Small/Mid Cap Strategy and Stock Picks - the DBS Vickers ...
Small/Mid Cap Strategy and Stock Picks - the DBS Vickers ... Small/Mid Cap Strategy and Stock Picks - the DBS Vickers ...
Regional Small/Mid Cap Strategy Q2 2008 Preuksa Real Estate Bloomberg: PS TB | Reuters: PS.BK BUY Bt10.70 SET : 820.31 Price Target : 12-month Bt 12.26 Potential Catalyst: (i) Rebounding consumer confidence, (ii) earnings jump boosted by tax savings from government’s property tax-cut stimulus package Analyst Chanpen Sirithanarattanakul +66 0 2657 7824 chanpens@th.dbsvickers.com Price Relative 11 . 70 10 . 70 9 . 70 8 . 70 7 . 70 6 . 70 5 . 70 4 . 70 3 . 70 Bt Dec - 05 Jun - 06 Dec - 06 Jun - 07 Dec - 07 Relative Index Preuksa Real Estate ( LHS ) Relative SET INDEX ( RHS ) Forecasts and Valuation FY Dec (Bt m) 2006A 2007A 2008F 2009F Turnover 8,181 9,088 11,465 13,826 EBITDA 1,725 1,800 2,558 2,670 Pretax Profit 1,578 1,603 2,393 2,503 Net Profit 1,303 1,270 1,914 2,003 EPS (Bt) 0.60 0.58 0.88 0.92 EPS Gth (%) 0.1 (2.8) 50.3 4.6 P/E (x) 17.8 18.4 12.2 11.7 P/Cash Flow (x) 22.0 21.8 40.2 23.6 EV/EBITDA (x) 13.8 13.0 9.3 8.8 DPS(Bt) 0.20 0.22 0.26 0.27 Div Yield (%) 1.9 2.1 2.5 2.6 ROE (%) 17.8 15.5 19.9 18.1 Net Gearing (%) 7.9 1.7 3.0 1.2 Book Value (Bt) 3.38 3.75 4.40 5.05 P/Book Value (x) 3.2 2.9 2.4 2.1 Consensus EPS (Bt) 0.8 0.9 Sector : Property Principal Business: Residential property development 219 169 119 69 19 Deserves re-rating Story: PS is the largest residential property developer in Thailand in terms of market share (16%) and second largest in terms of market capitalization. It focuses on lowto mid-priced townhouses and detached houses. In 2007, The PS successfully expanded into the city condominium market. Point: PS’ presales rocketed to a record high of Bt13.6bn in 2007, due to its aggressive new project launches and expansion into the condominium market. And prospects remain positive. Sales should continue to grow with 40 new projects to be launched this year, compared to 28 last year. The company will start to realize revenue from its two condominium projects that had been sold out since last year. The company is also a prime beneficiary of the government’s tax cut package, thanks to its large inventory on hand. We estimate that PS should see its EPS jump 50% this year, fuelled by strong housing sales and tax savings from the government’s stimulus package. Relevance: Valuations are undemanding at 12.2x FY08 PE given its strong EPS CAGR of 25.4% for FY07-09F. We reiterate our BUY rating for PS premised on (i) strong earnings growth prospects, (ii) a quality management team, (iii) strong balance sheet, and (iv) attractive valuation. Our target price is Bt12.26 based on 14x FY08 PE. PS is now our top pick in the residential property sector. At A Glance Issued Capital (m shrs) 2,186 Mkt. Cap (Btm/US$m) 23,390 / 743 Major Shareholders Vichitrpongpan’s family (%) 73.9 HSBC (Singapore) Nominees Pte Ltd (%) 5.8 Thailand Equity Fund (%) 4.9 Free Float (%) 21.8 Avg. Daily Vol.(‘000) 2,217 Page 50 www.dbsvickers.com Refer to important disclosures at the end of this report
