Poor Q3 Results For Most Listed Developers

[billaaa777]

Poor Q3 results for most listed developers

Most listed property developers showed disappointing third-quarter earnings, due mainly to stagnant economic conditions, high domestic oil prices and increased interest rates during the period.

Land and Houses' third-quarter net profit fell sharply by 63.81 per cent to Bt531.97 million, from Bt1.47 billion in the same period last year.

Thailand's largest property developer blamed the economic slowdown and increased interest rates for a 44.87-per-cent year-on-year Bt2.89-billion drop in sales.

The property developer said high energy prices also pushed up raw-material costs and lowered the company's gross profit margin to 30.65 per cent, from 34.49 per cent in the same period last year.

With the decline in both sales and the gross profit margin, Land and Houses reported its quarterly gross profit slumped by Bt1.13 billion. Quality Houses saw its third-quarter net profit drop 57.79 per cent from the same period last year, to Bt101.22 million.

Although its revenues surged 12.6 per cent in the third quarter to Bt2.01 billion, this only offset part of the increase in its sales costs.

The company's total third-quarter sales costs increased by Bt290 million, or 24.1 per cent, year on year.

Property Perfect swung back into a net loss of Bt44.01 million in the third quarter, compared with a net profit of Bt180.33 million in the same period last year. The company explained that its poor quarterly earnings were attributed to declines in its sales revenues of 32 per cent year on year, its gross profit margin to 31.21 per cent from 35.72 per cent in the same period last year and its investment profit. Its selling and administrative expenses rose by Bt12.1 million.

Golden Land Property Development was the best performer in the period among its industry peers. It posted a third-quarter net profit of Bt50 million, compared with a Bt12.65-million net loss in the same period last year.

Asian Property was the second-best performer, with a whopping 207-per cent year-on-year rise, from Bt206.9 million in last year's third quarter to Bt636.18 million this year. However, the property developer explained that the stunning quarterly result could be ascribed to a gain of Bt752 million from the sale of its investment in City Asset Fund.

Areeya Property showed a big improvement, with a third-quarter net profit of Bt13.34 million, compared with a net loss of Bt5.03 million in the same period last year.

Prinsiri also turned in a strong performance in the third quarter, with its net profit rising 102.79 per cent year on year to Bt155.28 million.

The Nation

I notice they never mention the drop in the real estate portion of the economy is related to the ever changing land laws and visa regulations. I wonder why?

[steveromagnino]

I notice they never mention the drop in the real estate portion of the economy is related to the ever changing land laws and visa regulations. I wonder why?

Of the big housing developers like Land and H; GOlden Land even smaller ones like AP; the number of units they are selling to non Thais is fairly low, so VISA regulation is almost a non issue. Sansiri maybe more, but land law would not affect these guys much as the project lead time is not a few months, it is longer than that.

I'm still skeptical (based on our own development work we do here at a property development company) that many serious buyers would be affected at all by the visa regs anyway; certainly none of the small percentage of non Thais buying in our first project and our research for a major resort project down south have mentioned visa regs at all. Exchange rate is a bigger factor for them.

[thedude]

agree with steve. the developers mentioned are focused on landed housing. foreign buyers of landed housing is so insignificant they account for less than 10% of buyer interest in moo baan projects. most foreigners who buy landed housing do so in their spouse's name.

[womble]

Another sign that the Thai economy is not as healthy as it was, visa, property law and foreign ownership are not really an issue here, small and insignificant.

Cars sales have fallen sharply, people are maxed out credit wise.

Thaksin's consumption driven economy is coming back to bite those that over extended their credit without thinking of the consequences.

[Steph1012]

It can only get worse.

As the house sales dry up so to the miriad associated costs. Even if the falang involvement of 10% is deemed insignificant by some, we do have to furnish and set up a house from scratch, spending 20% plus on top of the house price to kit it out.

Fall in house sales (and lettings to some extent) = loss of furniture sales, air-con sales, utensils, ovens, fridges, decorations, garden machinery etc. Look round your house and you will get the idea. The next sector to be hit, will be the companies who manufacture, sell, install, maintain and repair all these items. In my experience these are virtually 100% thai owned small businesses and they are going to feel this soon. Thailand for the Thais is going to seem a hollow slogan when the income is slashed and jobs are lost with all the hardship that entails in a country with virtually no social security system.

As womble pointed out above, car sales will be hit as this is an unnecessary purchase and none of us are going to buy a brand new car when we don't know if we will be around to drive it, or if the visa situation or W/P situation will be viable in the near future. And this is from somebody like me who has had proper visa and W/P for over 6 years now, pay taxes, stamp and all bills on the dot. I'm not jumping through too many more hoops at my time of life.

Whatever the temporary government do, we are going to have a new elected government next year that could impose all sorts of restrictions, and its not beyond the realms of possibility that Thaksin could be back seeking revenge on all and Sundry. Seeing a lot of him in the media again and you can be sure it's stage managed!

This is the first of many threads regarding Thai corporations petitioning governments because they are getting a financial hammering.

Edited November 16, 2006 by Steph1012

[dsfbrit]

It can only get worse.

As the house sales dry up so to the miriad associated costs. Even if the falang involvement of 10% is deemed insignificant by some, we do have to furnish and set up a house from scratch, spending 20% plus on top of the house price to kit it out.

