High Revenue but low profit, most listed property firms reported revenue growth of 10-20% in the Q1 2013 concerned with the same period last year. However, most of them recorded lower net profits due to higher construction and marketing costs amid high competition.
But net profit and margins squeezed by increases in construction, marketing costs Continued growth in residential demand boosted listed property firms' revenue in the first quarter, with companies posting increases of between 10 and 20 per cent from the same period last year.
Developers' inventory - a combination of undeveloped land and projects under construction - in the quarter increased from the end of last year, with most of them expanding their investment and launching projects both in Bangkok and the provinces.
Pruksa Real Estate's inventory of Bt41.79 billion as at March 31 was the highest among listed property firms, followed by Sansiri's Bt38.03 billion and Land & Houses' Bt34.57 billion.
High inventory levels and business expansion via the launch of residential projects, especially condominiums, in Bangkok and the provinces have boosted the debt-to-equity ratio of those property firms focused on condominium development above 2:1.
Noble Development's D/E ratio stands at 2.6:1, Sansiri's at 2.2:1 and Property Perfect's at 2.1:1.
But other property firms have controlled their D/E ratio at no more than 1.5:1 by balancing their portfolios between low-rise housing and condominium projects.
A ratio of 1.5:1 is also the average for listed property firms.
Pruksa Real Estate's director and chief financial and risk officer, Edward J Cooper, said the company had kept its D/E ratio at no more than 1.5:1 by balancing its portfolio with a mix of low-rise developments and condominiums.
"Our construction process through to delivery of low-rise home to customers averages five to six months. This generates cash to support our business operation at a time when the construction-through-delivery process for a condominium is between 18 and 36 months," he said.
He added that the company was also managing its debt by issuing a Bt6-billion debenture this month. Proceeds will be used to repay short-term debt and achieve a D/E ratio of 1.32:1 at year-end.
Land & Houses is also keeping its D/E ratio below 1.5:1 via a planned Bt6-billion debenture issue. The developer is studying the launch of a property fund, as well.
Net earnings down
Although all listed property firms have been at pains to manage their financial structure, they have also faced higher costs to the extent that some were unable to maintain their first- quarter net profit margin at the industry average of 15 per cent estimated for last year.
For example, Pruksa Real Estate recorded a net profit margin of 12 per cent for the period, against between 15 and 16 per cent for last year.
Sansiri, meanwhile, posted a net profit margin of between 9 and 10 per cent in 2012, but recorded a net loss for the first quarter of this year.
AP (Thailand), which has always had a net profit margin of between 13 and 16 per cent a year, reported a margin of only 7 per cent for the first quarter.
LPN Development, which specialises in condominium projects, recorded a first-quarter net profit margin of 14 per cent. Its traditional annual net margin is between 14 and 15 per cent.
Property Perfect's net profit margin in the period came in at only 4 per cent, well below the company's normal annual performance of 8-9 per cent. However, the company held a press conference to announce a targeted margin of at least 10 per cent for the full year.
SC Asset Corp's net profit margin of 12 per cent lags its normal 14-15 per cent per year, while Ananda Development's net margin of only 0.38 per cent is still the best it has ever recorded, after posting a net profit for the first time in the three years it has been listed.
MK Real Estate's first-quarter net profit margin of 11 per cent is lower than the company's average of 14-15 per cent a year, while Sena Development's 14 per cent maintains the company's annual average.
Five listed firms - Land & Houses, Quality Houses, Supalai, Noble Development and Lalin Property - continued to maintain their net profit margins above 15 per cent.
Land & Houses recorded a first-quarter margin of 23 per cent, with some of its net profit coming from investment business, which pays dividends to the company.
Quality Houses posted a net profit margin of 16 per cent, while Supalai achieved 22 per cent, Noble Development 16 per cent, and Lalin Property 17 per cent.
Most listed property firms with lower net profit margins than last year told the Stock Exchange of Thailand that their marketing and administration costs had risen following their business expansion.
For example, Sansiri reported that the company's marketing costs had increased to such an extent that it had made a first-quarter net loss, the first in a decade.
AP (Thailand) told the exchange that the company's income from condominium projects in the first quarter was lower than in the same period of last year. This had impacted the company's net profit margin, as the margin for condominiums was higher than for low-rise housing.
Maintaining revenue targets
However, most listed firms still believe their revenue performance for the full year will be on-target.
Sansiri president Srettha Thavisin said in a company release that the developer was confident that its financial results would improve in the second half of the year.
This would enable the company to achieve its target of presales of at least Bt48 billion and revenue growth at least 10 per cent from last year, he said.
"We believe that at the end of the year our revenue and net profit will meet the targets," he added.
Pruksa Real Estate's director and chief business officer, Prasert Taedullayasatit, said the company would maintain business growth by following a plan that targets full-year revenue of Bt33 billion, although the company has seen signs that income could exceed this level.
"We believe the property market will grow between 7 and 8 per cent this year, and we will expand in line with this growth," he said.