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28 Apr 2017

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Supalai PCL (SPALI)

Expect 1Q17 earnings of Bt1bn, down YoY and QoQ

► Expect 1Q17 earnings of Bt1.0bn, -20% YoY, -19% QoQ.

► Expect better performance in 2Q17-4Q17.

► Presales in 1Q17 reached 28% of the full year target.

► Growth prospects remain strong in 2017

► Maintain BUY recommendation but revise down 2017-18

earnings forecasts and target price to Bt30 from Bt32

Expect 1Q17 earnings of Bt1.0bn, -20% YoY and -19% QoQ

After SPALI’s analyst meeting, we have a negative view on its 1Q17

earnings, as the company is expected to see its lowest revenue and

profit of the year due to slow transfer billing. Earnings should

accelerate continuously through the rest of the year. We expect

revenue of Bt5bn and net profit of Bt1bn in 1Q17. The ready-to-

transfer condominium projects in 1Q17 are not large and are in the

provinces. Meanwhile, last year demand was boosted by the

government’s stimulus measures in 1Q16 and SPALI had huge

transfers in 4Q16 on seasonality.

Expect better performance through the rest of the year

Based on SPALI’s transfer plan, 1Q17 should be the low point for

the company’s transfers this year and transfers should increase in

2Q17 and 3Q17. For 2Q17, we expect revenues of approximately

Bt6.5bn and net profit of Bt1.3bn. The high point of the year should

be in 3Q17 and 4Q17 with expected revenues of Bt6bn-Bt7bn and

net profits of around Bt1.4bn and Bt1.5bn per quarter. Presales in 1Q17 reached 28% of the full-year target

SPALI targets presales of Bt27bn in 2017. Its presales in 1Q17

reached Bt7.6bn, +43% YoY, representing 28% of the full-year

target. Its sales are targeted at around Bt24.5bn. The flagship

project of the year is Supalai Oriental Sukhumvit 39 with presales

of 20% after launching in 4Q16, the project value has risen to

Bt10bn from its initial launch of Bt7.5bn due to the good location.

The price per square meter has risen from Bt120K to Bt130K and

will likely continue to rise. We believe the gross profit margin on this

project will be as high as 40%. SPALI decided to re-launch with

another grand opening ceremony again after finishing its sales

office and sample rooms. Growth prospects remain strong in 2017.

SPALI plans to launch 29 projects worth Bt37.2bn this year, up 57%

YoY from Bt24.1bn in 2016. The company has a backlog worth

Bt39.7bn, up by Bt3bn from the previous report. Land acquisition is

set at Bt8bn, up 60% YoY and construction expenses are set at

Bt12bn, up 20% YoY, implying the company will be more proactive

in 2017.

BUY

TP: Bt30.00 Closing price: Bt24.70

Upside/downside 21.4%

Sector Property Development

Paid-up shares (shares mn) 1,717

Market capitalization (Bt mn) 42,410

Free float (%) 64.86

12-mth daily avg. turnover (Bt mn) 135.20

12-mth trading range (Bt) 27.25/19.40

Major shareholders (%)

Prateep Tangmatitham 24.09

Thai NVDR 9.85

Ajchara Tangmatitham 5.25

Financial highlights

Source: SETSMART, AWS

Thailand Research Department

Vajiralux Sanglerdsillapachai

License, No. 17385

Tel: 02 680 5077

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Maintain BUY, but revise down 2017-18 earnings forecast and 2017 target price from

Bt32.00 to Bt30.00

We have revised down our 2017 earnings forecast as 1Q17 earnings are expected to be lower

than our previous forecast. We cut full-year earnings by 6.5% from Bt5.6bn (EPS of Bt3.24) to

Bt5.2bn (EPS of Bt3.04), still growing 7% YoY and growing 8% YoY to Bt5.6bn (EPS Bt3.55) in

2018. SPALI’s top management said the company’s real estate business has improved

significantly in March 2017, while the first two months of the year were still quiet. Overall, the Thai

property market remains lackluster this year, but it is better than in 2015 and 2016, but still not as

good as pre- 2015. We recommend BUY with a target price of Bt30.00, down from our previous

target of Bt32.00.

