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LPN to clear stock in H1

Bangkok Post Mar 27, 2009 Condo leader seeks to speed up financing The condominium market leader L.P.N. Development Plc aims to clear its inventory within the first half of this year by using aggressive marketing promotions, and by speeding up its loan approval process. Managing director Opas Sripayak said the company would try to process home loans within one month, and will offer completed units with attractive promotions and one-stop services. "Timing is very important now, and it can become a risk," he said yesterday. "We need to turn the inventory into cash as soon as possible because financial institutions are now tightening credit approvals for both developers and unit buyers." The company will use its own capital as much as possible to reduce the need for bank loans. It currently tries to work with the banks have provided loans for its projects, using the remaining unused capital to extend credit lines to buyers. L.P.N. has approximately 1.7 billion baht in capital, enough to finance the construction of all of its projects planned for this year, the company said. Mr Opas said L.P.N. would change its strategy in 2009, returning to its former system with the focus on speeding up the process of unit transfers, rather than reducing mortgage rejection rates. Last year LPN tried to help customers build their financial track records, which took around three months, plus another one to three months for loan approvals. Now on the unit transfer date, each customer needs submit home loan applications to several banks whose representatives L.P.N. invites to the project sites. If any bank approves a loan, the customer be sold the unit. "If their [customers] application is refused, we will negotiate with them to return the unit for resale," said Mr Opas. "Our inventory should not be with us for more than three months after construction is completed, or it will become a risk." Since it implementing the scheme earlier this year L.P.N. has seen loan rejection rates increase. Rejections stood at to 10.7% this month compared with 8.84% at the end of 2008. However, the initiative has increased its weekly sales to 100 million baht for 100 units, 50% of which are completed. The developer has recorded around 1.6 billion baht in sales this year, down from 2.9 billion in the first quarter last year. For the existing inventory, L.P.N. uses campaigns to attract customers to the sites, and then offers them minimal down payments to persuade them to buy. Mr Opas believes the strategies will not affect gross margins as its presale prices were at least 10% below the current prices of its remaining units. However, buyers are increasingly behind on their payments, he said. As of March 15, customers more than three months in arrears rose to 1.4% from 1.2% in February. This year L.P.N. plans to launch six to eight new projects with a combined value of 10-12 billion baht. A few will feature smaller one-bedroom units of only 25 square metres in order to cap the price at 700,000 baht. L.P.N. targets 10 billion baht in sales this year, with revenue realisation of 8 billion, or 10% growth from last year. However, last year's high construction costs are expected to lead to its average gross profit declining to 28% from 31% in 2008. LPN shares closed yesterday on the Stock Exchange of Thailand at 2.66 baht, up 10 satang, in trade worth 50.5 million baht.

 

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