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Flat growth expected despite a decrease in demand for property

The Nation March 3, 2009 Developer sees itself better placed than many of its peers Land & Houses, the country's largest developer, estimates flat sales at Bt15.4 billion this year, with residential demand expected to drop by more than 11 per cent due to the economic crisis. Forecasts indicate that overall residential demand this year will drop to 70,000 units, from 79,300 last year. "With flat growth, we'll be better off than many," senior executive vice president Naporn Soonthornchitcharoen said at a press conference yesterday. In 2008, LH saw its sales revenue drop 17.4 per cent on year, from Bt18.4 billion a year earlier. In 2006, sales totalled Bt17.61 billion, while 2005 was a record for the firm at Bt22.74 billion. Still, LH and some developers managed to post an increase in 2008 earnings after cutting inventory costs. LH led the market with earnings of Bt3.4 billion, up 8.5 per cent year on year from Bt3.16 billion. Lalin Property's earnings rose from Bt120 million a year earlier to Bt178.9 million. However, developers are more cautious about this year, given that the crisis has hit the manufacturing sector hard, which will put many workers out of a job and dampen consumer spending. Rutt Panichbhandhu, CEO and president of LH subsidiary Quality Houses, said the company will focus on maintaining cash flow and cost-cutting this year, with inventory being reduced. "Profitability will be the second priority," he said. Last year, net profit rose to Bt1.56 billion - against Bt1 billion a year earlier - due to a higher gross margin at 32.8 per cent, compared to 27.9 per cent a year earlier. Naporn said the company was now waiting to see whether the government's stimulus package would lift the economy. If it succeeds, the property market may recover in the second half. "We started to see a recovery in demand in February. The number of visitors in the month was 800 per site on average. And 10-11 per cent of the visitors per site decided to buy houses. These are better [numbers] than in January," he said, adding the percentage of visitors making buying decisions in January had dropped 20-25 per cent from the same period last year. To achieve its sales goal, LH will launch 12 residential projects worth Bt16.38 billion this year, raising its portfolio to 42 projects. Sales of 14 projects will be closed this year. However, the firm's marketing budget has been lowered from Bt347 million last year to Bt300 million. Meanwhile, the investment budget is set at Bt3.3 billion, including Bt300 million for investment in a subsidiary that is developing a serviced-apartment building at Sukhumvit Soi 19. LH plans to issue Bt3 billion in bonds this year or early next year in order to retire some loans and raise cash flow for next year, said senior executive vice president Adisorn Thananun-narapool. It expects to lower its financial cost from 4.9 per cent at present, as interest rates could drop further by 0.75-1 percentage point this year. Against last year's 15.7-per-cent annualised drop in revenue to Bt16 billion, Adisorn said the company's net-profit margin - the proportion of earnings to revenue - had grown 21.4 per cent year on year. "We believe that in the second quarter of this year, we will know whether the country's economy will recover. If not, we may adjust our sales revenue target at that time," he said.

 

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