Figure 1: 1Q17E’s results preview

Source: SET

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Quarterly Income Statement (Btmn)

Year to 31 Dec 4Q15 1Q16 2Q16 3Q16 4Q16

Total revenue 6,499 6,245 6,323 4,596 6,172

Cost of goods sold (4,042) (3,837) (3,875) (2,862) (3,885)

Gross profit 2,457 2,409 2,448 1,734 2,286

SG&A (575) (581) (633) (617) (705)

Operating Profit 1,882 1,827 1,815 1,117 1,581

Share of gain (loss) of joint venture (4) (9) 53 (3) 39

Other income 40 30 51 51 24

EBIT 1,918 1,848 1,919 1,165 1,644

Financial cost (75) (72) (87) (71) (84)

Pretax profit 1,843 1,775 1,832 1,094 1,561

Income tax expenses (375) (367) (350) (231) (329)

Minority interests (11) (11) (47) (16) (25)

Normalized profit 1,456 1,397 1,435 848 1,207

Extraordinaries items 0 0 0 0 0

Net profit 1,456 1,397 1,435 848 1,207

EBITDA 1,951 1,886 1,957 1,203 1,746

Normalized EPS (Bt) 0.85 0.81 0.84 0.49 0.70

Net EPS (Bt) 0.85 0.81 0.84 0.49 0.70

Depreciation & Amortization 33 38 38 38 43

Key Financial Ratios

Year to 31 Dec 2014 2015 2016 2017E 2018E

Sales growth (%) 47.4% 14.9% 9.2% 9.0% 9.4%

Normalized profit growth (%) 27.6% -2.9% 12.4% 13.9% 9.5%

Net profit growth (%) 17.8% -2.9% 12.4% 13.9% 9.5%

EPS growth (%) 17.8% -2.9% 12.4% 13.9% 9.5%

Gross margin (%) 41.7% 37.6% 38.0% 38.5% 38.5%

Operating margin (%) 31.3% 27.3% 27.2% 28.1% 28.1%

EBITDA margin (%) 32.4% 28.5% 29.1% 30.1% 30.0%

Normalized profit margin (%) 24.1% 20.4% 20.9% 21.9% 21.9%

Net profit margin (%) 24.1% 20.4% 20.9% 21.9% 21.9%

Effective tax rate (%) 19.8% 20.3% 20.4% 20.0% 20.0%

ROA (%) 12.4% 13.0% 10.2% 9.9% 10.2%

ROE (%) 24.6% 28.3% 23.3% 22.8% 22.5%

EV/EBITDA (x) 9.1 10.2 9.3 8.5 8.1

Net debt to equity (x) 0.7 0.9 0.9 0.8 0.7

P/E (x) 9.5 9.8 8.7 7.7 7.0

P/BV (x) 2.4 2.2 1.9 1.6 1.4

Dividend Yield (%) 4.0% 4.0% 4.2% 4.6% 5.0%

Main Assumptions

Year to 31 Dec (Btmn) 2014 2015 2016 2017E 2018E

Beginning backlog 12,742 18,129 37,879 36,500 44,700

Presales 19,386 23,010 24,500 28,000 29,500

Ending backlog 18,129 37,879 36,500 44,700 36,378

Revenue from real estate sales 18,270 20,999 22,902 24,981 27,355

Revenue from backlog 0 0 17,853 13,650 10,302

% reveue from backlog 0 0 78% 55% 38%

SG&A to sales (%) 10.9% 10.3% 10.3% 10.0% 10.0%

Dividend payout ratio (%) 38.3% 39.5% 36.9% 35.2% 35.0%

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CG Report

Score Range Number of Logo Description

90 – 100

80 – 89

70 – 79

60 – 69

50 – 59

Below 50

No logo given

Excellent

Very Good

Good

Satisfactory

Pass

N/A

Corporate Governance Report of Thai Listed Companies (CGR) 2016

Corporate Governance Report disclaimer

The disclosure of the survey result of the Thai Institute of Directors

Association (“IOD”) regarding corporate governance is made pursuant

to the policy of the Office of the Securities and Exchange Commission.

