Phuket Property: Land and Houses to explore new markets

PHUKET: Residential development will continue to be the core business for Land & Houses (L & H) while it invests in related businesses as well as others with future potential.

“Our strategy is to manage our investment budget by balancing homes for sale and businesses that will generate a return in the long run,” said Naporn Sunthornchitcharoen, a senior executive vice president.

The firm’s latest investment was the purchase of an apartment building in California worth US$10 million (306mn baht), using part of its capital-expenditure budget worth US$50mn for the United States.

Up to 80 per cent of the company’s annual revenue comes from residential sales and the remaining 1.5 to 2 billion baht from investments.

For example, the company established Bangkok Chain Hospital 10-years-ago and it became successful. However, L & H believed that it did not have enough experience to drive growth further and that other firms could manage and improve the business better than it could, so its board decided to sell the stake in the hospital to new investors last year for a gain of more than 2bn baht.

The company also sold its holding in Quality Construction Products last year to Siam Cement Group for a gain of 800mn baht.

L&H’s investment portfolio is worth 13bn baht at cost but about 25bn baht by market value – or nearly double the cost basis.

A few of its businesses are Home Product Center, Quality Houses, Quality Construction Products, LH Bank, Asia Asset Advisory Co and LH Muang Mai Co.

“When we invest, we consider the benefit in the long term. This is to sustain our growth over the long haul,” Naporn said.

Part of the company’s strategy has been to branch out overseas, especially in the US.

Though the company reaps returns from its portfolio, it still develops residential projects to cover all market segments at a pace of 14-20 a year – worth 20 to 25bn baht, depending on demand.

“Some of them will replace our existing projects that sold out and are ready to be transferred to customers,” he said.

The three key criteria for proposing a project are segmentation, or ‘Who is the customer for the product?’; design, or ‘What do customers want?’; and location, or ‘Is it convenient for transport?’.

Next year will see 14-20 projects introduced, depending on market demand, but their locations will hug the new mass-transit routes.

When the government set the policy to invest in mass transit and infrastructure to link the suburbs to Bangkok’s central business districts and also to invest in infrastructure upcountry, that changed the property market to urbanization, Naporn said.

Now there are more locations to launch a business that do not concentrate only on Greater Bangkok. This is the trend for property firms – to expand in the provinces – which started this year and will extend into next year.

“We have been in business in the provinces for more than 10 years but we will continue to expand upcountry at new destinations in 2013,” he said.

The company is targeting revenue growth of 10-15 per cent this year, after aiming for an increase of 14-15 per cent last year from 23.29bn baht in 2011.

L&H showed revenue of 19.25bn baht and net profit of 4.09bn baht in the first nine months of last year.

“When we do business we’re concerned about our stakeholders,” he said. “They have to get more benefit from our business. They include stockholders, customers, staff and the communities around our projects. That’s why we have to do business under the strategy of balancing businesses while maintaining our long term growth.”

— Somluck Srimalee