Date: October 17, 2024
Broker Name: CGS International Securities
Overview of Supalai’s Performance
Supalai (SPALI) remains optimistic about the property market in Thailand. The company plans to boost its condo launches in 2025, driven by expectations of improving market conditions following a policy rate cut by the Bank of Thailand on October 16, 2024. Supalai forecasts strong presales growth, particularly in the condo segment, for the remainder of 2024.
Presales Forecast and 3Q24 Performance
- 2024 Presales Forecast: The company maintains its presales forecast of THB 29.4 billion for 2024, which represents a 1.9% year-over-year increase. Supalai expects the highest quarterly presales for the year in 4Q24, projected at THB 9.3 billion.
- 3Q24 Net Profit: Supalai’s net profit for 3Q24 is estimated at THB 1.87 billion, marking a 17% quarter-over-quarter increase and a 57.1% year-over-year rise. The surge in profits is attributed to a significant rise in condo transfers, particularly from newly completed projects like Icon Sathorn and Loft Phasi Charoen Station.
- Residential Revenue: The residential segment saw a 24.5% quarter-over-quarter increase and a 38% year-over-year rise in 3Q24, reaching THB 9.78 billion. This was primarily due to a boost in condo transfers.
Future Plans: Expansion and New Projects
- 2025 Condo Launches: Supalai plans to double its condo launches in 2025. The company intends to focus on low-rise condo projects priced at THB 70k-80k per square meter, a segment with less competition. This strategic move aims to enhance revenue in 2026.
- Project Launches in 4Q24: Supalai plans to launch ten projects in 4Q24, including six low-rise housing projects and four condo projects, totaling THB 13.7 billion. The condo projects include Supalai Tyme Chareon Nakhon, Supalai Blu Sathorn-Ratchapruk, Supalai Sense Khao Rang Phuket, and Supalai Kram Khao Tao.
- Capex for Land Acquisition: The company has budgeted THB 8 billion for land acquisition in 2024, up from THB 5.8 billion in 2023, to support the development of new condo projects.
International Ventures and Joint Ventures (JVs)
- Australian JV Projects: Supalai expects Australia’s Foreign Investor Review Board (FIRB) to approve its JV investment in 12 projects by late October 2024. The company aims to start recognizing profits from these JV projects in November 2024.
- Investment Adjustments: Due to delays in approval, Supalai’s equity investment in these projects is anticipated to be reduced to approximately A$490 million from the A$530 million initially announced in December 2023. The company will make the first investment installment of A$240 million in late October 2024, with the remaining A$250 million scheduled for January 2025.
- Profit Contribution from JVs: The share of profit from JVs in Australia is expected to double year-over-year to THB 500 million in 2025.
Financial Highlights and Earnings Revisions
- Revenue and Profit Adjustments: Supalai adjusted its revenue and profit forecasts for FY24-26, cutting expected core earnings per share (EPS) by 3.6-4.9%. The revision reflects changes in residential revenue, gross margins, and JV profit assumptions.
- Gross Margin Improvement: The residential gross margin improved to 37.6% in 3Q24, up from 36.6% in 3Q23 and 36.1% in 2Q24, driven by higher condo contributions.
- Expected Strong Finish to 2024: The company anticipates 4Q24 transfers to be the highest for the year, supported by a THB 7.9 billion backlog, sale of office space worth THB 200 million at Icon Sathorn, and government cuts in transfer and mortgage registration fees.
ESG and Corporate Governance
- Sustainability Awards: Supalai continues to emphasize sustainable development, incorporating economic, social, and environmental principles into its business practices. The company has won the “Thailand Sustainable Investment” award from the Stock Exchange of Thailand for six consecutive years and has been recognized for excellent corporate governance since 2013.
- Commitment to Green Initiatives: The company aims to reduce greenhouse gas emissions by 40% and has been proactive in sustainable project developments.
Market Outlook and Strategic Focus
- Market Sentiment: Supalai’s management believes the property market has bottomed out and anticipates improved sentiment following the recent policy rate cut. The company expects the mid- to low-end housing segment to benefit from lower mortgage rejection rates.
- Focus on Affordable Housing: The company is strategically focusing on more affordable condos, particularly in the THB 70k-80k per square meter range, to capitalize on less competitive market segments.
Risks and Challenges
- Potential Risks: The company identifies potential downside risks, including lower-than-expected presales and delays in new project launches. Additionally, increased debt levels due to JV investments could impact the debt-to-equity ratio in 2025.
- Global and Domestic Challenges: The approval delays for international JVs, as well as fluctuations in local demand, remain areas of concern for Supalai’s growth projections.
Conclusion
Supalai’s strong performance in 3Q24, combined with strategic plans for expansion, positions the company for potential growth in the coming years. With a robust pipeline of projects, both domestically and internationally, Supalai is preparing for a significant increase in condo launches in 2025, aimed at capturing market opportunities and enhancing its revenue streams.
