20140820-Maybank_KERPL-B2S_suits_the_times__Initiate_BUY_22页_1mb

WHA Corp (WHA TB) Summary

Core Content

WHA Corp (WHA TB) is a Thai real estate company that has initiated a "BUY" recommendation with a 12-month price target of THB47.22, which represents a +33% increase from the current share price of THB35.50. The company's market capitalization is THB34.2B, with an average daily trading volume of THB5M. The analysis highlights WHA's focus on build-to-suit (B2S) warehouses, which are expected to benefit from the growth of FMCG, healthcare, and e-commerce industries in Thailand and neighboring countries.

Main Points

1. B2S Warehouses: A Strategic Move

• WHA is a leader in the B2S warehouse segment, with a fast-growing portfolio from 89K sq m in 2006 to 891K sq m by end-2013, achieving 100% occupancy.
• The company is accelerating its expansion, aiming to reach 1.7M sq m of net leasable area (NLA) within a year and eventually 3.0M sq m in both Thailand and overseas markets.
• The demand for B2S warehouses is driven by:
  • Expansion of food, beverage, and pharmaceutical companies.
  • Growth in physical and e-based retailing.
  • The need to diversify disaster risks, as seen after the 2011 flood.
  • The push for e-commerce, with Central Group's e-commerce platform being a key client.
  • The ASEAN Economic Community (AEC) facilitating faster trade and volume growth.

2. Strong Business Model and Growth Prospects

• WHA has a 60% Yr CAGR in NLA and is expected to achieve a 22% net profit CAGR.
• Its ROE is forecast to reach 35% by 2016, supported by a declining leverage from 0.88x in 2013 to 0.58x by 2016.
• The company is building solar roof projects to support its tenants and generate additional income, with a target of 100MW of power generation from 1.0M sq m of rooftops.

3. Financial Highlights

• Revenue is expected to grow significantly from THB2,168.8M in FY12A to THB7,604.2M in FY16E.
• Core net profit is projected to rise from THB214.4M in FY12A to THB2,276.8M in FY16E.
• Core EPS is anticipated to increase from THB0.42 in FY12A to THB2.36 in FY16E.
• Net dividend yield is expected to grow from 0.3% in FY12A to 3.6% in FY16E.
• Dividend payout ratio (DPR) is forecast to increase from 29% in FY12A to 54% in FY16E.

4. Valuation Analysis

• The fair value of WHA is calculated using a mix of DCF and cap rate methods.
• DCF valuation at a 10.4% WACC gives a fair value of THB63.30.
• Cap rate at 7.5% gives a fair value of THB31.
• The average fair value is THB47, which aligns with the 12M price target.
• At the price target, WHA is expected to trade at 1.3x PEG and 28x P/E, which is considered pricey but defensible due to its 22% net profit CAGR.

Key Information

1. Company Overview

• Sector: Real Estate
• Country: Thailand
• Share Price: THB35.50
• Target Price: THB47.22 (+33%)
• Market Cap (USD): 1.1B
• ADTV (USD): 5M
• Major Shareholders:
  • ANANTAPRAYOON FAMILY: 20.9%
  • ANANTAPRAYOON JAREEPORN: 16.0%
  • ANANTAPRAYOON SOMYOS: 15.3%

2. Expansion Strategy

• WHA has a property fund with ~390K sq m of assets and plans to incorporate a REIT in 4Q14.
• Indonesia and Myanmar are next targets for expansion, with 30K sq m of warehouses under construction in Indonesia.
• Management expects 20% of WHA's revenue to come from overseas markets within five years.

3. Competitive Landscape

• WHA is ahead of local players in the B2S warehouse market.
• HEMRAJ and TICON are other warehouse developers in Thailand, but they are not expected to be serious competitors due to differences in business models and target markets.
• WHA's unique customer-centric approach and specialized services give it a first-mover advantage.

4. Risks and Considerations

• Execution delays and material shortages could be risks during overseas expansion.
• Quality control is critical to maintaining high standards.
• Leverage is manageable, with a D/E ratio expected to drop from 0.88x in 2013 to 0.58x by 2016.

5. Dividend and Return Outlook

• Dividend yield is expected to rise from 0.3% to 3.6%.
• Dividend payout ratio is forecast to increase from 29% to 54%.
• ROE is expected to grow from 11% to 35% by 2016, supported by rising dividends and falling leverage.

6. Valuation Metrics

• Fair Value Range: THB20–63/share.
• DCF Value: THB63.30.
• Cap Rate Value: THB31.
• Average Value: THB47.
• P/E Ratio: 28x at the price target.
• PEG Ratio: 1.3x at the price target.

Conclusion

WHA Corp is positioned to benefit from the growing demand for B2S warehouses in Thailand and the broader ASEAN region. Its aggressive expansion strategy, strong financial performance, and dividend growth potential support the BUY recommendation. While the company is highly leveraged, it is expected to manage this risk effectively through asset carve-out and REIT incorporation. The THB47.22 target price is justified by a 22% net profit CAGR, a 1.3x PEG, and strong growth in rental income and solar projects.