Company Report - IMPACT - E - 20180219081453
Company Report - IMPACT - E - 20180219081453
Company Report - IMPACT - E - 20180219081453
IMPACT TB Outperform
Higher ARR outlook on economic growth
Target Price Bt17.20
We reiterate our Outperform rating on IMPACT and lift our target price to
Close Price (16/02/2018) Bt 15.70 Bt17.2 from Bt15.6 as we revise up our FY2017-19E earnings forecasts. We
Upside % 9.55 expect an improving economy will enable IMPACT to raise rental rates in
Valuation DDM FY2018-19E, and thus we raise our average rental rate (ARR) assumptions
Sector Property Fund for FY2017-19E by 2-5%, and accordingly FY2017-19E core earnings by 8-
Market Cap Btm 23,275 13%. Our economic view is based on our house economist’s expectation for
30-day avg t/o Btm 10.29 GDP growth to accelerate to 4.0%/4.2% in 2018/19E from 3.2%/4.0% in
No. of shares m 1,483 2016/17E. We estimate a dividend yield of 5.5%/5.9% for FY2018/19E (vs
CG Scoring N/A peer average 5.0%) and a widening gap between IMPACT’s dividend yield
Anti-Corruption Indicator N/A and 10-year bond yield in FY2018-19E, which should provide a cushion
Investment fundamentals against the negative impact on fund prices from an expected higher 10-year
Year end Mar 31 FY2016 FY2017E FY2018E FY2019E bond yield in 2018-19E.
Company Financials
Revenue (Btmn) 1,903 2,235 2,393 2,543 Investment highlights
Core profit (Btmn) 992 1,231 1,344 1,442 ► Better economic conditions to support a rental rate increase. IMPACT
Net profit (Btmn) 999 1,327 1,431 1,541 lowered prices in FY2015 (Apr 2015-Mar 2016) that resulted in full-year FY2015 ARR
Net EPS (Bt) 0.67 0.90 0.97 1.04
decreasing by 3%. Prices were lowered in an effort to maintain existing clients amid
DPS (Bt) 0.66 0.81 0.86 0.93
weak economic (GDP) growth of 0.8% in 2014. Our house economist expects
BVPS (Bt) 10.81 10.89 11.00 11.11
Net EPS growth (%) -16.25 32.88 7.86 7.69
Thailand’s GDP growth to accelerate to 4.0%/4.2% in 2018/19E from 3.2%/4.0% in
ROA (%) 4.87 6.47 6.94 7.41 2016/17E. We believe this positive outlook will enable IMPACT to negotiate with
ROE (%) 6.22 8.25 8.82 9.40 clients to raise rates. We thus assume ARR to increase by 5%/4% in FY2018/19E to
Net D/E (x) 0.20 0.20 0.20 0.19 Bt65/Bt67.7 per sqm/day, which should be a key earnings growth driver in both
Valuation years.
P/E (x) 22.27 17.54 16.26 15.10
► Revising up FY2017-19E earnings forecasts. We revise up our FY2017-19E
P/BV (x) 1.39 1.44 1.43 1.41
core earnings estimates by 8%/11%/13% to Bt1.23bn/Bt1.34bn/Bt1.44bn to reflect
EV/EBITDA (x) 22.03 19.15 17.67 16.45
Dividend yield (%) 4.40 5.16 5.48 5.92
our higher ARR assumptions and better-than-expected ARR in 3QFY17. As higher
rental rates should result in a higher GPM with rental area to remain the same, we
raise our FY2017-19E GPM assumption by 80-110 bps to 87.8%/87.9%/88.1%, and
IMPACT TB rel SET performance thereby expect FY2018/19E core earnings growth of 9%/7%.
THB IMPACT TB [LHS] Rel SET [RHS] Index
► Attractive dividend to mitigate pressure from rising bond yield. Although
18
the 10-year bond yield is likely to increase in FY2018-19E and pressure prices of
100 fixed income instruments such as REITs, this should be offset by 1) higher FY2018-
16
19E dividend yields of 5.5%/5.9% vs the average dividend yield of other listed
90 property funds and REITs of 5%; 2) a widening gap between IMPACT’s dividend
14
yield and forecasted 10-year bond yield of 2.8%/3.0% in FY2018/19E from
1.7%/2.7% in FY2016/17E; and 3) an expected incremental dividend yield of 32
12 80
bps/45 bps in FY2018/19E, which would be a faster increase than 10-year bond yield
Feb-17 May-17 Aug-17 Nov-17
by 18 bps/year in the same period based on the 10-year bond yield forecast of
Source: SET Smart Kasikorn Bank Pcl. (KBANK TB, Bt228, Not rated) for 2018E and Bloomberg
(all figures in THB unless noted)
consensus for 2019E.
► 4QFY17E earnings to surge YoY. We expect 4QFY17E (end-March 2017) core
earnings growth of 30-35% YoY driven by new events such as Thailand LGBT Expo,
Smart Senior Destination Fair, and ASEAN Logistics & Purchasing Expo, and a higher
Analyst number of international concerts such as Super show 7 and Imagine Dragon Evolve
Korakot Sawetkruttamat World Tour. 4QFY17E earnings are likely to be weaker QoQ due to the absence of
[email protected] major events held in 3QFY17, such as Motor Expo and OTOP City.
