SIRI has been the best
performing real estate stock this year, with its share price
surging 43% versus a 3% decline in the SET property index.
Based on our newly-revised figures, we expect SIRI to post
EPS growth of 488% this year and 74% in 2004. The main
profit driver is improved revenue recognition from its
housing portfolio and four inner city condo projects.
Although we like SIRI’s
long-term potential, we remain concerned about the
company’s negative free cash flow, rising debt levels and
relatively low gross margins. This year we forecast negative
free cash flow of Bt2.3bn. This will boost its debt levels
and gearing to Bt5.6bn and 1.6x respectively. However, we
expect cash flow to turn positive in 2004, reducing gearing
to 1.2x.
We rate SIRI a HOLD
given its demanding 2003 PER of 21.9x and EV/EBITDA of
15.4x. However, we have revised up our NPV estimate from
Bt5.3/share to Bt8.3, indicating a theoretical upside of
11%. Our favorite property stocks remain LH, NOBLE and LPN,
which offer deeper discounts to NPV.
Table 1:
SIRI's earnings forecasts
|
Year to Dec |
2001 |
2002 |
2003F |
2004F |
2005F |
|
Sales (Btmn) |
511 |
1,273 |
2,504 |
3,754 |
3,867 |
|
Net profits (Btmn) |
(89) |
49 |
295 |
513 |
534 |
|
EPS (Bt) |
(0.32) |
0.06 |
0.34 |
0.59 |
0.62 |
|
Growth (%) |
(112%) |
118% |
488% |
74% |
4% |
|
Cash per share (Bt) |
(0.1) |
0.1 |
0.8 |
1.0 |
1.1 |
|
PER (X) |
- |
128.8 |
21.9 |
12.6 |
12.1 |
|
BPS (Bt) |
2.1 |
3.8 |
4.1 |
4.7 |
5.3 |
|
EV/EBITDA (x) |
576.5 |
58.4 |
13.7 |
10.1 |
8.8 |
|
Dividend Yield (%) |
0% |
0% |
0% |
0% |
0% |
14 property
projects worth a combined Bt20.6bn
SIRI has developed 14
property projects worth a combined Bt20.6bn. Work on four of
these began in early 2001 and sales are likely to close
soon. Ten other projects were acquired after a Bt2.52bn cash
call last October including five single-detached housing
developments and a commercial building for leasing in the
Silom area of Bangkok. The development timetable for these
properties is 3-6 years. SIRI aims to raise its proportion
of pre-built housing units from less than 10% a year ago to
35% this year.
Table 2:
Detail of SIRI's housing projects
|
Current
projects |
Types |
Value |
Units |
Price |
|
|
|
|
|
(Btmn) |
|
(Btmn) |
|
|
|
Narasiri Watcharapol |
Housing |
584 |
108 |
5.4 |
|
|
|
Narasiri Watcharapol II |
Housing |
450 |
63 |
7.1 |
|
|
|
Narasiri Pinkloa |
Housing |
324 |
38 |
8.5 |
|
|
|
Narasiri Watcharapol
III |
Housing |
84 |
12 |
7.0 |
|
|
|
Total |
|
1,358 |
209 |
|
|
|
|
|
|
|
|
|
Lauch |
Period |
|
New
projects |
|
|
|
|
dates |
months |
|
Bann Narasiri (Sathorn
Wongwhan) |
Housing |
1,930 |
175 |
11.0 |
Jun-03 |
39 |
|
Bann Narasiri
(Pattanakarn) |
Housing |
2,750 |
292 |
9.4 |
Oct-03 |
48 |
|
Sukhumwit 67 |
Housing |
2,634 |
96 |
27.4 |
Oct-03 |
41 |
|
Ram Indra |
Housing |
7,350 |
1407 |
5.2 |
Oct-03 |
79 |
|
Bann Narasiri (Sanambin
Nam) |
Housing |
2,260 |
336 |
6.7 |
Dec-03 |
42 |
|
Silom Commercial
building |
Commercial |
253 |
37 |
6.8 |
Nov-02 |
na |
|
Total |
|
18,619 |
2,564 |
|
|
|
SIRI holds a 51% stake in
Sansiri Venture Co which is developing luxury condominiums
in the Central Business District. The joint venture, in
which Univenture Plc (UV) holds a 49% stake, has posted
pre-sales of Bt1,427mn, representing 69% of total condo
units, after opening four inner city condominiums in the
Yenakart, Suan Plu, Sukhumvit and Rajadamri areas. Sales
recognition for these projects will be spread over the next
three years. The JV aims to launch two new inner city condo
projects over the next 12-18 months.
