The property developer Chewathai (CHEWA) listed on the Market for Alternative Investment in April of this year. Managing director Boon Choon Kiat discusses the company's strategy and outlook.
Mr Boon says oversupply in certain areas of the property market makes it rarer for projects to sell out overnight. Established communities and mass transit access are key demand drivers.
Please explain the history of Chewathai.
CHEWA was established in March 2008 as a joint venture between the Panichewa family and TEE Development Pte Ltd of Singapore which is wholly owned by TEE Land Ltd, listed on the Singapore stock exchange. Given that both shareholders have expertise in various types of real estate development, our mission is spread widely across the industry. It includes residential property development such as condominiums and housing developments, industrial real estate, and in the future perhaps serviced apartments and hotels.
Please explain Chewathai's business model.
We have launched a total of 12 projects worth 10 billion baht since 2008 which are a combination of low-rise and high-rise condominiums as well as ready built factories. In our industrial estate portfolio we have 10 factories at Amata City Rayong with an average size of 2,500 square metres each. We will look to expand here further when there is a recovery in foreign direct investment. We have three residential brands: Hallmark low-rise condominiums, Chewathai high-rise condominiums, and Chewarom housing projects.
What projects is Chewathai developing today?
We have three condominiums in the launch and construction stages. Chewathai Residence Bangpho is located next to the upcoming Bang Pho mass-transit station, a location that we believe will become a vibrant residential area. A 1-billion-baht project with 172 units, it will be completed by 2017. We are also launching Chewathai Phetkasem 27 located opposite Siam University, a 1.4-billion-baht project with 638 units to be completed by 2018. Finally we recently acquired Aria Asoke for just over 500 million baht and rebranded it Chewathai Residence Asoke with 315 units and a project value of 1.7 billion to be completed in 2018. We are also launching our first housing development, Chewarom Residence near Rangsit, in the third quarter of this year and hope to launch a second project in the fourth quarter.
Why did Chewathai decide to become a publicly listed company?
It was our aim since incorporation to eventually become a listed company. Real estate development is a capital-intensive business and in order to achieve our long-term goals we required additional capital to fund future growth. This, combined with access to more financial instruments and reductions in borrowing costs, made the decision to list this year clearer.
We decided that the smaller index, the Market for Alternative Investment (MAI), was the best choice for us given the size of the company and the growth potential, even though we already meet the requirements to list on the SET. We will look to enter the latter in the future as the company grows in size.
How do you view the property market?
There is an oversupply in certain areas of the market and it is becoming rarer to see projects sold out overnight. However, the real estate industry is still location, location, location and location. If a location has a concentrated mass population and the residents grew up and feel comfortable there, projects typically sell well. If not, then a location should be near mass-transit lines.
The continued expansion of mass transit does drive the change in people's lifestyles dramatically. Today, it takes an average of one hour for people to drive to work and while the majority of the population still prefers to own a landed property, the locations are now becoming farther and farther out of Bangkok metropolitan, and thus we are seeing a shift in consumer demands.
What are the biggest risks facing your business?
Despite the many challenges we have faced including politics and natural disasters, we find that the resilience of the Thai people is very admirable and this, combined with an economy that is robust and one of the strongest banking systems in the region, allows those who do business here to understand that issues affecting Thailand are typically short-term in nature.
Where do you see Chewathai five years from now?
We are rebalancing our portfolio and within the next two years we hope to achieve 45% of revenues from landed property and 55% from condominiums. We foresee two forms of growth: organic growth by purchasing land and developing it, or inorganic growth by acquiring existing projects that are currently being developed. Our 2020 target is to be among the mid-tier developers in terms of backlogs and revenues of 5-10 billion. We may expand into serviced apartments and hotels, and further into industrial estate depending on where the opportunities are available.
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, e-mail pon@rossvancompernolle.com or supat@shareinvestor.com. Website: www.ShareInvestorThailand.com