Source: Phuket Gazette

The director general of the Land Department has reiterated that foreigners using Thai nominees to buy land anywhere in the country will have their land title deeds revoked if caught – even if the nominee in question is a lawfully wedded spouse.

Land Department Director Anuwat Meteewiboonwut made the comments during a recent stop in Phuket as part of a nationwide inspection tour of 30 provinces.

The tour is aimed at improving public services by land officials in three areas: dress, conduct when dealing with the public and working harder to eliminate a backlog of work.

Many members of the public have complained that it takes up to a year to complete a transaction that should only take one day, he said.

Mr Anuwat, a former governor of both Phang Nga and Samut Prakan provinces, said he was satisfied on the first two points, but rated the general level of success among land officials nationwide at speeding up their work rate at “only 30%”.

The next round of inspection tours will come in July, after which time personnel changes will be considered if service does not improve, he said.

“We have to keep pressure on them, otherwise the work will not get done,” he said.

As for foreigners seeking to buy homes in Phuket, they can do so through the Condominium Act, which allows foreign ownership of up to 49% of any project, he said.

Foreigners cannot use a Thai spouse as a nominee to buy property in Thailand, however.

“If the Thai spouse has enough money to buy the house that is fine, but if the Thai has no money and uses money given to him or her by a foreigner to acquire property, that is against the law. If we check and find out later that a Thai person has been using money from a foreigner to buy land anywhere in Thailand, we will revoke title deeds,” he said.

Mr Anuwat said the provisions of [Ministry of Interior] ministerial order 43 makes it difficult to issue land documents quickly, as it requires action from a number of different agencies. Desire for land on the island has also led to encroachment problems here, he said.

As a key market for property companies, Phuket is a constant source of problems and complaints to the director general’s office, he admitted.

“We will try to resolve these problems and develop our personnel continuously in order to provide high quality services. Fortunately the governor of Phuket used to work in the Land Department, so he understands the procedures and can help co-ordinate all the agencies involved,” he said.

Mr Anuwat was speaking of Phuket Governor Wichai Phraisa-ngop, who served as Land Office director in Nakhon Pathom in 1997 and as deputy director of the Land Department nationwide in 2003.

Land purchase through Thai spouse forbidden: Land Dept

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Source: Bangkok Post

Sales recover after a slow second half last year

Political battles and gamesmanship have had a far-reaching impact on every economic sector, including large property developers such as Charn Issara Development (CI).

The company only started seeing sales pick from February after almost no activity from June last year until January this year, according to managing director Songkran Issara. Sales also slipped back during the turbulent Songkran period but are now reviving, he added.

In his view, CI’s generally up-market clients are more worried about possible new activity by the red shirted supporters of former prime minister Thaksin Shinawatra. The prolonged protests of the yellow shirted PAD last year certainly had an impact as well, and any unrest triggered by either group is extremely detrimental for the country.

“The red shirts’ action was brief. When they emerged people thought they were not strong and so weren’t afraid, and Prime Minister Abhisit Vejjajiva had also just taken the helm,” says Mr Songkran. “But in a little while they built up momentum and became strong, leading to the situation deteriorating. After one or two months it turned bad again, but the second half of last year was awful.”

Just as the market seems to have perked up a little again, the country has suffered another setback with fears about the H1N1 strain of influenza leading to a further slowdown in the money-spinning Thai tourism sector. As tourism revenue dwindles, more workers are losing their jobs with hotels too up for sale. Chiang Mai has been very badly hit, followed by Bangkok, but Pattaya and Phuket are a little better off with occupancy down by about 30%.

However, Mr Songkran said his company’s Sri Panwa resort in Phuket was not much affected by the plunge in tourism. At the luxury development, 40 pool villas have been sold and another 18 large four- to five-bedroom villas have been retained for rental, attracting high-end Thai and foreign visitors. It is Europeans travelling on budget package tours who are staying away, but they are not among the resort’s clients.

CI’s revenue stream is set to flow steadily from now, though, because it has completed the Issara@42 condominium in Sukhumvit Soi 42 with buyers expected to move in within two months. Buyers have already begun moving into the fully finished Ban Charn Talay seaside condominium in Cha-am.

