LPN is currently trading at a
very attractive 38% discount to our NPV estimate of
Bt36/share. The stock has fallen 20% from its peak this year
of Bt28 despite recording pre-sales of Bt1.47bn at the end
of February. The company has also announced a Bt1 dividend
for 2002 operations, representing a yield of 4.4% at current
levels.
We expect earnings to double
this year to Bt332mn due to improved sales recognition of
its five existing condo projects. Three of LPN's city condos
at Suanplu, Rama IV and Narathiwat 24 worth Bt1bn have been
completely sold out while presales at two suburban projects
have reached 75% of total units.
LPN remains one of our top
picks in the property sector due to its leadership of the
market for inner city condominiums – a segment with strong
demand amid tight supply. As one of just a handful of
companies developing lower-priced condos for the mass
market, it is relatively insulated from the growing
competition seen in the single-detached housing market.
Table 1:
LPN's earnings forecasts
|
Year to Dec |
2001 |
2002F |
2003F |
2004F |
2005F |
|
Sales (Btmn) |
473 |
994 |
1,174 |
1,692 |
2,061 |
|
Net profits (Btmn) |
301 |
163 |
332 |
371 |
383 |
|
EPS (Bt) |
2.5 |
2.0 |
3.6 |
4.0 |
4.1 |
|
Growth (%) |
645% |
(70%) |
83% |
12% |
3% |
|
Cash per share (Bt) |
(0.5) |
1.2 |
3.7 |
4.2 |
4.3 |
|
PER (X) |
3.4 |
11.4 |
6.2 |
5.6 |
5.4 |
|
BPS (Bt) |
12.5 |
12.1 |
14.7 |
17.8 |
20.9 |
|
EV/EBITDA (x) |
(79.0) |
31.3 |
7.1 |
4.5 |
3.9 |
|
Dividend Yield (%) |
0% |
0% |
4% |
4% |
4% |
4Q02 sales
double yoy to Bt133mn
LPN's sales doubled yoy in
4Q02 to Bt133mn following the transfer of condo units in the
Sathorn and Happyland projects. Due to the tight supply
situation, nearly all condo sales in Bangkok are booked on a
pre-sales system rather than the pre-built method used by
leading housing developers. LPN is expected to book another
Bt1.47bn in pre-sales over the next four quarters.
Also in 4Q02, LPN recorded
Bt25mn in profits from the Grand Unity JV in which it holds
a 25% stake. This follows sales worth about Bt400mn from the
JV's Bt1.4bn Lumpini Water Cliff condo and townhouse
project. Although LPN booked Bt29mn in net pre-exceptional
losses in the final quarter, normalised earnings came in at
Bt45mn compared to normalised losses in 3Q02 and 4Q01.
Table 2:
Quarterly income statement
|
|
4Q02 |
4Q01 |
%
Chg |
3Q02 |
%
Chg |
2002 |
2001 |
%
Chg |
|
Sales |
133 |
66 |
100.5% |
105 |
25.8% |
994 |
473 |
110.4% |
|
COGs |
92 |
53 |
73.7% |
80 |
15.1% |
782 |
413 |
89.3% |
|
Gross
profits |
41 |
13 |
206.0% |
26 |
58.8% |
212 |
59 |
257.7% |
|
SG& A |
42 |
30 |
38.3% |
34 |
23.1% |
146 |
109 |
34.7% |
|
Operating profits |
(1) |
(17) |
na |
(8) |
87.6% |
66 |
(49) |
na |
|
Interest expenses |
(0) |
0 |
na |
3 |
na |
6 |
3 |
84.0% |
|
Non-operating income |
17 |
7 |
137.1% |
6 |
167.9% |
47 |
20 |
135.3% |
|
Pre-tax income |
16 |
(10) |
na |
(2) |
na |
107 |
(33) |
na |
|
Net
profits |
16 |
273 |
(94.2%) |
30 |
(47.9%) |
162 |
301 |
(46.2%) |
|
EPS |
0.2 |
5.9 |
(97.1%) |
0.3 |
(47.9%) |
1.8 |
6.6 |
(72.8%) |
|
Gross margins (%) |
30.9 |
20.3 |
|
24.5 |
|
21.3 |
12.5 |
|
|
Operating margins (%) |
(0.8) |
(25.7) |
|
(7.9) |
|
6.6 |
(10.5) |
|
After being in a net cash
position in 3Q02, LPN had net debt of Bt314mn at the end of
December as the company took out short-term loans to finance
several construction projects. Total working capital
requirements rose 25% qoq to Bt1.1bn. Construction of these
new developments is expected to last between three to eight
months, and 91% of the projects are sold. Accordingly, we
expect a substantial improvement in LPN's 2H02 cash flow as
the company receives regular payments by condo unit buyers.
Gearing was 0.5x in 4Q02 and should remain low over the next
three years.
