Political uncertainty could drag down performance
Industry Update February 12, 2014
Property Development (Real Estate)
Neutral
Political uncertainty could drag down performance Amid slowing demand of TH and upcountry CD and the political protests that gathered pace in 4Q13, large and reputable developers gained a bit more market share in 2013. In terms of the top and bottom lines, 4Q13 is expected to be the strongest quarter for most developers due to the concentration of scheduled CD transfers. Nevertheless, our major concern now is political uncertainty, which could negatively impact 2014 presales and 2014E-2015E revenues if it continues beyond mid-2Q14, the point when most developers expect the protests to end. Market share of top developers edged slightly higher in 13 The Bangkok Metropolitan Region (BMR)’s residential market generated Bt357.7bn presales (+19.2% YoY) in 2013, of which Bt90.7bn came from SDH (+17.2%), Bt61.1bn from TH (-2.0%) and Bt205.9bn from CD (+28.4%). When we look at large and reputable listed developers, their market share rose slightly from 60.7% to 62.0%. SIRI, the 2012-13 champion, saw its market share fall from 14.2% to 11.8%. On the other hand, PS gained ground as its market share rose to 11.5% from 9.8% in 2012 due to the outperforming presales of TH and successful CD launches.
Share data SET index
1,296.25
Sector index
232.29
52-week high
374.27
52-week low
215.79
Market capitalization (Bt m)
697,895.81
% of market cap
6.07
Avg daily turnover (m shares)
2,880.45
Beta
2.42
Sector Performance (%) Absolute
1M
3M
4.13
-15.42
Relative
3.11
-8.34
Developers expected to post strong 4Q13E earnings Companies under our coverage are expected to see 4Q13E norm. profit growth of 29.6%-381.3% QoQ, mainly due to concentrated CD transfers in the final quarter. Meanwhile, all developers except LPN and PS ended the year with lower presales than the original targets due to the weaker-than-anticipated upcountry market of CD and the protests that began in late-Oct. Political uncertainty weighing on confidence and presales Confidence indices have been on a falling trend since the political unrest started; consequently, residential presales were especially weak in Dec 13 and Jan 14 and are expected to remain depressed in Feb-Mar 14. The take-up rate of new launches fell to 18.0% in Dec 13, down from 37.0% in Nov 13 and 32.0% in Dec 12, before improving slightly to 20.0% in Jan 14. 2014E-15E earnings to be impacted if protests linger on Most developers that we have talked to set their business plans with the assumption that the protests would end around mid-2Q14. If the protests do not end by then, 2014E revenue should be impacted somewhat while 2014 presales should miss their targets. Assuming that the protests do not end until Jul-Aug 14, we would cut the cumulative 2014E earnings of companies under our coverage by 6.6%. The least impacted should be SPALI since its revenue is already 81.0% secured while the most impacted should be PF due to a low percentage of secured revenue (17.7%) and a weak CD portfolio. Maintain Neutral for sector, SPALI remains our top pick Presales should bounce back once the protest is over and consumer confidence starts recovering; thus, we maintain Neutral rating for the sector. SPALI remains our top pick as its long-term performance is most secured in term of both backlog to be realized during the next few years and cost advantage that leads to lower price per sqm and superior GPM. Its 2014E-15E CAGR of net profit is as high as 36%. We have Bt22.50 TP for the counter (8.5x 2014E PER), implying 33.9% upside.
Wasu Mattanapotchanart Analyst, no. 44357 [email protected] 66 (0) 2624-6268
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
12M 31.97
page 1 of 9
20.05
Market share of top developers edged slightly higher in 2013 CD and SDH presales performed well while those of TH fell in 2013 The Bangkok Metropolitan Region (BMR)’s residential market generated Bt357.7bn presales (+19.2% YoY) in 2013, of which Bt90.7bn came from SDH (+17.2%), Bt61.1bn from TH (-2.0%) and Bt205.9bn from CD (+28.4%). CD took up 57.6% of the market value in 2013, up from 53.4% in 2012, mainly on the back of well-received condos along mass transit train routes. However, we expect the CD portion to fall this year after big surges in supply and demand during the last few years. Listed vs. non-listed developers When we look at large and reputable listed developers, their market share rose slightly from 60.7% to 62.0%. SIRI, the 2012-13 champion, saw its market share fall from 14.2% to 11.8%; this is the biggest market share decline in the industry. On the other hand, PS gained ground as its market share rose to 11.5% from 9.8% in 2012 due to a strong TH portfolio and successful CD launches. In 2013, PS’s TH presales grew by 15.5% while the market fell by 2.0%; PS remains the TH market leader with a market share of 28.1%. ANAN experienced the biggest rise in market share from 3.0% to 5.9% thanks to its strategy of developing condos in close proximity (
Property Development (Real Estate)
Neutral
Political uncertainty could drag down performance Amid slowing demand of TH and upcountry CD and the political protests that gathered pace in 4Q13, large and reputable developers gained a bit more market share in 2013. In terms of the top and bottom lines, 4Q13 is expected to be the strongest quarter for most developers due to the concentration of scheduled CD transfers. Nevertheless, our major concern now is political uncertainty, which could negatively impact 2014 presales and 2014E-2015E revenues if it continues beyond mid-2Q14, the point when most developers expect the protests to end. Market share of top developers edged slightly higher in 13 The Bangkok Metropolitan Region (BMR)’s residential market generated Bt357.7bn presales (+19.2% YoY) in 2013, of which Bt90.7bn came from SDH (+17.2%), Bt61.1bn from TH (-2.0%) and Bt205.9bn from CD (+28.4%). When we look at large and reputable listed developers, their market share rose slightly from 60.7% to 62.0%. SIRI, the 2012-13 champion, saw its market share fall from 14.2% to 11.8%. On the other hand, PS gained ground as its market share rose to 11.5% from 9.8% in 2012 due to the outperforming presales of TH and successful CD launches.
