Thailand's Central Group cautious over 2016 expansion

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INVESTMENT
Central cautious over 2016 expansion
Watchiranont Thongtep
The Nation

BANGKOK: -- Central Group sees 2016 as another year to be more conservative with expansion, as the country’s largest retail operator is still concerned about weak domestic consumption.

Prin Chirathivat, deputy chief executive officer, said yesterday that both the global and domestic economies are expected to improve in the coming year. The only worry was moribund consumer spending, as the group is heavily involved in the retail business.

Unlike the retail business, the group's hotel business was still performing well this year.

The group will continue to develop department stores as planned but with a cautious approach.

"We have to be well prepared with a more flexible plan and put more focus on our core business," he said.

The company appears to be hedging its risk by focusing less on non-core businesses like warehousing.

To support future growth of its hard-line business, which heavily relies on inventory management, Central Group's CRC Power Retail is forming a 50:50 joint venture with WHA Corporation Plc.

WHA Central Alliance was established with Bt850 million in registered capital to manage its Bt4-billion warehouse project in Ayutthaya's Wang Noi district.

Located on 320 rai (51.2 hectares) of land owned by Central Group, the new warehouse will offer a total of 250,000 square metres of space. As the first phase, Central Group has already built a 56,000sqm facility on 100 rai.

The JV would take over both the land and warehouse under a sale-and-leaseback deal and carry out the next two phases to expand its capacity to 250,000sqm in three years. The Bt4-billion investment includes land.

Jareeporn Jarukornsakul, vice chairman and chief executive officer of WHA, said that through the sale and leaseback of the first phase, the new JV will realise revenue of about Bt100 million from the beginning.

The first phase was aimed at serving Central's hard-line retail business consisting of Thai Watsadu, HomeWorks, Baan&Beyond and Power Buy.

In preparation for continuing expansion, particularly of the new imported product line-up, the second phase is scheduled to be completed next year, adding 28,000sqm of rental space.

The hard-line business has played an important role in the group accounting for 10 per cent of total revenue, with an average annual growth of at least 10 per cent in revenue.

Somyos Anantaprayoon, chairman of WHA, said that after the completion of all phases, Central Group would lease 60 per cent of the total warehouse space for 10 years. The remaining areas would be available for new customers.

With experience in the build-to-suit warehouse business, WHA could help clients to save about 30 per cent in costs incurred by constructing their own warehouse.

WHA projects Bt400 million a year in income from the completed project, which would boost its rental, service and utilities income by 10 per cent.

Jareeporn said the JV was the third collaboration with Central Group. The company already provides the group a 23,000sqm warehouse and distribution complex on Bang Na-Trad Road and a 20,000sqm cold storage facility on Rama II Road.

Source: http://www.nationmultimedia.com/business/Central-cautious-over-2016-expansion-30275004.html


-- The Nation 2015-12-16