Date: October 29, 2024
Broker: UOB Kay Hian

3Q24 Earnings Growth

Supalai (SPALI) is expected to report a robust net profit of Bt1.8 billion for the third quarter of 2024, marking a significant 52% year-on-year (yoy) increase and a 13% quarter-on-quarter (qoq) rise. This substantial growth in earnings is primarily driven by strong performance in the high-rise segment and an increase in transfer volumes across key projects.

Residential Revenue and High-Rise Segment Performance

SPALI’s residential revenue for 3Q24 is projected at Bt9.7 billion, a 37% yoy and 23% qoq increase. This growth is largely attributed to successful transfers from prominent projects such as Icon Sathorn and Loft Phasi Charoen Station. These high-rise developments have bolstered SPALI’s overall transfer activity, establishing it as a standout performer in the residential property sector for the quarter.

Gross Margin and SG&A Improvement

SPALI’s residential gross margin is forecasted to rise to 37.5%, benefiting from a higher proportion of high-margin high-rise transfers. Additionally, the company’s SG&A-to-expenses ratio is expected to decline both yoy and qoq, supported by a larger revenue base. This improvement in operational efficiency has further contributed to SPALI’s profitability for the quarter.

Equity Income from Overseas Projects

While domestic projects remain the primary driver of earnings growth, SPALI’s equity income is projected to decrease slightly qoq, attributed to seasonal low transfers from its projects in Australia. Nevertheless, the company’s international portfolio continues to provide a diversified income stream, supporting overall financial stability.

Sector Position and Strategic Outlook

UOB Kay Hian maintains a “Market Weight” rating on the Thai property sector, noting that while there is some improvement, the market remains cautious due to external economic factors. SPALI’s strong performance in high-rise transfers and margin management positions it favorably within the sector, highlighting its strategic focus on both domestic and international growth opportunities.

Risks and Market Considerations

SPALI faces potential risks related to fluctuating economic conditions and tighter lending policies, which may impact consumer purchasing power in the residential sector. Additionally, increased operational costs pose a challenge, although SPALI’s efficient cost management and high-margin projects provide a buffer against these pressures. The company’s diversified revenue sources, including international projects, offer resilience in navigating these uncertainties.