Source: QH, KT ZMICO Research
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page 9 of 18
Financials Figure 18: Major assumptions 2011 Revenue Residential 8,814 Rental office 331 Hotel 704 Total 9,849
2012
2013
2014E
2015E
11,984 347 746 13,077
18,477 359 863 19,699
16,960 359 863 18,181
18,495 359 863 19,716
Growth (%) Residential Rental office Hotel Total
-28.0 6.8 1.2 -25.6
36.0 4.7 5.9 32.8
54.2 3.5 15.7 50.6
-8.2 0.0 0.0 -7.7
9.1 0.0 0.0 8.4
GPM (%) Residential Rental office Hotel Total
28.3 49.2 29.6 29.1
30.7 49.0 27.4 31.0
32.4 48.4 26.1 32.4
31.5 48.0 26.1 31.6
31.9 48.0 26.1 32.0
Norm. NPM
7.8
10.1
16.3
15.9
17.2
Source: QH, KT ZMICO Research
GPM to edge lower to its standard We expect the residential GPM to fall from 32.4% in 2013 to 31.5% in 2014 as the high-rise GPM should decline from 35.5% in 2013 to a more normal level of 33.0%. CD generated an abnormally high GPM in 2013 on the back of a one-off reversal of the contingency budget at Q. House Langsuan (Bt3.35bn) as its final unit was transferred. Figure 19: Residential GPM
Source: QH, KT ZMICO Research
Figure 20: Operating margin
Source: QH, KT ZMICO Research
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page 10 of 18
Associated companies expected to continue being major part of norm. profit QH and LH are the two developers with the highest amount of investments in other companies and rental assets. QH’s investment in associates contributed 29.9% of 2013 norm. profit. The number should rise to 37% - 38% in 2014 and 2015, mainly because the earnings of Home Product Center (HMPRO) are expected to rise by 18.2% in both 2014 and 2015 based on the consensus estimates. Policies regarding investment in associates QH aims to maintain its percentage share holding in the two property funds (QHPF and QHHR). It has no intention to buy more shares of HMPRO if HMPRO raises more capital in the future. Nevertheless, it holds HMPRO as a long-term investment and would sell the 19.77% stake at a very high price only. Regarding QH’s holding of LH Financial Group (LHBANK), the company might sell the 21.6% stake to a firm with banking expertise at an attractive price, but we do not expect the transaction to occur within this year. Leverage ratios to remain low QH has tried to keep the gearing ratio not too far above 1.0x. We expect the company’s gearing ratio to be stable at 1.19x in 2014 (2013E: 1.18) before falling to 0.92x in 2015 on an 8.4% surge in transfers. Our estimated gearing ratios will likely be slightly lower once we include the sale of Centre Point Hotel Silom in our forecasts. Figure 21: Share of profit from associates as % of
Figure 22: Investment in associates as of 25 Mar 14
norm. profit
QHPF QHHR HMPRO LHBANK Total
Source: QH, KT ZMICO Research
Total Market Cap (Btm) 7,093 3,024 91,580 15,264 116,961
Source: QH, KT ZMICO Research
Figure 23: Potential sale of Centre Point Hotel Silom Btm Book value 425 Selling price 500 - 550 Gain on sale 75 - 125 % buyback by QH
31.33%
Realized gain on sale
52 - 86
Source: QH, KT ZMICO Research
% 25.66% 31.33% 19.77% 21.60%
Stake Held Market Cap (Btm) 1,820 947 18,105 3,297 24,170
Figure 24: Leverage ratios 2011 - 2015
Source: QH, KT ZMICO Research
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page 11 of 18
Industry outlook Political impact might start fading in 2Q14 The degree of political instability and the number of violent incidents have gone down substantially after the PDRC consolidated the protests to only one site in Lumpini Park, down from seven stages, at the end of Feb 2014. Traffic is no longer blocked and consumers might have adjusted to the ongoing protests. Although we don’t expect to see any significant YoY presales growth in the coming months, the rate of the YoY decline should be less severe in 2Q14. Increase in development costs to decelerate We don’t expect the problems of labor shortages and rising prices of construction materials to worsen much in 2014 since the Bt2.2trn government budget for infrastructure investment was already ruled illegal by the Constitution Court. Land prices are also not expected to increase as much as some developers had feared since the property market has already started to cool down. High household debt remains an obstacle Most listed developers under our coverage continue to be supported by their banking “alliance”, and the rejection rate rose only slightly during early-2014. However, we believe the record-high household-debt-to-GDP ratio will limit consumers’ purchasing power in 2014, resulting in a 13.2% decline in presales. Figure 25: Household debt to GDP as of end-3Q13
Figure 26: Sector’s presales Presales 2013A
2014T
KTZ's target
SIRI
42,158
30,000
30,000
PS
41,282
41,000-45,000
36,925
LH
30,200
32,000
-
LPN
24,300
26,730
20,000
QH
20,400
21,400
17,608
SPALI
19,091
22,000
19,000
AP
15,184
21,000
17,500
SC
13,532
12,000
11,000
PF
13,040
16,000 222,130226,130
12,000
Total
219,187
% Growth Source: BoT, KT ZMICO Research
164,033
1.3% - 3.2%
% Growth (excluding LH) 0.1% - 2.7% *Stocks under our coverage only
-13.2%
Source: Company data, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 12 of 18
Upside risk / Downside risk Potential upside in low-rise presales and transfers QH is proving itself to be one of the least impacted by the political stalemate. From Jan to Feb 14, QH generated low-rise presales of Bt1.6bn (+28.0% YoY). We believe that the company has managed to weather the storm because i.) its projects are far from protest sites and ii.) its well-received TH products were growing on a low base because QH only started realizing revenue from TH for the first time in 2012. If this momentum continues, its implied presales growth target for low-rise properties in 2014 of 29.4% could be easier to achieve, potentially causing us to adjust the estimated low-rise presales and transfers upward. Sale of Centre Point Hotel Silom not yet included in forecasts On 20 Aug 13, the board of directors approved in principle the transfer of the subleasehold right of Centre Point Hotel Silom to Quality Houses Hotel and Residence Free and Leasehold Property Fund (QHHR). QH informed us that the selling price is in the range of Bt500m – Bt550m, implying realized gain of Bt52m – Bt86m on sale based on the assumption that QH will continue to hold 31.33% of QHHR. Figure 27: Breakdown of presales targets 2014
Source: QH, KT ZMICO Research
Figure 29: TH presales and transfers
Source: QH, KT ZMICO Research
Figure 28: Presales during Jan-Feb (2013 vs. 2014)
