GOLD's share price has fallen
20% from our last published report just a month ago.
Investors’ concerns on project delays, slower revenue
recognition, tight cash flow and potentials for cash call
look overblown. In fact, we expect to see GOLD's earnings
performance improve dramatically throughout this year. Also,
the management is speeding up project development and sales,
which will generate about Bt1bn cash. The company can easily
tap into the very liquid money market and take advantage of
low interest instead of raising fresh capital.
GOLD expects to record total
revenues of Bt1.07bn within 1H03. At the end of last year,
the company already had presales of Bt1.92bn, comprised of
Bt1.22bn from single-detached housing project sales and
Bt704mn from serviced apartment sales. In addition, GOLD
will add the Mayfair Marriott to its rental portfolio in May
2003. We are forecasting a 68% increase in full-year 2003
earnings to Bt517mn and 25% growth next year to Bt644mn.
After the recent sell-off,
GOLD shares are trading on an attractive 2003 PER of 8.6x or
a 52% discount to our revised NPV estimate of Bt14.9/share.
We, therefore, upgrade GOLD’s rating from TRADING BUY to
BUY.
Table 1:
GOLD's earnings forecasts
|
Year to Dec |
2001 |
2002F |
2003F |
2004F |
2005F |
|
Sales (Btmn) |
1,283 |
1,466 |
2,455 |
3,300 |
4,856 |
|
Net profits (Btmn) |
220 |
253 |
517 |
644 |
878 |
|
EPS (Bt) |
0.60 |
0.49 |
0.83 |
1.03 |
1.40 |
|
Growth (%) |
217% |
(18%) |
68% |
25% |
36% |
|
Cash per share (Bt) |
0.7 |
0.4 |
0.9 |
1.2 |
1.9 |
|
PER (X) |
12.0 |
14.5 |
8.6 |
6.9 |
5.1 |
|
BPS (Bt) |
12.3 |
10.1 |
9.0 |
9.8 |
11.0 |
|
EV/EBITDA (x) |
21.8 |
31.7 |
11.2 |
6.0 |
4.1 |
|
Dividend Yield (%) |
0% |
0% |
2% |
2% |
4% |
Pre-sales and
apartment divestment to boost earnings this year
At the end of last year, GOLD
had presales of Bt1.92bn, comprised of Bt1.22bn from
single-detached housing project sales and Bt704mn from
serviced apartment sales. In addition, GOLD sold 40 units
(from a total of 61) of its Sukhumvit Kallista project in
the first two months of this year. GOLD expects to record
revenues from serviced apartment sales of Bt1.07bn within
1H03. GOLD should be able to record net profit margin of
around 30% on this project based low acquisition costs of
around Bt655mn. Also, since 95% of its revenues are in cash,
proceeds from the sales should reduce debts for GOLD's new
development projects.
Table 2:
Profile of projects on hand
|
Projects |
Value |
Units |
Price |
Pre-sales |
|
Baan RamIndra |
544 |
124 |
4.4 |
29 |
|
Baan Lard Prao
–Exclusive I |
453 |
44 |
10.3 |
29 |
|
Baan Lard Prao
–Exclusive II |
222 |
20 |
11.1 |
72 |
|
Golden Lanna-
Ramkhamhaeng |
956 |
126 |
7.6 |
548 |
|
Sukumvit Kallista-
Condo |
1,073 |
61 |
17.6 |
704 |
|
Golden Legend I-
Sathorn |
1,766 |
140 |
12.6 |
538 |
|
Golden Legend II-
Sathorn |
1,765 |
163 |
10.8 |
- |
|
Golden Nakara-
Srinakarin |
4,144 |
396 |
10.5 |
- |
|
Golden Horizon- Pinklao |
2,786 |
238 |
11.7 |
- |
|
Total |
13,709 |
|
|
1,919 |
In 2H03, we expect speedier
revenue recognition from housing properties, particularly from
the Golden Lanna - Ramkhamhaeng and Golden Legend - Sathorn
Phrase I. Bookings of these projects have been delayed over
the last six months due to construction delays. The management
forecasts solid sales from the Sathorn project towards
year-end following the completion of public road resurfacing
in May 2003. We are projecting GOLD’s revenues to rise by
67% from Bt1.47bn last year to Bt2.46bn in 2003. The
company’s total existing backlog is worth of Bt10.8bn,
accounting for 104% of four-year sales estimate.
