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Thailand Listed Property Firms Stay Undaunted in 2013 Featured

FOR SALE: NORTHSHORE PENTHOUSE SUITES, NORTH PATTAYA, SOI 5

Thailand leading property firms convinced that the market is still experiencing real demand and not developing into a bubble, are continuing to launch residential projects in line with their business plans in 2013.

This is despite the Bank of Thailand's (BOT) concern about the state of the market, which it has been monitoring closely due to worries about oversupply and speculation. The central bank, fearing a bubble could be developing, is planning measures to rein in the market for second homes.

Pruksa Real Estate chief business officer Prasert Taedullaya said the company was sticking to its plan to launch 78 residential projects worth a combined Bt55 billion in 2013, despite the central bank's warning about oversupply.

"Some locations may be oversupplied, but not the overall market. Our customers represent real demand, buying homes in which to stay rather than for speculation. As a result, our business will not be negatively affected if the BOT introduces measures to control speculation in the second-home market," he said.

Pruksa also has its own measure in place to control speculative demand by refusing to sell to those wishing to buy more than 10 units, he added.

Meanwhile, the company enjoyed presales of Bt3.1 billion in the first three months of the year, in line with the expected level for the quarter. Its business plan targets presales of Bt35 billion and total revenue of Bt34 billion in 2013, Prasert said.

LPN Development managing director Opas Sripayak said the company was not alarmed by the BOT's possible measure for the second-home market, not least because most of its customers are first-home buyers.

"The BOT has been warning about the property market since early this year, and it has already had an impact on market sentiment," he said.

However, it will not affect LPN's strategy to launch 13 new condominium projects worth Bt20 billion this year, following its success in recording presales of Bt6.7 billion in the first quarter, he added.

Moreover, the company's speculative buyers only account for 5% of the total portfolio and, if they cannot transfer the homes they sign up for, the company resells them and they become real demand, the managing director said.

Sansiri president Srettha Thavisin, meanwhile, said the company was also maintaining its business plan, which is to launch 45 residential projects worth Bt61 billion during the course of the year.

"Most of our customers who buy a second home pay by cash, and that will not be negatively affected if the BOT introduces a measure to control the second-home market," he said.

According to a survey early this year, listed property firms will announce investments totalling more than Bt150 billion in each of the next two years for developing 216 residential projects expected to be launched in 2013. The Bt300 billion will be spent on the purchase of land and the construction of project infrastructure. More than half of the investment will come from companies' cash flow, with the rest from debenture issues and bank borrowings.

Major debenture issues

Many developers ranked in the top 10 plan to issue debentures worth more than Bt50 billion combined this year. Pruksa Real Estate plans to issue a Bt6-billion debenture with a mix of three- and five-year maturities in the first half of the year, while Sansiri issued a debenture worth Bt3 billion in January as part of its plan for debentures totalling at least Bt4 billion this year. Land & Houses plans a debenture with three- and five-year maturities worth between Bt6 billion and Bt7 billion. Half will be issued in the first six months of the year, and the remainder in the second period.

SC Asset Corp plans a five-year debenture worth Bt3 billion during the course of the year. Meanwhile, as of the end of last year, most leading property firms had maintained their debt-to-equity ratio well below 2:1. Only Sansiri and Property Perfect exceeded that level, with 2.1:1. Keeping the D/E ratio down forms part of the top developers' management of their business risk, should they be faced with an unpredictable situation.

As of December 31, Pruksa Real Estate's D/E ratio stood at 1.18:1, and Land & Houses' at 1.05:1. LPN Development had a ratio of 0.66:1, while SC Asset recorded 1.25:1 and Supalai posted 0.86:1.

"Most property firms' financial results are now healthier than they were at the end of the financial crisis in 1997, and they have a net debt gearing averaging only 0.99:1. Most of their debt-to-equity ratios are still lower than 2:1. This does not indicate a bubble in the property sector," Asia Plus Securities said in a research paper.

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