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Property
Perfect
PF <Bt7.30>
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Recommendation
New : BUY
Previous : BUY
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Asset
reappraisal boosts bottom line
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PF reported normalised
earnings of Bt530mn in 2002, 6% higher than our forecast and
a sharp turnaround from normalised losses of Bt459mn a year
ago. The company booked Bt1.72bn in extra gains on a
reappraisal of its property portfolio after reducing its
provisioning for asset losses from 43.2% to 23.4%.
Following
PF's strong performance, we have revised up our 2003
earnings forecast by 10% to Bt667mn. Based on presales of
about Bt1bn and several new project launches this year,
sales are expected to grow 74% to Bt3.17bn.
PF's share price has almost
halved since its 2002 peak of Bt13.50 last June. The stock
is now trading at a 58% discount to our NPV estimate of
Bt17.2 a share.
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Table
1: BECL's earnings forecasts |
|
Year
to Dec |
2001 |
2002 |
2003E |
2004E |
2005E |
|
Sales
(Btmn) |
594 |
1,817 |
3,171 |
3,155 |
2,957 |
|
Net
profits (Btmn) |
4,351 |
2,342 |
667 |
633 |
571 |
|
EPS (Bt) |
55.91 |
5.49 |
0.87 |
0.82 |
0.74 |
|
Growth (%) |
280% |
-90% |
-84% |
-5% |
-10% |
|
Cash per
share (Bt) |
0.8 |
0.8 |
0.7 |
0.5 |
0.6 |
|
PER (X) |
0.1 |
1.3 |
8.4 |
8.9 |
9.8 |
|
BPS (Bt) |
6.1 |
3.3 |
4.4 |
5.3 |
6 |
|
EV/EBITDA
(x) |
-103.7 |
19.3 |
14.3 |
14.4 |
12.9 |
|
Dividend
Yield (%) |
0% |
0% |
0% |
0% |
0% |
Surge in
housing sales and asset revaluation boosted profits in 2002
PF’s normalised 2002 profit
of Bt530mn was 6% above our forecast of Bt500mn. Net profit
fell 46% to Bt2.34bn, however, due to a sharp decline in
extra gains following PF's debt restructuring in 2001. Sales
topped Bt1.8bn, up 206% yoy, while operating margins swung
from minus 17.7% in 2001 to a very healthy 26.5% last year.
surpluses. The value of PF's property portfolio in 4Q02
jumped by Bt1.72bn after the company reduced its
provisioning for asset losses from 43.2% to 23.4%.
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Table
2: Quarterly income statement |
|
|
4Q02 |
4Q01 |
%
Chg |
3Q02 |
%
Chg |
2002 |
2001 |
%
Chg |
|
Sales |
682 |
144 |
372.9% |
450 |
51.6% |
1,817 |
594 |
205.9% |
|
COGs |
400 |
131 |
204.4% |
271 |
47.4% |
1,059 |
458 |
131.3% |
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Gross
profits |
282 |
13 |
2103.0% |
179 |
57.9% |
758 |
136 |
457.1% |
|
SG& A |
88 |
102 |
-13.7% |
77 |
13.6% |
277 |
241 |
14.8% |
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Operating
profits |
194 |
-89 |
319.0% |
101 |
91.7% |
481 |
-105 |
558.3% |
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Interest
expenses |
0 |
- |
n/a |
0 |
n/a |
- |
237 |
-100.0% |
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Non-operating
income |
13 |
0 |
4444.6% |
12 |
7.9% |
44 |
49 |
-9.7% |
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Pre-tax
income |
207 |
-88 |
334.4% |
113 |
82.8% |
525 |
-293 |
279.1% |
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Extra
items |
1,764 |
5,606 |
-68.5% |
- |
n/a |
1,812 |
4,811 |
-62.3% |
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Normalized
profits |
209 |
-89 |
n/a |
113 |
84.0% |
530 |
-459 |
n/a |
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Net
profits |
1,973 |
5,517 |
-64.2% |
113 |
1638.9% |
2,342 |
4,351 |
-46.2% |
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EPS |
2.6 |
7.2 |
-64.2% |
0.1 |
1638.9% |
3 |
55.9 |
-94.6% |
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Gross
margins (%) |
41.4 |
8.9 |
|
39.7 |
|
41.7 |
22.9 |
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Operating
margins (%) |
28.5 |
-61.6 |
|
22.5 |
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26.5 |
-17.7 |
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Reappraisal
in line with real estate recovery
Given the recovery in Thai
property prices since 1999, PF's reduction of provisioning
for asset losses appears reasonable. Land and Houses and
Quality Houses have cut their estimates on property losses
to 8.7% and 17% respectively in 4Q02 versus peak losses of
16% and 25%.
Figure
1: Assets and provision for losses in value
Gearing back
to normal levels
Strong cash flow reduced
total and net borrowing levels by about Bt1bn last year to
Bt3.61bn and Bt3.31bn respectively. PF also began acquiring
new land for future projects in 4Q02 as debt retirement has
progressed faster than the original financial restructuring
plan. Although working capital rose from Bt4.77bn in 3Q02 to
Bt6.26bn at end-2002, PF’s gearing declined from 5.3x to
1.4x during the same period.
