Big five property developers 'safe' from mergers of smaller players

The top five developers’ well-established brands and their large operating scale will ensure that they maintain their competitive advantage against the merged players. 

However, the smaller players that do not have strong niche market positions will face greater competition from these merged companies, which will become larger and have ready access to liquidity support from their new parents.

In the past few years, M&A activity in Thailand’s property market has been driven by conglomerates with vacant land or with plans to enlarge their property-development business. These conglomerates have acquired small-to-medium-sized residential-property developers. 

For example, the property arm of brewery Singha Group acquired listed Rasa Property Development and rebranded it Singha Estate; Property Perfect acquired listed Thai Property and Grand Asset Hotel and Property; and Golden Land Property Development, a subsidiary of TCC Group, is taking over non-listed Krungthep Land.

 

Limited impact 

Fitch expects these merged entities to have a limited impact on the top-ranked residential developers’ business and financial profiles over the next two to three years because of their much smaller size and weaker market position. Fitch estimates each of these merged entities’ revenue to be less than Bt20 billion a year, compared with the top five developers’ annual revenue of Bt20 billion to Bt40 billion each. In addition, the top five developers accounted for about 55 per cent of total revenue of listed players last year.

Some of the top-ranked property developers have also formed strategic alliances, which will strengthen their positions in high-rise housing and intensify competition in the condominium segment. 

Examples of alliances include a partnership between Sansiri and mass-transit operator BTS Group Holdings to build condominiums near urban rail stations, and a tie-up between AP (Thailand) and Japan’s Mitsubishi Estate Group to build condominiums.

However, Fitch expects the other market leaders to remain strong as they focus on different segments and have reasonable flexibility in their product mixes. 

The increasing supply of condominiums by leading developers is likely to put more pressure on smaller condo developers, which would require strong niche strategies or well-established brands to maintain their positions in the market.