Pruksa takes bold steps
Developer readies measures to handle worst crisis in its 27 years
Facing its worst revenue contraction on record, SET-listed developer Pruksa Holding Plc is taking unprecedented measures to weather the Covid-19 crisis by selling land banks, suspending new investments and managing cash flow in anticipation the market will shrink 30% this year.
Chairman and chief executive Thongma Vijitpongpun said the virus has drastically affected all business sectors.
By segment, condos will face the largest drop of 40%, while low-rise units will decline 30%.
"The impact on property developers will be no different than other sectors, but depends largely on the adjustments of each one," he said. "We will likely face a contraction of 25% from last year, the worst crisis since our inception 27 years ago."
In 2019, Pruksa posted 38 billion baht in revenue and planned early this year to have 40 billion in 2020.
But following the pandemic, the company slashed its revenue target to 30 billion baht by the end of the year.
PLOTTING A NEW COURSE
To keep the business safe during the outbreak, an economic downturn and the shrinking property market this year, Pruksa will monitor cash flow to keep sufficient cash available.
"We will temporarily halt projects that don't have good sales rates and those requiring a big investment," said Mr Thongma, 63. "Some new low-rise projects we plan to launch this year will be delayed as they require spending for on-site construction for the launch."
The developer cut its new projects scheduled for this year from 30 sites worth a total of 36 billion baht to 12 projects worth a combined 15 billion.
In the first five months it opened five projects worth 5 billion baht, but has no new projects planned for June.
Pruksa will monitor the market in the third quarter after many economic activities have reopened. If sentiment improves, it plans to increase the number of new projects it will launch in the second half.
"The virus affects home purchasing power. Many buyers were reluctant to accept unit transfers, which affects our cash intake," he said.
PIVOT FROM CONDOS?
Seeking alternative sources for cash, Pruksa announced land sales for both small plots at existing single detached house and townhouse projects as well as large plots it planned to develop.
There are two large plots the company plans to close deals on to book 500 million baht in total.
One is a plot worth 100 million baht in the Navanakorn area in Pathum Thani. The other is a plot worth 400 million baht on Phaya Thai Road on which it previously planned a condo project.
Mr Thongma said the company also had a three-rai plot on Silom Road near Lerdsin Hospital where it planned to develop a high-end condo project.
However, the development plan may shift to a second branch of Vimut International Hospital.
With spending of 5 billion baht, Pruksa is developing Vimut International Hospital near Saphan Kwai BTS station with 230 beds, targeting middle-income earners.
Construction is slated to be completed early next year for an opening in mid-2021.
Pruksa is also studying the development of a senior home as transitional care from the hospital.
The company looked for a plot sized around one rai in Bangkok to develop 50 units.
Mr Thongma said the company will reopen precast concrete factories in July after a temporary closure since May because of the outbreak.
Pruksa plans to sell precast concrete pieces to other developers as it can increase production capacity.
As of the end of March, Pruksa had 4 billion baht in cash. The company plans to roll over bonds of 2.6 billion baht due to expire in July, and 2.5 billion in November after completing 3 billion baht worth in May, he said.