Construction of its high-rise condominium tower, The Issara Lat Phrao, is well under way with the foundation finished. “Many of our projects are at the completion stage and we have sold 60% so now we are pushing the sales of the remaining 40%,” said Mr Songkran.

Of all CI’s projects, Sri Panwa in Phuket is doing the best followed by Ban Charn Talay. Bangkok is seen to be a very competitive market with many hurdles needing to be cleared to build any sort of project at all.

While Mr Songkran is always looking around for good land plots, he said he would do so more actively in the third and the fourth quarters of this year, with a focus on single-house and condominium projects.

He says condominiums near the Skytrain and underground stations are still selling as are others in the inner city. Less successful are single-house developments and large condominiums nowhere near train routes. The fact that many buyers are finding it tougher to get financing from cautious banks also hurts. “I think middle- to low-level condominiums will be hit as will single houses in the suburbs.”

The trouble with suburban houses in Bangkok is that they are often difficult to sell at a good price in the secondary market because Thais prefer buying new property. While there is a market for second-hand condominiums in good locations, buying power has been sapped with foreign buyers no longer active.

Prices vary from segment to segment but while Mr Songkran has noticed that the international property market seems to have bottomed out, he is uncertain whether the local market has done so.

“It might dip a little before it stabilises in about six months’ time and then slowly rises. It trails the overseas market a little; the impact on our market is slightly slower.”

Mr Songkran praised the government’s move to extend Bangkok’s mass-transit rail network with the BTS now crossing the Chao Phraya River to Wong Wian Yai. He also believes that the Airport Rail Link, which is due to start trial runs on Aug 12, should be extended all the way to the eastern seaboard. This would be easy to do because a rail line already exists and the only investment would be in new trains and some stations.

“After reaching the airport, change trains and this would take you to the eastern seaboard passing through Chon Buri. Now, as Chon Buri is heavily populated it should be worthwhile implementing this project and of course, taking it further to Pattaya.”

While economic conditions are uncertain right now, Mr Songkran advised those who have money in the bank and have not invested in anything at all to consider diversifying and invest some of their savings in stocks and property.

“This is a good opportunity to buy - at good prices - after this crisis good land plots will be used up. And the situation right now, with construction costs not at all high, means the market is in your hands so it’s a good opportunity.”

Thailand property developers: things are picking up

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Source: Bangkok Post

Raimon Land Plc has acquired an additional 25% stake in Taksin Hotel Holding Co, the developer of The River condominium, from a unit of the defunct US investment bank Lehman Brothers.

The acquisition from Lehman Brothers Bangkok Riverside Development Pte Ltd increases Raimon’s holding in the luxury condominium from 60% to 85% shareholding, 74% held directly by the SET-listed developer and 11% through subsidiary Contemporary Property Co.

The balance of the shares are held by Raimon Land’s two major shareholders, IFA Hotels & Resorts 3 Ltd and Istithmar FZE, both headquartered in Dubai.

The transaction is another step in Raimon Land’s reorganisation, which includes refinancing of several loans from local and international sources and the reduction of overhead expenses by 40%.

The company now would focus on existing projects under construction to ensure timely completion and transfer to buyers, said Raimon CEO Hubert Viriot.

As a result of the acquisition, he forecast Raimon’s revenue for the next three years would increase from 9 billion baht to 12.75 billion while profit sharing from proceeds on the project would rise by 25%. Raimon has achieved sales of 7.7 billion baht for The River, or around 55% of its overall inventory.

The developer has received a syndicated loan of 5 billion baht to support the development of the project, which is scheduled to be completed in 2011.

Raimon shares closed unchanged yesterday on the Stock Exchange of Thailand at 32 satang, in trade worth 3.73 million baht.

Raimon increases River stake

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Source: The Nation

China’s real estate investment market is expected to see rapid and aggressive growth over the rest of this year, as new government policies and efforts to boost domestic demand take effect, according to global real estate services firm Colliers International.

