ALL: Worsened Outlook and Dilution Make the Stock Unattractive

We downgrade our recommendation to SELL from HOLD and reduce our target price to Bt2.70 (previously Bt3.49), implying a downside of 16% from the current price. We derive our target price from a 20% discount to the 2022E PE ratio of Asia ex Japan Real Estate and apply a 15% small-cap discount.

Investment thesis:

• Partnership with Japanese firms as a gateway to efficient residential development
• Pipeline residential projects ensure strong mid-term growth
• Convertible bonds dilutes existing shareholders

Interim: 1Q21 was a tough quarter for ALL, and the consequences of the pandemic on the real estate sector become visible. Both margin and revenue growth were suppressed by intense competition and weakened credit terms for potential buyers. Also, the additional shareholder dilution effect has let us downgrade our recommendation.

Risks: Increased competition and slowdown in demand for residences, rising land and construction costs, delayed construction and transfer of projects, access to capital.