AP: 4QFY17 profit seen up a paltry 1.5% y-y February 9, 2018

  • 4QFY17 profit seen up a paltry 1.5% y‐y as growth capped by weak profit from JV: We expect AP to report marginal profit growth of 1.5% y‐y for 4QFY17 as deteriorating profit from JV keeps growth in check despite a healthy rise in revenue. For the quarter, revenue is projected to be 10% higher than in the like period of FY16 at Bt7.7bn, of which Bt6.6bn would come from backlog and the rest Bt1.1bn from revenue from SDH/TH presales of Bt3bn it achieved during the period. Margins appear to be flat but marketing expenses tend to rise following the launch of its new condo project Life Asoke Rama 9 while the share of profit from JV is forecast to fall dramatically to a mere Bt100mn from Bt509mn a year ago, hit by an estimated drop of 53% y‐y in JV revenue.
  • Profit growth likely to continue well into FY18: We expect its profit growth momentum to continue well into FY18 driven by a further rise in revenue and an increase in share of profit from JV. Our forecast assumes (i) revenue will grow 7% y‐y to Bt23.1bn underpinned by brisk momentum in SDH/TH presales and sales of condo inventories at its super luxury project Vittorio Sukhumvit 39 though there is a little backlog of only Bt6bn carried forward into FY18, and (ii) the share of profit from JV will rise 33% y‐y on the back of steady revenue growth fueled by backlog. We estimate AP will deliver 9% y‐y profit growth in FY18.
  • Rating upgrade to ‘BUY’ with FY18 target price of Bt9.80/share: In light of the outlook for continued profit growth and a compelling valuation, we upgrade our recommendation on AP to ‘BUY’ with a FY18 target price of Bt9.80/share. The recent share sell‐off along with the broad market has pulled its current P/E ratio below its historical mean of 9x at 7x with an estimated dividend yield of roughly 4.5%.

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