Both central and local governments in China initiated efforts to stabilise the real-estate market in the first quarter of this year, by abolishing regulations governing urban real-estate tax and the release of an “Opinion on Promoting a Healthy Property Market” by the Beijing Municipal Construction Committee.

According to Colliers’ latest Asia-Pacific Real Estate Investment Bulletin, the moves aimed to relax regulations governing foreign investment in China and boost housing consumption by existing property owners and foreigners.

Domestic institutional investors have continued to be active in both the residential and office sectors of the sales market. However, the bulletin said the investor profile will soon be more diversified because under recently revised insurance laws, Chinese insurance corporations became eligible to invest in the real-estate market.

It is estimated that approximately 100 billion yuan (Bt503 billion) in domestic funds will be injected into the property sector as a consequence.

In addition, changes in corporate real-estate strategy among Chinese and overseas retailers have become more apparent in that they have begun to purchase rather than leasing properties.

The bulletin says the real-estate market in western China, including Chengdu, continued to feel the impact of the global financial crisis in the first quarter of this year. Key international enterprises sought fewer workers and the bulk of them seemed determined to downsize their floor-area requirements in anticipation of business contraction over the near to medium term.

The office sector saw a negative take-up for the first time in the past 10 years due to the dramatic retreat of investment by foreign companies. In addition, existing investors and developers either deferred or shelved real-estate development plans in Chengdu.

However, a series of government measures was implemented to support the residential property market after a major price correction in the second half of last year and the number of residential sales transactions posted a rise in this year’s first quarter.

Despite the recent retreat of investment demand, the majority of investors remain confident about the real-estate market in Chengdu over the medium to long term.

According to the Chengdu Industry and Commerce Bureau, the financial crisis has had a relatively small impact on the city. Due to the fact that Sichuan and Chengdu are key targets in western China and local governments are giving preferential treatment to real-estate investment, the property market as a whole is expected to enjoy healthy growth over the medium term, the bulletin says.

Investment focus is expected to turn to the grade-A office sector and the housing market this year.

In the office sector, rentals remain under downward pressure because of growing supply over the next few years. At the same time, demand fundamentals on the leasing front are not looking strong because many companies have deferred expansion plans and devised new measures to cut back on costs, including real-estate rentals.

In general, the office sector investment market is expected to remain quiet until the bulk of new supply is launched by 2011.

The bulletin says that in China’s retail market, performance has been relatively resilient despite the economic downturn because of the limited supply of shopping malls.

Overall, retail rentals at individual shopping malls have fallen off by 10 per cent since the onset of the financial tsunami last year. With sustained leasing demand attributed to a group of foreign fashion labels that are looking to open new outlets in the core districts, retail rentals will remain stable and sales transactions involving prime retail shops are expected to remain active.

Chinese real estate investment to see growth

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Source: The Nation

Big developers sell and save but push new projects amid confidence in recovery

As confidence grows of a significant property market recovery in the second half of this year, Thailand’s major developers are walking a financial tightrope between prudence imposed by the downturn and grasping the opportunities of recovery.

On one hand, most of the big listed firms remain bent on reducing their inventories to reduce their costs and build up cash reserves. On the other, many new residential projects will be launched in the coming seven months. Some of this expansion will be funded by public debenture issues, and property firms are preparing to splurge on new land plots.

Following the recent announcement of first-quarter financial results, a survey by The Nation found the country’s 25 property developers that were listed on the stock exchange had a combined inventory of properties with a market value of Bt179.08 billion. This was an increase of only 0.16 per cent over the Bt178.79-billion value of the total inventory at the end of last year.

Most of the firms are trying to reduce their inventories by speeding up sales with promotions and special deals, cutting costs in the process and generating cash reserves. At the same time, they are striving to maintain their gross and net-profit margins close to last year’s predownturn levels.

Preuksa Real Estate president and CEO Thongma Vijitpongpun said his company was trying to reduce its inventory from last year’s level - sufficient for three months’ trading - to enough for only one and a half months this year.

At present, the inventory is down to enough for about two months’ trading, and efforts continue to bring it down even further in the second half of the year.