Table 3:
Details of Sansiri Venture Co's condo projects
|
Current
projects |
Lauch |
Value |
Units |
Price |
% sold |
Value
left |
|
|
dates |
(Btmn) |
|
(Btmn) |
|
|
|
Sirisathorn Yenakart |
Oct-02 |
529 |
169 |
3.1 |
100% |
- |
|
Sirisathorn Suan Plu |
Jan-03 |
335 |
75 |
4.5 |
60% |
134 |
|
Siri Sukhumvit 13 |
Jan-03 |
308 |
73 |
4.2 |
80% |
62 |
|
Rajdamri |
Jan-03 |
902 |
32 |
28.2 |
50% |
451 |
|
|
|
2,074 |
|
|
|
647 |
SIRI currently has
pre-sales of Bt1.2bn of which about 33% is expected to be
booked in 2003. Although we expect contributions from
pre-built housing units at its Sathorn-Wongwan and
Pattanakarn projects in 2H03, SIRI's revenue recognition
will be slower than property developers such as LH, QH and
NOBLE, which specialise in pre-built housing.
Sharp
turnaround in 4Q02
SIRI's sales and operating
margins in 4Q02 improved due to higher income recognition from
the Watcharapol and Pinklao projects. Unrecognised sales from
these projects is now only about Bt300mn. SIRI's gross margins
of 25% were below those of developers who sell pre-built
houses. SG&A expenses jumped 54% yoy in 4Q02 to Bt80mn due
to pre-operational expenses for new projects. However, net
profit came in at Bt52mn versus Bt4mn in 3Q02 and a loss of
Bt16mn in 4Q01.
Table 4:
Quarterly income statement
|
|
4Q02 |
4Q01 |
%
Chg |
3Q02 |
%
Chg |
2002 |
2001 |
%
Chg |
|
Sales |
583 |
175 |
233.2% |
368 |
58.3% |
868 |
285 |
204.6% |
|
COGs |
437 |
132 |
230.3% |
286 |
52.9% |
674 |
366 |
84.3% |
|
Gross
profits |
147 |
43 |
242.0% |
83 |
77.2% |
195 |
(80) |
na |
|
SG& A |
80 |
52 |
53.6% |
73 |
9.8% |
262 |
173 |
51.4% |
|
Operating profits |
67 |
(9) |
846.0% |
10 |
na |
(67) |
(253) |
na |
|
Interest expenses |
24 |
15 |
63.5% |
13 |
88.7% |
42 |
27 |
59.1% |
|
Non-operating income |
7 |
1 |
1084.7% |
4 |
88.5% |
15 |
10 |
48.0% |
|
Pre-tax income |
50 |
(23) |
na |
1 |
3604.9% |
(95) |
(270) |
na |
|
Net
profits |
52 |
(16) |
na |
4 |
1325.6% |
50 |
(89) |
na |
|
EPS |
0.2 |
(0.1) |
na |
0.0 |
4313.8% |
0.2 |
(0.3) |
na |
|
Gross margins (%) |
25.2 |
24.5 |
|
22.5 |
|
22.4 |
(28.2) |
|
|
Operating margins (%) |
11.5 |
(5.1) |
|
2.8 |
|
(7.7) |
(88.9) |
|
Due to its increasing funding
needs, SIRI posted negative cash flow of Bt4.82bn last year.
However, its Bt2.52bn capital-raising exercise last October
reduced its gearing to 1.2x at end-2002. This year we forecast
negative free cash flow of Bt2.3bn. This will boost its debt
levels and gearing to Bt5.6bn and 1.6x respectively. However,
we expect free cash flow to turn positive in 2004, reducing
gearing back to 1.2x.