The Mayfair
Marriott to debut in 2Q02
Besides the Sukhumvit Kallista,
GOLD has thee existing rental projects - the Somerset,
Goldenland Building and Voyage Panorama – which generate a
combined annual revenue of Bt120-140mn. In May this year, GOLD
will debut a 162-unit luxury serviced apartment called the
Mayfair Marriott in Central Bangkok District. While the
company owns 100% of this property, the Marriott Group is the
project manager.
Table 3: Detail
of the rental properties
|
Rental
properties |
Type |
Lettable |
Stake |
Partners |
Launch |
|
|
|
sq
metres |
(%) |
|
Date |
|
Existing
projects |
|
|
|
|
|
|
Somersert |
Apartment |
6,611 |
60% |
Ascott |
|
|
Naraya Pavilion |
Office |
11,064 |
100% |
|
Q4 02 |
|
Voyage Panorama |
Golf course |
2,470
rais |
100% |
|
Q4 02 |
|
Developing
projects |
|
|
|
|
|
|
The Mayfair Marriott |
Apartment |
16,000 |
100% |
Marriot |
Q1 03 |
|
Ascott Piriya |
Apartment |
40,000 |
60% |
Ascott |
Q1 04 |
|
Potential
development |
|
|
|
|
|
|
Sathorn Square |
Mixed use |
100,000 |
50% |
New world
HK |
Q3 05 |
|
Polo Park |
Residential |
na. |
90% |
na. |
na. |
The Mayfair Marriott
was acquired at a deep discount for Bt110mn in 2000. The
company invested Bt763mn to finish the project and should
achieve rental rates of Bt1,000/ sqm /month. Given its prime
location and low acquisition costs, we project GOLD to
break-even within the next 18 months. First year revenues
should reach Bt60mn or 30% of full occupancy forecast of
Bt200mn per annum.
Profit
forecasts upgraded by 15% and 24% in 2003-2004
We have revised our 2003
earnings forecasts up 15% to Bt517mn and 2004 forecast up 24%
to Bt644mn. Our new forecast assumes revenue growth of 27% and
31% to Bt2.46bn and Bt3.30bn, respectively, for the two years.
Due to rising house prices and good margins from apartment
sales, we have raised our gross margin estimate up by 1% this
year. In the mean time, controlled overheads should improve
operating profits by 2% to 24%. Also, we have boosted
borrowing and interest expenses by 8-10% this year, as GOLD
needs to speed up investment.
Table 4:
Earning revision
|
Earning
revision |
Original |
Revision |
%
Change |
|
|
2002 |
2003F |
2004F |
2002 |
2003F |
2004F |
2002 |
2003F |
2004F |
|
Revenues (Btmn) |
1,146 |
1,930 |
2,527 |
1,466 |
2,455 |
3,300 |
28% |
27% |
31% |
|
Gross
margins |
40% |
42% |
44% |
34% |
43% |
44% |
|
|
|
|
Operating
margins |
15% |
22% |
28 |
10% |
24% |
28% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expenses
(Btmn) |
109 |
115 |
119 |
120 |
133 |
114 |
12 |
18 |
(6) |
|
Working capital (Btmn) |
4,041 |
3,943 |
2,702 |
4,974 |
4,800 |
3,517 |
932 |
857 |
815 |
|
Borrowings (Btmn) |
2,564 |
2,866 |
3,098 |
3,097 |
3,163 |
2,525 |
533 |
296 |
(573) |
|
Net profits (Btmn) |
220 |
451 |
518 |
253 |
517 |
644 |
15% |
15% |
24% |
Improvement
began since 4Q02
Due to stronger-than-expected
4Q02 earnings of Bt69mn, GOLD exceeded our previous full-year
2002 forecast by 15%. While 4Q02 revenues grew 33% yoy and
199% qoq to Bt573mn, gross margin fell to 28%. The management
explained that this was due to extra-high cost of booking the
initial development for many new projects, such as Golden
Lanna and Legend. For the same reason, operating margins fell
to 4%. The management said gross margins should recover to
over 40% in 2003-2004 as income recognition should be
smoother.
