Singha plans US$3b property splurge to overcome booze curbs

[BANGKOK] Thailand's biggest beermaker plans to spend about 100 billion baht (US$2.96 billion) on hotels, shopping centers and property projects over five years as higher taxes and curbs on alcohol marketing erode earnings for the industry.

Singha Estate Pcl, a unit of closely held Boon Rawd Brewery Co, will invest 60 per cent of the budget in commercial property and the remainder to develop residential real estate, Chief Executive Officer Naris Cheyklin said in an interview. The expansion will boost revenue to at least 20 billion baht by 2019 from 362 million baht last year, he said.

The Bhirombhakdi family, who've produced Singha beer at Boon Rawd since 1933, is following the lead of billionaire Charoen Sirivadhanabhakdi, who expanded his property business amid government measures to curb alcohol consumption in Buddhist Thailand. Mr Charoen was forced to list his Thai Beverage Pcl unit in Singapore in 2006 after activists and monks held protests to block a local share sale by the maker of Mekhong whiskey.

"Boon Rawd has a very strong financial position from its beer and beverage businesses, and this should give them a lot of financing for expansion," Chanpen Sirithanarattanakul, head of research at DBS Vickers Securities (Thailand) Co in Bangkok, said by phone. "In the long term, demand for residential homes, hotel rooms and exhibition space will continue to grow with the population and the economy."

Singha Estate's purchase of hotels and a residential property developer in 2014 may help the company become profitable this year, Mr Naris said in an interview at his office in Bangkok on Monday.

"The company will be very aggressive on acquisitions because this will offer the fastest revenue growth," he said.

The Bhirombhakdi family took over Rasa Property Development Pcl in September and renamed it Singha Estate. The company reported a net loss of 250 million baht in 2014, compared with a 26.1 million baht profit the year before.

Singha Estate has surged 140 per cent through Tuesday since the takeover was announced April 16 last year. The stock has slumped 17 percent this year, compared with a 0.1 percent drop in the benchmark SET Index. The shares climbed 1.4 percent at the close Wednesday, its sharpest gain in three weeks.

"The risk is that Singha may have to spend more on marketing and development so that people get to know their brands," said Chanpen from DBS Vickers. "It could be challenging for them to succeed in the very competitive residential property sector."

The Bhirombhakdi's expansion into property comes as Thailand's military government threatens to strictly enforce alcohol advertising laws, and after regulatory changes in 2013 increased taxes on beer and spirits by basing excise duties on both the value and alcohol content of beverages.

Those measures have effectively limited the growth of alcohol consumption in the country, the Bangkok-based Center for Alcohol Studies said on its website.

Mr Charoen expanded his property portfolio in 2013 through the acquisition of Fraser & Neave Ltd, a Singapore-based maker of beverages and luxury condominiums. His Thai Beverage unit produces Chang, the biggest competitor for Boon Rawd's Singha and Leo, Thailand's best-selling beers.

Singha Estate will start construction this year of a 10 billion-baht commercial project in Bangkok, which will include a convention hall, shopping malls and office buildings, Naris said. The project will be built on the site of the former Japanese Embassy in Bangkok's Asoke district, close to the capital's main shopping artery, Sukhumvit Road.

Singha Estate will start sales this year at a luxury condominium project valued at about 5 billion baht at Asoke, Mr Naris said. It's also in talks to buy suburban shopping malls, hotels and office buildings, he said. Bank loans and the sale of units in a real estate investment trust will help finance investments and acquisitions, he said.

"Luxury condominiums in key locations in Bangkok still draw high demand from high-end customers," Mr Naris said. "But the economic slowdown has prompted us to be more cautious in implementing acquisitions and new projects." Thailand's central bank last month cut borrowing costs for a second straight meeting, and the finance ministry reduced its economic growth forecast for this year to 3.7 per cent from an earlier estimate of 3.9 per cent because of a slump in exports and domestic spending.

"The Thai economic slowdown has probably weakened sentiment in the overall property market," said Chanpen of DBS Vickers. "But we have seen a number of projects that are being launched very successfully."

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