Table 5:
Financial ratios
|
|
Q4/01 |
Q1/02 |
Q2/02 |
Q3/02 |
Q4/02 |
|
Gearing |
0.50 |
0.55 |
0.35 |
0.71 |
1.19 |
|
Interest Cover |
(4.6) |
(28.0) |
(26.1) |
(4.7) |
5.6 |
|
Inventory Days |
919 |
820 |
805 |
2,826 |
2,066 |
|
Collection Days |
53 |
48 |
46 |
59 |
61 |
|
Payment Days |
19 |
25 |
30 |
147 |
31 |
|
Net debt (Btmn) |
105 |
77 |
12 |
931 |
2,198 |
|
Working capital (Btmn) |
1,026 |
996 |
1,052 |
4,964 |
5,574 |
Graph1:
SIRI's borrowing and free cash flow forecasts
Strong
earning growth in 2003-2004
We have lifted our earnings
forecasts by 58% to Bt295mn this year and 81% in 2004 to
Bt513mn due to improved revenue recognition from housing and
condo sales. We have also raised our revenue estimates by
37% and 52% over the same period. In addition, we have
revised up our 2003 and 2004 estimates for operating margins
by 4% and 1.5% due to higher house prices and improved
economies of scale.
Table 6:
Earning revision
|
|
Original |
Revision |
%
Change |
|
|
2002 |
2003F |
2004F |
2002 |
2003F |
2004F |
2002 |
2003F |
2004F |
|
Revenues |
1,092 |
1,822 |
2,463 |
1,273 |
2,504 |
3,754 |
16.6% |
37.4% |
52.4% |
|
Gross margins (%) |
25.7% |
35.4% |
35.2% |
24.4% |
32.2% |
31.9% |
|
|
|
|
Operating margins (%) |
1.5% |
10.4% |
14.2% |
3.9% |
15.2% |
15.9% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Working capital (Btm) |
5,225 |
5,089 |
4,443 |
3,252 |
6,089 |
6,329 |
|
|
|
|
Free cash flow (Btmn) |
(4,615) |
438 |
1,133 |
(4,842) |
(2,166) |
836 |
|
|
|
|
Net debt (Btmn) |
2,212 |
1,715 |
569 |
2,077 |
4,230 |
3,395 |
|
|
|
|
Interest expenses (Btm) |
59 |
25 |
97 |
43 |
135 |
134 |
|
|
|
|
Extra in item |
25 |
0 |
0 |
23 |
0 |
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
profits (Btmn) |
(2) |
187 |
284 |
49 |
295 |
513 |
na |
57.5% |
80.8% |
|
Growth |
na |
Na |
51% |
0% |
499% |
74% |
|
|
|
|
EPS |
(0.00) |
0.22 |
0.33 |
0.06 |
0.34 |
0.59 |
na |
57.5% |
80.8% |
|
Growth |
na |
Na |
51% |
0% |
488% |
74% |
|
|
|
We now expect SIRI's working
capital requirements to rise to Bt6.1bn and Bt6.3bn in
2003-2004 versus our previous estimates of Bt5.1bn and
Bt4.4bn. As a result, SIRI's debt levels should rise by
Bt2-3bn over this period. SIRI is continuing to rely heavily
on the money market and we do not rule out the possibility of
a further cash call if its share price continues to show
strength. Interest expenses are forecast to rise to about
Bt135mn in 2003 and 2004 compared with just Bt43mn last year.
EPS is projected to surge 488% to Bt0.34 this year and 74% to
Bt0.59 in 2004.
Income recognition from
existing projects and Baan Sirisathron should boost profits in
1H03 while revenues from new housing projects should kick in
during 2H03. SIRI should achieve normalised earnings of
Bt295mn this year compared with just Bt26mn in 2002.