Table 3:
Financial ratios
|
|
Q4/01 |
Q1/02 |
Q2/02 |
Q3/02 |
Q4/02 |
|
Gearing |
1.18 |
1.24 |
0.30 |
0.18 |
0.50 |
|
Interest Cover |
(35.7) |
(17.6) |
25.6 |
(3.2) |
5.1 |
|
Inventory Days |
1,190 |
1,361 |
442 |
545 |
525 |
|
Collection Days |
17 |
28 |
19 |
10 |
19 |
|
Payment Days |
118 |
146 |
51 |
130 |
42 |
|
Net debt (Btmn) |
674 |
755 |
(30) |
(46) |
314 |
|
Working capital (Btmn) |
1,236 |
1,039 |
879 |
870 |
1,088 |
Presales from
five projects stand at Bt1.47bn
LPN currently has a total of
Bt1.47bn in presales from five projects. Three of its inner
city condos at Suanplu, Rama IV and Narathiwat 24 worth Bt1bn
have been completely sold out while presales at two suburban
projects have reached 75% of total units. In addition to the
Lumpini Place Water Cliff, the Grand Unity JV sold a Bt270mn
luxury townhouse, adjacent to the site. As LPN holds only 25%
in the JV, we have not included presales from these two
projects in our revenue forecasts.
Table 4: Detail
of the projects
|
Selling
projects |
% stake |
Value |
%
sold |
Pre-sales |
Launch |
Recognition |
|
Lumpini Center- Happy
Land IV |
100% |
240 |
70% |
168 |
3Q02 |
2Q03-2Q04 |
|
Lumpini Center- Lad
Phrao 111 |
100% |
360 |
80% |
288 |
3Q02 |
2Q03-2Q04 |
|
Lumpini Place Suanplu |
100% |
320 |
sold-out |
320 |
4Q02 |
4Q03-2Q04 |
|
Lumpini Place- Rama IV |
100% |
350 |
sold-out |
350 |
4Q02 |
4Q03-2Q04 |
|
Lumpini Place-
Narathiwat 24 |
100% |
340 |
sold-out |
340 |
1Q03 |
1Q04-3Q03 |
|
Total |
|
1,610 |
|
1,466 |
|
|
|
|
|
|
|
|
|
|
|
Lumpini Place- Water
Cilff: JV II |
25% |
270 |
sold-out |
|
1Q02 |
1Q04-3Q03 |
|
Lumpini Place- Water
Cilff: JV |
25% |
1,400 |
sold-out |
|
4Q02 |
4Q02-3Q03 |
|
|
|
|
|
|
|
|
|
Launching
projects |
|
|
|
|
|
|
|
Lumpini
Place-Chareonkrung |
100% |
460 |
|
|
2Q03 |
|
|
Lumpini Ville- Sathorn |
100% |
300 |
|
|
2Q03 |
|
Over the next three months,
LPN is planning to launch two projects worth Bt760mn in the
Sathorn and Chareonkrung areas of Bangkok. Meanwhile, the
company is introducing a new condo model called Lumpini
Ville, which is priced at Bt0.8mn/unit against Lumpini Place
(Bt1-1.2mn/unit) and Lumpini Center (Bt0.6-0.7mn/unit).
Although Lumpini Ville projects will still be in the inner
city, their locations will be less attractive than those of
Lumpini Place. The first project, Lumpini Ville Sathorn, is
scheduled for a launch in May.
Earnings
forecast revised down by 5% in 2003
We have revised down our
earnings forecast by 5% to Bt332mn this year, and fine-tuned
our 2004 projection to Bt371mn. Revenues forecasts were cut
by 20% and 10% over the same period but we have lifted our
2003 and 2004 estimates for operating margins by 3% and 1%
respectively. This is due to higher product pricing, low
acquisition costs and controlled overheads.
Table 5:
Earning revision
|
|
|
Original |
|
|
Revision |
|
%
Change |
|
|
2002 |
2003F |
2004F |
2002 |
2003F |
2004F |
2002 |
2003F |
2004F |
|
Revenues |
994 |
1,470 |
1,881 |
994 |
1,174 |
1,692 |
0% |
(20%) |
(10%) |
|
Gross margins (%) |
21% |
31% |
33% |
21% |
33% |
33% |
|
|
|
|
Operating margins (%) |
7% |
17% |
22% |
7% |
20% |
23% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital (Btm) |
1,255 |
1,055 |
1,256 |
1,255 |
826 |
1,134 |
|
|
|
|
Free cash flow (Btmn) |
(35) |
512 |
66 |
(35) |
712 |
(31) |
|
|
|
|
Net debt (Btmn) |
611 |
635 |
421 |
611 |
544 |
440 |
|
|
|
|
Interest expenses (Btm) |
6 |
41 |
33 |
6 |
26 |
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
profits (Btmn) |
163 |
348 |
367 |
163 |
332 |
371 |
0.0% |
(4.5%) |
0.9% |
Volatility
in earnings to lessen after 2Q03
This year we expect the Grand
Unity JV to record Bt1bn in sales and Bt252mn in profits, with
net margins of 18%. This should result in a net profit
contribution of Bt55mn to LPN during 1Q-3Q03. The company is
also expected to recognise sales from Lumpini Center Happyland
5 and Lad Phrao 111 in 2Q-3Q03 and sales from Lumpini Place in
Suanplu, Rama IV and Narathiwat 24 in 3Q03-3Q04.
