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Published on February 27, 2008

"We cannot raise housing prices to cover all of the costs, due to fierce market conditions. If the market remains highly competitive, we may not hike prices.

Then our gross margin will remain 30-31 per cent, with our net profit rising slightly," senior executive vice president Naporn Sunthornchitcharoen said yesterday.

Construction costs are expected to increase 8 per cent this year, he said.

Last year, L&H's revenue soared 15.8 per cent to Bt19.83 billion, but its net profit slumped 2.7 per cent to Bt3.15 billion.

"Our net profit dropped last year because we could not increase our housing prices despite rising costs," he said.

This year, L&H will break ground on 14 projects to help revenue up to Bt21 billion. Seven projects will be single-family homes, five will be townhouses and two will be condominiums.

Despite lower margins and higher construction costs, the company is keeping its focus on single-family homes and will proceed with new projects.

Demand for single-detached homes is still strong, while supply will likely decline as most players shift to developing city condos.

L&H's sales in the first two months has expanded 5 per cent year on year as a result, Naporn said.

L&H has set aside Bt4.5 billion to buy land, of which Bt4 billion is for land to be developed next year and in 2010.

The remaining Bt500 million is for investment in the LH Property Fund and LH Property Co, a 60:40 joint venture with Singaporean-based Reco Resorts, said L&H director and senior executive vice president Adisorn Thananun-narapool.

Most of the capital budget will be funded from internal cash flow and the balance from debentures to be issued later this year. The company's board last year approved up to Bt5 billion in debentures, but only Bt2 billion worth have been issued.

L&H's debt-to-equity ratio of 0.51 leaves room for borrowing more, Adisorn said.

Naporn said the real-estate market could expand 5-10 per cent this year on higher consumer confidence after last December's election, as well as on mega-project investment.

The property market in greater Bangkok dropped 5.5 per cent from 78,166 units in 2006 to 73,800 units last year, research by the Government Housing Bank showed.

Siam City Securities and KGI Securities (Thailand) in reports posted on www.settrade.com said L&H's new investment this year would drive its sales to achieve its target. They recommend "buy", with a target-share price of Bt9.30 to Bt9.60 apiece.

In other reports on the same website, ACL Securities and Kim Eng Securities (Thailand) believe the developer's share price now reflects the company's value, so both suggest selling the stock.

L&H closed down 15 satang to Bt8.50 a share, off 1.7 per cent from Monday.

Somluck Srimalee

The Nation