Source: QH, KT ZMICO Research
Figure 30: QH’s transfer target vs. KTZ’s forecast 2014
Source: QH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 13 of 18
Company Background Founded on 21 Oct 1983, QH’s primary objective was to build houses on land under a contract work scheme for customers. In 1990, the company began to carry out the business of serviced apartments, all of which were turned into hotels in 2013, as well as rental office buildings. Ten years after its establishment, the firm started engaging in the business of property development for sale, focusing mainly on luxury houses. In an attempt to boost its top-line growth and offset the lackluster presales trend in flood-impacted areas, the company has ventured into the markets of CD and TH with considerable success. QH’s portfolio has changed dramatically over the years; its revenue from high-end products fell from 55.0% of total transfers in 2009 to 22.0% in 2013, and low-end products came from non-existent in 2009 to 38% of total transfers in 2013 on the back of rising low-end TH presales. Figure 31: 2013 presales by company
Source: Company data, KT ZMICO Research Figure 33: Revenue breakdown 2013
Source: QH, KT ZMICO Research
Figure 32: 2013 revenue by company
Source: Company data, KT ZMICO Research Figure 34: Presales and realized sales
Source: QH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 14 of 18
Figure 35: Revenue contribution by segment 2013
Source: QH, KT ZMICO Research
All of QH’s revenue streams can be categorized as follows: a.) Single-detached houses (55.1% of 2013 revenue)
Prior to 2009, QH’s presales and revenue streams were purely SDH; QH has been known as a specialist of European-style luxury houses. The portion of SDH revenue has declined since 2010 as the company began to venture into the CD and TH markets for growth. The GPM for QH’s SDH has been quite low (28%-30% vs. industry’s > 30%) due to i.) subpar cost management (i.e., expensive materials compared to house selling prices), ii.) limited pricing power for high-end products and iii.) the 2011 flood, which severely dampened the sales and selling prices of QH’s projects in the Ratchapruek area. b.) Townhouses (17.0% of 2013 revenue) 2012 was the year that QH started seriously engaging in selling TH with two brands, namely The Trust Town Home and Gusto Town Home. Revenue from TH sales went from zero in 2011 to Bt1.8bn in 2012 and Bt2.8bn in 2013 (+54.2%). QH stated that the TH market in 2013 was so strong that it could not build its TH fast enough to keep up with the demand, leading the company to target Bt4.5bn TH transfers this year (+60.5%) and build a precast factory. Although the GPM of TH was low in the past, new TH launches since 2013 have yielded a higher GPM of 32.0% - 35.0% as the company has adapted to using materials that are more suitable to the products’ segments. c.) Condominiums (27.9% of 2013 revenue) QH’s four CD brands are Q, Q. House, Casa Condo and The Trust Condo. The company’s policy is to launch CD projects after EIA approval only. The normal range of CD GPM is 31.0% - 33.0%, although the GPM might spike in some periods due to the reversal of the contingency budget.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 15 of 18
Figure 36: QH’s brands of property projects for sale
Source: QH, KT ZMICO Research
d.) Rental offices (1.8% of 2012 revenue) QH operates six office buildings, including Q. House Convent, Q. House Asoke, Q. House Sathorn, Q. House Ploenchit, Q. House Lumpini and Waveplace; the latter three buildings are owned by Quality Houses Leasehold Property (QHPF) and leased by QH. We expect the company to keep its ownership of the first three buildings as the leasehold rights for them will expire in around 10 years. e.) Hotels (4.4% of 2012 revenue) QH operates and receives revenue from five hotels: Centre Point Hotel in Silom, Pratunam, Sukhumvit 10, Chidlom and Ploenchit. The Centre Point Pratunam, Sukhumvit 10 and Chidlom branches are owned by Quality Houses Hotel and Residence Freehold and Leasehold Property Fund (QHHR), and the one in Ploenchit is owned by Land and Houses Freehold and Leasehold Property Fund (LHPF). All of the hotels that are owned by the funds are being leased by QH.
Figure 37: Revenue and norm. profit
Source: QH, KT ZMICO Research
Figure 38: Profit margins
Source: QH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 16 of 18
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 (%)
2011 9,849 (6,981) 2,868 (2,103) 1,588 (244) 1,344 (309) 96 1,131 (182)
2012 13,077 (9,028) 4,049 (2,417) 3,690 (221) 3,468 (295) 60 3,234 (723)
2013 19,699 (13,312) 6,387 (3,218) 4,347 (176) 4,171 (228) 83 4,027 (636)
2014E 18,181 (12,441) 5,740 (3,083) 3,808 (186) 3,621 (281) 77 3,418 (453)
2015E 19,716 (13,416) 6,300 (3,211) 4,397 (186) 4,210 (287) 77 4,001 (539)
88 639 853 0.09 0.09 764 0.08 0.12
1,196 802 2,450 0.27 0.27 1,239 0.13 0.01
151 943 3,307 0.36 0.36 3,154 0.34 0.16
0 1,073 2,887 0.31 0.31 2,887 0.31 0.14
0 1,230 3,385 0.37 0.37 3,385 0.37 0.17
2011 1,113 67 16,427 1,434 18,925 37,966 9,677 12,723 24,799 8,477 13,168 37,966
2012E 1,650 88 21,697 506 17,931 41,871 7,352 15,012 26,076 9,184 15,795 41,871
2013 1,630 91 22,558 339 17,033 41,652 4,308 16,012 24,374 9,184 17,277 41,652
2014E 1,231 84 23,541 517 19,578 44,951 6,036 16,012 26,255 9,184 18,695 44,951
2015E 1,437 91 21,949 439 20,309 44,225 2,936 16,012 23,428 9,184 20,797 44,225
2011 853
2012 2,450
2013 3,307
2014E 2,887
2015E 3,385
88 244 (11,328) (5,470) (1,452) 203 (1,249) 7,735 0 (1,017)
1,196 221 (10,576) (1,682) (1,189) 369 2,340 (43) 0 (78)
151 176 (10,718) 3,284 (182) 357 501 (2,060) 0 (1,745)
0 186 (14,515) (910) (175) 427 252 1,727 0 (1,469)
0 186 (10,822) 4,101 0 488 488 (3,100) 0 (1,283)
6,718 (1) (5,627) (0.61)
(121) 536 (1,672) (0.18)
(3,805) (19) 4,820 0.52
258 (400) (351) (0.04)
(4,383) 206 4,926 0.54
2011 (25.6) (49.7) (60.7) 29.1 16.1 5.3 8.7 7.8 (46.0)
2012 32.8 132.3 187.3 31.0 28.2 10.8 18.7 9.5 (30.5)
2013 50.6 17.8 34.9 32.4 22.1 15.2 16.8 16.0 (21.2)
2014E (7.7) (12.4) (12.7) 31.6 20.9 13.6 15.9 15.9 (20.0)
2015E 8.4 15.5 17.2 32.0 22.3 14.7 17.2 17.2 (20.0)
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 17 of 18
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 BUY: Expecting positive total returns of 15% or more over the next 12 months TRADING BUY: Expecting positive total returns of 10% or more over the next 3 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months.
