Preuksa 'very confident' of a successful year

Riding a wave of confidence when others see gloom all around, company president and chief executive Thongma Vijitpongpun says his company is aiming for growth of 10 to 15 per cent in 2009.

What are your thoughts about property market trends in 2009?

Thailand's property market felt a negative impact from the twin crises - the global financial downturn and domestic political problems - in the last quarter of 2008, when home-buyers began delaying their decisions to buy because most of them were concerned about their future earnings.

Although Thailand's political environment has begun to stabilise following installation of the new government led by the Democrat Party, home-buyers are still waiting to see if they can feel confident about their future earnings. As a result, we believe the property market will drop between 5 and 10 per cent this year, compared with last year.

City condominiums will be hard to sell, with most buyers believing that residential prices should drop following the fall in the cost of construction raw materials and lower demand.

Demand for residences priced below Bt1 million per unit has continued to grow, but this market will face tighter bank restrictions on the provision of mortgages, and we expect it will slow down, also.

However, there is continued growth in demand for detached houses and townhouses priced between Bt2 million and Bt3 million, mainly because home-buyers have reduced the amount they are prepared to spend and have settled on a lower price.

What did you do when the global crisis hit Thailand's economy and the property market?

We had to change our business outlook and to focus on low-rise residential projects, including townhouses and detached houses, at prices between Bt1 million and Bt2 million per unit. These low-rise projects will generate faster returns on investment - within four to six months, compared to two to three years for condominiums.

We also delayed the launching of many new residential projects. We launched 46 projects worth up to Bt20 billion last year. This year we will have only 15 projects worth between Bt10 billion and Bt15 billion.

To manage our cash flow, we have reduced our inventory stock from enough to last two or three months to sufficient for two weeks or one month. We have managed this through the creation of a customer database. We have also reduced our land stock to manage our cash flow.

Meanwhile, we have suspended the development of new projects on undeveloped land to reduce the huge investment involved in building infrastructure in a project before presale. For all of the 15 new projects that we will launch this year, we have already developed their infrastructure ready for presale.

In the last quarter of 2008, we also cancelled the purchase of two new land plots worth nearly Bt1 billion so we could hold on to our cash for residential developments in 2009.

However, our overseas investment plans are going ahead. In the first quarter of this year we will launch a first residential project, worth nearly Bt300 million, in Bangalore, India. We will also restart research towards the development of residential projects in Vietnam and China, because this is a good time to buy land overseas, after its price has fallen as a result of the global crisis.

How do you manage your business risks when you expand investments overseas at a time of global recession?

Before expanding our overseas investments, we take about three years to study the business opportunities before making a decision to go ahead. We learn about and identify our target customers, we study the country's property laws as well as related laws that will impact on our investment. We also find a strategic partner before deciding whether or not to invest.

When we decide to go ahead, we measure the investment budget against the ability of our finances to support the risk, should the investment fail. We plan to spend only Bt300 million in India, or less than 10 per cent of our annual investment budget.

As for our present financial health, we have total assets amounting to Bt14.3 billion, total liabilities of only Bt5.1 billion, and last year we recorded revenue of nearly Bt14 billion and made a net profit of nearly Bt2 billion. This is enough to support our business risks when expanding our investments overseas.

How about your business growth this year?

Although the country's economy will grow only slightly and demand in the residential market is expected to drop between 5 and 10 per cent, we believe our business growth will still be 10-15 per cent this year.

We are very confident of our business growth this year, because we now have backlog - projects that are sold but are waiting to be completed and transferred to customers. This backlog is worth Bt12.7 billion. We also believe that our presales this year will reach Bt15 billion to Bt20 billion. That will be enough to meet our target.

When the property market drops, a number of small- and medium-sized property firms will move out. This means we will have fewer competitors than last year, so our business will grow by taking the share of those that drop out of the market, along with a share from those larger property developers that have decided to delay new residential projects in 2009.