The survey of the IOD is based on the information of a company listed

on the Stock Exchange of Thailand and the Market for Alternative

Investment disclosed to the public and able to be accessed by a

general public investor. The result, therefore, is from the perspective of

a third party. It is not an evaluation of operation and is not based on

inside information.

The survey result is as of the date appearing in the Corporate

Governance Report of Thai Listed Companies. As a result, the survey

result may be changed after that date, Asia wealth Securities Company

Limited does not conform nor certify the accuracy of such survey result.

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CG Report

The disclosure of the Anti-Corruption Progress Indicators of a listed company on the Stock Exchange of Thailand, which is assessed by Thaipat

Institute, is made in order to comply with the policy and sustainable development plan for the listed companies of the Office of the Securities and

Exchange Commission. Thaipat Institute made this assessment based on the information received from the listed company, as stipulated in the

form for the assessment of Anti-corruption which refers to the Annual Registration Statement (Form 56-1) , Annual Report (Form 56-2) , or other

relevant documents or reports of such listed company. The assessment result is therefore made from the perspective of Thaipat Institute that is a

third party. It is not an assessment of operation and is not based on any inside information. Since this assessment is only the assessment result as

of the date appearing in the assessment result, it may be changed after that date or when there is any change to the relevant information.

Nevertheless, AWS does not confirm, verify, or certify the accuracy and completeness of the assessment result.

Anti-Corruption Progress Indicator 2016

2S APCO BROOK CSS GFPT JMART LVT NCL PLANB SAUCE SR TICON TVD WIIKA APCS BRR DELTA GIFT JMT M NDR PLAT SC SRICHA TIP TVO WINABC APURE BSBM DNA GLOBAL JTS MAKRO NINE PRANDA SCCC STA TKT TVT XOABICO AQUA BTNC EA GPSC JUBILE MALEE NMG PREB SCN STANLY TLUXE TWPC ZMICOACAP AS CEN ECF GREEN JUTHA MBAX NNCL PRG SEAOIL SUPER TMC UAEC ASIA CGH EE GUNKUL K MC NPP PRINC SE-ED SUSCO TMI UBISAF ASIAN CHARAN EFORL HMPRO KASET MCOT NTV PSTC SENA SYMC TMILL UKEMAGE ASIMAR CHO EPCO HOTPOT KBS MEGA NUSA PYLON SGP SYNEX TMT UNIQAH ASK CHOTI ESTAR ICHI KC MFEC OCC QH SITHAI SYNTEC TPA UOBKHAI BCH CHOW EVER IEC KCAR MIDA OGC RML SKR TAE TPP UREKAAIE BEAUTY CI FC IFS KSL MILL PACE ROBINS SMIT TAKUNI TRT UWCAIRA BFIT CM FER ILINK KTECH MJD PAF ROCK SMK TASCO TRU VGIALUCON BH COL FNS INET KYE MK PCA ROH SORKON TBSP TRUE VIBHAAMARIN BIGC CPALL FPI INOX L&E ML PCSGH ROJNA SPACK TEAM TSE VNGAMATA BJCHI CPF FSMART INSURE LALIN MPG PDG RP SPALI TFG TSI VNTANAN BKD CPL FVC IRC LPN MTLS PDI RWI SPCG TFI TSTE WAVEAOT BLAND CSC GC J LRH NBC PIMO SAMCO SPPT THAI TTW WHAAP BROCK CSR GEL JAS LTX NCH PK SANKO SPRC TIC TU WICE