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Table
3: Financial ratios |
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Q4/01 |
Q1/02 |
Q2/02 |
Q3/02 |
Q4/02 |
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Gearing |
9.41 |
8.48 |
6.11 |
5.31 |
1.43 |
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Inventory
Days |
3,999 |
3,764 |
2,910 |
2,238 |
2,182 |
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Collection
Days |
7 |
4 |
3 |
2 |
2 |
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Payment
Days |
34 |
38 |
45 |
38 |
29 |
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Net debt
(Btmn) |
4,370 |
4,323 |
4,164 |
4,034 |
3,318 |
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Working
capital (Btmn) |
4,987 |
4,918 |
4,824 |
4,773 |
6,256 |
2003 earnings
forecast revised up by 10% to Bt667mn
Following its strong
performance, we have revised up our 2003 earnings forecast
by 10% to Bt667mn. Based on presales of about Bt1bn (28% of
total estimated sales) and several new project launches this
year, sales are expected to grow 74% to Bt3.17bn. Although
we have cut our forecast for gross margins by 6-7% for
2003-2008, overheads are expected to decline 3-4% a year
during the same period due to improved economies of scale.
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Table
4: Profit forecasts revision |
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|
Original |
Revision |
Change |
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2002 |
2003F |
2004F |
2002 |
2003F |
2004F |
2002 |
2003F |
2004F |
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Revenues |
1,774 |
2,907 |
3,038 |
1,817 |
3,171 |
3,155 |
2% |
9% |
4% |
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Gross
margins (%) |
40.5% |
38.2% |
37.2% |
41.7% |
32.4% |
30.4% |
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Operating
margins (%) |
25.0% |
22.2% |
20.5% |
26.5% |
19.4% |
18.4% |
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Pre-exceptionals |
47 |
- |
- |
1,812 |
- |
- |
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Normalized
profits |
500 |
607 |
623 |
530 |
667 |
633 |
6% |
10% |
2% |
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Net
profits (Btmn) |
547 |
607 |
623 |
2,342 |
667 |
633 |
328% |
10% |
2% |
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Income
statement |
|
(Btmn) |
2001 |
2002 |
2003F |
2004F |
2005F |
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Sales |
594 |
1,817 |
3,171 |
3,155 |
2,957 |
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COGs |
458 |
1,059 |
2,143 |
2,197 |
2,057 |
|
Gross
margins |
136 |
758 |
1,028 |
958 |
901 |
|
SG&A |
241 |
277 |
412 |
379 |
384 |
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Operating
margins |
-105 |
481 |
615 |
580 |
516 |
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Interest
expenses |
237 |
- |
- |
- |
- |
|
Other
income |
49 |
44 |
52 |
54 |
55 |
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Pretax
profits |
-293 |
525 |
667 |
633 |
571 |
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Income
taxes |
- |
- |
- |
- |
- |
|
Associate
Earnings |
-166 |
5 |
0 |
0 |
0 |
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Minority
Interests |
- |
- |
- |
- |
- |
|
Extraordinary
Items |
4,811 |
1,812 |
- |
- |
- |
|
Net
income |
4,351 |
2,342 |
667 |
633 |
571 |
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Balance
sheet |
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(Btmn) |
2001 |
2002 |
2003F |
2004F |
2005F |
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Cash equivalent |
111 |
295 |
380 |
521 |
1,471 |
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Receivable |
12 |
9 |
104 |
104 |
97 |
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Inventories |
5,057 |
6,332 |
6,588 |
6,753 |
5,634 |
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Investment |
305 |
328 |
328 |
328 |
328 |
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Fixed Assets |
43 |
44 |
46 |
48 |
49 |
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Total assets |
5,876 |
7,365 |
7,736 |
8,086 |
7,888 |
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Credits |
42 |
85 |
18 |
18 |
17 |
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ST-debts |
222 |
489 |
1,615 |
2,117 |
2,158 |
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LT-debts |
4,315 |
3,613 |
2,039 |
1,254 |
474 |
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Other liability |
5,136 |
4,259 |
2,685 |
1,898 |
1,090 |
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Equities |
476 |
2,532 |
3,419 |
4,052 |
4,623 |
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Cash
flow statement |
|
(Btmn) |
2001 |
2002 |
2003F |
2004F |
2005F |
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Net
Profit |
4,351 |
2,342 |
667 |
633 |
571 |
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Depre./Amort. |
8 |
6 |
8 |
8 |
9 |
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Net
Working Cap. |
47 |
-1,229 |
-419 |
-164 |
1,124 |
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Unrealized
F/X |
-76 |
- |
- |
- |
- |
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Cash
flow from operations |
-15 |
798 |
241 |
478 |
1,706 |
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CAPEX |
3 |
-8 |
-10 |
-10 |
-10 |
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Investment |
- |
- |
- |
- |
- |
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Cash
flow from investing |
-8 |
-113 |
-4 |
-10 |
-10 |
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Debt
Movement |
-6,179 |
-434 |
-448 |
-282 |
-740 |
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Capital
Call |
3,702 |
-219 |
219 |
- |
- |
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Dividend
Paid |
0 |
0 |
0 |
0 |
0 |
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Cash
flow from financing |
10 |
-506 |
-229 |
-282 |
-740 |
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Free
cash flow |
-12 |
790 |
231 |
468 |
1,696 |
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Financial
ratios |
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2001 |
2002 |
2003F |
2004F |
2005F |
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Gross
margins |
22.9% |
41.7% |
32.4% |
30.4% |
30.5% |
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Operating
margins |
-17.7% |
26.5% |
19.4% |
18.4% |
17.5% |
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Net
gearing |
9.29 |
1.5 |
0.96 |
0.7 |
0.25 |
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Interest
coverage |
-0.2 |
- |
- |
- |
- |
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Inventory
Days |
4,031 |
2,182 |
1,122 |
1,122 |
1,000 |
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Collection
Days |
7 |
2 |
12 |
12 |
12 |
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Payment
Days |
34 |
29 |
3 |
3 |
3 |
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