Regional Small/Mid Cap Strategy Q2 2008 Preuksa Real Estate Income Statement (Bt m) Balance Sheet (Bt m) FY Dec 2006A 2007A 2008F 2009F FY Dec 2006A 2007A 2008F 2009F Turnover 8,181 9,088 11,465 13,826 Fixed assets 1,202 1,314 1,468 1,661 Cost of sales (5,548) (5,919) (7,567) (9,402) Other LT Assets 202 216 216 216 SGA (1,030) (1,523) (1,474) (1,895) Cash 402 1,027 878 1,033 Opg Profit 1,603 1,646 2,424 2,530 Other Current Assets 7,581 8,489 10,091 11,357 Other Inc/(Exp) 23 5 10 10 Total Assets 9,386 11,046 12,653 14,267 Interest (Exp)/Inc (47) (48) (41) (37) ST Debt 538 - - - Pre-Tax Profit 1,578 1,603 2,393 2,503 Other Current Liabilities 1,020 1,648 1,815 2,001 Tax (275) (333) (479) (501) LT Debt 491 1,219 1,219 1,219 Minority interest - - - - Minority Int - - - - Net Profit 1,303 1,270 1,914 2,003 Shareholders' equity 7,337 8,179 9,618 11,047 Sales Growth % 7.4 11.1 26.2 20.6 Total Capital 9,387 11,046 12,653 14,267 Net Profit Gr % 2.4 (2.6) 50.7 4.6 Share Capital (m) 2,174 2,180 2,186 2,186 Gross Mgn % 32.2 34.9 34.0 32.0 Net cash/(debt) (581) (138) (287) (131) Opg Mgn % 19.6 18.1 21.1 18.3 Working capital 6,425 7,868 9,154 10,389 Net Mgn % 15.9 14.0 16.7 14.5 Gearing (%) 7.9 1.7 3.0 1.2 Cash Flow Statement (Bt m) Assumptions FY Dec 2006A 2007A 2008F 2009F FY Dec 2006A 2007A 2008F 2009F Net profit 1,303 1,270 1,914 2,003 Sales (Btm) 8,181 9,088 11,465 13,826 Depreciation 122 155 134 140 Sales Growth 7% 11% 26% 21% Non Cash Items 323 412 (32) (73) Gross Margin 32% 35% 34% 32% Change in W/C (693) (769) (1,435) (1,079) SGA/Sales 12.6% 16.8% 12.9% 13.7% CF from Operations 1,055 1,068 581 991 Div. Payout 34% 38% 30% 30% Capex (167) (149) (200) (200) Investment (1) (8) 0 0 CF from Investing (168) (157) (200) (200) Increase in debts (1,591) 190 0 0 Increase in capital 153 6 6 0 Dividends (389) (435) (481) (574) Interest paid (93) (46) (55) (61) CF from Financing (1,920) (285) (530) (635) Net change in CF (1,032) 625 (149) 155 Cash, Beg 1,434 401 1,027 878 Cash, End 401 1,027 878 1,033 Quarterly / Interim Income Statement (Bt m) Segmental Breakdown FY Dec 1Q2007 2Q2007 3Q2007 4Q2007 FY Dec 2006A 2007A 2008F 2009F Turnover 1,887 2,231 2,029 2,941 Sales (Btm) Cost of sales (1,238) (1,468) (1,361) (1,853) Detached House 3,269 3,863 4,442 4,887 SGA (292) (352) (414) (465) Townhouse 4,882 5,150 5,923 6,515 Opg Profit 358 411 254 622 Condominium 30 75 1,100 2,425 Other Inc/Exp 5 2 4 (6) Total 8,181 9,088 11,465 13,826 Interest (Exp)/Inc (10) (11) (14) (14) Sales Breakdown Pre-Tax Profit 353 403 245 602 Detached House 40% 43% 39% 35% Tax (61) (80) (56) (136) Townhouse 60% 57% 52% 47% Minority interest - - - - Condominium 0% 1% 10% 18% Net Profit 292 323 189 466 Total 100% 100% 100% 100% Sales Growth % (9.1) 4.9 18.6 29.6 Sales Growth Net Profit Gr % (20.9) (7.1) (26.5) 41.6 Detached House 0% 18% 15% 10% Gross Mgn % 34.4 34.2 32.9 37.0 Townhouse n.m. 5% 15% 10% Opg Mgn % 19.0 18.4 12.5 21.2 Condominium 20% 150% 1367% 120% Tax Rate % 17.3 19.8 22.8 22.7 Total 7% 11% 26% 21% Net Mgn % 15.5 14.5 9.3 15.8 Source: Company, DBS Vickers Page 51
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Regional <strong>Small</strong>/<strong>Mid</strong> <strong>Cap</strong> <strong>Strategy</strong> Q2 2008<br />
Preuksa Real Estate<br />
Income Statement (Bt m) Balance Sheet (Bt m)<br />
FY Dec 2006A 2007A 2008F 2009F FY Dec 2006A 2007A 2008F 2009F<br />
Turnover 8,181 9,088 11,465 13,826 Fixed assets 1,202 1,314 1,468 1,661<br />
Cost of sales (5,548) (5,919) (7,567) (9,402) O<strong>the</strong>r LT Assets 202 216 216 216<br />
