1QFY16net profit up 194% y‐y, in line with expectation

　　SC’s 1QFY16net profit increased nearly twofold from Bt469mn reported in 1QFY15. Revenuegrew by a whopping 68% y‐y with condo and home revenue of Bt1.8bn and Bt1.2bn vsBt541mn and Bt1.3bn a year earlier. Condo business saw a significant growth in revenue onthe back of revenue recognition of six condo projects vs four condos a year ago, which drovethe percentage of condo revenue up to 58% from 28%. As condo project offered a widermargin than SDH/TH project, gross margin increased to 36% compared to 34% in 1QFY15.SG&A expense also improved, thanks to the government’s fee waiving measure that resultedin higher revenue and cost but lower operating cost.

　　Business targets: Revenue and presales set at Bt15bn each, 10projects to launch

　　SC has kept its presales target at Bt15bn and planned to launch 10projects (eight SDH/TH andtwo condo projects) in 2016. The first‐quarter presales came in as low as Bt2.6bn as SCopened only two SDH/TH and one condo projects in the period, and that Bt4bn condo alreadymade VIP launch in 4QFY15, which caused absorption rate to decline in 1QFY16. Despite thefirst‐quarter dull presales, SC plans to launch seven projects over course of the year and oneof which is a large‐scale condo project in CBD, worth Bt7bn‐Bt8bn. With this in the picture, weare growing optimistic the company’s presales target would be met.As for 2016revenue, SC set target at Bt14.2bn. About 48% of which has been covered, given1QFY16revenue of Bt3.1bn and backlog to be recognized during the year of Bt3.8bn. Theremaining Bt7.3bn would come from: 1) SDH/TH presales to be able to recognize by end ofyear that we project at Bt6.4bn of our estimated Bt7.1bn presales in 2Q‐4QFY16, and 2) alittle amount from condo inventory sale while SC has had roughly Bt1.7bn inventory thatwould be ready for transfer by year‐end.

　　FY16net profit seen up 3%

　　Our FY16property revenue estimate is a tad below SC’s target as a large portion of incomewould derive from SDH/TH presales and we are uncertainty about condo inventory sale overcourse of the year, given market sluggishness. We forecast a 6% rise in FY16property revenueto Bt14bn but SC’s rental income appears to take a toll on total revenue, which wouldincrease at a slower pace of 5%. Gross margin would remain flat but SG&A to sales isexpected to improve slightly. Normalized profit thus would grow 8% while net profit wouldsee a moderate growth of 3% due to high base in 2015when SC recorded a Bt93mn gain onfair value adjustment.

　　‘BUY’ rating maintained

　　The first‐quarter earnings were in line and its FY16outlook remains bright. In addition, thestock trades at undemanding P/E of 6x vs 9x historical average and dividend yield of 6%. Wethus keep our ‘BUY’ rating on SC with a target price of Bt4.00.