We expect net profit surge 80% qoq and 76% yoy in 4Q19 driven by transfers of new transfer condominium project and sale of Grande Centre Point Sukhumvit 55 to LHHOTEL. Management plans to launch 16 low-rise projects worth Bt23b in 2020 but not high-rise projects so far. LH is targeting Bt28b pre-sales and Bt28b residential revenue for this year. We upgrade LH to BUY because the stock now offers 11.6% upside to our Bt11.5/sh TP and dividend yield is attractive at 4% (final dividend).

4Q driven by transfers of high-rise projects and sale of GCP to LHHOTEL

LH started to transfer The Bangkok Sukhumvit 55 in late 3Q19 and transferred the bulk (Bt0.74b or 18.5% of project value at Bt4b) in 4Q19. LH also sold Grande Centre Point Sukhumvit 55 to LHHOTEL and expects to book about Bt2b gain. Overall, we expect LH to book Bt2b core profit for 4Q19 and Bt4b net profit, +80% qoq and +76% yoy.

Management sets moderate targets for residential projects for 2020

So far, LH only has plans to launch 16 low-rise projects worth Bt28.4b this year. It is targeting Bt5b pre-sales for high-rise projects and Bt23b for low-rise projects. This means LH needs to launch high-rise projects this year to meet its pre-sales target. Meanwhile, revenue target is Bt24b for low-rise projects and Bt4b for high-rise projects. The Room Phayathai worth Bt3.9b is 44% sold (average unit price at Bt195k/sqm); this would be the most substantial among four condominium projects scheduled for transfer in 2020.

Upgrade to BUY, maintain TP at Bt11.5/sh; attractive dividend yield

We upgrade LH because the stock now offers 11.6% upside to our TP and dividend yield is attractive at 4% (assumed final Bt0.4 DPS). Our TP is based on SOTP valuation. We expect core EPS to grow 15% yoy to Bt0.71 in FY20F driven by the rental business and recovering residential market, but net EPS should register a contraction due to the high-base this year (gain from sale of asset).