In the News: 2009

Preuksa looks for growth through investments outside Thailand

The Wall Street Journal, December 29, 2009
By ORANAN PAWEEWUN

BANGKOK—Preuksa Real Estate PCL, a Thai property developer, said Tuesday it may increase its investments in China and Indonesia and expand to the Maldives as it pushes aggressively to lift revenue to 100 billion baht ($3 billion) by 2017.

Chief Operating Officer Prasert Taedullayasatit said the company is in negotiations to set up a joint venture with the Maldives government to construct a low-rise residential project next year. In the meantime, he said, Preuksa is exploring investment opportunities in China and Indonesia as both countries have large populations and residential demand is still strong.

The company is aiming to build up its portfolio outside Thailand to diversify its revenue streams and seek new growth markets. Its first foray overseas was in two wholly owned residential projects in India early this year, followed by an 85%-owned project in Vietnam in the second half of the year. Mr. Prasert said the company will realize around one billion baht next year from the projects in India and Vietnam.

Revenue from overseas investments is expected to contribute 40% of the company's total revenue target of 100 billion baht in 2017, he said.

The company this year set an industry record by chalking up presales of 23 billion baht, beating the 22 billion baht achieved in 2005 by Land & Houses PCL, Thailand's largest property developer by revenue.

Preuksa's presales in the current quarter are poised to hit eight billion baht, beating its previous quarterly high of 5.99 billion baht in the July to September period. Preuksa earlier had targeted presales of 18 billion baht and revenue of 17 billion baht for this year. Mr. Prasert said the company's revenue this year will exceed its target, while net profit will rise from last year's 2.73 billion baht.

"The key to success is our cost competitive edge and speed of construction. Our building cycle for townhouses and single-detached houses takes around 60 days only, but our suppliers give us 75 days in credit. It means we have money from customers' reservation before we pay to the suppliers," he said.

Townhouses and single-detached houses account for 75% of the company's revenue, while condominiums make up the rest. Preuksa is expected to enjoy around 25-30% growth in both presales and revenue next year, well above the industry's growth of 5%-10%, Mr. Prasert said.

Its backlog at the end of this year will be 15 billion baht to 16 billion baht, of which 10 billion baht will be realized as revenue in 2010, he said.

The property developer's net profit next year will be higher than 2009, based on the assumption that the Thai government will not extend property-tax incentives for the sector, he said.

The incentives, which are due to expire on March 28, include a reduction of a specific business tax for developers to 0.1% from 3.00% and a cut in land transfer and registration fees to 0.01% from 2% and 1%, respectively.

The company plans to launch 48 residential projects next year valued at 30 billion baht to 40 billion baht, and will use its cash-flow together with a 10 billion baht credit line from financial institutions to finance them.