Project backlogs to enable leading developers to hit revenue targets
April 18, 2014 00:00 By Somluck Srimalee The Nation 2,763 Viewed
Although the residential property market in the first quarter dropped nearly 10 per cent year on year in terms of presales, listed developers are confident they can achieve their overall revenue targets for the full year.
This is thanks to their high project backlogs, which will generate sufficient income over the course of the year.
A survey conducted by The Nation early this week found the top 10 listed property firms had a combined residential backlog worth Bt252.25 billion, enough to generate revenue through to the end of 2016.
Sansiri has the largest backlog at Bt54.28 billion, followed by Supalai with Bt39.22 billion and Pruksa Real Estate with Bt37.83 billion. (For full details of all 10 developers, see graphic.)
More than 30 per cent of the total will be booked as revenue this year.
Sansiri chief operating officer Wanchak Buranasiri said that about Bt19.96 billion of its backlog would be booked as revenue this year, Bt23.15 billion in 2015 and the remainder in 2016.
The Bt19.96 billion will form a large part of the company’s total revenue target of Bt34 billion for this year, which it expects to achieve despite the economic slowdown.
“The property market has suffered a negative impact from the political turmoil since November, as the number of visitors [to projects] and our presales have dropped by 50 per cent from normal. As a result, we have revised down our presales growth target,” said Land & Houses managing director Adisorn Thananum-Narapoolhed.
Part of the company’s targeted revenue of Bt25 billion will come from its Bt15-billion backlog of homes awaiting transfer to customers. Of that amount, Bt4 billion will be booked as revenue this year, and the rest in 2015 or 2016, he said.
Adisorn added that if the political crisis were to end this quarter, the property market might recover with presales growth of up to 5 per cent. If not, growth will be flat.
However, transfers this year will continue to grow by 5-10 per cent, thanks to a number of condominium projects launched since 2011 being completed and delivered to home-buyers.
The Government Housing Bank estimates that 110,300 new homes were registered in greater Bangkok last year, up 8.6 per cent from 2012.
Land & Houses president Naporn Sunthornchitcharoen said commercial banks had tightened up on mortgage approvals, with rejection rates now averaging 15 per cent.
Higher down payments
However, this will have little impact on the company because of its policy of demanding higher down payments than required by law. This ensures that its customers are able to get mortgages, he explained.
Meanwhile, Pruksa Real Estate chief executive officer Thongma Vijitpongpun said that although the company’s presales in the first quarter had come in below target, the company was sticking to its total revenue-growth goal of at least 10 per cent for the full year.
This is due to the backlog of projects launched in 2011 and 2012, especially condominiums, that will transfer to customers this year. The transfer of condos alone should be worth up to Bt10 billion.
“We have a rejection rate of 25 per cent. These are customers who ordered homes but did not take delivery, either because they could not get a mortgage or they simply changed their minds. This is a normal rate and will have no impact on our revenue target,” he said.
He added that the company also had ways to help many of these customers to win bank approval for mortgages – by changing the size of the home to match what they can afford, or by adding a co-signatory for the loan.
Therdsak Thaveeteeratham, executive vice president of Asia Plus Securities, said the company’s own survey of the top 15 listed property firms showed they had a total backlog worth Bt279.64 billion. Some 87 per cent, or Bt242.85 billion, of the total is from condominium projects, and the remainder from detached housing and townhouses.
The developers will be booking this income to their total revenue this year through to the end of 2016, he said, adding that this will enable them to achieve their 2014 revenue targets.
Therdsak said that although the sector was facing a business risk from the banks’ restrictions on the provision of home-loan customers at this time, the overall rejection rate would be no more than 15-20 per cent.
While this mainly affected lower-income applicants, developers would try to find ways to support many of these customers, failing which the companies would seek to resell the homes, he added.