JAPAN’S Shinwa Group is using Thailand as the springboard for the sale of its innovative construction technology to property developers throughout the Asean region.
The expansion strategy will be pursued by its investment arm for the region, Shinwa Real Estate (Thailand) Co Ltd, with expectations for sales of its building technology, known as Runesu, to reach Bt100 million a year, Shinwa Real Estate (Thailand) managing director Tomoyasu Yamabe said yesterday.
Alongside the promotion of the Runesu technology, the company plans to make investments in Thailand of up to Bt8 billion to cover this year and the next, Yamabe said at a press conference.
Speaking in Shinwa Group’s headquarters in Osaka, he said the company had an investment budget of up to Bt500 million for mergers and acquisitions targeting construction firms in Thailand in a bid to drive its construction business in the country and the wider Asean region.
“Thailand will be our production base to sell our construction technology, Runesu, to customers in Asean countries. This will drive our construction business in Asean,” Yamabe said.
Within Asean, the company expects to secure the first deals for the sale of the Runesu technology, which creates basement space in condominium units, in Malaysia and Singapore this year. In 2020, the company will expand to Indonesia, the Philippines, Hong Kong and Taiwan.
Under the company’s Bt8 billion investment budget for Thailand, some Bt3 billion will be spent this year on the development of condominium projects. These include Ren Sukhumvit 39 worth Bt2.5 billion, under a joint venture between Shinwa Real Estate Co Ltd, Prebuilt Plc and Pressance Corporation, and a low-rise project in Srinakarin Road near the Yellow Line rail route, worth about Bt200 million. The company is also planning another low-rise condominium project near a mass transit route, the company's executive director Wichai Chula-Orankun said.
The remaining Bt5 billion will be invested in 2020 for the development of condominium, townhomes and apartments, he said.
The company's investment budget will be drawn from the company’s initial cashflow, which will be boosted by revenue of about Bt600 million to be booked from the company’s first condominium project in Thailand, Runesu Thonglor 5. The units will be transferred to its customers in August. The funds for the rest of the investment budget will come from the parent company, Wichai said.
“We expect sales of up to 40 per cent from low-rise condominium projects, followed by 30 per cent from high-rise condominium projects, 20 per cent from townhomes, and the rest from premium serviced apartments in 2020,” he said.
Under its business model, the company expects 80 per cent of its total revenue will come from sales at residential projects and the rest from rental and fee income, he said.
Yamabe said the company believes that the property market in Thailand will continue to see strong growth, in spite of the uncertainties surrounding the prospect of a national election this year.
“We believe that the new election will create stability for the country's economy growth for long term,” Yamabe said.
In line with the company’s business expansion in Thailand over this year and the next, the company expects its total revenue will reach Bt1.5 billion and net profit Bt500 million in its 2020 fiscal year (August 2020-July 2021), he said.
Shinwa Group entered Thailand in 2017, marking its first overseas expansion beyond Japan. It did so by setting up a joint-venture firm to develop Runesu Thonglor Soi 5, worth Bt1.2 billion, with Woraluk Property Co Ltd. The group then established Shinwa Real Estate (Thailand) Co Ltd with registered capital of Bt4 million. Shinwa Group holds 49 per cent of the joint venture and its Thai partners the rest.
Shinwa Group recorded total revenue of Bt9.91 billion and net profit of Bt856 million in its 2018 fiscal year and expects total revenue to reach Bt10.4 billion and net profit Bt920 million in fiscal 2019.