Table 7:
Quarterly result forecasts in 2003
|
|
Net
Earnings |
Normalised
Earnings |
|
|
2002 |
2003 |
%
Chg |
2002 |
2003 |
%
Chg |
|
Q1F |
3 |
39 |
1068.5% |
(20) |
39 |
na |
|
Q2F |
(10) |
43 |
na |
(11) |
43 |
na |
|
Q3F |
4 |
92 |
2409.7% |
4 |
92 |
2409.7% |
|
Q4F |
52 |
121 |
130.2% |
54 |
121 |
123.8% |
|
Year |
50 |
295 |
494.4% |
26 |
295 |
1019.1% |
|
Income
statement |
|
(Btmn) |
2001 |
2002 |
2003F |
2004F |
2005F |
|
Sales |
511 |
1,273 |
2,504 |
3,754 |
3,867 |
|
COGs |
386 |
962 |
1,697 |
2,555 |
2,616 |
|
Gross
margins |
125 |
311 |
807 |
1,199 |
1,251 |
|
SG&A |
173 |
261 |
426 |
601 |
657 |
|
Operating
margins |
(48) |
50 |
382 |
598 |
593 |
|
Interest expenses |
27 |
43 |
135 |
134 |
111 |
|
Other income |
10 |
15 |
35 |
36 |
40 |
|
Pretax profits |
(64) |
22 |
282 |
500 |
522 |
|
Income taxes |
1 |
5 |
- |
- |
- |
|
Associate Earnings |
1 |
(0) |
- |
- |
- |
|
Minority Interests |
(3) |
(9) |
(13) |
(12) |
(12) |
|
Extraordinary Items |
(27) |
23 |
- |
- |
- |
|
Net
income |
(89) |
49 |
295 |
513 |
534 |
|
Balance
sheets |
|
(Btmn) |
2001 |
2002 |
2003F |
2004F |
2005F |
|
Cash equivalent |
191 |
1,632 |
1,176 |
1,101 |
1,547 |
|
Receivable |
79 |
214 |
240 |
309 |
74 |
|
Inventories |
972 |
3,121 |
6,338 |
6,537 |
6,232 |
|
Investment |
17 |
16 |
16 |
16 |
16 |
|
Fixed Assets |
478 |
3,187 |
2,949 |
2,731 |
2,451 |
|
Total
assets |
1,774 |
8,177 |
10,796 |
10,808 |
10,445 |
|
Credits |
25 |
82 |
261 |
325 |
250 |
|
ST-debts |
147 |
1,480 |
1,966 |
1,636 |
3,150 |
|
LT-debts |
159 |
2,229 |
3,667 |
3,051 |
727 |
|
Other
liability |
1,013 |
3,262 |
4,922 |
4,687 |
2,351 |
|
Equities |
590 |
3,224 |
3,519 |
4,033 |
4,566 |
|
Cash
flow statement |
|
(Btmn) |
2001 |
2002 |
2003F |
2004F |
2005F |
|
Net Profit |
(89) |
49 |
295 |
513 |
534 |
|
Depre./Amort. |
59 |
94 |
388 |
368 |
380 |
|
Net Working Cap. |
54 |
(2,227) |
(2,837) |
(240) |
420 |
|
Unrealized F/X |
- |
- |
- |
- |
- |
|
Cash
flow from operations |
(99) |
(2,040) |
(2,016) |
986 |
1,306 |
|
|
|
|
|
|
|
|
CAPEX |
(79) |
(2,802) |
(150) |
(150) |
(100) |
|
Investment |
(65) |
(1) |
- |
- |
- |
|
Cash
flow from investing |
92 |
(928) |
220 |
(150) |
(100) |
|
|
|
|
|
|
|
|
Debt Movement |
(80) |
3,404 |
1,924 |
(1,175) |
(772) |
|
Capital Call |
- |
2,586 |
- |
- |
- |
|
Dividend Paid |
- |
- |
- |
- |
- |
|
Cash
flow from financing |
8 |
4,099 |
1,924 |
(1,175) |
(772) |
|
|
|
|
|
|
|
|
Free
cash flow |
(178) |
(4,842) |
(2,166) |
836 |
1,206 |
|
Financial
ratios |
|
|
2001 |
2002 |
2003F |
2004F |
2005F |
|
Gross margins |
24.5% |
24.4% |
29.6% |
29.8% |
30.6% |
|
Operating margins |
(9.4%) |
3.9% |
12.6% |
13.8% |
13.6% |
|
Net gearing |
0.19 |
0.64 |
1.27 |
0.89 |
0.51 |
|
Interest coverage |
(1.4) |
1.5 |
2.6 |
3.9 |
4.9 |
|
Inventory Days |
919 |
1,184 |
1,312 |
905 |
848 |
|
Collection Days |
56 |
61 |
35 |
30 |
7 |
|
Payment Days |
24 |
31 |
54 |
45 |
34 |
|
