Hemaraj's new tack keeps cash flowing

Hemaraj's new tack keeps cash flowing

Power plant profits offset slow land sales

Hemaraj Land and Development Plc has cut its full-year land sales outlook to 1,200 rai from an earlier 1,600, citing first-half political unrest, but it expects a turnaround soon.

"The political conflict that weakened business confidence and delayed the appointment of a new Board of Investment meant that investment incentives could not be approved, hurting Hemaraj and the overall industrial sector," said Paopitaya Smutrakalin, director of planning and investor relations.

Having reached its lowest point, Hemaraj's performance should now improve, he said. The newly appointed government has promised measures to stimulate investment in the public and private sectors.

But Mr Paopitaya warned that while the investment climate has turned a corner, it is unlikely to rise to the pre-conflict level any time soon.

He said foreign investors will continue to invest here in the long run, especially for capital-intensive industries, as Thailand has the infrastructure to support such investment.

"What sets Thailand apart is that foreign companies are allowed to own land in industrial estates, compared with other countries such as Cambodia and Indonesia that only allow long-term leases," Mr Paopitaya said.

In the first half of the year, Hemaraj sold 297 rai of industrial land.

The company reported first-half revenue of 4.2 billion baht, down 2% from the year-earlier period.

Net income rose by 41% to 2.05 billion baht from the same period in 2013, driven by power plant profits.

"Land sales fell with the rental of ready-to-use spaces, but utility sales continued to rise in line with the number of factories at Hemaraj estates and profit derived from power increases," Mr Paopitaya said.

"The first-half performance reflects a strategy to diversify income and alleviate tension from previously relying on weak land sales."

Hemaraj gets 40% of its customers from Japan, 20% from Thailand and the rest from Europe and the US.

The company is spending 2.4 billion baht on seven small power producer (SPP) plants of 126 megawatts each, up from three plants with a combined 938 MW at present.

The new SPP plants will go on stream in 2017.

Shares of HEMRAJ closed yesterday on the SET at 4.48 baht, up 26 satang, in trade worth 353 million baht.

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