Analyst Expects AMATA to Benefit from the China Relocation, Giving TP at ฿18.5

KGI Securities maintained a rating of Outperform on Amata Corporation Public Company Limited (AMATA) with a target price at ฿18.5/share, seeing a support from the China relocation theme as Chinese customers account for 34.7% of its clients in Rayong.

 

KGI maintained a 2020 land sales target at 950 rai with 60-80% backlog transfer.

Land sales: Management is maintaining its 2020 land sales target of 950 rai which includes AMATA City Chonburi at 200 rai, AMATA City Rayong at 450 rai, and AMATA Thai-Chinese at 300 rai. Restrictions during the COVID-19 outbreak and low season in the first half of the year are the main reasons for weak pre-sales of ~100 rai YTD. However, the company has adopted technology such as online meetings and drone technology to provide services and short cuts for investors who cannot fly-in due to the restrictions.

Land transfers: With a backlog of Bt2.5bn as of 1Q20, the company targets 60% of the backlog to be transferred this year in its worst-case scenario and 80% in its best-case scenario. Including land transfers of 114 rai in 1Q20, implies 2020 land transfers would be in the range 400-500 rai (versus our current assumption of 484 rai).

 

Re-rate PER on IE business

KGI reiterated the industry view that the full impact from the COVID-19 restrictions would be felt in 2Q20 before recovering in 2H20-2021 supported by relocations from China. KGI maintained the 2020 earnings forecast at Bt1.2bn (implying earnings contraction of 30% YoY) with assumed land sales of 400 rai and land transfers of 484 rai. KGI expected land sales and land transfers to see strong recoveries to 700 rai and 538 rai, respectively, which would imply 2021 earnings growth of 21% YoY. AMATA is likely to gain competitiveness as 34.7% of its clients in Rayong are Chinese investors. To take into account the recovery outlook, we re-rate multiple PER on IE business from 12.0x (-0.5 S.D.) to 18.0x (+0.5 S.D).

 

Valuation & Action

KGI rolled the target price over to end-2021 at Bt18.50 based on SOTP valuation method. With 11.4% upside to the new target price, KGI maintained a rating of Outperform on AMATA. Land sales momentum in 2H20 would be a factor to watch and would provide earnings upside from KGI current forecast.

 

Risks

1) Geopolitical risk

2) Economic slowdown 

3) Natural disaster

4) Land acquisition

5) Sector concentration

6) Insufficient capital.