Thailand Property Sector Analysis – UOB Kay Hian Report

UOB Kay Hian Securities (Thailand) – November 28, 2024

In the latest analysis by UOB Kay Hian Securities, the report delves into the intricate dynamics of Thailand’s property sector as of the fourth quarter of 2024. The focus is on seven major property developers, analyzing their performance, challenges, and potential strategies for the coming year. Here’s a detailed look at each company’s standing and the sector’s overall outlook.

Sector Overview

The Thailand property sector is expected to see an improvement in presales during 4Q24, although developers are anticipated to miss their full-year targets. The expiration of real estate measures at the end of the year could drive a last-minute boost in homebuyer interest. However, margins remain under pressure due to competitive pricing strategies. Developers are increasingly cautious about new launches, focusing on reducing inventories and tackling weak purchasing power and high household debt. The sector maintains a ‘Market Weight’ rating.

AP (Thailand) – A Strategic Focus on Profit Margins

AP (Thailand) is highlighted as a top pick with a ‘BUY’ recommendation. Currently trading at 8.60 Bt with a target price of 11.30 Bt, AP’s strategic focus is on maintaining profit margins amid high construction costs. Despite the projected 13.5% decrease in EPS for 2024, the company shows resilience with a 3.9% expected EPS growth in 2025. AP’s presales figures showed a 15% year-on-year increase in 3Q24, although a slight dip of 7% from the previous quarter was noted. The company continues to lead in presales momentum, supported by strategic project launches and a focus on mid- to high-priced segments.

Land and Houses (LH) – Navigating Market Challenges

Land and Houses holds a ‘HOLD’ recommendation with a current price of 5.40 Bt and a target of 6.00 Bt. Despite a challenging market, LH is expected to see a modest 11% upside. The company’s EPS is projected to decline by 33% in 2024, reflecting the broader market challenges such as high living costs and household debt. LH’s presales were down by 15% year-on-year but showed an 11% quarter-on-quarter growth, indicating a gradual recovery.

LPN Development (LPN) – Facing Headwinds

LPN Development receives a ‘SELL’ recommendation with a current price of 2.84 Bt and a target of 2.10 Bt, representing a 26% downside. The company faces significant headwinds, with a projected EPS decline of 29.3% in 2024. Presales in 3Q24 fell by 16% year-on-year and 24% quarter-on-quarter, highlighting the challenges LPN faces in the current economic climate.

Origin Property (ORI) – Stability Amidst Volatility

Origin Property holds a ‘HOLD’ recommendation, with its price stable at 4.10 Bt. Despite a challenging year, ORI’s strategic approach has allowed it to maintain a steady course, with a slight EPS growth anticipated in 2025. However, the company faces a 35.7% decrease in EPS for 2024. ORI’s presales decreased significantly by 32% year-on-year and 17% quarter-on-quarter, reflecting the volatile market conditions.

Pruksa Holding (PSH) – Strategic Adjustments Needed

Pruksa Holding is advised with a ‘SELL’ recommendation. Currently priced at 8.35 Bt with a target of 6.60 Bt, PSH faces a 21% downside risk. The company’s EPS is expected to decline by 41.2% in 2024, necessitating strategic adjustments. Presales in 3Q24 were down by 28% year-on-year and 10% quarter-on-quarter, indicating the urgent need for PSH to realign its strategies in response to market demands.

Quality Houses (QH) – Incremental Growth

Quality Houses maintains a ‘HOLD’ recommendation with its current price at 1.81 Bt and a target of 1.82 Bt. The company shows slight growth potential with an expected 1% increase. QH’s presales decreased by 32% year-on-year and 28% quarter-on-quarter, reflecting the challenges in the lower-priced housing segment.

Supalai (SPALI) – Leading with Resilience

Supalai stands out with its ‘HOLD’ recommendation, reflecting a slight upside potential with a target price of 20.30 Bt. SPALI demonstrated resilience with earnings growth both year-on-year and quarter-on-quarter, supported by a favorable transfer mix. The company’s presales increased by 8% year-on-year and 4% quarter-on-quarter, underscoring its strong market position.

Future Outlook

The overall residential market in Thailand faces a challenging year ahead in 2025, with slow recovery in consumer purchasing power and high household debt levels. Developers are likely to focus on mid- to high-priced projects to maintain profit margins, while new project launches are expected to decline. The sector is advised to maintain a ‘Market Weight’ outlook, with selective investment strategies focusing on companies like AP (Thailand) that show strong potential amidst economic uncertainties.