Amata Corporation: Cutting land sales assumptions to reflect tariff uncertainty
- AMATA’s operating countries – Thailand, Vietnam, and Laos – face relatively high US reciprocal tariffs of 36%-48% vs. the region
- Tariffs paused for 90 days, with final tariffs subject to negotiation; this could hit near-term land sales
- Cut our land sales assumptions to 1,200 rai this year and next, from 2,500 rai and 2,200 rai earlier
- Still offering 54% upside to our revised TP of THB22.80, based on 40% discount to RNAV and 10x PE
90-day tariff pause provides temporary reprieve. In a follow-up announcement on 9 April 2025, President Donald Trump introduced a 90-day suspension of these tariffs for over 70 countries – excluding China – to allow time for negotiations aimed at correcting trade imbalances. However, key sectors such as autos, auto parts, steel, and aluminium are excluded from this pause and remain subject to elevated tariffs, highlighting national security concerns.
China tariffs surge as tensions escalate. Separately, the US sharply raised tariffs on Chinese imports – up to 145%, with some categories reaching 245%– in response to China’s retaliatory 84% tariff on US goods. This escalation adds another layer of complexity to the global trade landscape.
The US is set to introduce a special tariff targeting smartphones, computers, and other electronics products – currently exempt from tariffs – within the next month or two. This move will be part of a broader set of sector-specific tariffs aimed at industries such as semiconductors and pharmaceuticals. These new duties will be separate from reciprocal tariffs under Trump's trade policy.
Does this mark the end of China + 1 strategy? Not the end, but an evolution. While the new US tariffs challenge the status quo, they reinforce the importance of supply chain diversification. The "China + 1" strategy is far from obsolete – it’s evolving. We expect multinationals to further diversify operations across ASEAN, while also accelerating nearshoring to destinations like Mexico. This shift supports a more resilient, multi-regional supply chain approach.
Will FDI be redirected to other countries with lower US reciprocal tariffs? While the US reciprocal tariffs could certainly influence FDI decisions, the extent of the impact will depend on the outcome of negotiations and how tariffs evolve over time. If Thailand’s final tariff rate aligns with regional norms, it should remain competitive in attracting FDI. However, investors are likely to consider a combination of factors, including strategic location, industry-specific dynamics, trade agreements, and government incentives, which may mitigate the impact of tariff increases.
However, FDI into ASEAN could slow in the near term. While the final tariff rates are still uncertain, there is a growing concern that FDI into ASEAN could experience a slowdown in the near term. Uncertainty surrounding the US reciprocal tariffs and their impact on trade flows may cause investor hesitancy, delaying or reducing investment. This could be further exacerbated by geopolitical tensions and shifting global supply chain strategies making companies hesitant to commit to large-scale investments in the region.
Potentially muted land sales for AMATA in 1H25. As a result, we believe this slowdown in FDI could have a direct impact on AMATA's land sales, as demand for industrial property may decrease. Given the importance of FDI in driving land sales for industrial estates, the reduced investment inflows could lead to a more muted performance in AMATA’s land sales for 1H25.
We cut our land sales assumptions to reflect such tariff uncertainty. We are now assuming land sales will drop to 1,000 rai this year and 1,200 rai next year, vs. 2,500 rai and 2,200 rai, respectively, in earlier forecasts. We estimate that 1Q25 land sales were in the range of 200-300 rai, still below 1Q24 land sales of 325 rai. 2Q25 land sales could go even lower q/q amidst tariff uncertainty. Note that management still maintains its 3,500 rai land sales target for this year, pending more clarity on the US tariffs.
Huge backlog to still ensure revenue stream in 2025 and 2026. AMATA has a backlog (land sales which have yet to be realised as revenue upon title transfer) of THB21.2bn at end-2024. Of this, THB19.4bn came from land sales in Thailand, while THB1.8bn was from land sales in Vietnam. This backlog is expected to secure a steady revenue stream for both this year and the next. In Thailand, at least 50% of the backlog is expected to be transferred and recognised as revenue in 2025. As for the backlog in Vietnam, which has been delayed for some time, management anticipates that transfers could begin in the second half of 2025.
Can clients just walk away from contracts? With investors having paid on average 45%-50% of the total sales value, contract cancellations are unlikely. This suggests revenue and earnings should continue to grow, at least in 2025, based on our revised land sales of 1,000 rai this year and 1,200 rai next year, before easing in 2026.
AMATA does not rely solely on revenue from industrial land sales. As shown in the following table, around 35%-61% of its revenue came from industrial land sales in recent years, with the rest coming from recurring revenue including utilities, rental, and other income. This recurring revenue base provides a buffer against the volatility of land sales.
Strong profit contribution from associates. AMATA also invests in power and natural gas businesses via its JVs, where the company holds 20%-49% stakes, and thus records these investments based on equity accounting. These investments are mostly recurring in nature, with volatility coming mainly from exchange rate fluctuation, which is a non-cash item. From the table below, we can see that profit from associates made up 15%-56% of the company’s net profit in recent years.
Recommendation
Share price tumbled 30.5% after the announcement of US reciprocal tariffs. AMATA’s share price has plunged 30.5% from THB21.30 to THB14.80 now following the US’s shocking announcement of reciprocal tariffs as high as 10-50% for their trading partners and 36% for Thailand. Despite factoring in more conservative land sales for 2025-2026 to our forecasts, the stock is now trading on a 6.6x PE for 2025 (-2SD of historical average) and 0.77x P/BV (-4SD of historical P/BV). Note that its BV of THB19.11 per share is based on original cost and not re-valued. Its balance sheet is also quite strong, with low net gearing of 41% at end-2024.
Maintain BUY with a lower TP of THB22.80. Our revised TP is based on 10x 2025 PE and a 40% discount to RNAV of THB37.9, as we factored in more conservative land sales assumptions and a deeper discount to RNAV to reflect investors’ wait-and-see approach amidst tariff uncertainty. The stock still offers decent 54% upside to our lower TP. We, therefore, maintain BUY on AMATA, acknowledging near-term risks while recognising its long-term value proposition.
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