KGI Recommends Property Sector as 1Q22 Earnings Expected to Recover Sharply

As the country feels the pressure of rising inflation, fears are growing that a recession is just around the corner. Many traders, therefore, are looking for safe haven assets, and the stock market is more important than ever for long-term investment.

With this reason, KGI Securities Thailand recommends the property sector as an inflation hedge theme during the market recovery, retaining an Overweight rating on the sector’s stocks.

KGI said that amid the limited impact from the Omicron variant, it expects the property sector to report a combined normalized profit of THB6.3 billion  (+16% YoY, -19% QoQ). The QoQ drop should partly come from a sharp drop in high-rise transfers as most new condominium projects are scheduled to be completed from 2Q22F onwards. On a positive note, the average gross margin should remain healthy at 30.7% (flat YoY, +0.3ppts QoQ) confirming its view on the limited impact of rising construction costs.  

AP (Thailand) (SET: AP) and L.P.N Development (SET: LPN) are expected to be top performers in 1Q22F showing strong earnings growth both YoY and  QoQ.  

With an anticipated market rebound ahead, an inflation hedging theme, and a dividend yield of 6% in 2022F, KGI maintained an Overweight rating on the sector and continued to favor stocks with sustained investment plans and exposure to high-rise with no obsolete inventory issues. Origin Property (SET: ORI) (TP THB14.50), AP (TP THB12.80), and Pruksa Holding (SET: PSH) (TP THB17.50) remain the top picks.