SPRIME: Depressed Price Offers a Good Opportunity to Accumulate

We keep our BUY recommendation on SPRIME with a target price of Bt11.00 (previously Bt11.20), implying an upside of 38% from the current price. We derive our target price from a DCF-based valuation using a WACC of 6.8% and no terminal period.

Investment thesis:

• Large tenants across various industries should make occupancy resilient
• Addition of various Singha properties offers upside to our target price
• Downside from COVID-19 shutdown should be limited
• Now paying cash dividends, expect 7% in 2021E

Interim: Revenue fell by 5.5% in 3Q20 YoY but was up 3.4% QoQ, showing resilience in occupancy. While we see a slightly lower revenue in 2020E, we expect a bit better margins from this year and going forward.

Risks: Conflict of interest risk due to the largest unitholder and property owners being within the same conglomerate, rising bond yields, falling occupancy rate, and higher-than-expected renovation and overhaul costs.