KGI Securities expected Sino-Thai Engineering and Construction Public CO., LTD. (STEC) to report 2Q19 core earnings of THB 429 million, increasing 40.5% YoY, 24.9% QoQ. The improvement YoY would be due to higher revenue after accelerated progress on the MRT Orange, Pink and Yellow lines.
The increase QoQ would come from the improved gross margin which no employee benefits provision and a higher dividend income from Gulf Energy Development. Therefore, KGI expected 2Q19 revenue of THB 7.5 billion, rising to 32.6% YoY, 0.3% QoQ while gross margin will improve from 7.3% in 1Q19 to 7.8%. Earnings for 1H19 was expected to be THB772 million, increasing to 129.3% YoY, accounting for 47.7% of our full-year forecast.
KGI recommended “BUY” STEC share with the target price at THB 34.50/share.
AIRA Securities stated in the analysis mentioning the plan of Central Pattana Public Company Limited (CPN) to open 2-3 shopping centers per year and to expand the business in real estate for the mixed-use project such as condominium “The Escent” which has a very good response. All of the 6 projects have been sold out. Moreover, the takeover of Grand Canal Land Public Company Limited or GLAND (not price-in in the analysis) will support the development of lands. Aira expected the investment will continue to buoy the profit growth and long-term stability.
AIRA expected a 2H19 profit growth of CPN to grow better than 1H19 from transferring of three projects of “The Escent” (sold out) and selling a horizontal project of “Phyll” Phaholyothin 34 (30% sold). CPN has also gained an additional income from “Central Village” in the 3Q19 which 70% of the commercial areas or 40,000 square meters for rental have been sold. Moreover, AIRA expected the shopping center after renovation as well as an increase of rental fee to strongly increase a 2H19 of CPN profit growth.
Therefore, AIRA estimated the main business profit for the whole year of 2019 to be THB11,739 million, increasing 8% with the “BUY” recommendation at the target price of THB90/share based on DCF method to the current share price with a 17% upside.