• Positive view on FY18 business plan; LH will be more aggressive in new launches after being conservative for the last two years
• Potential upside to FY18F earnings, dividend and value of new rental asset
• Maintain OUTPERFORM, TP Bt12; high revenue visibility, good presales growth and decent dividend yield

Turning more aggressive in FY18

We returned from LH’s FY18 business plan meeting with a positive view. It had been conservative in new launches at Bt10-18bn p.a. in the past two years and its inventories especially for low-rise units are very low. Therefore, LH has increase new launches to 22 projects worth Bt36.3bn (+260% yoy) this year, comprising 72% low-rise and 28% condominium. Land has been secured. It is targeting Bt31bn presales (+19% yoy), Bt33bn property revenue (+6.4% yoy) and Bt3.7bn rental income (+19% yoy).

Guidance suggests upside risk to our earnings

Its current backlog secures 20% of our FY18F property revenue of Bt31.6bn (mostly condominiums), which is high. Normally, about 70-80% of LH’s revenue is from low-rise segment for which there is no backlog due to its pre-built strategy for low-rise segment. This suggests upside for our revenue forecast. There is also upside risk to dividends as we have not included the potential divestment of the apartment building in the US. The potential new rental asset in Bangkok is another upside. LH plans to lease land in Chuvit Garden (near BTS Nana station) to develop a hotel and office building for rent at a budget of Bt5-6bn. 

OUTPERFORM, SoTP-based TP Bt12; several upside potentials are on the table

Despite LH’s share price rising 11% YTD and almost at our TP, we maintain our positive view because we see upside to FY18F earnings, dividend yield and value accretion from the new rental asset. We shall revisit upon our 4Q17F preview. Good presales momentum from higher launches should drive up the share price further. However, the 7.2% rise in the share price yesterday could trigger profit-taking.