SELL INTO STRENGTH: Expecting total returns between -10% to +10% over the next 12 month; share price has largely priced in fundamentals
The industry, as defined by the NEUTRAL: analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months.
SELL: Expecting negative total returns of 10% or more over the next 12 months
UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 18 of 18
th
th
th
th
KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
Quality Houses
Buy (TP Bt3.74)
Cheap asset play with potential upside to earnings
Price Bt2.96
We expect QH’s norm. profit to dive by 8.5% in 2014 before recovering by 17.2% in 2015 on changes in CD transfers. Nevertheless, it should be noted that there is upside to 2014E low-rise transfers as low-rise presales rose very strongly in Jan-Feb 2014. We initiate coverage on the counter with a Buy rating and a TP of Bt3.74 based on RNAV. We believe that QH’s residential business is substantially undervalued as it is trading at only 1.7x 2014E PER. Revenue to dive in 14E before bouncing back in 15E We have 2014E revenue of Bt18.2bn (-7.7%) on the back of expected lower CD transfers and decelerating growth of low-rise transfers. Revenue should then recover in 2015E to Bt19.7bn (+8.4%) when the schedule of CD completion is heavier. Norm. profit to follow similar pattern in 14E-15E The GPM is expected to head downward to 31.6% in 2014 after reaching an abnormally high level of 32.4% in 2013, which was boosted by a one-off reversal of the contingency budget. SG&A to revenue is expected to rise slightly, mainly due to a lower revenue base, resulting in lackluster 2014E norm. profit of Bt2.9bn (-8.5%). Nevertheless, a 2015E revenue increase of 8.4% and expected NPM improvement should lead to a 17.2% increase in 15E earnings. More upside than downside risk We view our revenue forecast as a lower bound in 2014, and the revenue might move closer to the company’s target of Bt21.4bn (+8.6%) depending on the longevity of the political impact on presales. Also, we haven’t included the company’s planned sale of Centre Point Hotel Silom (Bt500m - Bt550m) to QHHR, which should fetch Bt52m – Bt86m realized gain on sale. Buy on latent asset value and potential earnings upside We initiate coverage on QH with a Buy rating and a TP of Bt3.74, comprising property development value and discounted fair values of investments in associates (HMPRO, LHBANK and two property funds). Even with the rather bleak 2014 outlook, we believe that the share price is overly discounted as QH’s residential unit is trading at an implied 2014E PER of only 1.7x. Financial and Valuation FY Ended 31 Dec Revenues (Btm) Net profit (Btm) Norm. profit (Btm) EPS (Bt) EPS growth (%) Dividend (Bt) BV (Bt)
2011
2012
2013
2014E
2015E
9,849 853 764 0.09 -60.7 0.12 1.43
13,077 2,450 1,239 0.27 187.3 0.01 1.72
19,699 3,307 3,154 0.36 34.9 0.16 1.88
18,181 2,887 2,887 0.31 -12.7 0.14 2.04
19,716 3,385 3,385 0.37 17.2 0.17 2.26
FY Ended 31 Dec Norm. PER (x) EV/EBITDA (x) PBV (x) Dividend yield (%) ROE (%) Net gearing (%)
2011
2012
2013
2014E
2015E
35.6 30.5 2.06 4.05 6.43 1.62
21.9 13.0 1.72 0.31 16.92 1.31
8.6 10.6 1.57 5.47 20.00 1.08
9.4 12.6 1.45 4.78 16.05 1.11
8.0 10.2 1.31 5.60 17.14 0.84
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
Stock Performance (%) 1M
3M
12M
Absolute
9.62
12.12
-33.93
Relative to SET
5.56
7.54
-24.39
Share data Reuters / Bloomberg
QH.BK/QH TB
Sector
Property Development
Paid-up Shares (m)
9,183.77
Par (Bt)
1.00
Market cap (Bt bn / US$ m)
27.00/835.00
Foreign limit / actual (%)
40.00/25.20
52 week High / Low (Bt)
4.54/2.28
Avg. daily T/O (shares 000)
99,568.00
NVDR (%)
6.56
Estimated free float (%)
62.98
Beta
1.82
Major Shareholders (13/03/2014) Land and Houses Plc.
24.98 %
GIC PRIVATE LIMITED - C
10.77 %
Thai NVDR Co., Ltd.
6.51 % FY14
FY15
Consensus EPS (Bt)
0.326
0.375
KT ZMICO vs. consensus
-4.9%
-1.3%
Company Profile The Company engages in the residential and commercial property development businesses. Its businesses include land and house projects, residential projects, service apartment for rent,hotel,office building for rent, residential and commercial buildings management services, investment business and others. CGR 2013
Wasu Mattanapotchanart Analyst, no. 44357 [email protected] 66 (0) 2624-6268 page 1 of 18
Valuation Depressed valuation of residential unit QH has investments in four associated companies/funds, including Quality House Leasehold Property Fund (QHPF), Quality Houses Hotel and Residences Freehold and Leasehold Property Fund (QHHR), Home Product Center (HMRPO) and LH Financial Group (LHBANK). Based on their market capitalizations on 25 Mar 14, these investments in QH’s portfolio are cumulatively worth Bt24.2bn. The investment value is equivalent to 87.7% of QH’s market capitalization, implying that QH’s residential business is trading at only 1.7x 2014E PER. Even with the rather bleak 2014 outlook, we believe that the share price is overly discounted. Rich latent asset value with some earnings upside, initiate with Buy We initiate coverage on QH with a Buy rating and a TP of Bt3.74, using the RevisedNet-Asset-Value (RNAV) method. We estimate the value of investment in associates at Bt2.62 per share while using balance sheet data for Bt3.17 property development value and Bt2.04 net debt. There is also some earnings upside as evidenced in JanFeb 14 low-rise presales growth of 28.0% vs. our estimated increase of 5.7% for the whole year. Figure 1: Valuation as of 25 Mar 14
Property Development Value (work‐in‐progress and completed inventories) Revised value of investment in asso. (11.2% discount to fair value/NAV/market value) Net debt Number of shares (unit) RNAV
Btm 29,138 24,028 18,690 9,184 34,550
Bt per share 3.17 2.62 2.04 3.74
Source: QH, KT ZMICO Research Figure 2: Revised value of investment in associates
QHPF QHHR HMPRO LHBANK Total