AKP BKI CPN ECL HTC KKP MINT PE PTG SAT SPC TGCI TNITY TVIAMANAH BLA CSL EGCO ICC KTB MONO PG PTT SCB SPI THANI TNL WACOALASP BTS DCC ERW IFEC KTC MOONG PHOL PTTEP SCC SSF THCOM TOGAYUD BWG DEMCO FE INTUCH LANNA MSC PM PTTGC SCG SSI THRE TOPBAFS CENTEL DIMET FSS IRPC LHBANK MTI PPP Q-CON SINGER SSSC THREL TPCBANPU CFRESH DRT GBX IVL LHK NKI PPS QLT SIS SVI TIPCO TPCORPBAY CIMBT DTAC GCAP KBANK MBK NSI PR RATCH SMPC TCAP TISCO TSCBBL CNS DTC GLOW KCE MBKET OCEAN PSL S & J SNC TCMC TMB TSTHBCP CPI EASTW HANA KGI MFC PB PT SABINA SNP TF TMD TTCL

AAV AU CBG CTW GJS KAMART M-CHAI PAP RCL SGF SUC TK TTA VIHACC AUCT CCET CWT GL KCM MCS PATO RICH SHANG SUTHA TKN TTI VPOADAM BA CCN DAII GLAND KDH MDX PERM RICHY SIAM SVH TKS TTL VTEAEONTS BAT-3K CCP DCON GOLD KIAT METCO PF RJH SIM SVOA TM TTTM WGAFC BCPG CGD DCORP GRAMMY KKC MODERN PICO RPC SIMAT SWC TMW TUCC WINNERAHC BDMS CHEWA DRACO GRAND KOOL MPIC PJW RS SIRI T TNDT TWP WORKAIT BEC CHG DSGT GSTEL KTIS NC PL S SLP TACC TNH TWZ WORLDAJ BEM CHUO DTCI GTB KWC NEP PLE S11 SMART TAPAC TNP TYCN WPAJD BGT CIG EARTH GYT KWG NETBAY PMTA SAFARI SMM TC TNPC UAC WRAKR BIG CITY EASON HARN LDC NEW POLAR SALEE SMT TCB TNR UEC YCIALLA BIZ CK EIC HFT LEE NEWS POMPUI SAM SOLAR TCC TOPP UMI YNPALT BJC CKP EKH HPT LH NFC POST SAMART SPA TCCC TPAC UMS YUASAAMA BLISS CMO EMC HTECH LIT NOBLE PPM SAMTEL SPG TCJ TPBI UPAMATAV BM CMR EPG HYDRO LOXLEY NOK PRAKIT SAPPE SPORT TCOAT TPCH UPAAMC BOL CNT ESSO IHL LPH NPK PRECHA SAWAD SPVI TFD TPIPL UPFAPX BPP COLOR F&D IRCP LST NWR PRIN SAWANG SQ TGPRO TPOLY UPOICAQ BR COM7 FANCY IT MACO NYT PRO SCI SSC TH TR UTARIP BRC COMAN FMT ITD MAJOR OHTL PSH SCP SST THANA TRC UTPARROW BSM CPH FN ITEL MANRIN OISHI PTL SEAFCO STAR THE TRITN UVASEFA BTC CPR FOCUS JCT MATCH ORI QTC SELIC STEC THIP TRUBB UVANASN BTW CRANE FORTH JSP MATI OTO RAM SF STHAI THL TSF VAROATP30 BUI CSP GENCO JWD MAX PAE RCI SFP STPI TIW TSR VISource : Thai Institute of Directors

Companies participating in Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC)

under Thai Institute of Directors (as of October 28, 2016) are categorised into:

• Companies that have declared their intention to join CAC, and

• Companies certified by CAC.

Companies that have declared their intention to join CAC

Companies certified by CAC

N/A

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Meung District, Chachoengsao 24000

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