Thai developer Sansiri puts sales before profitability during virus crisis

Bangkok

THAI property developer Sansiri is placing sales ahead of profitability as it looks to generate cashflow to survive the coronavirus pandemic.

The Bangkok-based group, which builds high-end condominiums in cities around the South-east Asian nation, is offering aggressive discounts and other promotional campaigns in an attempt to lure buyers.

It expects to revise its annual sales target after a strong start to the second quarter, the company's president Srettha Thavisin said.

"During times of crisis, profitability comes second," he said in an interview.

"Cash is king and brand strength is big. The coronavirus crisis is bigger than 9/11 and the Asian financial crisis combined, bigger than anything we have ever encountered," he said, referring to the September 2001 terrorist attacks against the US.

Sansiri last month increased its second quarter sales target to 12 billion baht (S$521.7 million) after generating 4.2 billion baht from home sales in the first three weeks of April. That puts the company on track for a record first-half revenue, Mr Srettha said.

But analysts do not appear as confident. The company's stock has nine sell ratings, five holds and one buy, according to data compiled by Bloomberg. Its shares are down 36 per cent since January versus an 18 per cent decline in the country's benchmark stock index.

"While we see its earnings outlook turning ugly over the next few years, we fully endorse management's view that cashflow, not profitability, should be the company's key focus in the near term," Kasikorn Securities said in a report that downgraded the stock on April 24.

The sole buy rating came in an upgrade on April 30 by Krungsri Securities analyst Ratasak Piriyanont, who said that Sansiri "was a first-mover in the price war to divest inventory units and managed to book solid pre-sales in the first quarter".

Although its debt-to-equity ratio of 1.9 times is "inferior" to domestic peers, the company "has sufficient financial resources to weather the Covid-19 impact under the worst-case scenario," he said.

Thailand's tourist-dependent economy has been ravaged by the coronavirus and the full impact won't be apparent until this quarter, Deputy Prime Minister Somkid Jatusripitak said earlier last week.

The government is trying to rebalance its economic structure to rely less on exports and tourism, and more on domestic demand.

Fortunately for Sansiri, most of its customers are local, accounting for around 95 per cent of sales, Mr Srettha said. Its main source of foreign buyers is China.

He said the fact that coronavirus case numbers are coming down, combined with Thailand's good healthcare system, should be a draw for international investors once the crisis abates.

Overseas buyers have long flocked to the country's real estate market for investment properties and holiday homes.

"Assuming we do not see a second wave, the Thai real estate industry will become better," Mr Srettha said. "But now we have to keep our eyes on who will survive through this." BLOOMBERG