Market Value 1,820 947 18,105 3,297 24,170
Fair Value/NAV 2,205 1,171 20,400 3,297 27,073
Revised Value 1,764 936 18,360 2,967 24,028
Remarks for Revised Value 20% discount to NAV 20% discount to NAV 10% discount to consensus' TP 10% discount to market price
Source: QH, KT ZMICO Research Figure 3: PER Band and sensitivity of market prices based on PER at different standard deviation levels
PER
Implied Market price
(x)
(Bt)
(%)
+2.0SD
18.6
5.84
97%
+1.0SD
14.4
4.52
53%
Upside/Downside
+0.5SD
12.3
3.87
31%
+0.25SD
11.3
3.54
19%
Average
10.2
3.21
8%
-0.25SD
9.2
2.88
-3%
-0.5SD
8.11
2.55
-14%
-1.0SD
6.01
1.89
-36%
Note: 2014E EPS = 0.31 Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 2 of 18
Figure 4: PBV Band and sensitivity of market prices based on PBV at different standard deviation levels PBV
Implied Market price
(x)
(Bt)
(%)
+2.0SD
2.1
3.93
33%
+1.0SD
1.7
3.20
8%
+0.5SD
1.5
2.84
-4%
Upside/Downside
Average
1.3
2.48
-16%
-0.5SD
1.13
2.12
-28%
-1.0SD
0.94
1.76
-41%
Note: 2014E BVPS = 1.88 Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 3 of 18
Figure 5: Peer comparison Ticker
Yield (x) 13A
ROE (%) 13A
ROA (%) 13A
14.4 8.4
5.4 5.8
19.7 25.8
9.4 11.6
9.7
10.0
5.5
25.7
14.8
57.7 -8.5
10.4 8.6
6.6 9.4
4.0 5.5
21.6 16.1
10.6 7.9
-33.0
41.2
9.1
7.2
5.5
12.0
3.6
31.1
-2.3
-5.4
7.3
7.7
4.9
15.1
6.3
360 163 170
8.0 -36.9 0.0
-11.0 -92.2 8.7
44.9 2699 -17.8
11.2 192.7 14.1 28.6
7.7 6.9 17.9 9.6
3.8 0.0 2.9 4.3
10.8 0.5 9.4 15.6
4.3 0.1 2.8 7.2
-
9,292 6,755 1,141 3,921 1,522 1,108
-8.7 0.7 225.7 3.2 -36.7 101.8
-45.7 -1.5 227.3 16.6 -63.4 21.0
33.6 -3.3 -85.8 -22.8 220.6 -44.8
18.2 16.7 12.8 11.5 38.5 4.9 17.1
17.4 13.5 17.5 11.6 14.8 8.6 13.9
2.6 1.7 2.1 3.3 1.8 4.1 2.6
5.1 7.4 9.7 6.9 2.0 11.4 7.1
2.4 4.1 13.1 3.7 1.1 6.4 5.1
-
-
1,537 1,355 410 467 389
85.7 101.4 67.5 92.3 21.4
57.2 36.6 46.5 71.0 63.5
30.4 5.2 31.7 5.6 41.8
18.8 13.6 11.6 10.1 14.8 13.8
14.4 13.0 8.8 9.6 10.4 11.2
1.1 2.1 3.1 1.8 1.0 1.8
14.9 27.3 19.7 12.4 7.5 16.4
6.3 9.7 8.5 7.8 5.1 7.5
6.12 2.67 3.02 2.15 2.18
-
-
3,337 1,086 2,243 921 2,988
17.5 17.5 16.3 10.0 17.3
15.9 16.7 14.2 9.3 17.0
4.5 2.7 3.8 3.9 1.6
6.2 5.0 9.5 19.1 10.0
3.8 2.9 4.4 7.4 6.2
-
-
778
14.3 20.8 -12.7 3.4 27.9 272.1
-26.8 6.0 18.4 7.9 -3.8
1.56
-81.3 20.9 -12.5 3.5 27.6 #N/A N/A
154.1
15.7
39.0 18.7
1.0 2.9
-5.6 7.4
-1.5 3.9
7.49 6.11 3.06 19.46 16.32 21.35 43.3 14.56 92.5 11.04
-
-
8,621 2,742 7,281 20,502 12,267 12,328 15,065 6,518 32,250 8,512
28.7 22.5 22.6 23.1 38.6 -14.4 -22.5 28.3 -8.1 8.1
27.0 -5.2 22.3 20.0 15.6 -18.3 23.7 66.4 -15.7 23.4
25.2 11.8 20.4 23.2 33.1 13.8 -2.7 13.3 12.7 -27.0
5.0 3.7 5.4 8.1 10.5 19.9 14.4 6.2 12.4 10.3 9.6
4.0 3.3 4.4 6.8 8.2 16.6 13.3 4.9 11.6 13.5 8.7
3.9 6.7 6.7 2.4 2.4 3.5 2.5 4.9 3.6 4.5 4.1
20.3 16.3 20.2 21.0 12.9 4.2 3.8 16.8 5.8 6.9 12.8
3.8 4.9 5.5 8.1 4.0 3.0 2.8 4.8 4.2 5.3 4.6
Price (Local)
TP
Rating
THAILAND LH TB Equity PS TB Equity
9.35 20.20
22.50
LPN TB Equity
15.30
16.00
SPALI TB Equity QH TB Equity
17.50 2.96
22.50 3.76
SIRI TB Equity
1.90
2.00
AP TB Equity
5.15
5.32
SC TB Equity PF TB Equity NOBLE Equity AVERAGE
3.16 0.92 12.10
3.68 0.91 -
Buy Sell Into Strength Buy Buy Sell Into Strength Sell Into Strength Buy Sell -
2.77 9.43 2.17 3.22 1.615 1.79
-
1155 1070 2360 865 428
SINGAPORE CAPL SP Equity CIT SP Equity HOBEE SP Equity KPLD SP Equity WP SP Equity WINGT SP Equity AVERAGE INDONESIA CTRA IJ Equity SMRA IJ Equity CTRS IJ Equity CTRP IJ Equity DILD IJ Equity AVERAGE MALAYSIA KLCCSS MK Equity IGB MK Equity SPSB MK Equity MSGB MK Equity UEMS MK Equity MRC MK Equity AVERAGE CHINA & HONG KONG 600048 CH Equity 3383 HK Equity 2007 HK Equity 688 HK Equity 1109 HK Equity 101 HK Equity 12 HK Equity 813 HK Equity 16 HK Equity 83 HK Equity AVERAGE
Mkt Cap (US$m)
Norm. profit growth (%) 12A 13A 14E
Norm. PER 13A 14E
2,878 1,379
14.0 37.3
13.4 48.4
2.5 -8.6
14.8 7.7
693
12.8
8.2
-3.4
922 835
6.8 62.2
5.1 154.7
558
42.6
452
Note: Norm. PER and Yield are based on a fully-diluted number of shares Source: Bloomberg, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 4 of 18
Earnings and presales prospects Lofty targets from management The company set its performance targets in Nov 13; back then, management didn’t anticipate that the protests would have lasted this long, and it now admits that the political situation has to be monitored closely and that the targets will have to be reviewed on a quarterly basis. In 2014, QH aims for Bt21.4bn presales (+4.9%) and Bt19.4bn transfers (+5.0%). The most aggressive goals in 2014 involve Bt5.0bn TH presales (+72.4%) and Bt4.5bn TH transfers (+60.5%). Hence, we view the company’s targets merely as upper bounds. Lower revenue and profit in 2014E on light CD transfers The 8.2% YoY decline in 2014E residential revenue stems from forecasted lower CD transfers on a lighter completion schedule; this leads to 2014E norm. profit of only Bt2.9bn (-8.5%). CD transfers should come in at Bt4.3bn in 2014 (-34.0%) before rising to Bt5.2bn in 2015 (+21.1%). CD transfers in the respective years are already 100.8% and 81.3% secured. Figure 6: Transfer target by QH
Source: QH, KT ZMICO Research Figure 8: Revenue and norm. profit
Source: QH, KT ZMICO Research
Figure 7: Presales target by QH
Source: QH, KT ZMICO Research Figure 9: CD completion in 2014 Value (Btm) Q.House Sukhumvit 79 1,990 Casa Condo Ratchada1,500 Ratchapruk Casa Condo Campus 330 Choeng Doi Suthep The Trust Condo Hua-Hin 1,530 Total 5,350
Start of transfer 3Q14 2Q14 4Q14 4Q14
Source: QH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 5 of 18
