Hemaraj Land and Development Plc. (HEMR.BK/HEMRAJ TB): Positive investment sentiment

At yesterday’s analyst meeting, HEMRAJ’s management expressed its confidence that the company would achieve its land sales target of 1,700 rai supported by good investment momentum in Thailand even with the disruptions from Japan’s earthquake and tsunami early in the year and ongoing severe flooding in Thailand. The company has been insignificantly impacted thanks to its good location and industrial clustering in its industrial estates. Besides, new business opportunities, such as co-investing in SPP projects and establishing a logistics park, should generate higher recurring incomes and add value to the counter in the long run. Nevertheless, we cut our net profit forecast by 63% to Bt362mn in 2011 due to higher-than-expected unrealized FX loss from affiliates. However, we are maintaining 2012 earnings forecast and reiterate Outperform on the counter with a target price of Bt2.30. While the upside to our target price may be limited, positive investment sentiment in flood safe areas may allow the share price to overshoot in the short term.