SGA (1,030) (1,523) (1,474) (1,895) Cash 402 1,027 878 1,033<br />
Opg Profit 1,603 1,646 2,424 2,530 O<strong>the</strong>r Current Assets 7,581 8,489 10,091 11,357<br />
O<strong>the</strong>r Inc/(Exp) 23 5 10 10 Total Assets 9,386 11,046 12,653 14,267<br />
Interest (Exp)/Inc (47) (48) (41) (37) ST Debt 538 - - -<br />
Pre-Tax Profit 1,578 1,603 2,393 2,503 O<strong>the</strong>r Current Liabilities 1,020 1,648 1,815 2,001<br />
Tax (275) (333) (479) (501) LT Debt 491 1,219 1,219 1,219<br />
Minority interest - - - - Minority Int - - - -<br />
Net Profit 1,303 1,270 1,914 2,003 Shareholders' equity 7,337 8,179 9,618 11,047<br />
Sales Growth % 7.4 11.1 26.2 20.6 Total <strong>Cap</strong>ital 9,387 11,046 12,653 14,267<br />
Net Profit Gr % 2.4 (2.6) 50.7 4.6 Share <strong>Cap</strong>ital (m) 2,174 2,180 2,186 2,186<br />
Gross Mgn % 32.2 34.9 34.0 32.0 Net cash/(debt) (581) (138) (287) (131)<br />
Opg Mgn % 19.6 18.1 21.1 18.3 Working capital 6,425 7,868 9,154 10,389<br />
Net Mgn % 15.9 14.0 16.7 14.5 Gearing (%) 7.9 1.7 3.0 1.2<br />
Cash Flow Statement (Bt m)<br />
Assumptions<br />
FY Dec 2006A 2007A 2008F 2009F FY Dec 2006A 2007A 2008F 2009F<br />
Net profit 1,303 1,270 1,914 2,003 Sales (Btm) 8,181 9,088 11,465 13,826<br />
Depreciation 122 155 134 140 Sales Growth 7% 11% 26% 21%<br />
Non Cash Items 323 412 (32) (73) Gross Margin<br />
32% 35% 34% 32%<br />
Change in W/C (693) (769) (1,435) (1,079) SGA/Sales 12.6% 16.8% 12.9% 13.7%<br />
CF from Operations 1,055 1,068 581 991 Div. Payout 34% 38% 30% 30%<br />
<strong>Cap</strong>ex (167) (149) (200) (200)<br />
Investment (1) (8) 0 0<br />
CF from Investing (168) (157) (200) (200)<br />
Increase in debts (1,591) 190 0 0<br />
Increase in capital 153 6 6 0<br />
Dividends (389) (435) (481) (574)<br />
Interest paid (93) (46) (55) (61)<br />
CF from Financing (1,920) (285) (530) (635)<br />
Net change in CF (1,032) 625 (149) 155<br />
Cash, Beg 1,434 401 1,027 878<br />
Cash, End 401 1,027 878 1,033<br />
Quarterly / Interim Income Statement (Bt m)<br />
Segmental Breakdown<br />
FY Dec 1Q2007 2Q2007 3Q2007 4Q2007 FY Dec 2006A 2007A 2008F 2009F<br />
Turnover 1,887 2,231 2,029 2,941 Sales (Btm)<br />
Cost of sales (1,238) (1,468) (1,361) (1,853) Detached House 3,269 3,863 4,442 4,887<br />
SGA (292) (352) (414) (465) Townhouse 4,882 5,150 5,923 6,515<br />
Opg Profit 358 411 254 622 Condominium 30 75 1,100 2,425<br />
O<strong>the</strong>r Inc/Exp 5 2 4 (6) Total 8,181 9,088 11,465 13,826<br />
Interest (Exp)/Inc (10) (11) (14) (14) Sales Breakdown<br />
Pre-Tax Profit 353 403 245 602 Detached House 40% 43% 39% 35%<br />
Tax (61) (80) (56) (136) Townhouse 60% 57% 52% 47%<br />
Minority interest - - - - Condominium 0% 1% 10% 18%<br />
Net Profit 292 323 189 466 Total 100% 100% 100% 100%<br />
Sales Growth % (9.1) 4.9 18.6 29.6 Sales Growth<br />
Net Profit Gr % (20.9) (7.1) (26.5) 41.6 Detached House 0% 18% 15% 10%<br />
Gross Mgn % 34.4 34.2 32.9 37.0 Townhouse n.m. 5% 15% 10%<br />
Opg Mgn % 19.0 18.4 12.5 21.2 Condominium 20% 150% 1367% 120%<br />
Tax Rate % 17.3 19.8 22.8 22.7 Total 7% 11% 26% 21%<br />
Net Mgn % 15.5 14.5 9.3 15.8<br />
Source: Company, <strong>DBS</strong> <strong>Vickers</strong><br />
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