1QFY16 profit slightly above forecast

　　SPALI posted a slight earnings beat in 1QFY16. For the quarter, profit surged 55% y‐y to Bt1,397mn,which came in slightly above our forecast of Bt1,367mn. Revenue jumped 25% y‐y to Bt6,131mn inline with our estimate, largely boosted by strong SDH/TH revenue as a result of a continued growth inSDH/TH presales since late last year. In this period, the share of SDH/TH revenue soared to 50% from32% in the year‐earlier period. As SDH/TH margins were typically lower than those of condo projectsat 35% against 40%, the increased proportion of SDH/TH revenue therefore dragged margins lowerbelow 40% in this period but the margin figure was still higher than what it achieved in the sameyear‐ago period when Supalai Wellington project, which had an exceptionally low margin of only30%, put a drag on overall margins. Note that much of the revenue from Supalai Wellington projectwas booked last year with only a handful amount of revenue left to be booked this year. Overallmargins were slightly better than forecast in this period. On the other hand, SG&A expenses werealso effectively managed. Its SG&A expenses to sales ratio drifted lower to 9% from 10% a yearearlier, offseting a Bt9mn loss from its JV property project in Australia, which is currently in the initialstages of development and expected to generate profit in FY17. Overall 1QFY16 results slightly beatour forecasts.

　　FY16 profit set to grow 8% y‐y as operating outlook still on track

　　We expect SPALI to deliver profit growth this year on the back of revenue growth and lower SG&Aexpenses. In our forecast, we predict its full‐year revenue will come in at Bt22bn based onassumptions that it currently has an estimated Bt17.6bn in revenue on hand, comprising a backlog atend‐1QFY16 of Bt11.5bn to be booked as revenue in 2QFY16‐4QFY16 and a projected 1QFY16revenue of Bt6.1bn. To meet the above revenue target, SPALI needs to generate revenue of anotherBt4.4bn, which is likely to be achieved on expectations that SDH/TH presales will arrive at Bt9bnduring 2QFY16‐4QFY16. By our estimate, SDH/TH presales in 2QFY16 may likely drop to Bt3bn fromBt4bn in 1QFY16, reflecting the effect of the government’s property tax incentives which expired inApr 2016 and the remaining Bt6bn is expected to be made in 2HFY16. We reckon that SDH/THpresales in 2QFY16‐3QFY16 could likely be recognized as revenue this year, which would in turn putSPALI on track to meet the above revenue target. Margin tends to hold steady at 37%‐38% this year.Despite a lack of a margin drag from Supalai Wellington project, an increasing proportion of revenuefrom SDH/TH projects, which normally have lower margins than those of condo projects may put acap on the margin upside this year. SG&A expenses look set to fall on transfer tax savings as part ofthe government’s property stimulus package. On this basis, we estimate SPALI will achieve profitgrowth of 8% y‐y this year.

　　‘BUY’ rating with Bt24.50/share target price

　　We reiterate a ‘BUY’ call on SPALI shares with a Bt24.50/share target price. The rating is based on thefact that its overall operating performance is still on track to achieve full‐year expectations and itscurrent valuation also looks compelling. Currently SPALI is trading at a mere 7x P/E, a discount to itshistorical average of 9x and a dividend yield of roughly 5%.