October 2018

What is CHEWA’s growth strategy?

We are very open to multiple avenues for growth, we will continue to organically grow our business with the expansion of residential projects for both high-rise and low-rise projects throughout Bangkok. Also, as we have shown in the past we have grown through acquisitions such as with the condominium project AQ Aria Asoke, and recently utilizing the joint venture structure on residential projects and hospitality projects. The reason that we are open to these different models is because as a smaller real estate developer we must remain flexible and be able to grasp market opportunities when presented to us.

CHEWA’s financial performance has been impressive, what are the reasons for this.

It is because of our strategy to focus on certain locations that are popular, where there is strong demand and where customers want to upgrade. In the first half of 2018 we achieved 1.4 billion baht in revenue with a 10% net profit margin and our target for the full year is a revenue increase of 20% to 2.4 billion baht. Through economies of scale our net profit margin has increased from 7%-8% to 10%. Our backlog is 800 million baht and going forward we will launch an additional 10 projects. To ensure the long-term sustainability of the company, in May this year we successfully completed a rights offering at a ratio of 1:1 and raised 537 million baht. In addition to this we issued bonds of 1.7 billion baht during year at attractive financing rates. The combination of these two gives us 2.2 billion baht of fresh capital to invest into purchasing new land plots to develop projects.

When we last spoke, CHEWA was targeting to developing a balance between low rise and rise high developments and recurring income properties, how is this progressing?

We successfully sold out our first low rise project, Chewarom Rangsit Don Muang. It was a pilot project to learn the market, to create a name for ourselves. It is a 490 million baht project with 81 units and thus we saw the steady absorption rate over 12 months for the project. Now for us to achieve a diversified balance between the different real estate segments will take another four to five years as the revenue models differ between high rise and low rise projects. Because of the higher value of the condominium projects are 1 billion baht or more and low rise projects that average a sale of 6 units per month per project at 2 million baht per unit implies that we will require 10 housing projects being developed concurrently. Going forward we are diversifying launching both townhouse and condominium projects, there are 7 new projects are 3 JV projects for a total of 11.8 billion baht and we are also partnering in a senior living project at Kamala Beach Phuket with Nye Estate, LPN Development and CH Karnchang. Finally, we also have factories for rental and the target when we went public was to grow this to a 1.5 billion baht business before potentially launching a REIT. This is still part of the plan and with the government’s EEC developments beginning to take hold we will look at potential opportunities to take over existing warehouses and factories.

There has been a recent change in the major shareholders, what are the reasons for this?

TEE Land which is a subsidiary of TEE Group Singapore and were founding shareholders with a 33% stake in CHEWA and decided to liquidate their stake because of their group level decision to restrategise and focus on their home market Singapore. They have been very good partners of CHEWA and voted in favour of the rights offering that was completed in May 2018. From CHEWA’s viewpoint we are moving forward and see the potential within Thailand hence our capital increase to seize upon opportunities that are present.

What are your viewpoints on each segment of the real estate industry in Bangkok?

The real estate industry in Bangkok, Thailand is a very competitive industry with every developer today launching projects across the entire product and price range. In the past it was possible to have a niche market whether it be high end condominiums, low cost housing and so forth but today the landscape has changed. However, despite these changes there is a still a constant gradual demand by homebuyers for both housing and condominiums and we have seen this in our sales this year and expect to hit our revenue growth target of 20%. Both the macroeconomic and microeconomic indicators for Thailand are still positive, the ambience is positive, the infrastructure projects that the government announced two to three years ago are going ahead and people are aware that elections are coming. We feel that the Thai economy will continue to be vibrant for the next two years and that the government knows that real estate is a key driver for the economy given the impact it has upon employment, construction, and banking, so it is quite an exciting period for property.

Where do you see CHEWA in five years from now?

Our focus is to become a medium sized developer maintaining a revenue level of 5 billion baht per year and we aim to achieve this within the next three to four years.

The Executive Q&A Series is presented by ShareInvestor, Asia's leading financial internet media and technology company and the largest investor relations network in the region. The interview was conducted by Pon Van Compernolle. For more information, email admin.th@shareinvestor.com Website: www.ShareInvestorThailand.com