Expected to stage a strong recovery in 2015 In 2015, we expect the 21.1% rise in CD transfers to push total revenue upward by 8.4% to Bt19.7bn. This, together with an expected lower SG&A-to-revenue ratio and 2015E share of profit on investment in associates of Bt1.2bn (+14.6%), is expected to lead to a 17.2% increase in 2015 norm. profit to Bt3.4bn. Backlog at record high after it penatrated CD market QH, always known for its luxury SDH, started entering seriously into the CD market in 2011, and its CD presales momentum has built up since then. At the end of 2013, QH had Bt9.0bn in presales, Bt8.5bn of which was high-rise properties while the remaining Bt500m was SDH and TH. Nevertheless, low-rise properties, the majority of which are pre-built, still dominate its portfolio, and the record-high backlog secures only 28.3% and 22.7% of 2014E and 2015E transfers. Figure 10: SG&A-to-revenue ratio
Source: QH, KT ZMICO Research
Figure 11: Share of profit on investment in associates
Note: HMPRO’s 2014E-15E net profits are based on consensus estimates Source: QH, KT ZMICO Research
Figure 12: Contribution of backlog as of 31 Dec 13
Source: QH, KT ZMICO Research
Figure 13: Breakdown of backlog by product type
Source: QH, KT ZMICO Research
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 6 of 18
Continued expansion into provincial markets in 2014 Of the total of 26 projects (Bt22.3bn) to be launched in 2014, nine projects (Bt6.8bn) will be outside the Bangkok Metropolitan Region (BMR), reflecting QH’s bid to increase its upcountry presales from 10% to 14% of the total in 2014. Seven out of the nine projects will serve local demand while the other two will be vacation homes (CD), namely The Trust Condo North Pattaya and Casa Seaside Condo Rayong. Like other developers, QH is cautious about launching vacation homes and might decide to postpone the launches to next year. Figure 14: Project launches in 2014
No
Low‐rise projects
1 Casa City Nakhon Prathom Total projects to be launched in 1Q14 2 Casa City Ratchapruk‐Pharam 5 3 Casa City Outer Ring Road ‐ Lamlukka 4 The Trust Ville Rungsit 5 The Trust City Sukhumvit 6 The Trust Town Rungsit 7 Gusto Teparak Total projects to be launched in 2Q14 8 Casa Grand Ratchapruk ‐ Pharam 5 9 Casa Presto Phraram 5 ‐ Ratchaphruk 10 Casa Ville Don Muang 1 11 Casa City Outer Ring Road‐Lamlukka 3 12 Casa City Pracha Uthit 90 13 The Trust Town Bor‐win 14 Gusto Don Muang 2 15 Gusto Bangna‐Suvarnabhumi Total projects to be launched in 3Q14 16 Laddarom Villa Mee‐Chok City Hall 17 Casa Premium Pharam 2 18 Casa Premium Outer Ring Road ‐ On Nuch 19 The Trust Ville Mithsamphan Total projects to be launched in 4Q14 Total (19 projects: SDH = 7 , TH = 12) No 1 2 3 4 5 6 7
High‐rise projects Casa Cond Campus Choeng Doi Suthep Q Seaside Cha‐Am Q. House Condo Phahon Yothin‐Chiang Rai The Trust Condod Amata Nakorn The Trust Condo North Pattaya Casa Seaside Condo Rayong The Trust Condo Rattanatibet Total (7 high‐rise projects) Grand Total (26 projects)
Location TYPE Nakhon Prathom TH Bangkok TH Pathumthani SDH Bangkok TH Samutprakarn TH Bangkok TH Bangkok TH Bangkok SDH Bangkok SDH Bangkok SDH Pathumthani TH Samutprakarn TH Chonburi TH Bangkok TH Bangkok TH Chiangmai DH Bangkok DH Bangkok DH Chonburi DH
Location Chiangmai Petchaburi
Type CD CD
Chiangrai Chonburi Chobburi Rayong Bangkok
CD CD CD CD CD
Value (Btm)
Unit
329 151 329 151 1,230 401 280 80 547 171 943 229 627 274 652 269 4,279 1,424 846 118 2,432 385 671 114 300 120 939 280 413 222 803 313 1,060 407 7,464 1,959 686 195 847 116 1,000 144 585 213 3,118 668 15,190 4,202 Value (Btm) Unit 330 201 1,803 207 483 850 1,250 378 2,000 7,094 22,284
358 518 585 152 1,030 3,051 7,253
Launch date
Start of transfer
1Q14 2Q14 2Q14 2Q14 2Q14 2Q14 2Q14 3Q14 3Q14 3Q14 3Q14 3Q14 3Q14 3Q14 3Q14 4Q14 4Q14 4Q14 4Q14
2Q14 2Q14 3Q14 3Q14 3Q14 3Q14 2Q14 3Q14 3Q14 4Q14 4Q14 4Q14 3Q14 4Q14 3Q14 1Q15 4Q14 4Q14 4Q14
Launch date 1Q14 2Q14
Start of transfer 4Q14 2016
2Q14 2Q14 3Q14 4Q14 4Q14
2016 2015 2016 2016 2016
Source: QH, KT ZMICO Research
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page 7 of 18
Figure 15: Upcountry projects 2014 (old + new)
Source: QH, KT ZMICO Research
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page 8 of 18
Investing in precast factory to support future growth QH plans to invest Bt175m in a precast factory this year; the factory will have production capacity of 1,000 low-rise residential units per year and support 30% of the necessary precast materials to be used by QH. As mid-segment SDH and lowend TH have become a large part of QH’s revenue stream, a reliable source of precast materials is needed. Figure 16: Transfer breakdown and QH’s forecast by segment
Source: QH, KT ZMICO Research
Figure 17: Transfer breakdown and QH’s forecast by product
Source: QH, KT ZMICO Research
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page 9 of 18
Financials Figure 18: Major assumptions 2011 Revenue Residential 8,814 Rental office 331 Hotel 704 Total 9,849
2012
2013
2014E
2015E
11,984 347 746 13,077
18,477 359 863 19,699
16,960 359 863 18,181
18,495 359 863 19,716
Growth (%) Residential Rental office Hotel Total
-28.0 6.8 1.2 -25.6
36.0 4.7 5.9 32.8
54.2 3.5 15.7 50.6
-8.2 0.0 0.0 -7.7
9.1 0.0 0.0 8.4
GPM (%) Residential Rental office Hotel Total
28.3 49.2 29.6 29.1
30.7 49.0 27.4 31.0
32.4 48.4 26.1 32.4
31.5 48.0 26.1 31.6
31.9 48.0 26.1 32.0
Norm. NPM
7.8
10.1
16.3
15.9
17.2
Source: QH, KT ZMICO Research
GPM to edge lower to its standard We expect the residential GPM to fall from 32.4% in 2013 to 31.5% in 2014 as the high-rise GPM should decline from 35.5% in 2013 to a more normal level of 33.0%. CD generated an abnormally high GPM in 2013 on the back of a one-off reversal of the contingency budget at Q. House Langsuan (Bt3.35bn) as its final unit was transferred. Figure 19: Residential GPM
Source: QH, KT ZMICO Research
Figure 20: Operating margin
Source: QH, KT ZMICO Research
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page 10 of 18
