Company Overview

Supalai Public Company Limited (SPALI) is a renowned property developer focusing on low-rise properties and condominiums in the mid-to-low-end market segment. With a strategic focus on sustainable growth and innovation, SPALI continues to play a significant role in Thailand’s real estate sector.

Stock Performance and Key Metrics

SPALI’s current share price stands at Bt16.60, with a target price of Bt18.20, indicating a potential upside of 9.6%. The company’s FY24 NAV per share is valued at Bt27.34, with a net debt per share of Bt14.78. Major shareholders include Mr. Prateep Tangmatitham (31.8%), Thai NVDR Company Limited (8.9%), and Mrs. Ajchara Tangmatitham (6.3%).

4Q24 Performance Preview

SPALI is expected to report a subdued performance for 4Q24. The anticipated net profit is Bt1.5 billion, representing a year-on-year (yoy) decline of 26% and a quarter-on-quarter (qoq) drop of 25%. This decrease is primarily attributed to sluggish demand in the low-rise segment and a decline in transfer activities.

Key financial highlights for the quarter include:

• Sales and services revenue: Bt8.3 billion (-17.8% yoy, -15.5% qoq).
• Operating EBIT: Bt1.97 billion (-18.8% yoy, -23.4% qoq).
• Core profit: Bt1.42 billion (-24.5% yoy, -23.9% qoq).
• Gross margin: 36.4% (down 320 basis points qoq).
• SG&A-to-sales ratio: 12.7% (up 180 basis points yoy).

Financial Performance (2022-2026F)

SPALI’s financial trajectory reflects a mix of challenges and resilience. Key details include:

2025 Business Plan

SPALI aims to launch 36 new projects worth Bt46 billion in 2025, marking a 12% yoy decline. The pipeline includes:

• 28 low-rise projects valued at Bt33.2 billion, focusing on the mid-to-high-end segment.
• 8 high-rise condominium projects worth Bt12.8 billion, the highest number of condo launches in a decade.

Despite a 20% yoy presales growth target of Bt32 billion, total revenue is expected to slightly decline to Bt30 billion. Management has allocated Bt8 billion for land purchases and Bt9 billion for construction.

Market Outlook and Challenges

The residential market, especially the low-rise segment, faces headwinds, while the high-rise segment shows potential due to reduced new supply. However, SPALI’s ambitious presales target may face challenges due to intensifying competition and a shrinking backlog. Additionally, only one condominium project is scheduled for transfer in 2025.

Australia Operations: A Bright Spot

SPALI’s Australian operations are expected to bolster earnings in 2025. Presales from Australia reached Bt3.1 billion in 2024, a 49% yoy increase. Management anticipates doubling presales in 2025, supported by the acquisition of 12 joint venture projects in December 2025, bringing the total to 24 projects.

Risks and Recommendations

Key risks include:

• Lower-than-expected presales, transfers, and gross margins.
• Tightening bank policies affecting market dynamics.

UOB Kay Hian maintains a “HOLD” recommendation for SPALI, with a revised target price of Bt18.20, reflecting a cautious outlook amidst challenging market conditions and a shrinking backlog. The valuation is pegged at 6.3x 2025F PE, 0.5 standard deviations below its historical mean.

Environmental, Social, and Governance (ESG) Initiatives

SPALI demonstrates a strong commitment to ESG principles:

• Environmental: Focus on sustainable development and effective environmental management practices.
• Social: Initiatives like the “Supalai Saang Dee” project aim at community development and fair labor practices.
• Governance: Adherence to CG Code principles, emphasizing transparency, stakeholder roles, and anti-corruption measures.

Conclusion

While SPALI showcases resilience and a robust financial position, challenges in the low-rise segment and a cautious market outlook necessitate a conservative stance. Investors are advised to monitor developments in the high-rise and Australian segments, which present growth opportunities.