March 20, 2014 00:00 By SOMLUCK SRIMALEE
CH KARNCHANG, a leading infrastructure and power plant construction company, is studying moving into the same business in Myanmar within three years to balance its investment portfolio in Thailand, which has faced unexpected situations.
“We may start to invest in Myanmar this year or maybe next year, depending on the demand in the market,” CEO Plew Trivisavavet said yesterday.
This follows the company’s success in expanding to Laos 10 years ago, he said.
Myanmar is reforming its laws to allow foreign investors to do business in the country. It also needs to develop its infrastructure and electricity-generating base to support its growth after the Asean Economic Community comes to fruition next year.
Now the company is focusing on only two countries in Asean – Laos and Myanmar – which show better potential than Cambodia and Vietnam.
About 70 per cent of its construction revenue comes from Laos. The rest is from the domestic market.
Last year, Ch Karnchang earned Bt7.67 billion on revenue of Bt42 billion, of which Bt32 billion was from the construction business and Bt10 billion from the sale of a major stake in its subsidiary, Thai Tap Water, and dividends from its subsidiaries such as CK Power, Bangkok Expressway and Bangkok Metro.
The company receives Bt500 million-Bt600 million a year in dividends from its subsidiaries, while working on construction contracts averaging Bt35 billion a year with a net profit margin of 8-10 per cent.
This year, the company has continued to maintain total revenue at less than Bt35 billion and net profit margin at 8-10 per cent, even though the Bt2-trillion infrastructure scheme has been delayed.
Its Bt112.47-billion backlog will contribute an average of Bt35 billion in revenue a year.
“When the Bt2-trillion mega-infrastructure project is delayed from plan, that will have less of an impact on our business,” he said.
The company will sign two construction contracts worth Bt21.75 billion this year – the Bt4.75 billion contract of its subsidiary CK Power for phase 2 of the Bangpa-In cogeneration plant and Bt17-billion contract for the Nam Bak hydropower plant in Laos.
It will join the bidding for construction projects worth Bt85.97 billion for extending the MRT dark green line (Mo Chit-Saphan Mai-Ku Khot), laying a double track line from Khlong 19 to Keang Koy and building phase 2 of Suvarnabhumi Airport.
“We expect to win at least 25 per cent of the total. That will top up our backlog to maintain the Bt112-billion level next year. When we deliver construction projects worth Bt35 billion, that will be booked as our revenue this year,” he said. To support the new bidding and also refinance some debentures that mature early this year, the company issued debentures worth Bt3 billion early this year, of which Bt2 billion was for refinancing and Bt1 billion for working capital.
The company also plans to issue debentures worth Bt2 billion in the last quarter of this year, of which Bt1 billion will be for refinancing debentures that mature in the last quarter of this year as the rest for adding to working capital.
The company has set aside a Bt800-million capital expenditure budget this year to develop its hydropower plant project in Laos through Xayaburi Power Co. It is studying launching an infrastructure fund.
“We don’t need a huge investment budget at this time, but if we need it, we will be ready to raise capital through an infrastructure fund. However, it won’t be now, maybe three or five years from now. This is only a study,” he said.
Ch Karnchang’s total equity is Bt16.84 billion and debt-to-equity ratio is 1.73 times.