Share data SET index
1,296.25
Sector index
232.29
52-week high
374.27
52-week low
215.79
Market capitalization (Bt m)
697,895.81
% of market cap
6.07
Avg daily turnover (m shares)
2,880.45
Beta
2.42
Sector Performance (%) Absolute
1M
3M
4.13
-15.42
Relative
3.11
-8.34
Developers expected to post strong 4Q13E earnings Companies under our coverage are expected to see 4Q13E norm. profit growth of 29.6%-381.3% QoQ, mainly due to concentrated CD transfers in the final quarter. Meanwhile, all developers except LPN and PS ended the year with lower presales than the original targets due to the weaker-than-anticipated upcountry market of CD and the protests that began in late-Oct. Political uncertainty weighing on confidence and presales Confidence indices have been on a falling trend since the political unrest started; consequently, residential presales were especially weak in Dec 13 and Jan 14 and are expected to remain depressed in Feb-Mar 14. The take-up rate of new launches fell to 18.0% in Dec 13, down from 37.0% in Nov 13 and 32.0% in Dec 12, before improving slightly to 20.0% in Jan 14. 2014E-15E earnings to be impacted if protests linger on Most developers that we have talked to set their business plans with the assumption that the protests would end around mid-2Q14. If the protests do not end by then, 2014E revenue should be impacted somewhat while 2014 presales should miss their targets. Assuming that the protests do not end until Jul-Aug 14, we would cut the cumulative 2014E earnings of companies under our coverage by 6.6%. The least impacted should be SPALI since its revenue is already 81.0% secured while the most impacted should be PF due to a low percentage of secured revenue (17.7%) and a weak CD portfolio. Maintain Neutral for sector, SPALI remains our top pick Presales should bounce back once the protest is over and consumer confidence starts recovering; thus, we maintain Neutral rating for the sector. SPALI remains our top pick as its long-term performance is most secured in term of both backlog to be realized during the next few years and cost advantage that leads to lower price per sqm and superior GPM. Its 2014E-15E CAGR of net profit is as high as 36%. We have Bt22.50 TP for the counter (8.5x 2014E PER), implying 33.9% upside.
Wasu Mattanapotchanart Analyst, no. 44357 [email protected] 66 (0) 2624-6268
REFER TO DISCLOSURE SECTION AT THE END OF THE NOTES
12M 31.97
page 1 of 9
20.05
Market share of top developers edged slightly higher in 2013 CD and SDH presales performed well while those of TH fell in 2013 The Bangkok Metropolitan Region (BMR)’s residential market generated Bt357.7bn presales (+19.2% YoY) in 2013, of which Bt90.7bn came from SDH (+17.2%), Bt61.1bn from TH (-2.0%) and Bt205.9bn from CD (+28.4%). CD took up 57.6% of the market value in 2013, up from 53.4% in 2012, mainly on the back of well-received condos along mass transit train routes. However, we expect the CD portion to fall this year after big surges in supply and demand during the last few years. Listed vs. non-listed developers When we look at large and reputable listed developers, their market share rose slightly from 60.7% to 62.0%. SIRI, the 2012-13 champion, saw its market share fall from 14.2% to 11.8%; this is the biggest market share decline in the industry. On the other hand, PS gained ground as its market share rose to 11.5% from 9.8% in 2012 due to a strong TH portfolio and successful CD launches. In 2013, PS’s TH presales grew by 15.5% while the market fell by 2.0%; PS remains the TH market leader with a market share of 28.1%. ANAN experienced the biggest rise in market share from 3.0% to 5.9% thanks to its strategy of developing condos in close proximity (