After the first quarter of 2009, Preuksa reported an inventory with a market value of Bt12.25 billion, down 3 per cent on the level at the end of last year.

“When we reduce our inventory, that means we’re succeeding in selling our projects and generating income,” Thongma said. “At the same time, we are keeping our cash for expansion to new locations.”

He said the economic slump meant the company had to hold onto its cash and invest only in projects that would speed up sales and generate high returns.

LPN Development managing director Opas Sripayak said his company had to reduce its inventory to generate income.

“Our business strategy for reducing our inventory is to speed up sales by launching promotions at existing projects, which are selling more slowly than we expected. When we succeed in reducing our inventory, this will mean we will have more cash to develop new residential projects in new locations, following market demand,” he said.

LPN Development’s inventory at the end of the first quarter was valued at Bt5.49 billion, down 6 per cent from its value at the end of last year.

Asian Property Development CEO Anuphong Assavabhokhin said that in times of economic downturn, property firms had to speed up sales from their inventories to convert products into cash to serve their need for business expansion.

As a result, his company has been launching new marketing campaigns every month. These have helped to reduce the company’s inventory stock from a value of Bt14.54 billion at the end of last year to Bt13.96 billion after this year’s first quarter, a drop of 4 per cent, he said.

At the same time as they are striving to reduce their inventories, most major listed companies are continuing to launch new residential projects in areas where there is strong demand, such as Sukhumvit, Ram-Indra, Lat Phrao and Ratchadaphisek roads. Many are confidently expecting to record sales growth this year.

Most small and medium-sized property firms listed on the stock exchange are also trying to whittle down their inventories. But their future plans remain frozen, with a “wait and see” business strategy; holding on to their cash rather than investing it.

For example, NC Housing, which reported an inventory valued at Bt2.85 billion after the first quarter of this year, achieved a 2-per-cent drop in inventory value, from Bt2.89 billion at the end of last year. It suspended new projects in the first half of this year.

Managing director Somchao Tanterdtham said NC Housing would wait and see whether the market recovered in the second half. The suspension of new projects in the first half of the year could be extended to the full year, he said.

However, should the company see a convincing recovery in the second half, NC Housing could launch one or two new projects because it has land ready for development, Somchao said.

Despite the possibility of having no new projects this year, NC Housing still expects to match last year’s sales, or possibly lift sales as much as 10 per cent. It recorded revenue of Bt779.59 million for a net loss Bt45.8 million last year but revenue of Bt220.44 million for a net profit of Bt26.37 million in this year’s first quarter.

MK Real Estate director Chukiat Tangmatitham said his company launched only one residential project in the first half of the year and that there would be no more in 2009, because the company was waiting for the country’s economy to recover.

Although the company will not launch more projects this year, its inventory, which is currently valued at Bt4.86 billion, is expected to generate sales growth of 5-10 per cent this year.

MK Real Estate recorded revenue of Bt748 million for a net profit Bt169 million in the first quarter, a whopping increase of 120 per cent and 317 per cent, respectively, over figures from the same period last year.

Tightrope between risk and caution

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Source: NY Times

MARKET OVERVIEW

The real estate market in Thailand’s beach resorts is fed mostly by foreign buyers, who make up more than 90 percent of the market share, according to Frank Khan, the director of Knight Frank Thailand’s residential department. Because of this dependence on incoming foreign money, which has become scarce because of the global economic crisis, the second-home market in Phuket and Pattaya has ground to a halt. Mr. Khan said the exception was the adjacent resort town of Hua Hin, which has remained a popular second-home destination for wealthy Thais, including the king of Thailand himself.

Mr. Khan says homes priced below 10 million baht (about $290,000) are selling, but the market above that threshold is stagnant, even in Hua Hin and Bangkok, where some investors are still buying at the lower end. The large expatriate community in Bangkok mostly revolves around the international businesses there, said David Gray, the director of East Coast Real Estate, based in Pattaya, and there is not much of a high-end second-home market in the city itself.

