Govt schemes expected to be boon to Italian-Thai

The investment schemes should also bring big business to construction-material firms and banks, the securities house said in a research note yesterday.

Thanks to the government projects and boom times in the property market, domestic cement consumption is expected to reach 33 million to 34 million tonnes, near the all-time high of 37 million tonnes before the 1997 financial crisis. Other construction materials will also enjoy brisk demand.

The investment should directly and indirectly boost bank loan growth to 12 per cent in each of the next two years, up from the 9-per-cent average in the past nine years. Large corporate loans will drive portfolio growth in the period, not SME (sma+international bidding. As the largest contractor and a qualified bidder for the water-management project, ITD with a Bt220-billion backlog is forecast to post a net profit of Bt1.29 billion this year, 10 times its 2012 result. Its gearing ratio of 3.1 – the highest among listed construction firms – is a major risk and the company’s plan to unload assets shows no progress. 

The 10 construction companies under Asia Plus Securities’ coverage now sit on a combined backlog of Bt370 billion – the highest in more than a decade. Thanks to the huge backlogs, which can support the companies financially for three to four years, Thai construction companies are believed to be paying more attention to the profit margin of projects, not their value. 

Of the Bt2-trillion infrastructure investment, 81.2 per cent will be allocated to rail networks, 12.3 per cent to motorways and 1.49 per cent to ports. It is generally believed that the government will kick off fund-raising in the fourth quarter.

Bidding should take at least three months after the enactment of the borrowing bill on assumption that the terms of reference are ready before the tendering. As contracts need to be signed and construction areas cleared, construction work is expected to take shape some time in the second quarter of next year.

Still, Asia Plus Securities showed concern over the project timelines. 

“The mega-projects are [being] kicked off at a time when local contractors have their hands full and face a labour shortage. This may worsen the labour shortage. And without proper measures, this may affect the construction schedules,” it said.