Valuation
19 February 2018 ► We raise our DDM-based target price to Bt17.2 from Bt15.6 following our FY2017-
Kasikorn Securities Public Company Limited 19E earnings upgrades. Our target price implies a 5.0% dividend yield for FY2018E,
which is in line with the average dividend yield of other property funds and REITs.
Fig 1 Expect ARR to increase in FY2017-19E Fig 2 Quarterly ARR and GDP growth
In terms of occupancy rate (OCR), we believe improving economic conditions will spur an increase in
events. For example, some retailers may arrange more trade fairs to boost sales during a period of
improving consumption compared to during weak consumption sentiment. As a result, we expect
IMPACT’s OCR to increase gradually from 51% in FY2017E to 53% in FY2019E.
Fig 3 OCR to gradually increase in FY2017-19E Fig 4 Quarterly OCR and GDP growth
40%
FY2014 FY2015 FY2016 FY2017E FY2018E 2019E
Profit and loss statements New Previous %Change New Previous %Change New Previous %Change
Service revenue 2,235 2,186 2.2 2,393 2,285 4.7 2,543 2,388 6.5
Cost of services 273 284 (3.8) 289 297 (2.7) 302 309 (2.4)
Gross profit 1,962 1,903 3.1 2,104 1,988 5.8 2,241 2,079 7.8
SG&A expenses 585 607 (3.7) 614 627 (2.1) 644 650 (0.9)
Operating profit 1,387 1,307 6.1 1,500 1,373 9.3 1,607 1,441 11.6
EBITDA 1,387 1,307 6.1 1,500 1,373 9.3 1,607 1,441 11.6
EBIT 1,483 1,445 2.6 1,587 1,559 1.8 1,706 1,641 4.0
Core profit 1,231 1,146 7.5 1,344 1,212 10.9 1,442 1,271 13.4
Net profit 1,327 1,284 3.4 1,431 1,398 2.4 1,541 1,471 4.8
Key assumptions
Occupancy rate (%) 51.3 51.3 0.0 52.4 52.1 0.4 53.1 52.4 0.7
Average rental rate (Bt/sqm/day) 61.9 60.5 2.3 65.0 62.3 4.3 67.7 64.2 5.4
GPM (%) 87.8 87.0 0.8 87.9 87.0 0.9 88.1 87.0 1.1
Source: KS Research
Our revisions result in FY2018-19E core earnings growth of 9%/7% from expected core earnings growth
of 24% in FY2017E. We therefore expect IMPACT to pay a dividend of Bt0.81/Bt0.86/Bt0.93 for FY2017-
19E, representing yields of 5.2%/5.5%/5.9% based on the current share price.
Fig 6 FY2018-19E core profit to continue to grow Fig 7 Dividend yield to increase to 6.0% in FY2019E
2) an expected widening gap (dividend yield gap) between IMPACT’s dividend yield and the
forecasted 10-year bond yield to 2.8%/3.0% in FY2018-19E from 1.7-2.7% in FY2016-17E. This
yield gap is higher level the two-year historical average of 2.5%; and
Our assumption of Thailand’s 10-year government bond yield is based on KBANK’s forecasted rise in bond
yield to 2.7% at end-2018 and the Bloomberg consensus forecast for a continued increase to 2.95% at
end-2019.
Fig 8 10-year bond yield to trend up in 2018-19E Fig 9 Widening dividend yield gap in FY2017-19E
2.2% 0.0%
2015 2016 2017E 2018E 2019E FY2015 FY2016 FY2017E FY2018E FY2019E
Fig 10 Historical 10-year bond yield vs IMPACT’s DY Fig 11 Two-year historical average of DY gap
Jan-18
Jul-16
Sep-16
Mar-17
Nov-16
Jul-17
Sep-17
Nov-17
May-16
May-17
Dec-16
Dec-17
Jul-16
Jan-17
Mar-17
Apr-17
Jan-18
Oct-16
Sep-16
Feb-17
Jul-17
Nov-16
Sep-17
May-16
Jun-16
Aug-16
May-17
Jun-17
Aug-17
Oct-17
Nov-17
4QFY17E
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
Source: IMPACT, KS Research Source: IMPACT, KS Research
New events
Regular events
Our DDM-based target price is based on a discount rate of 8% with a terminal growth rate of 2%. At the
stock’s latest closing price, IMPACT offers an attractive total shareholder return of 15% (capital gain 10%,
dividend yield 5%).
Fig 15 Expect FY2017-19E dividend yield of 5.2%-6.0% Fig 16 Quarterly dividend yield since fund’s inception
(%) Bt/shr
6.5% 0.24 0.23
0.22
5.9% 0.22 0.21
6.0%
0.20
5.5% 5.5% 0.20 0.19 0.19 0.19
5.5%
5.2% 0.18 0.18 0.17 0.17 0.17
0.18
5.0%
0.16 0.15
4.4%
4.5%
0.14
4.0% 0.12
3.5% 0.10
3QFY14
4QFY14
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QFY17
2QFY17
3QFY17
3.0%
FY2015 FY2016 FY2017E FY2018E FY2019E
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject security(ies) and subject company(ies); and
no part of the compensation of the research analyst(s) was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in
the report.
Investment Ratings
Outperform: Expected total return of 10% or more within a 12-month period
Neutral: Expected total return between -10% and 10% within a 12-month period
Underperform: Expected total return of -10% or worse within a 12-month period
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