AMATA is one of our favourite stocks in the property
sector due to 1) expectations of strong growth in industrial
estate land sales primarily from the expansion of the Thai
auto-manufacturing sector, 2) the company's net cash
position, 3) current attractive valuation, with 2003 PER of
6.24x, dividend yield of 7.95% and a 30% discount to our
fair value estimate of Bt27; and 4) expectations that the
share price can begin to reflect its true value after
several minority shareholders have completely liquidated
their holdings.
We estimate that AMATA sold 750 rai of industrial plots
in 2002 and will sell 850 rai in 2003. The company has
already signed letters of intent for 300 rai. As a result,
we forecasting an 16% growth in sales in 2003 to Bt2,493mn
and a 17% increase in normalised earnings to Bt647mn.
We estimate that AMATA turned net cash positive at the
end of last year. Cash flow generated from land sales should
be sufficient to finance new landbank acquisitions. Even
with the rebuilding of its landbank, AMATA can afford to
maintain a high dividend payout ratio of 45-55% or around
Bt1.50 per share.
|
Figure
1: Amata’s earnings forecasts |
|
Year
to Dec |
2000 |
2001 |
2002E |
2003E |
2004E |
|
Sales
(Btmn) |
946 |
1,211 |
2,155 |
2,493 |
2,524 |
|
Normalised
earnings |
36 |
216 |
554 |
647 |
607 |
|
Earnings
(Btmn) |
63 |
336 |
842 |
647 |
607 |
|
Normalised
EPS (Bt) |
0.17 |
1.01 |
2.6 |
3.03 |
2.85 |
|
EPS (Bt) |
0.29 |
1.57 |
3.95 |
3.03 |
2.85 |
|
Normalised
PER (x) |
113.09 |
18.65 |
7.28 |
6.24 |
6.64 |
|
PER (x) |
64.1 |
12.01 |
4.79 |
6.24 |
6.64 |
|
EV/EBITDA
(x) |
35.22 |
12.78 |
6.34 |
4.67 |
3.56 |
|
CF/share
(Bt) |
0.71 |
0.88 |
2.9 |
3.38 |
3.2 |
|
BV per
share (Bt) |
8.41 |
9.13 |
9.07 |
11.6 |
12.94 |
|
Price/BV
(x) |
2.25 |
2.07 |
2.08 |
1.63 |
1.46 |
|
DPS (Bt) |
- |
1 |
2.5 |
1.5 |
1.5 |
|
Dividend
yield (%) |
0.00% |
5.29% |
13.24% |
7.95% |
7.95% |
AMATA – one
of our top picks in property sector
Amata Corporation Plc. (AMATA) is one of our favourite
stocks in the property sector due to the following factors:
- The company will achieve strong growth in land sales due
primarily to the expansion of the Thai auto-manufacturing
sector. We estimate that AMATA’s land sales increased to
750 rai in 2002 and will further increase to 850 rai in
2003. The company has already signed letters of intent for
300 rai, which should be completed in 1H03.
- We are forecasting 16% growth in sales in 2003 to
Bt2,493mn after a 78% increase in 2002. Normalised
earnings are projected to increase 17% this year to
Bt647mn.
- The growth in sales is not fully factored into AMATA's
share price. Based on our 2003 forecast, AMATA is trading
on a PER of 6.24x, or roughly half of the average rating
for the major residential developers. Our DCF analysis
indicates AMATA's fair value at Bt27, 43% higher than the
company's current share price of Bt18.9. The best
indication, however, of AMATA's current low market
valuation is its high dividend yield of 7.94%.
- AMATA can afford a high dividend payout since new land
sales are generating enough cash flow to pay for new
landbank acquisitions and the company should have turned
to a net cash position by end-2002.
- We believe that AMATA shares will outperform the market
over the next six months given expectations of continuing
strong earnings, its current low valuation and the fact
that some of the minority shareholders have completed
their share sales.
AMATA
expected to record 156% growth in 2002 normalised earnings
We came away from a recent
meeting with the management of AMATA feeling quite optimistic
on the company’s near-term earnings prospects. The strong
growth of the automotive sector in Thailand is expected to
result in continuing strong demand for industrial estates in
the Eastern Seaboard. Auto-related companies account for 39%
of the Amata Nakorn's customers and 30% of Amata City's
customers.
We are projecting 2002 sales of
Bt2,155mn, representing an increase of 78% from Bt1,211mn in
2001. We base this projection on the estimated 750 rai (300
acres) sold last year. We expect gross margins to average 44%
in 2002 since AMATA sold most of land from its Amata Nakorn
Industrial Estate, which tends to achieve its highest gross
margins. If we do not include extraordinary gains of Bt288mn
from debt restructuring and other items, we believe that AMATA
would record normalised earnings in 2002 of Bt554mn,
representing an increase of 156% yoy.
