3QFY17 profit seen boosted by better profit from affiliates and ex‐item but margins likely to hold flat: We expect QH to deliver a solid set of financial results for 3QFY17, underpinned largely by better profit from affiliates and exitem. Our forecast puts its 3QFY17 net profit at Bt1.4bn, up 92% y‐y. Stripping out ex‐item, 3QFY17 core profit is projected to rise a mere 2% y‐y. For 3QFY17, the share of profit from affiliates tend to be higher than a year earlier on the back of better profit from HMPRO and QH is expected to book a potential gain of Bt698mn from revaluation of LHBANK after a capital injection from its new partner CTBC but margins from property sales are unlikely to be better than the levels achieved a year ago as revenue contribution from low‐margin SDH/TH projects remains a drag.

3QFY17 total revenue expected to grow 14% y‐y: We forecast QH to report a 14% y‐y jump in 3QFY17 total revenue to Bt5.1bn on expectations that (i) revenue from property sales will go up 16% y‐y to Bt4.8bn, boosted by a 5% y‐y rise in SDH/TH presales and a y‐y increase in condo revenue thanks to additional revenue contribution from The Trust Condo @ BTS Erawan and (ii) rental income will be down 8% y‐y as a result of a y‐y drop in occupancy rates.

‘SELL’ rating reaffirmed on rich P/E valuation: Upbeat earnings expectations for 3QFY17 driven largely by ex‐item are not new while valuation remains too rich to find QH stock a compelling value at up to 10x FY18 normalized P/E, which represents a big premium to its historical P/E average of 8x‐9x against weak core profit outlook for FY18. Our forecast shows QH’s FY18 core profit will drop 2% y‐y. At the end of the day, we reaffirm a ‘SELL’ rating on QH shares with a FY18 target price of Bt2.40/share based on 8.5x FY18 normalized P/E.