Date: October 29, 2024
Broker: UOB Kay Hian

3Q24 Earnings Projection

Land and Houses (LH) is projected to report earnings of Bt920 million in the third quarter of 2024, which represents a 22% year-on-year (yoy) decline and a 10% quarter-on-quarter (qoq) drop. The earnings decrease is attributed to weak presales in the low-rise segment, which have impacted transfer volumes for the quarter.

Residential Gross Margin

The residential gross margin for LH is anticipated to decrease to 24.5% from previous levels. This margin compression reflects the reduced transfer activity and higher fixed costs associated with LH’s operations. The lower transfer volume further contributes to the overall downward pressure on profitability for the quarter.

Low Condo Backlog and Transfer Activity

A significant factor contributing to the earnings decline is the limited condo backlog, which has restricted LH’s transfer volumes in the high-rise segment. The lower backlog has left LH reliant on the low-rise segment, which has not met expectations in terms of presales and transfer activity.

Presales Overview

For 3Q24, LH’s presales totaled Bt4.8 billion, which marks an 11% quarter-on-quarter (qoq) improvement but a 15% year-on-year (yoy) decrease. This mixed performance highlights the ongoing struggles within LH’s low-rise portfolio, as economic challenges and weaker consumer sentiment impact demand for these properties.

Sector Position and Market Weight

In its sector analysis, UOB Kay Hian maintains a “Market Weight” position on the Thai property sector, reflecting a cautious stance on the residential market outlook. LH is one of the companies under this assessment, and its current performance underscores the sector-wide difficulties in driving substantial growth in an environment of constrained consumer confidence.

Risks and Key Challenges

Several risks could further impact LH’s performance, as highlighted by UOB Kay Hian. These include the tightening of bank policies, which may reduce consumer access to credit, as well as rising operational costs. In addition, weaker-than-expected economic growth poses a risk to LH’s ability to sustain its presales and transfer volumes in the coming quarters.