Comprehensive Analysis of Land and Houses Public Company Limited

Date of Report: November 18, 2024

Broker: UOB Kay Hian

Introduction

In this detailed company update, UOB Kay Hian provides a comprehensive analysis of Land and Houses Public Company Limited (LH), a leading property developer in Thailand. This report delves into LH’s financial performance, market position, and future prospects while providing recommendations for potential investors.

Company Overview

Land and Houses Public Company Limited is renowned for its expansive portfolio in the real estate sector in Thailand. The company is actively engaged in developing residential projects that span single detached houses, townhouses, and condominiums. Additionally, LH generates substantial income from rentals of serviced apartments and properties.

Stock Data and Performance

As of the report date, LH’s stock is listed under the Bloomberg ticker LH TB and is categorized under the GICS sector of Real Estate. The company has issued approximately 11,949.7 million shares, with a market capitalization of Bt62,736.0 million (US\$1,801.1 million). The 52-week high and low for LH’s share price were Bt8.20 and Bt4.86 respectively. The stock has experienced fluctuations with a notable decline over the year, marking a 35.6% decrease year-to-date.

Key Stakeholders

Significant shareholders include Mr. Anant Asavabhokhin with a 23.9% stake, followed by Thai NVDR Company Limited and Mayland Co., Ltd., holding 11.8% and 5.7%, respectively.

Financial Highlights

For the fiscal year 2024, LH’s net asset value per share is projected at Bt4.31, with net debt per share at Bt4.63. The target price for LH is set at Bt6.00, indicating a potential upside of 14.3% from the current share price of Bt5.25. The company’s financial outlook reveals a challenging landscape for its residential segment, with expectations of extra gains from asset divestment poised to bolster Q4 2024 earnings.

Strategic Insights and Company Update

Despite the anticipated boost in earnings from asset divestments, LH’s residential segment remains under pressure due to a low backlog and weak gross margins. Concerns also persist regarding the company’s dividend payment capacity amidst cash flow management issues and vulnerable performances.

Analyst Meeting Insights

During the analyst meeting following the Q3 2024 results, it was apparent that challenges continue to affect the residential segment. Revenue from rental businesses and equity income has been insufficient to counter the decline from the residential side.

Stock Impact and Future Outlook

The company anticipates a recovery in Q4 2024 presales due to new project launches valued at Bt12.3 billion. Notable upcoming projects include Nantawan Pool Villa Rama 9 – New Krungthep Kritha and Mantana 100+ Rama 2 – Bangkhuntian. Moreover, the divestment of Terminal 21 Pattaya shopping mall for Bt5.7 billion is expected to contribute an extra gain of Bt1.5-1.6 billion to the bottom line.

Dividend Declarations

Despite a lower payout ratio, LH announced an interim dividend of Bt0.15 per share for the period January to September 2024. The payout ratio stands at 62%, below the historical average, reflecting the company’s focus on cash flow management amid weak performance.

Financial Performance and Projections

In 2023, LH reported net turnover of Bt26,745 million, with a decline projected for 2024 at Bt25,291 million. The company’s EBITDA is also expected to decrease from Bt5,295 million in 2023 to Bt3,994 million in 2024. However, a rebound is anticipated in 2025 and 2026 with projected turnovers of Bt28,555 million and Bt32,403 million respectively.

3Q24 Results

In 3Q24, LH’s net profit was reported at Bt650 million, marking a significant decline of 45% year-on-year and 36% quarter-on-quarter. This result was 29% below the estimated figures, primarily due to lower-than-expected revenue and gross margins.

Risks and Recommendations

Several risks could impact LH’s future performance, including lower-than-expected presales, tightening bank policies, and slower-than-expected economic recovery. Despite these challenges, the recommendation remains to maintain a HOLD position with a target price of Bt6.00. This valuation considers the core business and affiliated companies, while acknowledging the difficulties in the residential segment and expected reduction in project launches in 2025.

Environmental, Social, and Governance (ESG) Considerations

Land and Houses has proactively engaged in ESG initiatives. Environmentally, the company has extended its scope for GHG emission management, achieving a reduction of 15.52 tonnes carbon dioxide equivalent. Socially, LH is dedicated to improving the quality of life for all stakeholders, exemplified by their safety supervision for employees and charity projects. In governance, LH is combatting corruption by partnering with the Thai private sector and enhancing its complaint management process.