Fall in house sales (and lettings to some extent) = loss of furniture sales, air-con sales, utensils, ovens, fridges, decorations, garden machinery etc. Look round your house and you will get the idea. The next sector to be hit, will be the companies who manufacture, sell, install, maintain and repair all these items. In my experience these are virtually 100% thai owned small businesses and they are going to feel this soon. Thailand for the Thais is going to seem a hollow slogan when the income is slashed and jobs are lost with all the hardship that entails in a country with virtually no social security system.

As womble pointed out above, car sales will be hit as this is an unnecessary purchase and none of us are going to buy a brand new car when we don't know if we will be around to drive it, or if the visa situation or W/P situation will be viable in the near future. And this is from somebody like me who has had proper visa and W/P for over 6 years now, pay taxes, stamp and all bills on the dot. I'm not jumping through too many more hoops at my time of life.

Whatever the temporary government do, we are going to have a new elected government next year that could impose all sorts of restrictions, and its not beyond the realms of possibility that Thaksin could be back seeking revenge on all and Sundry. Seeing a lot of him in the media again and you can be sure it's stage managed!

This is the first of many threads regarding Thai corporations petitioning governments because they are getting a financial hammering.

Agree with nearly all of that. In my humble case, because of uncertainty over the land issue - I have not had an extension built (300,000) baht nor even had the roof insulated as the cost/benefit for the insulation cost of around 100,000 baht (another thread is currently discussing this) is at least 4 years ie: savings in Air conditioning costs.

I have stopped all non-maintenance spending in Thailand for now.

Wait and see mode at the moment.

[steveromagnino]

no doubt for someone like View Talay or Royal Phuket Marina this uncertainty is a big deal, but even major developers who somewhat focus on foreigners like Raimon Land are still unveiling new projects, and there are still people buying them.

For each foreign person not wanting to drop 20k on some furniture, there are a ton more Thais who might or might not; let's not over estimate the impact of the foreign dollar. For cars, hardly any tourists have cars, and of the expats I know who don't live here, hardly any; for expats living here some have a car, but that is a drop in the bucket compared to Thai car purchasing.

For all the scaremongering and threats to leave, as I said, in my experience and guessing the future, the actual impact, at least so far in Bangkok, is fairly small for the big Thai developers like L&H, AP, Golden Land, Supalai etc. In total, my guess is we are talking about 100,000 foreign people affected in some way by these regulations, and a fair few of them will wriggle around and figure out some way to stay anyway; no matter how much the govt policy appears not to want them. For any with a half decent income, it isn't like most of the new regulations are that stringent. For many affected, the person earning 50k a month or so; it isn't like this is a major impact on the Thai economy...is it?

Regarding 'The Dude''s 10% max; I'd say it is far smaller than that overall; and yet for some developers as high as 80-90% foreign money e.g. View Talay. And those are the ones that will get hit and are getting hit no doubt at the moment.

Mind you, just checked out a new retirement village sold out in Scandanavia recently being built in Jomtien; there are still plenty of new markets there.

I do agree that the Thai economy is not so healthy right now; and there has been tightening in many sectors which makes selling hard and may cause some price drops which squeezes margins; THAT is what is causing Q3 to dip plus greater than expected costs for some developers (projects get planned years in advance sometimes), not some minor enforcement of a few laws affecting a relatively small number of foreigners. That's why I think wait and see is the right approach to buying right now; but on the other hand, Sansiri and others have been clearing excess stock for a while now and you have a bunch of the next rung down developers like AP and LPN going hammer and tongs. Things are still moving, people are still buying; it just isn't the haven of a few years back when L&H shot up on the back of a consumer spending frenzy (again, not much to do with foreign money).

All of this is Bangkok specific of course (where most of the developers do business); Phuket, Samui and so on are a different story; no doubt they are feeling the brunt more from foreign dollars; but again I'd put in order:

- strength of the baht

- uncertainty in the south

- coup

- tsunami fall out

- legality of foreign ownership issue

then a long way behind

- Visa regulations

let's face it, for someone spending $1m USD on a villa, they can afford an extra few thousand baht to get a tourist visa from their consulate.

Edited November 16, 2006 by steveromagnino

[Steph1012]

let's face it, for someone spending $1m USD on a villa, they can afford an extra few thousand baht to get a tourist visa from their consulate.

You are spot on with this last remark. Getting and keeping your visa in order are fairly straight forward if you can accept the tax and company structures. Most people affected by the Visa clampdown do only have themselves to blame and should have seen the writing on the wall. It won't affect the "came, fell in love and want to stay" brigade (of which I am proud to be one), but it will affect western couples who do plan these things more carefully than us hot blooded escapees!

Most of us have been burned before and realise we can pick ourselves up and start again in any regard. Its often said on here that you should be able to walk away from any investment you may have here and not to risk all. These are wise words, but they are preventing many of us from making purchases of anything other than vital repairs. I've temporarily clamped down on buffalo repairs and purchase, rice harvesting costs and fence renewing (NOTE temporarily!) as this gets the wifes family on side!! Try it.

The people affected by the Visa, WP clampdown are however, very vocal and this is bad publicity that is affecting many peopel who could quite legitimately live here.

The most often heard comment amongst potential buyers (and I do meet a lot of them) is "what if they change the rules again?" They could and almost certainly will change them again, and a married retired western couple with one million US to invest are going to be put off by this more than the likes of me with my small residence for me and my Thai wife.