Currency fluctuations are also affecting the Thai second-home market, according to Mr. Gray. He said the baht’s relative strength against foreign currencies, including the ruble, the British pound and the Australian dollar, was motivating cash-strapped foreign second-home-owners to sell their Thai holdings. “A lot of people are cashing in on the exchange rate right now,” he said. “People can take much less for their homes and still not lose anything.”

Second homes in Phuket cost about twice as much as comparable homes in Pattaya, Mr. Gray said, because Phuket is an island and developable land is more limited. He is seeing more second-home-owners moving away from the beach resorts and into the countryside, many building retirement homes. North of Bangkok, for example, it is possible to find an acre for a couple of thousand dollars. “For Thailand, that’s cheap,” he said.

WHO BUYS IN PATTAYA

Thailand attracts buyers from all over the world, according to Mr. Gray. He has sold properties to Europeans, Americans and Australians, as well as people from other Asian countries. Until a few years ago, British and German buyers were the most prevalent, but interest from German as well as Russian buyers has decreased, he said. “Americans seem to be buying at the moment,” he added, “or whoever holds American dollars,” because the dollar is relatively strong.

BUYING BASICS

Foreigners cannot own stand-alone houses in Thailand, but there are a number of common ways to work around that stricture. Mr. Gray says foreigners can set up a Thai company through which to buy property (though new regulations may soon make this method more difficult). It costs 30,000 to 50,000 baht (about $880 to $1,460) to set up a company for this purpose, Mr. Gray said, and running costs after that come to about 20,000 baht (about $590) per year for accounting fees and taxes.

Many foreigners buy property in the name of a Thai person they trust, according to Mr. Gray. They can then lease the property back from the official owner for up to 30 years. The lease can be renewed at the end of its term, Mr. Gray said.

Foreigners are permitted to own a condominium or apartment outright, as long as more than half the development is owned by a Thai entity. “Any building can be up to 49 percent foreign owned,” Mr. Gray said. “There has to be majority Thai ownership in the building.”

When property changes hands, the buyer pays transfer taxes, fees and stamp duties to the local land officials. Mr. Gray says these costs are normally 5 to 6 percent of the declared value of the property. (Declared value is determined by the government, and is usually 50 to 60 percent of market value.) But Mr. Gray also said that the government, in an attempt to stimulate the market, had reduced all taxes and fees to less than 1 percent of declared value until April 2010. The seller pays the real estate agent’s commission, which ranges from 3 to 5 percent of the sale price.

International Real Estate

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Source: Bangkok Post

Among other opportunities are properties held by cash-strapped foreigners looking to bail out on their investments.

Thailand’s lingering political problems have led to a significant slowdown of new and second-hand condominiums, but prices have not dipped substantially, says James Pitchon, executive director of CB Richard Ellis (CBRE).

The discounts offered by those eager to exit the market are between 10% and 15% below the market’s perceived average price - or what buyers think a building is worth versus what developers say it is. By contrast, condo prices in Singapore and Hong Kong are down 30%.

New launches are down, of course, given the poor economy, particularly in the luxury condominium sector, with the supply of completed freehold condominium in downtown Bangkok standing at about 55,000 units.

Mr Pitchon says the slowdown is healthy for the market given the present demand. However, he warns that 2009 is really a stress test for condos, because as many as 11,000 to 12,000 units that were begun two or three years ago are being completed within this year. “When it comes to transfer of title we’ll find out if the original buyers were speculators, end-users or investors.”

Interestingly, despite the Songkran unrest, CBRE concluded transactions within the luxury segment in which it specialises both during Songkran week and the week after.

The turmoil in fact turned into a catalyst for people who were thinking about getting their money back. Although there were buyers and sellers prior to the unrest, the gap between them was often too wide. Right now, if a unit owner is willing to offer a 10-15% discount he should be able to attract buyers.

“We have seen foreigners who bought off-plan wanting to resell and willing to discount to their purchase price or, in a limited number of cases, to below their purchase price,” says Mr Pitchon.

Thai buyers, he says, certainly see these discounts as an opportunity. “I think this will probably be a continuing trend - foreigners wanting to exit the market, particularly those who are speculating. They need the money - a lot of people’s investment portfolios are down.