Associated companies expected to continue being major part of norm. profit QH and LH are the two developers with the highest amount of investments in other companies and rental assets. QH’s investment in associates contributed 29.9% of 2013 norm. profit. The number should rise to 37% - 38% in 2014 and 2015, mainly because the earnings of Home Product Center (HMPRO) are expected to rise by 18.2% in both 2014 and 2015 based on the consensus estimates. Policies regarding investment in associates QH aims to maintain its percentage share holding in the two property funds (QHPF and QHHR). It has no intention to buy more shares of HMPRO if HMPRO raises more capital in the future. Nevertheless, it holds HMPRO as a long-term investment and would sell the 19.77% stake at a very high price only. Regarding QH’s holding of LH Financial Group (LHBANK), the company might sell the 21.6% stake to a firm with banking expertise at an attractive price, but we do not expect the transaction to occur within this year. Leverage ratios to remain low QH has tried to keep the gearing ratio not too far above 1.0x. We expect the company’s gearing ratio to be stable at 1.19x in 2014 (2013E: 1.18) before falling to 0.92x in 2015 on an 8.4% surge in transfers. Our estimated gearing ratios will likely be slightly lower once we include the sale of Centre Point Hotel Silom in our forecasts. Figure 21: Share of profit from associates as % of
Figure 22: Investment in associates as of 25 Mar 14
norm. profit
QHPF QHHR HMPRO LHBANK Total
Source: QH, KT ZMICO Research
Total Market Cap (Btm) 7,093 3,024 91,580 15,264 116,961
Source: QH, KT ZMICO Research
Figure 23: Potential sale of Centre Point Hotel Silom Btm Book value 425 Selling price 500 - 550 Gain on sale 75 - 125 % buyback by QH
31.33%
Realized gain on sale
52 - 86
Source: QH, KT ZMICO Research
% 25.66% 31.33% 19.77% 21.60%
Stake Held Market Cap (Btm) 1,820 947 18,105 3,297 24,170
Figure 24: Leverage ratios 2011 - 2015
Source: QH, KT ZMICO Research
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page 11 of 18
Industry outlook Political impact might start fading in 2Q14 The degree of political instability and the number of violent incidents have gone down substantially after the PDRC consolidated the protests to only one site in Lumpini Park, down from seven stages, at the end of Feb 2014. Traffic is no longer blocked and consumers might have adjusted to the ongoing protests. Although we don’t expect to see any significant YoY presales growth in the coming months, the rate of the YoY decline should be less severe in 2Q14. Increase in development costs to decelerate We don’t expect the problems of labor shortages and rising prices of construction materials to worsen much in 2014 since the Bt2.2trn government budget for infrastructure investment was already ruled illegal by the Constitution Court. Land prices are also not expected to increase as much as some developers had feared since the property market has already started to cool down. High household debt remains an obstacle Most listed developers under our coverage continue to be supported by their banking “alliance”, and the rejection rate rose only slightly during early-2014. However, we believe the record-high household-debt-to-GDP ratio will limit consumers’ purchasing power in 2014, resulting in a 13.2% decline in presales. Figure 25: Household debt to GDP as of end-3Q13
Figure 26: Sector’s presales Presales 2013A
2014T
KTZ's target
SIRI
42,158
30,000
30,000
PS
41,282
41,000-45,000
36,925
LH
30,200
32,000
-
LPN
24,300
26,730
20,000
QH
20,400
21,400
17,608
SPALI
19,091
22,000
19,000
AP
15,184
21,000
17,500
SC
13,532
12,000
11,000
PF
13,040
16,000 222,130226,130
12,000
Total
219,187
% Growth Source: BoT, KT ZMICO Research
164,033
1.3% - 3.2%
% Growth (excluding LH) 0.1% - 2.7% *Stocks under our coverage only
-13.2%
Source: Company data, KT ZMICO Research
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page 12 of 18
Upside risk / Downside risk Potential upside in low-rise presales and transfers QH is proving itself to be one of the least impacted by the political stalemate. From Jan to Feb 14, QH generated low-rise presales of Bt1.6bn (+28.0% YoY). We believe that the company has managed to weather the storm because i.) its projects are far from protest sites and ii.) its well-received TH products were growing on a low base because QH only started realizing revenue from TH for the first time in 2012. If this momentum continues, its implied presales growth target for low-rise properties in 2014 of 29.4% could be easier to achieve, potentially causing us to adjust the estimated low-rise presales and transfers upward. Sale of Centre Point Hotel Silom not yet included in forecasts On 20 Aug 13, the board of directors approved in principle the transfer of the subleasehold right of Centre Point Hotel Silom to Quality Houses Hotel and Residence Free and Leasehold Property Fund (QHHR). QH informed us that the selling price is in the range of Bt500m – Bt550m, implying realized gain of Bt52m – Bt86m on sale based on the assumption that QH will continue to hold 31.33% of QHHR. Figure 27: Breakdown of presales targets 2014
Source: QH, KT ZMICO Research
Figure 29: TH presales and transfers
Source: QH, KT ZMICO Research
Figure 28: Presales during Jan-Feb (2013 vs. 2014)
Source: QH, KT ZMICO Research
Figure 30: QH’s transfer target vs. KTZ’s forecast 2014
Source: QH, KT ZMICO Research
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page 13 of 18
Company Background Founded on 21 Oct 1983, QH’s primary objective was to build houses on land under a contract work scheme for customers. In 1990, the company began to carry out the business of serviced apartments, all of which were turned into hotels in 2013, as well as rental office buildings. Ten years after its establishment, the firm started engaging in the business of property development for sale, focusing mainly on luxury houses. In an attempt to boost its top-line growth and offset the lackluster presales trend in flood-impacted areas, the company has ventured into the markets of CD and TH with considerable success. QH’s portfolio has changed dramatically over the years; its revenue from high-end products fell from 55.0% of total transfers in 2009 to 22.0% in 2013, and low-end products came from non-existent in 2009 to 38% of total transfers in 2013 on the back of rising low-end TH presales. Figure 31: 2013 presales by company
