Sector Update, 7 April 2014
Industrial Estate
Underweight
Macro
Risks
Removal Of Major Obstacle
Growth
Value






3

3

1
2
BOI application vs land sales
The new Board of Investment (BOI) will be set up by mid-2014 and it will
take another four months to clear BOI application backlog of THB660bn.
Land sales are likely to rebound in 2H14 but still insufficient to boost
2014 net profit. We like Amata as it is trading at a 35% discount to its
NAV and below its long-term mean P/BV, and WHA for its superb rental
space and income CAGR of 40% for 2013-15F.

Source: CB Richard Ellis, Board of Investment
1 rai = 1,600 sq m

Market share of IE developers

Source: Company data, RHB estimates
Breakdown of industries applying for BOI incentives

New board of Investment (BOI) to function soon. The BOI committee
terms expired last October but a new committee cannot be set up under
the caretaker government. Now that the Election Commission and the
Council of State rule the legitimacy of the caretaker government, a new
BOI is likely to be in place soon. There are more than 400 projects worth
a combined THB660bn waiting for investment privilege approval. They
will likely be cleared within 4-5 months after the new committee is set up
by mid-2014.
Industrial land sales to rebound but still insufficient to boost 2014
bottomline. Land sales to date have softened significantly without a
proper BOI committee. It will take some time to set up a new committee
and clear backlog. We expect new land sales to kick in during 2H14, but
the transfer of land title deeds should take place next year. This implies
that industrial estate (IE) developers will derive their revenue mainly from
their backlog at end-2013 rather than new sales. Historical data shows
that the value of investments applying for BOI privileges is 80%
correlated to industrial land sales.
Tough 2014. For 2014, we estimate the sector’s bottomline to plunge by
almost 20% from: i) soft land sales in 1H14, and ii) lower gains from the
sale of assets into REITs. However, recurring income from utilities, rental
and power will continue to grow at double digits. We expect a modest
rebound of 12% in 2015, with a possible upside surprise if land sales in
2H14 rebounds faster than expected.
Valuations. Our Top Picks are Amata Corp (AMATA TB, BUY, TP:
THB18.50) and WHA Corp (WHA TB, TRADING BUY, TP: THB38). We
like Amata for its cheap valuations – below its mean P/BV of 2.9x and at
a 35% discount to its NAV of THB25. WHA, on the other hand, is a
growth stock with its rental income and rental space likely to grow at a
40% CAGR in 2013-15F. Despite its rapid rental space growth, the
company has been able to maintain superior efficiency, ie a 100%
occupancy rate, high ROE and ROA of 20% and 15% respectively, as
well as a low net D/E ratio of 1x.
Wanida Geisler +66 2862 9748
License No.17602
P/B (x)
Yield (%)
Dec-14F
Dec-14F
THB18.5
15.1
1.9
2.3
BUY
THB3.5
10.3
2.2
4.8
TRADING BUY
NEUTRAL
Price
Target
Amata Corporation
THB15.9
THB3.4
Hemaraj Land & Dev
Source: Company data, RHB estimates
P/E (x)
Dec-14F
Com pany Nam e
Rojana Ind Park
Rating
THB7.1
THB6.3
17.7
1.5
2.7
Ticon Industrial Connection PCL
THB17.8
THB19.5
12.2
1.7
5.6
NEUTRAL
WHA Corp PCL
THB32.8
THB38.0
23.6
6.6
1.7
TRADING BUY
Source: Company data, RHB estimates
[email protected]
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