“There is a view that that prices are not going to rise, so their choice is to get out,but to transfer title means paying the full remaining 70% of the purchase price. There is no financing for that for foreigners.”

However, CBRE is seeing a very different attitude among Thai buyers. Thais are currently receiving almost zero interest on bank accounts and there are very few alternative investments within the country. More importantly, most of the money in Thailand stays within Thailand, with very little capital flight.

“So the options are you can keep it in the bank, put it in the stock market or other financial instrument, or put it in property. And right now with deposit rates close to zero, even a yield of 3-5% is better than receiving nothing in the bank account.”

Also helping the property market is a real worry in the world that inflation might start to head up as the economy recovers. Although the effect of the global financial crisis is deflationary, there are those who believe that there is a danger that the amount of money being thrown into the financial system may result in inflation. This view is mostly held among older investors who remember the 1970s.

“To build new will cost more in an inflationary environment, and property is still seen as a hedge against inflation provided you are not buying into a bubble market,” says Mr Pitchon. “CB Richard Ellis does not believe that Thailand is in a bubble market,” he added.

A good example of a bubble market is London, where property prices in Kensington and Chelsea increased by 450% from 1995 to 2007-08, and since then have dropped by 10-15%.

However, in Bangkok in many cases projects that are 10 years old have not even seen a doubling of prices. While the prices of new buildings and units have increased, this usually reflects better quality, as many units now come fitted with floor covering, kitchens and air-conditioning and are not bare shells as in 1995-97.

But with so many new units nearing completion, some developers could come under pressure to discount prices of their unsold inventory when they complete their buildings.

“But each developer will make their own decision. Whether to try and hold, whether to reduce pricing, hold and rent it would depend on the developers and their relationship with the banks. There is pressure from developers’ inventories, but we don’t know what the outcome is going to be yet.”

Aside from this, Mr Pitchon pointed to speculators who baulk at completing transactions when they see that prices are not rising. Some foreign speculators have shown willingness to settle for getting some of the downpayment back, and the buyers clearly benefit because they would be able to purchase units just prior to completion at the prices of two to three years ago.

“This will not happen at every building,” cautions Mr Pitchon. “It will depend on the level of speculative buying or pressure on the developer to sell inventory.”

However, this pressure is still unlikely to lead to a significant drop of prices in better-quality building, as it would apply only to the few units that have to be resold or sold at discounts by a developer because of the circumstances he faces.

Plenty of bargains are there to be had in the Thai condo market

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Source: The Nation

Siam Paragon Development, undaunted by the economic crisis, predicts exhibitors at the Siam Paragon Luxury Property Showcase will have sold 150-200 residential units worth more than Bt1.5 billion by the time the fair ends on May 24.

Forty developers are promoting 12,000 units built in Bangkok and tourist destinations like Hua Hin and Koh Samui at the showcase.

Worth more than Bt20 billion in total, most of the homes are priced from Bt2 million - with some at Bt100 million per unit.

Siam Paragon Development executive chief marketing officer Kriengsak Tantiphipop said at the fair’s opening yesterday that more than 40,000 visitors were expected, with over 80 per cent of them locals. The target transaction value is 40-per-cent higher than that achieved at last year’s event.

“The property market has recovery potential, as investors are seeking a higher return on investment in light of low deposit rates,” said Kriengsak.

Aside from the Bt15-million investment for this event, the company plans another fair in the third quarter in The Emporium, which will cost Bt8 million to Bt10 million. Another fair is planned for the fourth quarter in Siam Paragon.

Encouraging investment in these events is a change in home-buyers’ behaviour, Kriengsak said. Buyers now prefer to look around for the best offers at property fairs, as they can compare promotional packages from many developers. This is more convenient than visits to project sites, which are time-consuming.

At the current fair, Kasikornbank offers a zero-interest mortgage rate for the first year to all home-buyers.

Some property firms offer a guaranteed 6-per-cent annual return on investment for the first three years for those buying with a view to renting out their property. Others offer a one-year free stay, as they will shoulder the first 12 months of instalments.

