Asian Property goes lowrise

Asian Property Development plans to launch new residential projects with a market value of nearly Bt2 billion in the first half of 2009 by focusing on lowrise projects rather than larger highrise develop¬ments, chief executive Anuphong Assavabhokin said.

Its new projects will be lowrise developments such as detached houses and townhouses.

The company has also decided to suspend six new res¬idential projects, including four condominiums and two lowrise projects, which it planned to launch before the end of this year.

"We have to be strict with our investment plans for next year because we cannot estimate whether Thailand's econ¬omy will hit by the global economic recession or not. As a result, we have to keep our cash and choose to develop those projects that will pay cash back to us faster than those that take time," he said.

Condominium projects normally take between oneandahalf and two years to generate cash back to the company, whereas lowrise residences such as detached houses or townhouses generate cash more rapidly, he said.

Although the company plans to make lower investments next year, this is not expected to affect Asian Property development's financial results in 2009 because the company has a current backlog of presold residential units that will be booked to revenue after construction is complete and they are delivered to customers. The backlog has a value of Bt15 billion, and will appear as company revenue next year and in 2010.

The company also has an inventory of residences that are waiting for sale, including condominium units, detached houses and townhouses collectively worth Bt8.6 billion, and that is sufficient to generate next year's total revenue.

"Our backlog and our inventory, when combined with new projects worth Bt2 billion, will be enough to give us business growth next year and in 2010. We don't need to make more investments next year if Thailand's economy gets a negative impact from the global economic recession," he said.

However, if Thailand's economy remains healthy next year, with strong growth, Asian Property Development has enough cash to expand its investments, Anuphong said.

He said the company had adopted a conservative busi¬ness policy in August 2008, when global investment bank Lehman Brothers filed for bankruptcy and the full impact of the subprime mortgage crisis on the US financial sec¬tor became obvious.

"We started to revise our business plan by suspending six new projects that were due to be launched in the final quarter of this year and started to revise our investment plans for 2009 to save our business, in case Thailand faced a worsecase scenario from the crisis," he said.

Asian Property Development recorded total revenue of Bt2.7 billion and a net profit of Bt453 million in the third quarter of this year - increases of 38 per cent and 46 per cent respectively over figures from the third quarter of 2007.

Meanwhile, 18 out of 19 brokerage firms publish¬ing analyses of Asian Property Development's finan¬cial results at www.settrade.com earlier this month recommended that investors buy the company's stock at target prices between Bt3.60 and Bt6 per share. Most of them said Asian Property Development's share price was lower than its face value. The brokers also said that even though the country's economy may drop in the next year, Asian Property Development had strong financial results. Its cash flow and its Bt15million backlog will generate income for the com¬pany until 2010, they said.

However, DBS Vickers Securities (Thailand) recommended "hold" on the company's stock with a targeted price of Bt2.30 per share.

Asian Property's shares were trading late last week between Bt1.70 and Bt1.96 each.