WHA - 3Q24: Net profit down YoY and QoQ

WHA reported 3Q24 net profit of Bt459mn (down 26.3% YoY and 64.4% QoQ) with core profit of Bt757mn, pulled down by high tax expense, FX loss and higher interest expense. We expect 4Q24 to drop YoY but rise QoQ on booking backlog and gain from asset monetized from WHAIR. This gives us a 2024F net profit growth forecast of 12.7% to Bt4.99bn, with 2025F growing 16.2%. We maintain our Outperform with a 2025 TP of Bt6.60 based on 7-year avg PE of 17x, reflecting its earnings cycle. It is paying an interim dividend of Bt0.0669/sh, XD Nov 21.

3Q24 net profit dropped 26.3% YoY and 64.4% QoQ. WHA reported 3Q24 net profit of Bt459mn, 34% below consensus and 37% below INVX, pushed down by a higher effective tax rate and interest expense. Total revenue was Bt2.04bn (-3.1% YoY and -11.8% QoQ), 33% rental and service income and 38% real estate sales on total land transfers of 370 rai (199 rai from JV-IER) plus 29% from other sales. Average gross margin was 48.5%, down QoQ but up YoY, with a slip in the rental and real estate sales businesses while gross margin from industrial development was 51.1%, slipping from 52.2% in 3Q23 (pressured by sale of two land plots with low gross margin). Interest expense increased 25.3% YoY and 28.5% QoQ from higher debt with average cost of debt rising 0.14% to 3.28%. Effective tax rate was Bt312mn (+268% YoY and +1260% QoQ) as it booked Bt213mn income tax for a group restructure. 9M24 net profit is Bt3.11bn (+54.7%).

9M24 land sales at 72% of year target…likely to achieve. In 3Q24, WHA sold 750 rai (-24% YoY but +82% QoQ) with one big lot of ~400 rai to Google for its first data center in Thailand. This brings 9M24 land sales to 72% of its 2024 target of 2,500 rai (-10% YoY). However, as it has letters of intent (LoI) on hand for ~900 rai, we believe it is on track to achieve its goal. Current client profile from 2020 to present places China on top at 66%, followed by Taiwan at 7%. Main industries are consumer, automotive and electronics and electrical appliances. WHA aims for these three sectors to remain core in 2025, with the addition of data centers.

Maintain 2024-2025, expect growth QoQ in 4Q24. WHA has current backlog of 1,259 rai, expected to be booked as revenue within 2025. Thus, we maintain our 2024 revenue forecast of Bt12.8bn (-13.4%), with average gross margin widening to 53.1% from 46.4% in 2023. Contribution from equity investment is expected to grow 12% to Bt1.67bn, backed by higher contribution from the JV (IER). We thus expect a high net profit in 2024F of Bt4.99bn (+12.7%). With the sale of Bt1.06bn in assets to WHAIR in December plus transfers of backlog, we expect 4Q24F to grow QoQ and be 2024’s best.

Key risk: In 2025, we expect Thailand will continue to benefit from the geopolitical risk and investment relocation. With the expansion of new economy ventures, we expect the country’s highly rated skilled labor force and efficient utilities to bring expansion in data centers, electronics and other higher-value sectors. We are also monitoring FDI and policy changes in important trading countries. For the utilities business, we also monitor regulatory risk and cost of raw materials.