This will be a good time for investors who have cash and want to find a good investment, Kriengsak said.

Optimism over Bangkok property fair

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Source: The Nation

An increasing number of Thai investors are taking an interest in property projects overseas, in the light of declining asset values and the prospect of a global economic recovery next year, international property agency Jones Lang LaSalle (Thailand)’s managing director said.

Thai investors have shown a strong interest in expanding their investments in commercial buildings in overseas markets including the UK, Japan, Hong Kong and Singapore, Suphin Mechuchep said.

“If they wait to buy at the bottom price in the second half of this year, they stand to lose a business opportunity because investors from other countries also sense a bargain. As a result, Thai investors are keen to buy or take over commercial assets overseas,” she said.

Investments made now could generate average returns of 7 to 10 per cent a year, she said, adding that their break-even period should also be shorter.

Suphin pointed out that Central Group invested in CentralWorld and @Office on Ratchaprasong Junction during the financial crisis of 1997. Central Group now sees an average return on investment from the project of 7.5 to 8 per cent a year.

Quality Houses took over the QH Lumpini office building in 1998, shortly after the crisis. Its return on investment averages 7 to 8 per cent. Returns on investments made during economic slumps tend to be bigger and come in quicker than investments made in normal periods, Suphin said.

Meanwhile, Tonson Property, a development and investment arm of the Rattanarak tycoon family, has set aside Bt500 million a year to invest in commercial properties such as hotels, resorts and office buildings in both the domestic and overseas markets.

The Rattanarak family holds a major stake in Bank of Ayudhya.

The company’s managing director, Kanis Saengchote, said now is a good time to invest in property and commercial buildings because asset values are between 30 and 50 per cent lower than in normal periods.

“We are negotiating with French, British and Middle Eastern investors to raise money through property or other funds. This will be combined with our capital to expand our investments,” he said.

TCC Land, the property arm of beverage tycoon Charoen Sirivadhanabhakdi, has set aside Bt4.5 billion to invest in commercial property overseas this year, with a focus on the retail and hospitality businesses, deputy CEO Soammaphat Traisorat said.

Early this year, the company took over a hotel in New Zealand worth nearly Bt1 billion.

“This is a good time to invest, as we can bargain for a discount of more than 30 per cent compared to last year,” he said.

TCC Land owns a number of hotels in Thailand and overseas.

Thai investors look to overseas property

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Source: The Nation

Mega-projects expected to boost growth this year and next

Thailand’s leading construction contractors expect to gain an increased share of work from the government’s new Bt500-billion mega-projects, especially the new rapid-transit systems, and this will drive their revenue growth this year and in 2010.

Italian-Thai Development’s president Premchai Karnasuta said his company expected to pick up about 40 per cent of the work in constructing the new rail routes. Bidding will open this year for contracts worth nearly Bt100 billion - the first part of the total Bt500-billion cost of the mega-projects to be built over the next five years.

Italian-Thai is expecting new construction contracts worth Bt200 billion this year, and part of this will come from the mega-projects, especially the new rail routes, he said.

At present, the company has won the bidding and signed contracts for projects worth Bt50.7 billion. It has offered what it claims are the lowest bids for further projects worth Bt101.2 billion, and expects to sign contracts for these later this year. It is also involved in the bidding process for yet more projects worth Bt110.2 billion.

“We expect to win more than a half of the [projects valued at] Bt110.2 billion, which are currently in the application process,” Premchai said.

In the construction business, Italian-Thai Development ranks in front of other contracting companies listed on the Stock Exchange of Thailand. It expects to record a net profit this year, from the both private and the government projects, after suffering a net loss Bt2.65 billion in 2008, he said.

Ch Karnchang’s executive-board chairman and chief executive Plew Trivisvavet said his company had a backlog of signed construction contracts worth a combined Bt12 billion. It expects to win new contracts to help build the new rapid-transit rail routes that will increase the value of its projects on hand by nearly Bt10 billion this year, he said.