Table 5:
Quarterly income statement
|
|
4Q02 |
4Q01 |
%
Chg |
3Q02 |
%
Chg |
2002 |
2001 |
%
Chg |
|
Sales |
573 |
432 |
32.7% |
192 |
198.7% |
1,466 |
1,283 |
14.3% |
|
COGs |
412 |
208 |
98.4% |
130 |
217.0% |
962 |
745 |
29.1% |
|
Gross
profits |
161 |
224 |
(28.3%) |
62 |
160.3% |
505 |
538 |
(6.2%) |
|
SG& A |
139 |
90 |
54.2% |
74 |
87.9% |
355 |
323 |
10.0% |
|
Operating profits |
21 |
134 |
(84.2%) |
(12) |
na |
150 |
215 |
(30.4%) |
|
Interest expenses |
31 |
13 |
143.1% |
23 |
37.8% |
120 |
46 |
162.6% |
|
Non-operating income |
64 |
10 |
522.8% |
7 |
785.4% |
79 |
20 |
305.5% |
|
Pre-tax income |
85 |
144 |
(40.7%) |
(5) |
na |
109 |
189 |
(42.5%) |
|
Net
profits |
69 |
130 |
(46.8%) |
67 |
3.9% |
253 |
220 |
14.7% |
|
EPS |
0.1 |
0.2 |
(51.0%) |
0.1 |
(4.2%) |
0.4 |
0.6 |
(37.2%) |
|
Gross margins (%) |
28 |
52 |
|
32.2 |
|
34.4 |
41.9 |
|
|
Operating margins (%) |
4 |
31 |
|
(6.5) |
|
10.2 |
16.8 |
|
The company continued
to raise funds last quarter. Unlike developers who focus
primarily on pre-built housing, GOLD’s net borrowings and
working capital rose to Bt2.2bn and Bt5.0bn, respectively.
GOLD recently issued Bt1bn in debentures with three-year
maturity at a coupon rate of 4.95%. In addition, the company
rules out the possibility of a cash call in the near term
for several reasons: 1) estimated Bt1.07bn cash proceeds
from apartment sales, 2) unfavorable stock market situation
and 3) large liquidity in the money market and current low
interest rates.
Table 6:
Financial ratios
|
|
Q4/01 |
Q1/02 |
Q2/02 |
Q3/02 |
Q4/02 |
|
Gearing |
0.51 |
0.46 |
0.51 |
0.53 |
0.60 |
|
Interest Cover |
10.5 |
2.7 |
1.1 |
(0.6) |
0.7 |
|
Inventory Days |
2,221 |
1,673 |
1,701 |
2,212 |
1,792 |
|
Collection Days |
202 |
130 |
100 |
97 |
108 |
|
Payment Days |
46 |
33 |
58 |
111 |
69 |
|
Net debt (Btmn) |
1,732 |
1,679 |
1,796 |
1,896 |
2,203 |
|
Working capital (Btmn) |
5,148 |
5,099 |
5,233 |
4,713 |
4,974 |
Quarterly
results to inspire growth this year
With projected earnings growth
of 67% this year to Bt517mn, quarterly growth comparison with
the previous year should be favourable throughout 2003. We are
projecting 37% yoy and 88% qoq earnings growth to Bt130mn in
1Q03, primarily driven by apartment sales. We are looking at
around Bt109mn profits each quarter in 2Q-3Q03. In the final
quarter, profits should reach Bt169mn as booking from housing
projects should be strong near year-end.
