Set to open overseas offices as domestic sales slow due to political turmoil; Myanmar project also on the cards
Fragrant Property will open sales offices in Middle East, China, Taiwan and Singapore by mid-year, with a view to boosting this year’s presales at a time when local demand has slowed due to the continuing political turmoil.
The developer is also studying whether to expand its investment into Myanmar, where its first residential project could be launched this year, chief executive officer James Duan said during an interview with The Nation early this week.
“We cannot change the country’s [Thailand’s] political and economic environment, but we have to revise our business strategy to match demand. With up to 49 per cent of our customers being foreigners, we have to expand our marketing arm to form a closer relationship with foreign customer targets,” he said.
He added that the company could not estimate when the country’s political turmoil would end, but it must get on with running the business. This means Fragrant Property has to find a way to maintain growth during a period of domestic market slowdown.
Its four new foreign branches will open by the middle of the year to support overseas sales, as 49 per cent of its customers are foreign investors who work in key markets such as Taiwan, Singapore, Hong Kong and China. Some of these customers are Europeans who work in Asia.
The company has set aside Bt30 million to Bt40 million for foreign branch openings this year, and it targets them generating presales worth between Bt1.6 billion and Bt2 billion by year-end.
This will form part of its total presales target of Bt4.8 billion-Bt4.9 billion for 2014, more than double last year’s Bt2 billion, said the CEO.
The company also targets overall revenue of between Bt2.5 billion and Bt3 billion this year, against the Bt1.5 billion generated last year.
Some of this will come from the developer’s Bt3-billion backlog of homes that have been reserved and will be ready to transfer to customers over the course of the year.
The company plans to launch the first of two new condominium projects together worth between Bt4.5 billion and Bt5 billion this year. It will be located on Sukhumvit 31 in Bangkok, while negotiations are under way over the purchase of a plot of land in one of the capital’s central business districts (CBDs) for the second project, said Duan.
Half of the investment budget for the two projects will come from the company’s cash flow, with the remainder coming in the form of bank borrowings.
At present, Fragrant Property has a debt-to-equity ratio 1.75:1, which he said left room enough for such project financing.
Meanwhile, the Circle 2 and Circle 4 condominium projects will be completed this year and delivered to customers, which would reduce its total debt and leave the company in a healthy financial situation to get new project financing to support its business plan for the year, he added.
“We have continued to focus on Bangkok CBD locations that match our experience in developing condominium projects rather than detached housing or townhouses,” he explained.
The company this year also plans to raise capital by listing on the Stock Exchange of Thailand, in a move that he said should bring in between Bt1 billion and Bt2 billion.
The company has appointed KT Zmico Securities as its financial adviser for the initial public offering.
Currently, the company has registered capital of Bt842 million, with 46 per cent of the shares held by Taiwanese investors and the remainder by Thai investors and Duan’s family.
Established in 2008, Fragrant Property turned a profit of between Bt40 million and Bt50 million in each of the past two years, he said.
“Our business took time to generate a net profit because of all of our residential projects are condominiums that took between two and two-and-a-half years to construct before generating turnover,” he said.
Now, however, the company’s financial results are healthy enough to apply to be a listed company in the SET, he added.