SPALI – 2Q23: Beat INVX and consensus forecasts

SPALI reported 2Q23 net profit of Bt1.7bn (-18% YoY but +7.1% QoQ), beating our estimates by 17% and consensus by 9% from better other income than expected related to projects in Australia. Average gross margin marked a new low at 35%. 1H23 net profit was Bt2.78bn (-14.5%) and accounted for 40% of our full year net profit estimates of Bt7.02bn (-14%). We stay Neutral with 2024 TP of Bt27/share on average PE of 7X. It announced a 1H23 dividend of Bt0.7/share, XD Aug 22, giving yield of 3.4%.

2Q23 net profit beat us by 17%, consensus by 9% on other income. SPALI reported 2Q23 net profit of Bt1.7bn (-18% YoY but +7.1% QoQ), 17% ahead of our estimates and 9% above consensus. Revenue was 6% higher than expected at Bt8.16bn (-0.4% YoY but +42.4% QoQ), 65% from low-rise and 35% from condos on transfers of SUPALAI Loft Sathorn-Ratchapruek (project value Bt1.4bn, sold 100%, transferred 75%). Average gross margin was 35%, a new low but slightly above our estimate of 35.8%, pressured by a lower gross margin at projects in Australia of +/-30% vs. SPALI’s 38-40%. The JV in Australia contributed Bt127mn (+54.4% YoY and +93% QoQ). Other income was Bt279mn (-22% YoY but +66% QoQ) well above our forecast of Bt91mn, backed by income from Australia. 1H23 net profit is Bt2.78bn (-14.5% YoY), 40% of our 2023 forecast.

Maintain 2023 and 2024. SPALI has current backlog of Bt19.8bn with 59% to be booked as revenue in 2H23 and the rest in 2024F-2026F. By product, 38% is low-rise and 62% is condo. We maintain our 2023 revenue forecast of Bt34.4bn (-0.2%), 74% secured. Average gross margin will fall to 36.9% in 2023 from 38.9% in 2022, pressured by Australia. We thus keep our net profit forecast at Bt7.02bn (-14%). We believe 2024 will remain pressured by projects in Australia and maintain our net profit at Bt7.6bn (+8.4%).

Risks and concerns. With interest rate rising in 2023, rejection rate is expected to rise as well. Condo backlog in 2024-2026 is low and we will see if low-rise presales growth will be able to back up total revenue growth.

Tactical call: Neutral with TP of Bt27. Pressured by the earnings slip in 2023 and low backlog for the next 2-3 years, we maintain our tactical call of Neutral with 2024 TP of Bt27.0 on average PE (16 years) of 7X. SPALI announced a 1H23 dividend of Bt0.70/share on a payout ratio of 50%, giving yield of 3.4%; XD is Aug 22.