Analyst Recomm. “BUY” ORI after May Presales Hit the Year’s High, Raising a TP to ฿7.3

KTB Securities (Thailand) (KTBST) has maintained a “BUY” recommendation on Origin Property Public Company Limited (ORI) and raised a target price from ฿5.50/share to ฿7.30/share after its May presales hit the year’s high of 2.4 billion baht.

 

2020E earnings outlook improve on strong presales in May

KTBST raised both the target price and target PER to 7.8x (+0.5 SD above its 5-yr average) from 6.8x following 2020E earnings forecast upgrade and had increasingly positive toward ORI’s 2020E earnings outlook after its May presales hit the year’s high, which drove 5M20 figures up +18% YoY to 9.0 billion baht, accounting for 42% of the company’s presales target of 21.5 billion baht.

 

KTBST saw the possibility on ORI’s plan to launch four condo projects in 2H20E that 2020E presales may exceed the company’s target, KTBST thus raise the 2020E net profit forecast by 10% to 2.3 billion baht, which represents a decline of -24% YoY, as KTBST revised up  revenue recognition estimate to 15.0 billion baht, including that from JV, from 13.0 billion baht. ORI’s current backlog has completely secured our full-year revenue forecast.

   

ORI’s share price rebounded sharply in the one- and three-month periods, following a deep decline earlier, and thereby outperformed the SET Index by 21%/7%. KTBST believes downside risk from the current level will be limited given 1) strong 2020E revenue recognition outlook, including substantial sales of standing inventories in April-May, and a start of condo transfers over the course of the year; and 2) its substantial backlog to boost revenue growth in the long term. Additionally, the stock’s valuation remains attractive, trading at the lowest 2020E PER at 6.1x compared to the sector’s average level of 11x. Although KTBST forecast ORI’s 2020E core profit to decline -18%, the pace of which would be much slower compared to the sector’s average decrease of -30% YoY.

 

Implication

KTBST has upgraded its 2020E forecast; 2Q20E core profit likely to remain flat QoQ on low revenue recognition outlook. KTBST expected 2Q20E core profit to remain flat QoQ in expectation of small revenue recognition, while the strong presales in April-May may be recognized in 2H20E. KTBST thus forecast 2H20E net profit to grow significantly as ORI is expected to recognize substantial revenue in the period.

 

Valuation/Catalyst/Risk

KTBST raised ORI’s target price to ฿7.30/share to reflect a stronger 2H20E/2020E earnings outlook. Key catalyst is its promising 2H20E earnings growth given the strong 5M20 presales and substantial backlog.