Some estate clients put off stakes

Economy January 24, 2014 00:00

By The Nation

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A fifth of industrial estates' new foreign customers have postponed their investment on concerns over the political unrest, but are expected to continue viewing Thailand in a favourable light thanks to its growing economy and their reliance on export mark

“Based on the recent roadshow to Japan, they are still interested in factory construction in Thailand. They see that by doing business in Thailand, they will have customers from surrounding countries where demand is increasing faster than in Japan. 
“Now, about 20 per cent of new customers from Japan and Europe are slowing down due to Thailand’s political turmoil,” Virapan Pulges, managing director of Ticon Industrial Connection Plc, said yesterday. 
Some foreign investors, which had never operated a business in Thailand, have had to put their plans to purchase land and construct plants on hold, as their parent companies overseas did not trust the country’s political situation, he said. 
European countries are also adopting a wait-and-see attitude and tapering their business plans for Thailand.
David Nardone, president and CEO of Hemaraj Land and Development, also said about 10-20 per cent of new customers have deferred their decision to buy land due to the political chaos. 
However, if the political problem is prolonged further, the number of procrastinating investors will not rise, as their investment, particularly for makers of cars for export, is planned in advance and their business does not rely merely on the domestic economy.
Hemaraj’s existing customers are still investing as the economy will continue to grow, driven by the planned infrastructure development projects, particularly for transportation.
Virapan also expressed confidence that foreign firms, especially those that have operated here, would continue to invest in the country.
Personally, Virapan expects the political crisis to ease in the latter half of this year and then the new government could be formed.
Ticon targets this year’s  revenue growth at 20 per cent, lower than last year, when the top line was plumped up by asset sales. 
This year’s  revenue would come from a 10-per-cent hike in rents, Bt500-million asset sales for a fund and the  Bt6-billion capital increase. 
For this year, Ticon is allotting about Bt8 billion for expansion of ready-to-rent factories and warehouses, of which Bt6 billion will come from asset sales for funds and the remaining Bt2 billion from borrowing from financial institutions. 
Lower base for revenue 
Hemaraj targets single-digit  revenue growth this year, slower than last year, due to the lack of extraordinary gains and a lower target for land sales – 1,600 rai versus 2,200-2,300 rai last year. 
“Last year’s high base for revenue was because of extraordinary income from the property fund. Given our conservative forecast for land sales, Hemaraj may raise its target later,” Nardone said.
Late this year, the company will introduce its eighth industrial estate with 3,200 rai of land, close to the Eastern Seaboard Industrial Estate. About 40 per cent of customers are from automaker groups. They are Hemraj’s existing customers that will expand their production capacity.