Date: October 29, 2024
Broker: UOB Kay Hian

3Q24 Performance Overview

AP (Thailand) is expected to report a net profit of Bt1.36 billion in the third quarter of 2024, marking a 17% year-on-year (yoy) decline but an 11% quarter-on-quarter (qoq) increase. Revenue from real estate sales is anticipated at Bt9.6 billion, with townhouse sales as a primary contributor. This quarterly improvement comes despite overall challenges in the residential property sector.

Gross Margin and Transfer Mix

For the third quarter, AP’s residential gross margin is projected to moderate to 32%, primarily influenced by a shift in the transfer mix. This adjustment reflects the balance between high and low-margin property transfers in AP’s portfolio. Meanwhile, the selling, general, and administrative (SG&A)-to-sales ratio is expected to improve slightly over the previous quarter, supporting overall profitability.

Equity Income Boost from Project Transfers

AP’s equity income is expected to see a considerable increase from the prior quarter, largely driven by the transfer of a significant project, “Life Rama 4 – Asoke.” This project is a highlight for the quarter, bolstering AP’s revenue through its steady transfer activity, contributing positively to overall earnings.

Presales and Project Outlook

AP’s presales remained resilient in 3Q24, reaching Bt13.4 billion, a 15% yoy increase but slightly down by 7% qoq. Despite market-wide presales challenges in both low-rise and high-rise segments, AP has demonstrated consistent performance. Moving into 4Q24, AP anticipates an upswing in presales, supported by new project launches and positive market sentiment, spurred by a recent interest rate cut and favorable upcoming real estate measures.

Sector Standing and Market Position

Amidst a cautious sector outlook, AP (Thailand) is noted as a top pick by UOB Kay Hian within the Thai property sector. The brokerage maintains a “Market Weight” rating for the sector, acknowledging the slow recovery potential in the residential market. AP’s diversified portfolio and strategic project management are seen as strengths that position the company to weather ongoing economic uncertainties better than some of its peers.

Risks and Considerations

UOB Kay Hian highlights risks for AP that include tightening bank lending policies and a volatile economic landscape, which may impact consumer purchasing power. Additionally, rising costs and slower-than-expected economic growth could pose challenges to sustaining the current trajectory in AP’s residential segment.