Although net profits in 1Q03
are forecast to drop 17.6% yoy to Bt42mn, normalised earnings
should grow 560% from Bt6mn a year ago. We forecast earnings
to surge to average of Bt90mn in 2Q-3Q03 and Bt112mn in 4Q03.
Over the next three years, LPN aims to launch between 6-9
projects a year. After 2Q03, its quarterly revenues will be
less volatile as the company books income from some of its
recently-launched projects.
Graph1:
Quarterly normalised profits and forecasts
|
Income
statement |
|
(Btmn) |
2001 |
2002 |
2003F |
2004F |
2005F |
|
Sales |
473 |
994 |
1,174 |
1,692 |
2,061 |
|
COGs |
413 |
782 |
789 |
1,131 |
1,404 |
|
Gross
margins |
59 |
212 |
385 |
561 |
657 |
|
SG&A |
109 |
146 |
153 |
169 |
237 |
|
Operating
margins |
(49) |
66 |
232 |
392 |
420 |
|
Interest expenses |
3 |
6 |
26 |
22 |
20 |
|
Other income |
20 |
75 |
63 |
84 |
99 |
|
Pretax profits |
(33) |
135 |
269 |
454 |
499 |
|
Income taxes |
0 |
1 |
- |
83 |
117 |
|
Associate Earnings |
- |
1 |
63 |
- |
- |
|
Minority Interests |
(0) |
0 |
0 |
0 |
0 |
|
Extraordinary Items |
334 |
28 |
- |
- |
- |
|
Net
income |
301 |
163 |
332 |
371 |
383 |
|
Balance
sheets |
|
(Btmn) |
2001 |
2002 |
2003F |
2004F |
2005F |
|
Cash equivalent |
19 |
298 |
845 |
624 |
696 |
|
Receivable |
15 |
59 |
26 |
37 |
45 |
|
Inventories |
1,347 |
1,285 |
977 |
1,277 |
1,488 |
|
Investment |
80 |
91 |
101 |
101 |
101 |
|
Fixed Assets |
196 |
208 |
345 |
450 |
474 |
|
Total assets |
1,698 |
2,059 |
2,420 |
2,658 |
3,001 |
|
Credits |
133 |
89 |
177 |
180 |
211 |
|
ST-debts |
413 |
573 |
405 |
328 |
268 |
|
LT-debts |
289 |
38 |
139 |
112 |
92 |
|
Other liability |
279 |
147 |
249 |
305 |
404 |
|
Equities |
585 |
1,212 |
1,450 |
1,734 |
2,024 |
|
Cash
flow statement |
|
(Btmn) |
2001 |
2002E |
2003E |
2004E |
2005E |
|
Net Profit |
301 |
163 |
332 |
371 |
383 |
|
Depre./Amort. |
15 |
9 |
12 |
15 |
17 |
|
Net Working Cap. |
160 |
(26) |
430 |
(308) |
(188) |
|
Unrealized F/X |
- |
- |
- |
- |
- |
|
Cash flow from operations |
171 |
(15) |
862 |
89 |
280 |
|
|
|
|
|
|
|
|
CAPEX |
550 |
(20) |
(150) |
(120) |
(40) |
|
Investment |
(80) |
(94) |
(10) |
- |
- |
|
Cash flow from investing |
513 |
(101) |
(160) |
(120) |
(40) |
|
|
|
|
|
|
|
|
Debt Movement |
(693) |
(90) |
(68) |
(103) |
(80) |
|
Capital Call |
- |
(54) |
0 |
- |
- |
|
Dividend Paid |
- |
(91) |
(92) |
(87) |
(92) |
|
Cash flow from financing |
(693) |
394 |
(160) |
(190) |
(172) |
|
|
|
|
|
|
|
|
Free cash flow |
721 |
(35) |
712 |
(31) |
240 |
|
Financial
ratios |
|
|
2001 |
2002E |
2003E |
2004E |
2005E |
|
Gross margins |
12.5% |
21.3% |
32.8% |
33.2% |
31.9% |
|
Operating margins |
(10.5%) |
6.6% |
19.8% |
23.2% |
20.4% |
|
Net gearing |
1.17 |
0.26 |
(0.21) |
(0.11) |
(0.17) |
|
Interest coverage |
(8.8) |
23.0 |
11.4 |
21.5 |
25.9 |
|
Inventory Days |
1,190 |
600 |
452 |
412 |
387 |
|
Collection Days |
12 |
22 |
8 |
8 |
8 |
|
Payment Days |
118 |
42 |
82 |
58 |
55 |
|