Figure
2: AMATA quarterly earnings performance
|
|
Net
Profit |
|
Normalised
Net Profit |
|
|
2001 |
2002 |
%
Chg |
|
2001 |
2,002 |
%
Chg |
|
Q1 |
21 |
135 |
548.7% |
Q1 |
21 |
135 |
548.7% |
|
Q2 |
93 |
415 |
348.0% |
Q2 |
31 |
150 |
378.4% |
|
Q3 |
18 |
157 |
772.2% |
Q3 |
18 |
134 |
644.3% |
|
Q4E |
204 |
135 |
-33.9% |
Q4E |
146 |
135 |
-7.5% |
|
YearE |
336 |
842 |
150.7% |
YearE |
216 |
554 |
156.1% |
2003 earnings
forecast assumes land sales of 850 rai
AMATA's management targets
land sales this year of 900 rai. However, our own earnings
estimate conservatively assumes land sales of 850 rai. At
the end of September last year, AMATA had a backlog of
Bt600mn or about 240 rai. Currently, the company has signed
letters of intent for another 300 rai, which should be
completed in 1H03. Our forecast assumes that Amata Nakorn
Industrial Estate sells 550 rai, while Amata City Rayong
sells 300 rai this year.
Figure
3: AMATA historic and projected land sales
Currently, AMATA has only 500
rai of developed land plots available at Amata Nakorn. The
company intends to purchase another 1,000 rai of raw
landbank this year, developing 500 rai of this in 1H03.
Included in the 1,000 rai to be purchased, AMATA is in the
process of buying 100 rai of NPL land from a commercial bank
at below current market prices.
However, we assume that
average landbank acquisition prices increase slightly. Since
AMATA won't likely adjust up its sales prices, we are
factoring in a gradual deterioration in AMATA's gross
margins over the next two years from an estimated 44.01% in
2002 to 42.04% in 2003 and 41.08% in 2004. At Amata City,
AMATA still has plenty of raw landbank of around 2,000 rai
and should, therefore, maintain relatively stable gross
margins of around 30%.
Assuming SG&A expenses
increase proportionally to sales, while interest expenses
further decrease, AMATA should achieved normalised earnings
in 2003 and 2004 of Bt704mn and Bt615mn, respectively.
Investors to
benefit from generous dividend payout
We expect AMATA to pay a
final dividend of Bt1.50 representing a yield of 7.94% at
the current share price. Given the company's strong
financial position and strong cash flow, AMATA can afford to
continue to pay out dividends of at least Bt1.50 per annum
over the next several years, representing a payout ratio of
45-55%.
Several
minority shareholders have already liquidated their shares
Over the last two years,
several of AMATA's minority shareholders, including the
Panishchiwa family, the Srifuengfung family and The Mall
Group, have liquidated their holdings in the company. As
January 3, 2003, the Kromadit family and the Yodmani family
remain the major shareholders with equity stakes of 30% and
7.7%, respectively. Meanwhile, shares held by retail and
institutional investors have increased to 36.5% and 8%,
representing a relatively large free float of around 45%. As
selling pressure from minority shareholders is no longer a
concern, we believe that AMATA should begin to trade closer
to its fair value.
Figure
4: AMATA shareholder breakdown
|
Majors
Shareholders |
03/01/2003 |
01/11/2002 |
10/05/2002 |
12/04/2001 |
17/04/2000 |
|
Mn
Shr |
%
Shares |
Mn
Shr |
%
Shares |
Mn
Shr |
%
Shares |
Mn
Shr |
%
Shares |
Mn
Shr |
%
Shares |
|
Kromadit Family |
63.99 |
29.98 |
64.00 |
29.99 |
29.61 |
27.75 |
28.42 |
26.64 |
27.25 |
25.54 |
|
Yodmani Family |
16.51 |
7.74 |
16.79 |
7.87 |
12.15 |
11.38 |
3.73 |
3.49 |
3.69 |
3.46 |
|
Itochu Corp. |
10.00 |
4.69 |
10.00 |
4.69 |
5.00 |
4.69 |
18.70 |
17.53 |
18.70 |
17.53 |
|
Sophonpanich family |
5.47 |
2.56 |
5.35 |
2.5 |
2.17 |
2.03 |
2.08 |
1.95 |
1.98 |
1.85 |
|
Institutional
investors |
17.29 |
8.09 |
21.20 |
9.93 |
4.87 |
4.57 |
5.20 |
4.87 |
2.70 |
2.53 |
|
NVDR |
1.79 |
0.84 |
2.54 |
1.19 |
- |
- |
- |
- |
- |
- |
|
Manit Nopamornbodee |
7.57 |
3.55 |
7.57 |
3.55 |
3.78 |
3.55 |
3.78 |
3.55 |
3.78 |
3.55 |
|
Kawin Kuengudorm |
1.08 |
0.51 |
1.08 |
0.51 |
8.00 |
7.5 |
8.00 |
7.5 |
8.00 |
7.5 |
|
Panishchiwa Family |
- |
- |
10.33 |
4.84 |
6.69 |
6.26 |
14.17 |
13.28 |
13.57 |
12.71 |
|
Srifuengfung Family |
- |
- |
- |
- |
4.21 |
3.94 |
4.21 |
3.94 |
4.21 |
3.94 |
|
The Mall |
- |
- |
- |
- |
- |
- |
3.78 |
3.55 |
3.78 |
3.55 |
|
Retails |
77.89 |
36.5 |
63.25 |
29.64 |
42.19 |
19.77 |
18.05 |
8.46 |
20.16 |
9.45 |
AMATA
shares are worth Bt27 apiece
Based on our 2003 forecast,
AMATA is trading on a PER of 6.24x, EV/EBITDA of 4.67x and
P/BV of 1.63x. This is roughly half the average rating for the
major listed residential developers. We believe that this is
unjustified given that AMATA should have been in a net cash
position by the end of last year and has relatively liquid
assets with cash and land inventories accounting for about 18%
and 58% of AMATA's total assets, respectively. The best
indication, however, of AMATA's current low market valuation
is the company's high dividend yield of 7.94%.
