L.P.N. Development Plc (LPN) We dow

L.P.N. Development Plc (LPN)

We downgrade our rating on LPN to Underperform from Neutral after cutting our 2016 target price to Bt12.0 from Bt14.7 in accordance with our earnings revision. Weak demand at its low-end condo projects, due mainly to fragile customer credit in this segment, has not only constrained LPN's presales, but also lowered earnings visibility. LPN's 2016 presales and revenue targets, both Bt17.6bn, are in our view unlikely to be achieved. In the short term, a strong 2Q16 earnings performance and the introduction of new high-end condo projects in 3Q16 may boost trading sentiment in the stock, but its fundamentals are unchanged: Real demand in its core low-income segment will remain the main driver of LPN's value.

Investment highlights

- 2016-18 earnings revision. We cut our 2016-18 earnings forecasts by 11-23% to reflect weaker-than-expected YTD presales and slower-than-expected new launches in 2016. Despite maintaining new launch value in 2016, we slash our full-year presales forecast by 15% to Bt15.0bn. New launch value and presales in 2017-18 thus fall by 11-22%, while sales revenue in those years is revised down by 8-19%. Based on our new forecasts, 2017 earnings growth will turn negative for only the second time since 2004 (and the first time since 2014).

- 2016 targets unlikely to be achieved. As a result of sluggish presales at newly launched and existing projects, LPN's YTD presales remain low at Bt4.2bn (23.9% of the company's full-year target of Bt17.6bn). This, along with the fact that the firm's planned new projects are mostly in the same locations as existing projects, mean it won't be easy for LPN to achieve the target. We also believe it as unlikely that LPN's sales revenue target (identical to the presales target of Bt17.6bn) will be achieved. The slow sales rate at completed and nearly completed projects is the key factor behind our expectation, which stands despite the fact that the expiration of the government's property-stimulus package in April should help boost LPN's 1H16 revenue to above Bt9.0bn.

- Growth outlook at risk on declining backlog. The combination of slowing presales and rising sales revenue have clearly eroded LPN's backlog. At the end of 1Q16, backlog fell sharply to just Bt8.7bn from a peak level in the recent cycle of Bt24.9bn in 2Q14. Secured revenue was at just 70% of its target for 2016 and 4percent for 2017. Incorporating presales in April and May of Bt1.35bn, secured revenue still rose by only an insignificant level. LPN's growth outlook for 2017-18 is thus at risk based on its current presales and backlog status.

- 2Q16 earnings, high-end condo offer short-term catalysts. On the back of the expiration of the property stimulus package and an increasingly rapid construction process, LPN has been able to encourage clients at many projects to move transfers previously scheduled for 2Q16 through early 3Q16 forward to April. Its 2016 earnings are thus likely to peak in 2Q16. In addition, LPN confirmed it has secured a land bank to develop a second high-end condo project and plans to launch it in late 3Q16 to early 4Q16. Although project details have yet to be disclosed, we see this move and a solid 2Q16 earnings outlook as providing positive trading sentiment for the stock. However, we do not see the move changing its fundamentals, as the low-income segment will remain the key focus in the long term.

Valuation

- Our earnings revision triggered a lowering of the PE multiple we use to value the stock to 7.1x (-1SDV of its 5-year number) from 8.65x on negative earnings growth expected in 2017. Our 2016 target price thus falls to Bt12.0. With 10% downside risk from the latest closing price to our new TP, we downgrade our recommendation on LPN to Underperform from Neutral.

ผลลัพธ์ (อังกฤษ) 2:

LPN Development Plc (LPN) We Downgrade on our rating from Neutral LPN to underperformed after cutting the 2,016th our Target Price from Bt12.0 to Bt14.7 in accordance with our earnings Revision. Weak demand at its low-end condo projects, due mainly to fragile customer credit in this segment, has not only constrained LPN's presales, but also lowered earnings visibility. LPN's 2016 presales and revenue targets, both Bt17.6bn, are in our view unlikely to be achieved. In the short term, a strong 2Q16 earnings performance and the introduction of new high-end condo projects in 3Q16 may boost trading sentiment in the stock, but its fundamentals are unchanged: Real demand in its core low-income segment will remain the main driver. VALUE of LPN's. Investment Highlights - Revision earnings from 2,016 to 18. We cut our 2016-18 earnings forecasts by 11-23% to reflect weaker-than-expected YTD presales and slower-than-expected new launches in 2016. Despite maintaining new launch value in 2016, we slash our full-year presales forecast by. 15% to Bt15.0bn. New launch value and presales in 2017-18 thus fall by 11-22%, while sales revenue in those years is revised down by 8-19%. Based on our forecasts New, two thousand and seventeen Will earnings growth turn negative for only the second time since 2004th (and the First time since 2014th). - 2016th targets unlikely to be achieved. As a result of sluggish presales at newly launched and existing projects, LPN's YTD presales remain low at Bt4.2bn (23.9% of the company's full-year target of Bt17.6bn). This, along with the fact that the firm's planned new projects are mostly in the same locations as existing projects, mean it will not be easy for LPN to achieve the target. We also believe it as unlikely that LPN's sales revenue target (identical to the presales target of Bt17.6bn) will be achieved. The Slow Sales rate at completed and nearly completed Projects is the Key factor Behind our expectation, which stands Despite the Fact that the expiration of the Government's Property-stimulus Package in April should Help Boost LPN's 1H16 Revenue to above Bt9.0bn. - Growth Outlook. at risk on declining backlog. The combination of slowing presales and rising sales revenue have clearly eroded LPN's backlog. At the end of 1Q16, backlog fell sharply to just Bt8.7bn from a peak level in the recent cycle of Bt24.9bn in 2Q14. Secured revenue was at just 70% of its target for 2016 and 4percent for 2017. Incorporating presales in April and May of Bt1.35bn, secured revenue still rose by only an insignificant level. LPN's growth Outlook for 2017-18 is thus at risk based on ITS Presales current backlog and Status. - 2Q16 earnings, High-End condo Offer short-term catalysts. On the back of the expiration of the property stimulus package and an increasingly rapid construction process, LPN has been able to encourage clients at many projects to move transfers previously scheduled for 2Q16 through early 3Q16 forward to April. Its 2016 earnings are thus likely to peak in 2Q16. In addition, LPN confirmed it has secured a land bank to develop a second high-end condo project and plans to launch it in late 3Q16 to early 4Q16. Although project details have yet to be disclosed, we see this move and a solid 2Q16 earnings outlook as providing positive trading sentiment for the stock. However, we do not See the Move ITS changing fundamentals, as the low-income segment Will remain the Key Focus in the long term. Valuation - Revision Our earnings triggered a lowering of the PE multiple we use to the Stock VALUE to 7.1x (. -1SDV of its 5-year number) from 8.65x on negative earnings growth expected in 2017. Our 2016 target price thus falls to Bt12.0. With 10% downside risk from the latest closing price to our new TP, we downgrade our recommendation on LPN to Underperform from Neutral.

