Pruksa to manage condo speculation

Developer to focus on real demand for homes

Pruksa Real Estate has taken steps to rein in speculative sales in its condominium projects by focusing on real demand, president and chief executive officer Thongma Vijitpongpun said yesterday.

The developer's latest board meeting decided on a policy to restrict speculation by declining further sales when a customer has already signed up for five condo units, which means they almost certainly wish to sell the booking contracts on rather than have the units transferred in the future.

"Most home-buyers who purchase low-rise residences [detached and semi-detached houses, and townhouses] will buy to stay. But some condominium buyers, about 5 to 10 per cent, have bought to sell on quickly; this is higher than the 2011 level, as a result of which we now have a policy to manage speculation in the condominium market," he said.

When selling condos to speculators, if they cannot then find new buyers for the booking contracts, the company's business will be affected because it cannot transfer the property and generate sufficient income from the projects, he added.

This is why Pruksa has for the present decided to be selective about accepting customers when selling condo units.

"Although our projects will be sold out more slowly, the policy will make sure we sell our condominiums to real demand or investors with purchasing power to buy and transfer the units, rather than to speculators who only seek a profit from selling the booking contract. But this will mean some delay in getting money in the future," he said.

Last year's overall property market in Bangkok and its suburbs showed a volume of 110,876 units and a total value of Bt311.85 billion. Some 62 per cent of the volume, or 68,850 units, and 53 per cent of the value, was accounted for by condominiums.

HIGHER DIVIDEND

Pruksa recorded revenue of Bt27.14 billion and net profit of Bt3.89 billion for last year. Some 54 per cent or Bt14 billion of income was from townhouse projects, 32 per cent or Bt8.7 billion from detached housing, Bt2.8 billion or 10 per cent from condominiums, and 4 per cent from overseas investment.

After this impressive performance, the company will pay a dividend of Bt0.50 per share, compared with Bt0.40 in the previous year.



Pruksa will continue to keep its dividend rate at no less than 30 per cent of the business-specific net profit after all reserve funds have been deducted, Thongma said.

Overseas investment will generate revenue of about Bt800 million this year from the company's interests in Maldives and India.

"Although our Bt300-million investment in Maldives will show a net loss about Bt50 million, it is a good learning process for expanding investment overseas.

"Meanwhile, we have had successful sales in India that will generate a net profit of about 15 per cent from a project value of Bt1.5 billion," he added.

Chief business officer Prasert Taedullayasatit said the Thai property market this year was showing signs of strong growth, but the emphasis would move from the lower-to-middle-income market to the middle-to-upper-income market.

This will mean a shift in Pruksa's business direction to focus on the latter market range in its planned 78 residential project launches worth Bt55 billion during the year.

The middle- and upper-income markets in essence cover units priced between Bt5 million and Bt10 million, with some homes costing even more.

"Our new projects will be for both low-rise and high-rise homes priced from Bt1 million through to more than Bt10 million per unit, which will drive presales to achieve the target of Bt35 billion and total revenue to the targeted Bt34 billion this year," he said.

Currently, the company has a sales backlog of Bt35.39 billion. About Bt25 billion, or 73 per cent, is due to be realised this year, forming a major part of the company's revenue target of Bt34 billion - the highest such target in the industry.

DEBENTURE ISSUE

Given the company's aggressive growth this year, Pruksa plans to issue a debenture worth Bt6 billion in May. Half of the issue will have a maturity period of three years, and the other half a maturity of five years.

The debenture targets an annual interest rate of between 4 and 4.5 per cent, said the company's director and chief finance and risk officer, Edward J Cooper.

"When we issue the debenture, we will have a debt-to-equity ratio of no more than 1.5:1," he said.

The current ratio is 1.18:1.