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Published on March 20, 2008

Siam City Securities stated in its research that the company would sign contracts worth Bt14.55 billion. They include the Bt1-billion Nam Bak 1 and 2 hydropower plants in Laos, for which revenue should be booked in the second half of this year.

It should also win road- and building contracts from the Bangkok Metropolitan Administration worth Bt3.4 billion. Others include the expansion of Thai Tap Water worth Bt1 billion, and a craft-paper plant for Siam Cement Group in Vietnam worth Bt150 million.

Executives of Ch Karnchang and other construction firms mentioned earlier that foreign expansion was necessary given the reduced number of local projects.

At the end of last year, Ch Karnchang's backlog was worth Bt18.7 billion, generating a gross profit margin of 10-12 per cent.

Siam City Securities expects Ch Karnchang will focus more on foreign projects, which generate gross profit margins of 10-15 per cent, to increase its profitability.

"The company's gross profit margin should rise from 8.48 per cent to 9.72 per cent, while the net profit should rise from Bt15 million to Bt180 million," it said. However, the increasing cost of major raw materials, particularly iron and cement which account for 40-50 per cent of total costs respectively, will be the major factor pressuring the company's profitability to fall below expectations, it noted.

Ayudhya Securities is less optimistic. While saying that Ch Karnchang has plans to bid for power plants worth Bt4 billion and urban rail systems worth Bt5 billion, it said the company's revenue could drop from last year's level.

Last year, Ch Karnchang signed new contracts worth Bt5 billion. If it does not win new projects this year, its revenue could fall 26 per cent - and by 30 per cent next year.

The brokerage house expects Ch Karnchang to report a net loss from normalised business of Bt178 million this year. However, the company will earn profit from the listing of its subsidiary Thai Tap Water on the Stock Exchange of Thailand, and this will raise the constructor's net profit to Bt43 million.

The Nation