Table 7:
Quarterly result forecasts in 2003
|
|
Net
Earnings |
Normalised
Earnings |
|
|
2002 |
2003 |
%
Chg |
2002 |
2003 |
%
Chg |
|
Q1 |
95 |
130 |
36.6% |
95 |
130 |
36.6% |
|
Q2 |
22 |
109 |
404.0% |
22 |
109 |
404.0% |
|
Q3 |
67 |
109 |
63.7% |
(14) |
109 |
901.5% |
|
Q4E |
69 |
169 |
144.5% |
50 |
169 |
240.8% |
|
Year |
253 |
517 |
104.9% |
153 |
517 |
238.4% |
|
Income
statement |
|
(Btmn) |
2001 |
2002 |
2003F |
2004F |
2005F |
|
Sales |
1,283 |
1,466 |
2,455 |
3,300 |
4,856 |
|
COGs |
745 |
962 |
1,407 |
1,833 |
2,855 |
|
Gross margins |
538 |
505 |
1,048 |
1,467 |
2,001 |
|
SG&A |
323 |
355 |
470 |
528 |
777 |
|
Operating margins |
215 |
150 |
578 |
939 |
1,224 |
|
Interest expenses |
46 |
120 |
133 |
114 |
131 |
|
Other income |
20 |
76 |
31 |
38 |
56 |
|
Pretax profits |
189 |
105 |
476 |
863 |
1,150 |
|
Income taxes |
7 |
- |
- |
259 |
345 |
|
Associate Earnings |
33 |
28 |
34 |
13 |
18 |
|
Minority Interests |
(15) |
(16) |
(8) |
(27) |
(55) |
|
Extraordinary Items |
(10) |
103 |
- |
- |
- |
|
Net income |
220 |
253 |
517 |
644 |
878 |
|
Balance
sheets |
|
(Btmn) |
2001 |
2002 |
2003F |
2004F |
2005F |
|
Cash equivalent |
550 |
894 |
150 |
424 |
342 |
|
Receivable |
749 |
434 |
202 |
127 |
186 |
|
Inventories |
4,518 |
4,722 |
5,137 |
4,003 |
4,701 |
|
Investment |
613 |
1,349 |
1,349 |
1,349 |
1,349 |
|
Fixed Assets |
1,378 |
1,387 |
2,770 |
3,900 |
4,636 |
|
Total
assets |
7,972 |
9,067 |
10,087 |
10,414 |
12,102 |
|
Credits |
488 |
182 |
540 |
613 |
1,033 |
|
ST-debts |
879 |
735 |
1,740 |
970 |
799 |
|
LT-debts |
1,287 |
2,363 |
1,423 |
1,556 |
1,901 |
|
Other
liability |
996 |
707 |
897 |
1,272 |
1,677 |
|
Equities |
4,512 |
5,169 |
5,637 |
6,204 |
6,986 |
|
Cash
flow statement |
|
(Btmn) |
2001 |
2002E |
2003E |
2004E |
2005E |
|
Net Profit |
220 |
253 |
517 |
644 |
878 |
|
Depre./Amort. |
53 |
53 |
67 |
121 |
365 |
|
Net Working Cap. |
(1,457) |
(194) |
174 |
1,283 |
(338) |
|
Unrealized F/X |
3 |
(4) |
- |
- |
- |
|
Cash
flow from operations |
(1,156) |
(482) |
657 |
2,174 |
853 |
|
|
|
|
|
|
|
|
CAPEX |
7 |
(63) |
(1,450) |
(1,250) |
(1,100) |
|
Investment |
- |
- |
- |
- |
- |
|
Cash
flow from investing |
(417) |
(131) |
(1,167) |
(1,250) |
(1,100) |
|
|
|
|
|
|
|
|
Debt Movement |
427 |
932 |
65 |
(637) |
175 |
|
Capital Call |
1,145 |
437 |
(49) |
1 |
1 |
|
Dividend Paid |
(0) |
(0) |
(0) |
(78) |
(97) |
|
Cash
flow from financing |
1,321 |
1,084 |
16 |
(714) |
78 |
|
|
|
|
|
|
|
|
Free
cash flow |
(1,149) |
(544) |
(793) |
924 |
(247) |
|
Financial
ratios |
|
|
2001 |
2002E |
2003E |
2004E |
2005E |
|
Gross margins |
41.9% |
34.4% |
42.7% |
44.4% |
41.2% |
|
Operating margins |
16.8% |
10.2% |
23.5% |
28.4% |
25.2% |
|
Net gearing |
0.36 |
0.43 |
0.53 |
0.34 |
0.34 |
|
Interest coverage |
5.1 |
1.9 |
4.6 |
8.6 |
9.8 |
|
Inventory Days |
2,214 |
1,792 |
1,333 |
797 |
601 |
|
Collection Days |
213 |
108 |
30 |
14 |
14 |
|
Payment Days |
239 |
69 |
140 |
122 |
132 |
|