Our DCF analysis indicates
AMATA's fair value at Bt27, roughly 43% higher than the
company's current share price of Bt18.9. We based this
valuation on relatively conservative assumptions, including
narrowing margins and flat sales until 2005, a WACC of 14% and
terminal growth of 6%. Even at our fair value estimate,
AMATA's shares would still be trading on an undemanding PER of
8.18x and attractive dividend yield of 5.6%.
|
Figure
5: Income statement |
|
(Btmn) |
2000 |
2001 |
2002E |
2003E |
2004E |
|
Sales |
946 |
1,211 |
2,155 |
2,493 |
2,524 |
|
COGs |
562 |
627 |
1,207 |
1,445 |
1,487 |
|
Gross
margins |
384 |
584 |
948 |
1,048 |
1,037 |
|
SG&A |
271 |
270 |
345 |
349 |
379 |
|
Operating
margins |
113 |
314 |
604 |
699 |
658 |
|
Interest
expenses |
105 |
64 |
38 |
34 |
28 |
|
Other
income |
29 |
14 |
46 |
54 |
54 |
|
Pretax
profits |
37 |
264 |
612 |
719 |
685 |
|
Income
taxes |
1 |
6 |
22 |
23 |
34 |
|
Associate
earnings |
0 |
-10 |
5 |
-2 |
1 |
|
Minority
interests |
-1 |
-32 |
-40 |
-47 |
-44 |
|
Extraordinary
items |
27 |
120 |
288 |
- |
- |
|
Net income |
63 |
336 |
842 |
647 |
607 |
Figure
6: Balance sheet
|
(Btmn) |
2000 |
2001 |
2002E |
2003E |
2004E |
|
Cash equivalent |
279 |
296 |
656 |
1,187 |
1,981 |
|
Receivable |
84 |
62 |
50 |
61 |
62 |
|
Inventories |
3,074 |
3,197 |
2,804 |
2,612 |
1,935 |
|
Investment |
199 |
266 |
203 |
153 |
103 |
|
Fixed Assets |
225 |
297 |
366 |
425 |
462 |
|
Total assets |
4,248 |
4,453 |
4,564 |
4,992 |
5,099 |
|
Credits |
121 |
134 |
172 |
192 |
194 |
|
ST-debts |
172 |
95 |
486 |
393 |
214 |
|
LT-debts |
925 |
455 |
114 |
157 |
194 |
|
Other liability |
1,234 |
1,608 |
1,283 |
1,367 |
1,283 |
|
Equities |
1,796 |
2,161 |
2,469 |
2,796 |
3,083 |
Figure
7: Cash flow statement
|
(Btmn) |
2000 |
2001 |
2002E |
2003E |
2004E |
|
Net Profit |
63 |
336 |
842 |
647 |
607 |
|
Cash flow
from operations |
448 |
1,477 |
745 |
994 |
1316 |
|
Cash flow
from investing |
-110 |
-887 |
-624 |
-1,044 |
-534 |
|
Cash flow
from financing |
-167 |
-571 |
-215 |
-370 |
-463 |
|
|
|
|
|
|
|
|
Free cash
flow |
413 |
1,381 |
653 |
907 |
1,247 |
Figure
8: Financial ratios
|
(Btmn) |
2000 |
2001 |
2002E |
2003E |
2004E |
|
Gross margins |
40.6% |
48.2% |
44.0% |
42.0% |
41.1% |
|
Operating margins |
11.9% |
26.0% |
28.0% |
28.0% |
26.1% |
|
Debt-Cash/Equity (x) |
0.46 |
0.12 |
Cash |
Cash |
Cash |
|
Interest coverage (x) |
1.36 |
5.12 |
17.1 |
22.35 |
25.81 |
|
Inventory Days |
1,186 |
963 |
848 |
660 |
475 |
|
Collection Days |
32 |
19 |
9 |
9 |
9 |
|
Payment Days |
47 |
40 |
52 |
49 |
48 |
|