Source: Company data, KT ZMICO Research Figure 33: Revenue breakdown 2013
Source: QH, KT ZMICO Research
Figure 32: 2013 revenue by company
Source: Company data, KT ZMICO Research Figure 34: Presales and realized sales
Source: QH, KT ZMICO Research
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page 14 of 18
Figure 35: Revenue contribution by segment 2013
Source: QH, KT ZMICO Research
All of QH’s revenue streams can be categorized as follows: a.) Single-detached houses (55.1% of 2013 revenue)
Prior to 2009, QH’s presales and revenue streams were purely SDH; QH has been known as a specialist of European-style luxury houses. The portion of SDH revenue has declined since 2010 as the company began to venture into the CD and TH markets for growth. The GPM for QH’s SDH has been quite low (28%-30% vs. industry’s > 30%) due to i.) subpar cost management (i.e., expensive materials compared to house selling prices), ii.) limited pricing power for high-end products and iii.) the 2011 flood, which severely dampened the sales and selling prices of QH’s projects in the Ratchapruek area. b.) Townhouses (17.0% of 2013 revenue) 2012 was the year that QH started seriously engaging in selling TH with two brands, namely The Trust Town Home and Gusto Town Home. Revenue from TH sales went from zero in 2011 to Bt1.8bn in 2012 and Bt2.8bn in 2013 (+54.2%). QH stated that the TH market in 2013 was so strong that it could not build its TH fast enough to keep up with the demand, leading the company to target Bt4.5bn TH transfers this year (+60.5%) and build a precast factory. Although the GPM of TH was low in the past, new TH launches since 2013 have yielded a higher GPM of 32.0% - 35.0% as the company has adapted to using materials that are more suitable to the products’ segments. c.) Condominiums (27.9% of 2013 revenue) QH’s four CD brands are Q, Q. House, Casa Condo and The Trust Condo. The company’s policy is to launch CD projects after EIA approval only. The normal range of CD GPM is 31.0% - 33.0%, although the GPM might spike in some periods due to the reversal of the contingency budget.
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page 15 of 18
Figure 36: QH’s brands of property projects for sale
Source: QH, KT ZMICO Research
d.) Rental offices (1.8% of 2012 revenue) QH operates six office buildings, including Q. House Convent, Q. House Asoke, Q. House Sathorn, Q. House Ploenchit, Q. House Lumpini and Waveplace; the latter three buildings are owned by Quality Houses Leasehold Property (QHPF) and leased by QH. We expect the company to keep its ownership of the first three buildings as the leasehold rights for them will expire in around 10 years. e.) Hotels (4.4% of 2012 revenue) QH operates and receives revenue from five hotels: Centre Point Hotel in Silom, Pratunam, Sukhumvit 10, Chidlom and Ploenchit. The Centre Point Pratunam, Sukhumvit 10 and Chidlom branches are owned by Quality Houses Hotel and Residence Freehold and Leasehold Property Fund (QHHR), and the one in Ploenchit is owned by Land and Houses Freehold and Leasehold Property Fund (LHPF). All of the hotels that are owned by the funds are being leased by QH.
Figure 37: Revenue and norm. profit
Source: QH, KT ZMICO Research
Figure 38: Profit margins
Source: QH, KT ZMICO Research
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page 16 of 18
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 (%)
2011 9,849 (6,981) 2,868 (2,103) 1,588 (244) 1,344 (309) 96 1,131 (182)
2012 13,077 (9,028) 4,049 (2,417) 3,690 (221) 3,468 (295) 60 3,234 (723)
2013 19,699 (13,312) 6,387 (3,218) 4,347 (176) 4,171 (228) 83 4,027 (636)
2014E 18,181 (12,441) 5,740 (3,083) 3,808 (186) 3,621 (281) 77 3,418 (453)
2015E 19,716 (13,416) 6,300 (3,211) 4,397 (186) 4,210 (287) 77 4,001 (539)
88 639 853 0.09 0.09 764 0.08 0.12
1,196 802 2,450 0.27 0.27 1,239 0.13 0.01
151 943 3,307 0.36 0.36 3,154 0.34 0.16
0 1,073 2,887 0.31 0.31 2,887 0.31 0.14
0 1,230 3,385 0.37 0.37 3,385 0.37 0.17
2011 1,113 67 16,427 1,434 18,925 37,966 9,677 12,723 24,799 8,477 13,168 37,966
2012E 1,650 88 21,697 506 17,931 41,871 7,352 15,012 26,076 9,184 15,795 41,871
2013 1,630 91 22,558 339 17,033 41,652 4,308 16,012 24,374 9,184 17,277 41,652
2014E 1,231 84 23,541 517 19,578 44,951 6,036 16,012 26,255 9,184 18,695 44,951
2015E 1,437 91 21,949 439 20,309 44,225 2,936 16,012 23,428 9,184 20,797 44,225
2011 853
2012 2,450
2013 3,307
2014E 2,887
2015E 3,385
88 244 (11,328) (5,470) (1,452) 203 (1,249) 7,735 0 (1,017)
1,196 221 (10,576) (1,682) (1,189) 369 2,340 (43) 0 (78)
151 176 (10,718) 3,284 (182) 357 501 (2,060) 0 (1,745)
0 186 (14,515) (910) (175) 427 252 1,727 0 (1,469)
0 186 (10,822) 4,101 0 488 488 (3,100) 0 (1,283)
6,718 (1) (5,627) (0.61)
(121) 536 (1,672) (0.18)
(3,805) (19) 4,820 0.52
258 (400) (351) (0.04)
(4,383) 206 4,926 0.54
2011 (25.6) (49.7) (60.7) 29.1 16.1 5.3 8.7 7.8 (46.0)
2012 32.8 132.3 187.3 31.0 28.2 10.8 18.7 9.5 (30.5)
2013 50.6 17.8 34.9 32.4 22.1 15.2 16.8 16.0 (21.2)
2014E (7.7) (12.4) (12.7) 31.6 20.9 13.6 15.9 15.9 (20.0)
2015E 8.4 15.5 17.2 32.0 22.3 14.7 17.2 17.2 (20.0)
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page 17 of 18
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 BUY: Expecting positive total returns of 15% or more over the next 12 months TRADING BUY: Expecting positive total returns of 10% or more over the next 3 months
SECTOR RECOMMENDATIONS OVERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to outperform the relevant primary market index by at least 10% over the next 12 months.
