Ch. Karnchang Plc was founded in 1972 to engage in the general construction business, focusing initially on civil works for government agencies. Listed on the Stock Exchange of Thailand since August 1995, it has since expanded the scope of its work substantially. Prasert Marittanaporn, senior executive vice-president for administration, discusses the company’s strategy and outlook.
What is CK’s business model?
Ch. Karnchang has more than 40 years of experience and expertise in all types of construction, such as buildings, roads, bridges as well as large-scale infrastructure projects such as expressways, underground mass-transit systems, dams and power plants. We have also expanded by investing in Bangkok Metro Plc, Bangkok Expressway Plc, Thai Tap Water Plc, Xayaburi Power Co Ltd and CK Power Plc as their businesses represent basic infrastructure.
How does CK manage its costs effectively?
Prasert: Skills from 40 years of experience
Typically when bidding for a project, we contact the necessary suppliers to ensure that we can accurately forecast our costs and margins. We typically subcontract most of the labour and our subcontractors will have to operate within their own budget. In terms of machinery, depending upon the type we may purchase or lease it — being a public company helps with the cost of financing.
Finally, time management is an important factor and we have a reputation of being able to complete our projects before the deadline, which in turn helps with management.
What impact will the pending government spending have on CK and the industry?
The construction industry is a key cog in the Thai economy because when projects are awarded we begin to hire people, buy supplies, machinery and raw materials, and we require financing from financial institutions. All of this helps to ensure that the Thai economy continues to grow.
The pending infrastructure projects are positive for us and the industry but they were already part of a long-term plan and the only question was when they would be awarded. Given the current timeline, the 2.7 trillion baht in infrastructure spending will take place over a number of years, which is positive for the industry because it would be impossible for all of us in the industry to be able to handle a large number of projects at one time. Our target is to be awarded 20% of the projects because we have the skill sets, the people, knowledge and capacity necessary to execute them.
CK holds stakes in multiple businesses. What are the plans for these holdings?
For decades we have participated in bidding for various projects that involve concessions from the public sector. In some of these projects we took the long-term strategic view that we should be involved as an investor as well because these investments are related to the basic infrastructure of the country. As a group we continue to maintain shareholdings and board positions, and we bring in professional managers with the necessary expertise to ensure that the long-term strategic vision of each business is being achieved.
What differentiates CK from its competitors?
There are several factors. First, we target projects that require the skill sets and capability we have built up from our 40 years of experience, ranging from roads to subway systems to power plants. Second, we have investments in companies that will continue to grow with Thailand and the region, which in turn provide us with construction projects. This is important because we want to ensure that our backlog is maintained above 100 billion baht.
What are the biggest risks facing your business?
In the construction business we have to be very prudent from an operational standpoint as there are multiple factors that can derail a project. Thus we ensure that every manager, every employee understands their roles and responsibilities in a project and we are constantly training and improving their skills. This helps us to retain employees as well.
Naturally politics is a risk for us as changes in government delay public projects but we are able to offset this with the projects that we receive from the private sector and our own investments.
What impact will the Asean Economic Community have on your business?
The AEC will bring opportunities for our company and the industry, but CK has already been working in neighbouring countries such as Laos, Vietnam and Cambodia for the past 10 years. We believe that the large construction players in Thailand have a competitive advantage to expand abroad because of their track record and knowledge gained in Thailand.
For example, when we built the first subway in Bangkok we had to partner with German and Japanese firms because we had limited knowledge and skills in that particular field. However, now we have this knowledge, we have the technology and facilities necessary and are able to construct new subway lines independently.
Where do you see CK five years from now?
Thailand is still continuing to grow as a nation with further expansion of its infrastructure such as transport and power. CK will be able to benefit from this because we are strategically invested in those key sectors that are part of the basic infrastructure of the country, and because as a construction company with wide-ranging capabilities we are able to complete multiple projects when they become 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, with more than 500 listed clients. This interview was conducted by ShareInvestor. For more information, e-mail admin.th@shareinvestor.com or visit www.shareinvestorthailand.com