ALL: Intense Price Competition Drags on Growth Prospects
We downgrade our recommendation to HOLD from BUY and reduce our target price to Bt3.49 (previously Bt4.00), implying a downside of 5% from the current price. We derive our target price from a 20% discount to the 2021E PE ratio of Asia ex Japan Real Estate and apply a 15% small-cap discount.
Investment thesis:
- Recent investment in shopping mall diversifies revenue stream
- Partnership with Japanese firms as a gateway to efficient residential development
- Pipeline residential projects ensure constant near-term growth
Interim: The 4Q20 results provided mixed signals. While the high revenue was a positive surprise, the pandemic has caused price competition, resulting in lower margins. We expect that the Real Estate sector continues to face hardship throughout 2021.
Risks: Increased competition and slowdown in demand for residences, rising land and construction costs, delayed construction and transfer of projects, access to capital.
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