Industrial estate sector: Seems more positive, but there are still concerns

Our top picks for the sector are Amata Corporation (AMAT.BK/AMATA TB) and Hemaraj Land and Development (HEMR.BK/HEMRAJ TB). Both should be key beneficiaries from relocation demand, as they were not affected by the flood. We raised AMATA’s 2012 earnings by 14% to Bt1.4bn and its target price by 46% to Bt18.40. We raised HEMRAJ’s earnings by 9% to Bt2.3bn and its target price by 26% to Bt2.90. Meanwhile, we raised ROJNA’s 2011 earnings from a net loss of Bt2.3bn to a net loss of Bt1.3bn and upgraded the counter to Neutral from Underperform. We maintain a Neutral rating for the industrial estate sector as there are no concrete catalysts to support long-term growth. Thailand’s investment outlook may be aided by the rebuilding efforts at damaged plants in the short-term, but investor confidence will probably suffer in the medium to long term if a proper flood prevention plan is not put in place, as investors revisit their manufacturing footprint and take into account the risk of floods and other natural disasters in Thailand.