debentures to maintain cash flow

Property firm Preuksa Real Estate will issue debentures worth Bt1.5 billion, with interest rates between 5 per cent and 5.5 per cent, to maintain its cash flow as it develops 22 new residential projects worth Bt15 billion this year.

The company will set aside an investment budget of Bt10 billion for the projects: Bt7 billion for construction of the infrastructure and homes in the projects and Bt3 billion to buy 15 plots. The company has six plots in hand for the project.

Company president and CEO Thongma Vijitpongpun said that although the company has Bt2 billion in cash - enough to develop the new residential projects - it must hold more cash now that commercial banks are restricting loans to the sector.

"We now have more credit lines from the banks, but we don't know whether the banks will hold the credit lines if they see a risk," said chief financial officer Somboon Wasinchutchawal.

The company appointed Kasikornbank to be financial adviser and underwriter for its debentures, Bt1 billion of which will be open for sale from January 26-28 at the bank's branches. If demand for the debentures is higher than Bt1 billion, the company can sell an additional Bt250 million to Bt500 million. The debentures will have a maturity of three years.

The company's current debt-to-equity ratio is 0.3:1. After issuing the debentures, the debt-to-equity ratio will increase to be 0. 45:1, which is still lower than that of other property firms, Somboon said.

Thongma said the company also expects presales of Bt18 billion this year, up 11 per cent from last year. This will be booked to company revenue as Bt17 billion in 2009, up 31 per cent from Bt12.9 billion in 2008.

Preuksa's revenue of Bt12.9 million last year fell short of its target of Bt14 billion after home-buyers delayed their decision to buy in the final quarter. However, revenue was up 43 per cent from Bt9 billion in 2007.

"Although the country's economy grew only slightly and the property market as a whole saw a significant drop, we believe that our business can continue to grow with an integrated business strategy customised to targeted customers," Thongma said.

Of the 22 new residential projects to be launched this year, 11 will be for detached houses, eight for townhouses, two will be condominiums and the final one will be its residential project in Bangalore, India.

Meanwhile, the company is studying plans to expand into the provinces, especially Chon Buri and Phuket.

Thongma said that this time of low growth presented a good opportunity for the company to find ways to balance its business risk.

"We cannot say when we will launch new projects upcountry. If we see a business opportunity, we will be ready to expand our investment immediately," he said.