Thai Developer Cuts Prices to Stress Sales Over Profit in Crisis

(Bloomberg) -- Thai property developer Sansiri Pcl is placing sales ahead of profitability as it looks to generate cashflow to survive the coronavirus pandemic.

The Bangkok-based group, which builds high-end condominiums in cities around the Southeast Asian nation, is offering aggressive discounts and other promotional campaigns in an attempt to lure buyers. It expects to revise its annual sales target after a strong start to the second quarter, President Srettha Thavisin said.

“During times of crisis, profitability comes second,” Srettha said in an interview. “Cash is king and brand strength is big. The coronavirus crisis is bigger than 9/11 and the Asian financial crisis combined, bigger than anything we've ever encountered,” he said, referring to the September 2001 terrorist attacks against the U.S.

Sansiri last month increased its second quarter sales target to 12 billion baht ($371 million) after generating 4.2 billion baht from home sales in the first three weeks of April. That puts the company on track for record first-half revenue, Srettha said.

Analysts don't appear as confident. The company's stock has nine sell ratings, five holds and one buy, according to data compiled by Bloomberg. Its shares are down 36% since January versus an 18% decline in the country's benchmark stock index.

“While we see its earnings outlook turning ugly over the next few years, we fully endorse management's view that cash flow, not profitability, should be the company's key focus in the near term,” Kasikorn Securities Pcl said in a report that downgraded the stock on April 24.

The sole buy rating came in an upgrade on April 30 by Krungsri Securities Pcl analyst Ratasak Piriyanont, who said Sansiri “was a first-mover in the price war to divest inventory units and managed to book solid presales in the first quarter.” Although its debt-to-equity ratio of 1.9 times is “inferior” to domestic peers, the company “has sufficient financial resources to weather the Covid-19 impact under the worst-case scenario,” he said.

Thailand's tourist-dependent economy has been ravaged by the coronavirus and the full impact won't be apparent until this quarter, Deputy Prime Minister Somkid Jatusripitak said earlier this week. The government is trying to re-balance its economic structure to rely less on exports and tourism, and more on domestic demand.

Fortunately for Sansiri, most of its customers are local, accounting for around 95% of sales, Srettha said. Its main source of foreign buyers is China.

Srettha said the fact that coronavirus case numbers are coming down, combined with Thailand's good healthcare system, should be a draw for international investors once the crisis abates. Overseas buyers have long flocked to the nation's real estate market for investment properties and holiday homes.

“Assuming we don't see a second wave, the Thai real estate industry will become better,” Srettha said. “But now we have to keep our eyes on who will survive through this.”