Finally, I gratefully thank my parents and my friends for all their support throughout the period of this thematic article. This thematic article provides a perspective on valuation studies focusing on the stock price of Ananda Development Public Company Limited (ANAN), based on the discounted cash flow valuation model (FCFF), which represents the concept that the company's stock price represents its fundamental value should reflect. term of cash flow, growth and risk. The one-year target price result of ANAN will be approximately equal to THB 3.53, compared to the current price of THB 4.00. Therefore, the rating is indicative of SELL.
VALUATION
Highlights
Business Description
- Main Subsidiary
- SWOT Analysis .1 Strengths
After-sales service: one of Ananda's subsidiaries is a community management and service delivery entity of the legal entity. Customer Confidentiality: After Aston's building failure to transfer to customer, which affects Ananda's reputation. Budgeting constraint: Ananda's capital structure is mainly financed by equity, but it can raise more budget with loans.
Macro-Economic Analysis
- Positive Factor
- Negative Factor
These numbers (numbers) may imply that, due to the larger population in Bangkok, the larger number of high-income households. The number of real estate loans to total loans in Thailand remained stable from 2011 to 2017 (Graph 5). This may indicate that Thai people generally have more debt, which is relevant to mortgage growth for housing growth, as mentioned above. After 2015, the growth rate of the number of registered apartments dropped from 25% to 9%, reflecting consumer confidence to spend money.
Industry Analysis
- Expansion of the condominium market along the mass transit route Since the sky train was built in 1999, and the subway was opened in 2004
- Property Developer Company in Thailand joint venture with foreign and more foreign customer in the market
- Investment of the Retirement Community project during 2018-2020 Thailand is transitioning from the elderly society to the complete old society
- Prop Tech 'New Normal' 4.0 eras when the property comes integrated with technology
They also change their lifestyle and lifestyle in the city to become more "Vertical Living". In 2027, the final year of Bangkok's mass transit network development plan. In the residential segment for the elderly, developed by the private sector, there are two types of housing projects.
In addition to the entrepreneur, the target group will target a family with elderly people and also expand the market to residential buyers who will also become a parent in the future. As a result, the number of elderly people with middle income earners will increase in the future and this may reflect the opportunities for the long-term housing market for the elderly. It should be able to attract the elderly to trust and eventually buy housing.
In the real estate business it is the same, but it has to adapt to catch up with the development of Property Technology or in short as 'Prop Tech'. In the 4.0 era, "Digital Disruption" has transformed the real estate industry into the "New Normal" or "new norms" for the real estate industry. To meet the needs of consumers in the era by bringing Technology to the property business called Prop Tech when consumer behavior changes to this new norm.
It is to find technology developers who are involved in business, be it building technology, home management online buying and selling systems or even residential technology.
Competitors Analysis
- Ananda Development the first Tech Company in Thailand Ananda Development restricting the decision to Tech Company, the first in
- Ananda Development the market leader in condo along the mass transit
- Ananda Development is the number one joint venture in market Since Ananda Development joint venture with Mitsui Fudosan, Japan’s largest
- Ananda Development is the number one of international sales From the growth of the real estate market due to the expansion of foreign
But often the technology happens to support the original work in each section to the potential or strengthen the quality. Prop Tech is a new business opportunity from entrepreneurs, if we look at Prop Tech's investment angle is to find new business opportunities, but in terms of strategy, the key objective is to look for startups related to real estate. To meet the core business of real estate development companies, that is the development of project for both sale and rent there.
As a result, the company has gained the trust of its customers and strengthened its leadership in the development of buildings near mass transportation to meet city life. According to the growth, it can be concluded that Ananda Development is the number one joint venture strategy in Thailand from the result of 5 years the value is 95,000 million baht and 21 projects in hand. Most foreign customers come from 38 countries, but the segment has resulted in the highest sales growth from 10 countries: USA, UK, Canada, Australia, China, Japan, Hong Kong, Singapore, Malaysia and Taiwan account for 93%. of all foreign customers.
Ananda Development gains about 3% market share in the listed company industry and grows in market share about 1% in the top 10 residential development companies in Thailand. According to the statistics market data (market data statistics) recorded by SET in Thailand in Ananda Development get about 3% of the market share from the company's sales report shows 11,340 million baht if compared to the total sales of the industry in 2016 about 403,571 million baht and in 2017 still gain 3% market share in the industry, this means that the performance of Ananda Development is still stable. If we focus on top 10 companies related to housing development which are almost popular choice of customers like LH, PSH, SPALI, QH, SIRI, AP, LPN, ANAN, GOLD and SC, Ananda development got about 5% of market shares in 2016.
Anandas continues to perform and may (capable) gain more customer reliance as a result of market share growth of around 1% from 5% to 6% in 2017 when compared to the top 10 housing developers in Thailand.
Discounted Cash Flow Valuation (DCF)
- Investment Summary
- Discounted Cash Flow Assumption
- Valuation summary
Then calculate the value from the project value and subtracted from the transfer value of the previous year. In terms of depreciation, we look at PBM data based on the details in the notes to the financial statements for the last 5 years. So after we calculate the data, we'll assume that the next four years' estimate of depreciation is the same as the last year of 2017.
