L.P.N. Development

L.P.N. Development Plc (LPN)

- Presales reach Bt6.3bn in 1Q13, +30% YoY and +58% QoQ
- Backlog of Bt19.9bn, securing 85% of our 2013 forecast and 43% of 2014
- New launches raised to 14 projects worth Bt24.7bn, including first high-end condo in 2Q13
- Q1 2013F net profit of Bt362mn, +23% YoY but -71% QoQ; results out May 9
- TTR looks more attractive, but risk of BoT action overhangs; Neutral

Q1 2013 operational wrap-up. LPN again achieved record presales of Bt6.3bn in 1Q13, +30% YoY and 58% QoQ, underwritten by strong response to three new launches in the period that contributed ~40% of total presales. Presales are now equivalent to 31% of its full year target, putting it well on the way to making its goal. In the quarter, Lumpini Place Suksawat-Rama 2 and Lumpini Place UD-Phosri were both sold out soon after launch, plus 80-85% of Lumpini CondoTown Ramintra-Lat Pla Khao 2.
High visibility, as usual. At end-March 2013, LPN had total backlog of Bt19.9bn, of which Bt11.5bn will be realized as income this year and the remaining Bt8.3bn next year. This secures 85% of our 2013 forecast and 43% of 2014.
New launch added in. LPN has added one new launch this year – the Bt520mn Lumpini Place Huahin Soi 7 (near SC’s Santora Hua Hin), to be launched in 2H13. This does not change its new launch value of Bt24.7bn, +48% YoY. Provincial launches comprise ~21% of the total. LPN will launch its first high-end product - Lumpini Suite Sukhumvit 24 - in 2Q13. We expect gross margin on this to be good as it purchased the land several years ago at a cost of ~Bt270K/sqm, while market price is more than double that now. This could give margin upside for 2014-2015. Selling price could be ~Bt150K/sqm, with the smallest package, a 1-bedroom unit, at Bt4.5mn. This is not its area of expertise and we thus do not expect it to launch more in this end on a regular basis.
Q1 2013 preview. We estimate net profit of Bt362mn, +23% YoY but a sharp drop of 71% QoQ. Major revenue contributors are LPN CondoTown Radplaklao, LPN Ville Sukhumvit 109 and LPN Park Riverside-Rama 3. It will release earnings on May 9, 2013.
Maintain Neutral. LPN’s share price corrected ~10% over the past three weeks, widening the upside to our PT. Despite this, we maintain Neutral as it still faces the possibility of action from the central bank to curb the condo market if it assesses this as overheated. The substantial rise in prices and rapid sell-out has made the BoT cautious towards the housing market especially condo, in our view. There are also an increasing number of homebuyers buying more than one home, and this could be a sign of rising speculation. We believe this issue will be a market overhang, with LPN at most risk since virtually all of its income is from condo.