Housing developer Pruksa Real Estate, a subsidiary of SET-listed Pruksa Holding Plc, is shifting from a sales-driven approach to becoming a "thinking company" with a primary goal of creating sustainable growth.
Piya Prayong, chief executive of Pruksa Real Estate, said driving sales to reach 100 billion baht is no longer the goal because such an accomplishment requires a massive amount of project launches, resulting in a bloated company structure.
QUANTITY OVER QUALITY
"To achieve the old targets, we expanded by adding so many projects," he said.
"But speedy expansion resulted in many devalued assets. That likely leads to growth without quality."
The peak of such expansion happened in 2016 when Pruksa opened 69 new projects worth a combined 59.7 billion baht, the largest tally in history.
The company outlook for that year was 60-65 projects worth 50-54 billion baht.
The next two years Pruksa announced plans to launch 72 projects worth 60.8 billion baht and 77 projects worth 67.8 billion, respectively. However, actual launches numbered 56 projects worth 59.2 billion baht in 2017 and 55 projects worth 53.5 billion in 2018.
Presales escalated from 39 billion baht in 2014 to a peak of 50.6 billion in 2018, before falling to 35.6 billion in 2019.
"We launched many new brands at that time and branched out via many strategic business units [SBU] as we focused on a large number of projects," said Mr Piya.
"In some locations, we had more than one project and they cannibalised each other."
After revenue peaked in 2015 at 50.6 billion baht, it declined to 46.9 billion in 2016 and 43.9 billion in 2017.
When lending curbs were announced in 2018 that would be effective in April 2019, Pruksa planned a restructuring for 2019.
Despite high revenue, its sales, general and administrative expenses (SG&A) rose to 30% in those years due to organisational bloat, he said.
At the time, it had 30 SBUs and 20 housing brands with a total of 3,500 staff at its maximum.
"The property market landscape changed," said Mr Piya, a founding staff member who has worked with Pruksa since its establishment in 1993.
"We had 30% growth per year and bonuses of up to 10 months when Thai GDP growth was 10%. But in the past decade, GDP growth was only in the single digits."
Changing goalposts
Pruksa founder Thongma Vijitpongpun set the goal of 100 billion baht in revenue for 2020 back in 2015. But hitting that target solely from property development is impossible, said Mr Piya.
Pruksa started restructuring in 2019, scaling down from 30 SBUs, 20 brands and 3,000 staff to 12 SBUs, 12 brands and 1,600 staff at present.
The 12 brands comprise three for single detached houses: Passorn, the Plant and the Palm.
The four townhouse brands are Baan Pruksa, Pruksa Ville, the Connect and Patio, while the condo brands comprise Plum, the Privacy, the Tree and the Reserve.
"Cutting brands and SBUs will help increase efficiency," he said. "Each SBU should generate 3-4 billion baht in revenue per year. This is a suitable level for our new goal -- sustainable growth."
Another urgent mission in the company's restructuring was to outsource some jobs like construction and even sales.
For condos, Pruksa outsources entirely to contractors. The company cut its number of contractors for low-rise houses to three from 30 previously per site. Some of its current contractors for low-rise houses were formerly Pruksa's construction staff.
Clearing unsold inventory was a mission for Mr Piya once he was promoted to chief executive in August 2020.
At the end of 2021, Pruksa's total assets were 68 billion baht, down from a peak of 99 billion in 2019 and 80 billion in the third quarter of 2020. SG&A declined to 15.2% while active projects dipped from 300 worth more than 100 billion baht to 145 projects worth 76.8 billion.
8 FACTORS
"We planned to have a lean organisation and change the business model to a thinking company even before the pandemic," he said. "Customer value is our focus. We will beat our rivals based on eight factors we determined from our conversations with customers."
The most important factor, given a weight of 30%, is premium project location in an area, said Mr Piya, followed by home functions at 20%, which should exceed that of rivals.
For example, a single detached house must have at least four bedrooms with at least one on the ground floor for elderly people. It can also have a work room, while every bedroom must attach to a bathroom, he said.
The other six factors are specifications for materials, design, facilities, environment, brand and services, such as after-sales service, security and financial advice.
"We aim to be a thinking company and plan to join Vimut Hospital, one of our affiliates, to introduce residential projects with healthcare services," said Mr Piya. "These projects can boost recurring income for the parent firm."