In terms of capital expenditure, we calculate the value of the starting property development for sale each year, plus the CAPEX for the year, and subtract from the cost of each year's project sales to obtain the year's ending property development. We know the date of the last 5 years of the start of the property development for sale and the cost of the project sale which also ends with the property development for sale in the year from the start of the previous year, so we can calculate the CAPEX for the year of can calculate. In terms of net operating working capital, we calculated the sum of the total value of trade receivables and inventory and subtracted trade receivables.
For the value of debtors, we calculated by dividing estimated annual revenue by 365 days and multiple with average debtor turnover ratio of ANAN from the past 5 years as 11.45. For the value Inventory, we calculated by dividing the estimated cost of the year by 365 days and multiple with average inventory turnover of ANAN from the last 5 years as 0.33. For the value of Accounts Payable, we calculated by dividing the estimate for the year's purchases by 365 days and multiplying by the average accounts payable turnover for ANAN from the past 5 years as 54.56.
According to information above, the cost of equity result of ANAN is equal to 9.25%.
Scenario Analysis
Evaluation criteria: Based on the stock price from the valuation using the discounted cash flow method to the company, we assign a recommendation for the target stock, when the upside is more than 10% from the current price, we assign a BUY recommendation and when the upside is -10%, we assign a 10% HOLD recommendation and when the estimated price target has 10% lower than the current price, we assign a SELL recommendation. The results show that the share value will increase to THB 6.25 at best, when compared to the underlying supply, we still recommend BUY. On the other hand, in the worst case scenario, the share price will fall to THB 0.80 compared to the base case, so we still recommend SELL.
In conclusion, if the change in the EBIT factor from the situation can significantly affect the share price.
Sensitivity Analysis
Financial Analysis
Investment Risk and Downside Possibilities
- Fierce market in real estate industry
- The scarcity of empty land in metropolis
- Risks from the changing of regulations and laws which relating to real estate business
- Risk from higher cost of construction
- Risk of inventory
- Risk of Ananda’s financing and approval restriction policy from financial institution
In addition, the company has a policy of not owning land before the investment, which may be costly, may affect the risk of land acquisition that is not in accordance with the future business plan and the increasing land price risk. To reduce this risk factor, Ananda has a long-term plan with land agency partner to limit the risk of unexpected land purchases in potential locations with optimized costs. The risk of land acquisition that cannot be developed the project due to legal restrictions.
For the development of condominium projects, the Environmental Impact Assessment (EIA) must be requested for EIA approval. Currently, the approval is under approval of the committee for environmental impact analysis agencies to consider the environmental impact report. To present the report, Ananda hired a consultancy firm registered with the Ministry of Natural Resources and Environment, which is responsible for preparing the Environmental Impact Assessment and related laws and regulations. Ananda has met the conditions in the EIA report in all respects. .
Ananda is connected to its business alliance and believes that strong business partnerships will mitigate the risk of price adjustment. In terms of labor cost escalation, Ananda has a project development concessionaire that can reduce the risk of labor cost adjustment for a project under construction. As a policy to limit the risk of unsold units through more efficient inventory management, low-rise housing projects and townhouse projects will be developed.
For condominium projects, Ananda has reduced the risk of units being left over by focusing on in-depth research to develop the style of condominium projects and meet the demand of key target groups.
DATA
Business Structure
Revenue Breakdown
Major Shareholders (as of March 14, 2017)
Organizational Chart
Management
- Board of Directors
Corporate Governance
Five Forces Analysis
- Threat of New Entrants: low
- Threat of Substitutes: low
- Bargaining Power of Customers: medium
- Bargaining Power of Suppliers: low
- Competition in the industry: high
On the other hand, product differentiation such as location and innovative design will reduce the buyer's bargaining power. There are many direct and indirect competitors who need the same similar material products that Ananda needs. As for the construction concessionaire, Ananda has a subsidiary construction company called Helix, which provided approximately 30% of the total project to Ananda's project in order to reduce the risk and bargaining power of the supplier.
Workforce, Ananda has taken this factor into account by implementing an innovation called Ananda UrbanTech to reduce the amount of labor required in construction. The growth rate of the industry will affect fierce completion and the land price will rise faster, lowering the margin of each developer.
Income Statement of Ananda
Statement of Cash Flow Projections
Backlog Data in percentage of project sold and transfer Table 2.6 Backlog Data of project sold and transfer
Backlog Data in percentage of project sold and transfer in JV Table 2.7 Backlog Data of project sold and transfer in JV
Discount Cash Flow Valuation Model Table 2.10 Discount Cash Flow Valuation Model
Financial Statement of ANAN
Statement of Comprehensive Income of ANAN
Common Size Analysis of Assets of ANAN
Common Size Analysis of Liability and Equity of ANAN
Common Size Analysis of statement of income of ANAN
Trend Analysis of Assets of ANAN
Trend Analysis of Liability and Equity of ANAN
Trend Analysis of statement of income of ANAN
Growth Analysis of Assets of ANAN
Growth Analysis of Liability and Equity of ANAN
Growth Analysis of statement of income of ANAN
Return Ratio of ANAN
Retrieved from https://www.ananda.co.th/en/ir/presentations/presentations Ananda Development Public Company Limited.
