Most Thai corporates that survived the financial crisis of 1997 are in good shape today, with some using their financial strength to expand abroad.
According to a survey by The Nation, most listed and non-listed corporates that struggled after the devaluation of the baht in 1997 now post healthy financial results, maintaining their debt-to-equity ratios at not over 2:1.
Companies listed on the Stock Exchange of Thailand reported an average debt-to-equity ratio of 1.31:1, while return on equity recorded an average of 3.75 per cent as of March 31.
On April 30, the SET reported that up to 40 per cent of total revenue in 2011 of listed companies was from overseas. This came from their direct investment overseas, as well as exports.A prime example of post-crisis recovery is Central Group, which had to sell some of its stake in Big C Supercenter to a foreign partner after the 1997 meltdown. Now, the group has bought it back. The group is also a market leader in local retail business, with 500 branches nationwide and total retail space of more than 2.5 million square metres as of last December 31. The group has also opened branches in Italy, and plans more overseas openings in Asia countries.
Sawasdi Horrungruang faced a debt burden after the baht’s devaluation in 1997 and lost his major stake in a steel business, but he hung on to his industrial-estate and property business, Hemaraj Land and Development. Last year, the company enjoyed revenue of Bt12.1 billion and net profit of Bt4.3 billion.
“After the financial crisis in 1997, we learned to manage our business risk and how to drive our business growth in line with the country’s and global economy changes,” Sawasdi has said.
Italian-Thai Development, a leading construction firm that also faced a debt burden in 1997, now has construction projects valued at Bt144.29 billion both in Thailand and overseas, such as India and Mozambique, that will generate revenue until 2020. Last year, the company recorded revenue of Bt43.91 billion, down 4 per cent from 2012, and net profit of Bt992 million.
The property sector was hit hard by the 1997 crisis, forced to sell some stakes to foreign buyers, while some had to withdraw from the market altogether. But most of the survivors have emerged from the crisis as leaders in the real-estate market.One of these is Land & Houses, which had to sell a major stake to the Government of Singapore Government Investment Corporation (now GIC) in 1998. Last year, L&H successfully expanded into the US property market.
LPN Development, which took two years to restructure its debts worth Bt3.13 billion, now is a major developer of condominium projects, generating revenue of Bt14.4 billion and net profit of Bt2.3 billion last year. The company maintains its debt-to-equity ratio at not over 1.5:1.
LPN Development managing director Opas Sripayak said the company reduced its financial risk by focusing on cash management.
“We do business by using our own cash and also manage our construction and delivery processes to match our existing projects before launching new ones. This has helped us to enjoy healthy financial results since the 1997 crisis,” he said.