Sriracha Construction banking on SET
Sriracha Construction, which specialises in mechanical-equipment installation, has applied to list on the Stock Exchange of Thailand this quarter, hoping that its listing status will boost its attractiveness to foreign companies.
Founder and managing director Boonkrua Khemapiratana said yesterday that the company has a strong financial status and no debt burden, but sees it as essential to list on the bourse as doing so would increase its reliability in the eyes of foreign businesses.
Eighty per cent of Sriracha’s revenue comes from overseas projects.
The company is bidding for much more foreign work, including large-scale energy projects in Australia and South Africa, said Chatmongkol Khemapiratana, a Sriracha director.
Mechanical-equipment installation forms a significant part of these major projects, with a value of Bt4 billion-Bt5 billion. Whether the company lands the work is expected to be known in the second half of the year.
Sriracha has a backlog of Bt1.3 billion. If it wins the projects in Australia and South Africa, revenue this year will exceed the Bt2.98 billion generated last year. However, if it fails to win either of them, revenue will be lower than last year’s, he said.
Chatmongkol explained that the mechanical-equipment side of construction ebbed and flowed in line with the cycle of industry. This year is not a part of the cycle in which there is a great deal of new heavy-industry construction.
The company will float 78.25 million new shares in an initial public offering (IPO) this quarter. The shares will be tradable in the SET in the same period, he said.
The IPO shares will be used for plant expansion, machinery and equipment purchase and working capital. The company has a cash flow of Bt600 million-Bt700 million.
Sriracha is not worried that stock-market volatility will impact on its share price, as the company has confidence in its fundamentals, he added.
Deputy managing director Gridsada Potisomporn said the company was well-known both locally and overseas and had secured many large-scale projects from big-name companies.
There are few mechanical constructors for heavy industry, therefore the gross profit margin (GPM) is higher than for general construction.
The GPM for this kind of construction is 20 per cent on average, compared with single-digit GPM for general construction, he said.
Increases in raw-material prices and the daily minimum wage were not hitting the company’s costs significantly, because raw materials for construction are only 20 per cent of overall costs, he added.
Meanwhile, all 1,300 of the company’s workers are highly skilled, which means they were already earning more than Bt300 per day. Labour expenses account for 55-60 per cent of total costs.
The cost of Thai labour in mechanical construction is reasonable when compared with that in other Asean countries, Gridsada said, adding that overseas customers prefer hiring Thai companies and their highly skilled workforce due to the confidence they have in the quality of work and the fairness of costs.
