Brief Thailand: QH: 2018 Earnings Grew 10% In-Line with Our Forecast and more

In this briefing:

1. QH: 2018 Earnings Grew 10% In-Line with Our Forecast
2. Memory Chips and the Elasticity Myth

1. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

QH has 4Q18 net profit of Bt786m (-13%YoY, -40%QoQ). The 2018 result was in-line with our expectation.

• 4Q18 earnings from property development segment drop 36%YoY caused by one time charge of Bt150m from litigation and lead to higher SG&A-to-sales to 25.4% from 18.1% in 4Q17. Meanwhile, total sales grew 20%YoY.
• 4Q18 equity income grew 12%YoY at Bt493m driven by HMPRO contribution which derived from its branches expansion and HMPRO S.
• 2018 core earnings grew 83%YoY to Bt2.0bn backed by gross margin improvement and better SG&A controls. Meanwhile, sales drop 6% YoY due to lower new project launches.
• We maintain positive outlook in 19-20E driven by Q Sukhumvit transfer and foresee little impact from LTV implementation. QH’s portfolio are based on luxury segment and 50% of net profit come from equity income which mainly driven by HMPRO.
• Announced an interim dividend payment of Bt0.14 (XD on 24 Apr), which is equivalent to 4.3% upcoming dividend yield.

We maintain our BUY rating with a target price of Bt3.9 based on 10xPE’19E.

2. Memory Chips and the Elasticity Myth

During recent earnings calls memory chip makers have postulated that the market will return to higher margins once price elasticity causes demand to increase.  This popular myth needs to be treated with great skepticism since, as this Insight will reveal, short-term price elasticity has a negligible impact upon memory chip sales if it has any impact at all.