SELL INTO STRENGTH: Expecting total returns between -10% to +10% over the next 12 month; share price has largely priced in fundamentals
The industry, as defined by the NEUTRAL: analyst's coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months.
SELL: Expecting negative total returns of 10% or more over the next 12 months
UNDERWEIGHT: The industry, as defined by the analyst's coverage universe, is expected to underperform the relevant primary market index by 10% over the next 12 months.
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
page 18 of 18
th
th
th
th
KT•ZMICO Securities Company Limited
st
8 , 15 -17 , 19 , 21 Floor, Liberty Square Bldg., 287 Silom Road, Bangrak, Bangkok 10500 Telephone: (66-2) 695-5000
Phaholyothin Branch
rd
Fax. (66-2) 631-1709
Ploenchit Branch
th
nd
2
Sindhorn Branch
3 Floor, Shinnawatra Tower II,
8 Floor, Ton Son Tower,
1291/1 Phaholyothin Road,
900 Ploenchit Road, Lumpini,
Floor, Sindhorn Tower 1, 130-132 Wireless Road, Lumpini,
Phayathai, Bangkok 10400
Pathumwan, Bangkok 10330
Pathumwan, Bangkok 10330
Telephone: (66-2) 686-1500
Telephone: (66-2) 626-6000
Telephone: (66-2) 627-3550
Fax. (66-2) 686-1666
Fax. (66-2) 626-6111
Fax. (66-2) 627-3582, 627-3600
Nakhon Pathom Branch 1156 Petchakasem Road, Sanamchan Subdistrict, Amphoe Meuang , Nakhon Pathom Province 73000 Telephone: (034) 271300 Fax: (034) 271300 #100
Chachoengsao Branch
Viphavadee Branch
Phitsanulok Branch
G Floor, Lao Peng Nguan 1 Bldg.,
Krung Thai Bank, Singhawat Branch
333 Soi Cheypuand, Viphavadee-Rangsit Road,
114 Singhawat Road,
Ladyao, Jatujak, Bangkok 10900
Muang, Phitsanulok 65000
Telephone: (66-2) 618-8500
Telephone: 083-490-2873
Fax. (66-2) 618-8569
th
Chonburi Branch
Pattaya Branch
108/34-36 Mahajakkrapad Road,
4 Floor, Forum Plaza Bldg.,
382/6-8 Moo 9, T. NongPrue,
T.Namuang, A.Muang,
870/52 Sukhumvit Road, T. Bangplasoy,
A. Banglamung, Cholburi 20260
Chachoengsao 24000
A. Muang, Cholburi 20000
Telephone: (038) 362-420-9
Telephone: (038) 813-088
Telephone: (038) 287-635
Fax. (038) 362-430
Fax. (038) 813-099
Fax. (038) 287-637
Khon Kaen Branch
5th Floor, Charoen Thani Princess Hotel,
Hat Yai Branch
Sriworajak Building Branch
200/301 Juldis Hatyai Plaza Floor 3,
1st – 2nd Floor, Sriworajak Building, 222
260 Srichan Road, T. Naimuang,
Niphat-Uthit 3 Rd,
Luang Road, Pomprab,
A. Muang, Khon Kaen 40000
Hatyai Songkhla 90110
Bankgok 10100
Telephone: (043) 389-171-193
Telephone: (074) 355-530-3
Telephone: (02) 689-3100
Fax. (043) 389-209
Fax: (074) 355-534
Fax. (02) 689-3199
Central World Branch
Chiang Mai Branch
Phuket Branch
999/9 The Offices at Central World,
422/49 Changklan Road, Changklan
22/61-63, Luang Por Wat Chalong Road,
16th Fl., Rama 1 Rd, Pathumwan,
Subdistrict, Amphoe Meuang,
Talat Yai, Mueang Phuket,
Bangkok 10330
Chiang Mai 50100
Phuket 83000
Telephone: (66-2) 673-5000,
Telephone: (053) 270-072
Tel. (076) 222-811,(076) 222-683
(66-2) 264-5888 Fax. (66-2) 264-5899
Fax: (053) 272-618
Fax. (076) 222-861
Pak Chong Branch
Cyber Branch @ North Nana
173 175, Mittapap Road,
Krung Thai Bank PCL, 2 Floor, North Nana Branch 35 Sukhumvit Rd.,Klong Toey Nua Subdistrict , Wattana District, Bangkok 10110 Telephone: 083-490-2871
Nong Sarai, Pak Chong, Nakhon Ratchasima 30130 Tel. (044) 279-511 Fax. (044) 279-574
Nakhon Ratchasima Branch
Bangkhae Branch
6th Floor The Mall Group Building Bangkhae 275 Moo 1 Petchkasem Road, North Bangkhae, Bangkhae, Bangkok 10160 Tel. (66-2) 454-9979 Fax. (66-2) 454-9970
624/9 Changphuek Road, . Naimaung, A.Maung, Nakhon Ratchasima 30000 Telephone: (044) 247222 Fax: (044) 247171 Information herein was obtained from sources believed to be reliable, but its completeness and accuracy are not guaranteed. All opinions expressed constitute our views on that date and are not intended as an offer or solicitation to sell or buy any securities. Investors should exercise care when making a decision to invest in securities. No one may modify or distribute any part of this report unless written permission is first received from Seamico Securities Plc. If any modifications are made, quotes or references taken from the report and the report date must be clearly mentioned and must not cause misunderstanding or damage to the company.
