AP PCL: 3QFY17 profit seen rising 35% y-y October 27, 2017

3QFY17 profit seen at Bt617mn, up 35% y‐y: We expect AP to report a strong set of results for 3QFY17 underpinned by solid revenue, better margins and share of profit from JV. For the quarter, revenue is projected to be Bt4.6bn on expectations that the bulk of revenue will come from SDH/TH revenue at up to Bt3.5bn driven by a sharp rise of 26% y‐y in SDH/TH presales and the rest will come from revenue contribution from Rhythm Asoke and Sukhumvit 42 condo projects. Margins tend to be better than the levels seen a year earlier and AP is expected to see a Bt102mn profit from its JV in 3QFY17 against a loss of Bt52mn in 3QFY16. In sum, we estimate AP will post a 35% y‐y rise in 3QFY17 profit to Bt617mn.

Profit growth momentum to continue into FY18: We nudge our FY17 profit growth forecast for AP higher by 9% to reflect stronger‐than‐expected presales and margin outlooks. AP reported 9MFY17 total presales of Bt28bn, which had already exceeded its full‐year target of Bt26bn on the back of better‐than‐expected SDH/TH and condo presales. There is also scope that margins will slightly surprise to the upside in 2HFY17. Looking ahead into FY18, we also raise our profit growth outlook for AP by 6% to 8%. Our forecast assumes FY18 revenue will grow 7% y‐y to Bt23.1bn. Even though its current backlog covers only 11% of our FY18 revenue target, we believe brisk SDH/TH presales would serve as a key driver of revenue growth for AP in FY18. The share of profit from its JV is also expected to rise further by 19% y‐y based on assumptions that JV’s current backlog now covers up to 87% of our FY18 revenue target.

Valuation still cheap in P/E terms: We maintain a ‘Accumulate’ call on AP with a FY18 target price of Bt9.80/share based on valuation discount to historical P/E average of 9x, near‐term positive catalyst from upcoming 3QFY17 results and continued profit growth prospects well into FY18.

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