20150922-Maybank_KERPL-Near_Time_for_Bottom_Fishing_17页_1mb

Thailand Property Market Summary

Core Content

The Thailand property market is currently in a recovery phase, with the sector bottoming in 2Q15 and a gradual recovery expected to begin in 4Q15. Despite the overall market challenges, several developers are still recommended as BUYs, while others are held. The report highlights the impact of the 17 Aug Bangkok bombing on the market sentiment and launch delays, which have affected the performance of residential property stocks. The analysis is based on historical data, current market conditions, and future projections for 2016, particularly focusing on low-rise developments.

Main Views

• Sector Outlook: The residential property sector has underperformed the SET index, with a 8% YTD decline versus the SET's -7%. The recovery is expected to be driven by low-rise projects, especially townhouses and single-detached houses (SDH), due to their manageable construction costs, faster transfers, and quicker revenue recognition.
• Price Targets: The price targets (TPs) for property stocks have been re-pegged to the 10-year P/E means, down from the previous 0.5-1.0 SD above the mean, reflecting the market's subdued performance and the need for a more conservative approach.
• Recommendations: AP, LPN, PS, and QH are recommended as BUYs, while LH and SPALI are advised to be HOLDs. QH is highlighted as the top pick due to its strong position in the low-rise market.
• Market Sentiment: The sector's recovery is expected to be slow due to subdued disposable income and stringent bank lending criteria. However, the market is anticipated to pick up in 4Q15 and 2016 with the resumption of launches and improved demand.

Key Information

• Launch Delays: The 17 Aug bombing caused delays in property launches, pushing many projects to 4Q15 and some into 2016.

• Performance of Developers:

  • AP: Expected to meet its 2015 revenue target, with a backlog of THB10.3b. Its P/E target is now 7.6x, down from 8.14x.
  • LH: Has a high backlog of THB10.8b for FY15-16, but is expected to miss its 2015 presales target. Its TP has been revised to THB9.14.
  • LPN: Has postponed some projects, leading to a lower TP of THB19.04. It remains the dominant condo developer.
  • PS: Postponed 7-8 condo projects to 2016, but is on track to meet its 2015 revenue target. Its TP is now THB31.67.
  • QH: Postponed four projects to 2016, but is still a top pick due to its strong low-rise pipeline. Its TP is THB3.86.
  • SPALI: Expected to meet its 2015 targets with a backlog of THB11.2b. Its TP has been revised to THB19.68.

• Dividend Yields: All developers offer dividend yields above the market average, with AP at 5.2%, LPN at 5.9%, and SPALI at 5.7% for 2016, making them attractive for income-focused investors.

Summary Table of Recommendations and TPs

Key Factors Influencing Recovery

• Low-Rise Demand: Expected to drive the 2016 recovery due to stronger consumer interest and manageable costs.
• Economic Challenges: High household debt, flat disposable income, and strict lending criteria continue to pose challenges.
• Launch Delays: Many projects have been delayed, with some expected to launch in 2016, potentially boosting market activity.
• Market Sentiment: Improved sentiment in 4Q15 is anticipated to trigger increased transfers and sales.

Conclusion

The Thailand property market is showing signs of recovery, with a focus on low-rise developments. While the sector is still in a challenging environment, the re-pegging of price targets to 10-year means and the continued performance of key developers suggest a cautious BUY approach for certain stocks. The market is expected to stabilize in the coming quarters, with the potential for a more robust recovery in 2016.