SET-listed Thai Polycons Plc (TPOLY) has been in the construction business since 1988 and since diversified into renewable energy and property. President Chainarong Chanpalangsri discusses the company's strategy and outlook.
Please explain Thai Polycons' history and business model.
We started in 1988 initially with 1 million baht in capital and 30 employees as a subcontractor focusing on small construction projects. Over time, we grew and eventually listed on the Market for Alternative Investment (MAI) before moving to the main board of the SET.
Today we have four main business lines. Our core business is construction of multiple project types, from infrastructure to property or commercial developments. Second, we have a renewable energy company that focuses on biomass power plants. Third, we have a property business and will launch our second development next year. Finally, a trading business supports each of the above business lines.
How is the construction business progressing and how do you view the industry in Thailand?
We've had issues with our performance due to the increase in the minimum wage. The government's insistence any impact would be minimal was incorrect, as the cost of each item increased and resulted in project losses for ourselves and others in the industry.
Chainarong: Building on construction base
Going forward we're confident, as our backlog is currently at 5 billion baht excluding potential work with MAI-listed TPC Power Holding Plc (TPCH). Our customers range from property developers to hospitals, infrastructure and power plants, and we're able to bid for projects across the board, as our philosophy is to remain open to new opportunities. The industry has a lot of potential with the government's plans for infrastructure work, and we hope to participate in some projects with partners or joint ventures.
Why has Thai Polycons expanded into renewable energy with TPCH?
The construction industry is cyclical, and we were looking for a new business to diversify into for a more consistent cash flow. In 2006, we were doing civil work for a 20-megawatt biomass plant and able to learn a lot about the business. We realised it provided attractive returns and cash flows and that if we combined our construction expertise with that of a qualified and experienced team, we could potentially thrive in this industry. After seeing the government was going to support renewable energy, we started TPCH. It developed its first project in 2010 and was listed at the start of this year.
Today we have 100 MW in hand -- 20 MW already in operation, 40 MW under construction, and we expect a total of 60 MW to be operational next year. Within three years we expect to have installed capacity of 150 MW and in five years to achieve 200 MW. We can build a plant within 14 months versus 20 months for other firms, thereby decreasing costs and, more importantly, ensuring the quality of the plant when completed.
What are Thai Polycons' plans for the property business?
We're focusing on building our brand first. Our first project on Ram Intra Road has 174 units with 70% sold. Next year we'll launch a second, similar project near the highway and along the future Pink Line. As is the case with TPCH, as a construction company we understand how to construct projects efficiently and on time, within budget and of high quality.
What are the biggest risks facing your business?
We've been in the construction industry for 27 years and know how to mitigate the cyclical nature of the business. That is why we remain flexible and have a mix of private-sector and government clients and work on multiple types of projects ranging from property to infrastructure. The only major risk is a potential lack of clarity from the government regarding infrastructure projects and renewable energy, which may lead to delays in projects being awarded.
What effect do you think the Asean Economic Community (AEC) will have on your business?
This will be positive for our business, the country and the region. But what interests me most is the potential technologies from developed countries that may come to Thailand and help to reduce the cost of construction, improve quality and quicken the process. I believe companies with these technologies will naturally come to Thailand, and the opportunities for future joint ventures are very appealing.
Where do you see Thai Polycons in five years?
As a group we'll become stronger, with TPCH ensuring a strong cash flow that can be used to expand our core business in construction and potentially property as well. And with the advent of the AEC and Thailand's continued economic progress, we can see each of our business lines continue to grow, be it construction, renewable energy or property.
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. This interview was conducted by Pon Van Compernolle. For more information, email pon@rossvancompernolle.com or supat@shareinvestor.com or visit ShareInvestorThailand.com