ผลลัพธ์ (อังกฤษ) 3:

L.P.N. Development Plc (LPN).We downgrade our rating on LPN to Underperform from Neutral after cutting our 2016 target price to Bt12.0 from Bt14.7 in. Accordance with our earnings revision. Weak demand at its low-end condo projects due mainly, to fragile customer credit. In, this segment has not only constrained LPN "s presales but also, lowered earnings visibility. LPN" s 2016 presales and. Targets revenue, Bt17.6bn both, in are our view unlikely to be achieved. In the short term a strong, 2Q16 earnings performance. And the introduction of new high-end condo projects in 3Q16 may boost trading sentiment in, the stock but its fundamentals. Are unchanged: Real demand in its core low-income segment will remain the main driver of LPN "s value.Investment highlights.- 2016-18 earnings revision. We cut our 2016-18 earnings forecasts by 11-23% to reflect weaker-than-expected YTD presales. And slower-than-expected new launches in 2016. Despite maintaining new launch value, in 2016 we slash our full-year presales. Forecast by 15% to Bt15.0bn. New launch value and presales in 2017-18 thus fall, by 11-22% while sales revenue in those. Years is revised down by 8-19%. Based on our, new forecasts 2017 earnings growth will turn negative for only the second. Time since 2004 (and the first time since 2014).- 2016 targets unlikely to be achieved. As a result of sluggish presales at newly launched and, existing projects LPN s. " YTD presales remain low at Bt4.2bn (23.9% of the company "s full-year target of Bt17.6bn). This along with, the fact that. The firm "s planned new projects are mostly in the same locations as, existing projects mean it won" t be easy for LPN to. Achieve the target. We also believe it as unlikely that LPN "s sales revenue target (identical to the presales target of. Bt17.6bn) will be achieved. The slow sales rate at completed and nearly completed projects is the key factor behind our. Expectation which stands, despite the fact that the expiration of the government "s property-stimulus package in April should. Help boost LPN "s 1H16 revenue to above Bt9.0bn.- Growth outlook at risk on declining backlog. The combination of slowing presales and rising sales revenue have clearly. Eroded LPN "s backlog. At the end of 1Q16 backlog fell, sharply to just Bt8.7bn from a peak level in the recent cycle of. Bt24.9bn in 2Q14. Secured revenue was at just 70% of its target for 2016 and 4percent for 2017. Incorporating presales in. April and May, of Bt1.35bn secured revenue still rose by only an insignificant level. LPN "s growth outlook for 2017-18 is. Thus at risk based on its current presales and backlog status.- 2Q16 earnings high-end condo, offer short-term catalysts. On the back of the expiration of the property stimulus package. And an increasingly rapid construction process LPN has, been able to encourage clients at many projects to move transfers. Previously scheduled for 2Q16 through early 3Q16 forward to April. Its 2016 earnings are thus likely to peak in 2Q16. In. Addition LPN confirmed, it has secured a land bank to develop a second high-end condo project and plans to launch it in. Late 3Q16 to early 4Q16. Although project details have yet to, be disclosed we see this move and a solid 2Q16 earnings outlook. As providing positive trading sentiment for the stock. However we do, not see the move changing its fundamentals as the,, Low-income segment will remain the key focus in the long term.Valuation.- Our earnings revision triggered a lowering of the PE multiple we use to value the stock to 7.1x (- 1SDV of its 5-year. Number) from 8.65x on negative earnings growth expected in 2017. Our 2016 target price thus falls to Bt12.0. With 10% downside. Risk from the latest closing price to our new TP we downgrade, our recommendation on LPN to Underperform from Neutral.