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BANGKOK: Thai real estate developer Sansiri Pcl is putting sales above profitability as it seeks to generate cash flow to survive the Covid-19 (coronavirus) pandemic.
The Bangkok-based group, which builds high-end condos in cities across the Southeast Asian country, offers aggressive discounts and other promotional campaigns in an attempt to attract buyers.
It expects to revise its annual sales target after a strong start in the second quarter, said President Srettha Thavisin.
“In times of crisis, profitability comes second,” Srettha said in an interview. “Cash is king and brand strength is great. The coronavirus crisis is bigger than September 11 and the combined Asian financial crisis, bigger than anything we’ve found,” he said, referring to the terrorist attacks. September 2001 against the United States.
Last month, Sansiri raised her second-quarter sales target to 12 billion baht ($ 371 million) after generating 4.2 billion baht from home sales in the first three weeks of April. That puts the company on track to make record revenue in the first half, Srettha said.
Analysts don’t seem so sure. The company’s shares have nine sales ratings, five holds and one purchase, according to data compiled by Bloomberg. Its shares fell 36% since January compared to an 18% decline in the country’s benchmark stock index.
“While we see that its earnings outlook will turn ugly for years to come, we fully support management’s view that cash flow, not profitability, should be the company’s key focus in the short term,” he said. Kasikorn Securities Pcl in a report that downgraded the shares. April 24th.
The one-time purchase rating came on an upgrade on April 30 by Krungsri Securities Pcl analyst Ratasak Piriyanont, who said that Sansiri “was the first in the price war to divest inventory units and managed to book solid presales in the first trimester”. Although its 1.9 times debt / equity ratio is “lower” than its national peers, the company “has sufficient financial resources to withstand the impact of Covid-19 in the worst case,” he said.
Thailand’s tourism-dependent economy has been devastated by the coronavirus and the full impact will not be apparent until this quarter, Deputy Prime Minister Somkid Jatusripitak said earlier this week. The government is trying to rebalance its economic structure to become less dependent on exports and tourism, and more on domestic demand.
Fortunately for Sansiri, the majority of her clients are local and account for about 95% of sales, Srettha said. Its main source of foreign buyers is China.
Srettha said the fact that the number of coronavirus cases is falling, combined with Thailand’s good health system, should be attractive to international investors once the crisis subsides. Foreign buyers have long flocked to the nation’s property market in search of investment properties and vacation homes.
“Assuming we don’t see a second wave, the Thai real estate industry will improve,” said Srettha. “But now we have to be aware of who will survive through this.” – Bloomberg
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