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Published on April 4, 2008

Property firm Quality Houses will switch its business strategy's focus to developing residential projects as part of its drive to reach sales growth of 10-20 per cent this year.

The company will suspend expansion plans for the office-building and serviced-apartment segments this year, because an oversupply is expected in both, said president and CEO Rutt Phanijphand.

Quality Houses now manages five office buildings and seven serviced-apartment projects in Bangkok's central business district. The office buildings are operated under the company's Q House brand and located in Bangkok's Phloenchit, Asoke, Sathorn, Lumpini and Convent Road areas. The seven serviced-apartment projects are run under the Centre Point brand and are located in the city's Silom, Phetchaburi, Sukhumvit, Thonglor, Langsuan, Wireless Road and Sala Daeng areas.

Rutt said the company's involvement in both segments had taken 10 years to become profitable and that it had had to set aside a huge budget to develop the projects. Due to the long gestation period, the company has decided to suspend investments in both segments this year.

The company will shift focus to developing saleable residential projects this year and plans to launch 10-15 projects a year over the next two years. This is in line with targeted sales growth of 10-20 per cent.

The company's net profit for this and the next two years is expected to be better than last year's.

"Our net profit was lower than that of other property developers in the market because nearly 20 per cent of our revenue came from rental fees from serviced apartments and office buildings, which typically generate lower returns compared with returns from selling residential properties. However, with the shift in our focus this year, we believe our net profit will be better than last year's," Rutt said.

Quality Houses posted revenue of Bt10.58 billion last year for a net profit of Bt1.06 billion, or about 10 per cent of revenue.

Listed property developers normally generate a net profit of 12-15 per cent.

The company expects to achieve its revenue target of Bt12 billion this year, up 13.42 per cent from last year.

Up to Bt10.5 billion is expected from selling residential projects, while the rest of the Bt1.5 billion will come from rental fees.

The company plans to launch 11 new residential projects worth Bt16 billion this year to achieve the target.

The company also plans to reduce its debt-to-equity ratio from 1.4 now to 1 by lifting its property fund from Bt8 billion to between Bt11 billion and Bt12 billion.

The company expects this to help reduce its total debt from Bt14.8 billion to about Bt10 billion.

"We're awaiting a new draft of the Hotel Act before applying for our serviced apartments to be designated as hotels. Then we'll add some of our serviced apartments and office buildings to our property fund. This will in part reduce our debt and help our financial status become healthier than it is now," Rutt said.

Somluck Srimalee

The Nation

      At a glance

n Long gestation period forces Quality Houses to put new projects for office buildings and serviced apartments on hold.

n Company expects to reduce its total debt from Bt14.8 billion to about Bt10 billion.