Rise in cost hits profits

Listed property firms suffered negative impacts from an increase in management and construction costs and delay on the part of buyers in transferring their residences in the first quarter of this year.

Most of the companies reported a drop in net profit in the first quarter of this year when compared with the same period last year, according to financial results declared to the Stock Exchange of Thailand this week. 

Land & Houses reported net profit of Bt1.4 billion in the first quarter of this year, a 26-per-cent drop year on year. Pruksa Real Estate recorded net profit of Bt633.03 million in the first quarter of this year, a 13.44-per-cent drop year on year. LPN Development reported net profit of Bt294.43 million in the first quarter of this year, dropping 27.4 per cent from the same period of last year.

However, some of them showed growth in net profit thanks to their buyers speeding up transfer of residential projects. They include Asian Property Development, Sansiri, Quality Houses, and Sena Development.

Asian Property recorded net profit of Bt421.33 million in the first quarter of this year, up 218.77 per cent from the same period of last year. Sansiri recorded net profit of Bt340.40 million in the first quarter of this year, up 57.26 per cent from the same period of last year. Quality Houses announced net profit of Bt304.32 million in the first quarter of this year, up 92.96 per cent from the same period of last year, while Sena Development recorded net profit of Bt49.38 million in the first quarter of this year, up 22.71 per cent from the same period of last year.

 

Drop in revenue, rise in cost

Land & Houses senior executive vice president Adisorn Thananan-narapool reported to the SET that the company’s net profit in the first quarter of this year was lower than the same period of last year because the company’s administration expenses rose to Bt378.06 million compared to Bt287.01 million in the same period last year. It increased due to flood-related expenses amounting to Bt51.8 million and Bt29.85 million from the opening of Terminal 21 shopping mall and Grand Center Point Hotel. 

However, in the first quarter of 2012, the company did not have any profit from divestment while during the same period last year the company recorded pre-tax profit from divestment in Bangkok Chain Hospital of Bt2.76 billion. The company had also suffered a Bt622.01 million loss in the first quarter of last year from impairment of its investment in Indonesia.

LPN Development’s managing director, Opas Sripayak, said the company’s net profit in the first quarter of this year decreased by 27.41 per cent as the company’s sales revenue was only Bt2.06 billion, lower than estimates and lower than the same period of last year.

Meanwhile, the company’s expenses on sales (excluding ownership transfer) increased 19.42 per cent because of the opening of new projects. Its management expenses remained stable and did not fluctuate with the decreased income as the company has improved the working process and is able to reduce such expenses by 3.04 per cent.

Pruksa Real Estate reported that the company’s net profit in the first quarter of this year was lower than in the same period last year as the company’s total revenue of Bt4.67 billion in the first quarter of this year was 14.2 per cent lower from the same period last year. 

Due to the last year’s massive flooding, buyers delayed booking and transferring ownership. 

Meanwhile, the company’s cost of real estate sales rose to 64.5 per cent of revenue compared to 60.7 per cent in the same period of last year. The rise in cost was because of increase in construction material cost and the additional costs incurred during the floods last year.

SC Asset Corporation’s chief financial officer, Attapol Sariddipuntawat, said the company’s net profit in the first quarter of this year was lower than last year as its total revenue dropped while marketing and advertising costs rose.

Asian Property Development’s CEO, Anuphong Assavabhokin, said the company’s net profit in the first quarter of this year was better than the same period of last year as none of its residential projects were affected by the floods last year as a result the company could deliver its residential projects to its customer on time. 

Meanwhile, the company's condominium project, the Address Sukhumvit 28, is also already for transfer to its customer in the first quarter of this year worth Bt737 million. This enabled it to report higher revenue and net profit in the first quarter of this year compared to the same period of last year. 

 

Recovery in second quarter

Although most listed property firms reported net profit in the first quarter of this year, albeit lower than the same period of last year, most of them believed that their total revenue and net profit in the second quarter of this year will be better than in the first quarter as residential prices will go up because of the cost push. 

SC Asset’s chief operating officer, Kree Dejchai, said the company will revise up its residential prices between three and five per cent in the second quarter of this year due to increase in construction cost. 

Sansiri president Srettha Thavisin said the company showed high pre-sales in the first quarter of this year as a result the company has adjusted its pre-sales target from Bt32 billion to Bt36 billion this year due to strong demand to buy residences since March this year. 

“Although we have revised up our pre-sales target, our total revenue target continues to be Bt28 billion for this year," he said.