In addition, it has other contracts waiting to be signed. They include the first contract for construction of the Purple Line rapid-transit route, the construction of an underground pedestrian tunnel at a Bangkok intersection, a small power plant in Ayutthaya’s Bang Pa-in district and the Nam Bak Dam in Laos.

As well, Ch Karnchang is planning to bid for many other projects, including the Red, Blue and Green lines, as well as road-construction jobs in India and Vietnam.

The company believes the Purple Line contract will be the most profitable one, even though CKTC - a joint venture between Ch Karnchang and Tokyo Construction - had to lower its project price in the most recent round of negotiations with the Mass Rapid Transit Authority.

Plew said the worsening local economy would not affect Ch Karnchang because the government would implement many measures to shore up the economy and maintain employment. He expects the company’s revenue and net profit to surpass those of 2008, which was a difficult year because of volatile construction-material prices.

This year, prices seem stable, which makes for easier management.

Last year, Ch Karnchang and its subsidiaries posted consolidated revenue of Bt14.51 billion, down from Bt14.92 billion in 2007. But the group recorded a higher net profit of Bt544 million, up from Bt14 million in 2007.

With more government projects open for bidding this year, a number of securities brokers are recommending “buy” on the stocks of construction contractors, especially Sino-Thai Engineering and Construction, Ch Karnchang and Syntec Construction.

Siam City Research Institute has maintained a “neutral” recommendation for the entire contractor sector, saying delays in government spending on infrastructure projects, while limiting the amount of construction work done in the short term, will keep the sector’s earnings stable during the first half of 2009 and lead to a possibly significant rise in the second half.

The institute believes that Cabinet approval of four electric train routes - the Purple, Red, Light Green and Green lines - will assure the contractor sector of continuous revenue from this year until 2013.

The broker believes the number of construction projects will increase during the second half of this year, starting with the Purple and Red lines, worth Bt36.05 billion and Bt8.7 billion, respectively. It says a start on the infrastructure mega-projects should boost confidence among private investors.

Siam City Research Institute’s top pick in the contractor sector is Ch Karnchang, for which it has made a “buy” recommendation with a fair value of Bt4.50. It says the firm’s earnings are expected to improve this year on the strength of its backlog, which is worth as much as Bt12 billion.

There is also the strong possibility of new small-power-producer projects worth Bt18 billion, a planned tunnel beneath Charan Sanitwong Road, and the construction of the Purple Line. These will contribute to Ch Karnchang’s 2009 earnings, which are expected to grow by 4 per cent year on year to Bt13.87 billion, as well as strengthening its earnings over the next three to five years.

Asia Plus Securities’s head of research Therdsak Thaveeteeratham agreed that construction-material costs were no longer a concern for the sector, which absorbed high steel and oil costs last year. He also echoed Siam City Research’s view that the number of new construction projects would increase in the second half of this year.

The sector is likely to record combined net profits of Bt1.17 billion this year, marking a turnaround from last year’s loss of Bt1.44 billion, he said.

Therdsak’s top picks for the sector are Sino-Thai Engineering and Construction and Syntec Construction.

Sino-Thai is a major contractor with expertise in the construction of power plants, petrochemical plants and waste-management systems. Its financial situation is strong, with cash reserves at the end of last year totalling Bt974 million - higher than its short-term borrowing of Bt769 million. Thus, Sino-Thai’s debt-to-equity ratio is as low as 0.2 times, leaving the firm well prepared should any liquidity problems arise this year, Therdsak said.

Sino-Thai’s backlog is worth Bt12.09 billion. This year, it is expected to post an operating profit of Bt285 million and pay its first dividend to shareholders. Asia Plus gives it a fair value of Bt3.83 per share.

The broker said Syntec’s expertise was mainly in high-rise buildings, condominiums and hotels, which provided higher profitability than other types of construction projects.

Most of its customers are listed firms, which carry a lower risk of exposure to bad debts. The company’s financial status is strong, with cash reserves of Bt431 million.

This year, Syntec is expected to post an operating profit of Bt227 million, with revenue from its backlog last year totalling Bt6.2 billion. Asia Plus gives its stock a fair value of Bt0.57 per share.

Contractors prepare for good times

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