Real estate companies are rushing to raise funds to "accumulate liquidity" through "bond issuance and IPOs". Since the second quarter, the total bond issuance has exceeded 36 billion baht, with four companies preparing for IPOs. Meanwhile, "cash flow" continues to increase, aiming to cope with uncertainties ahead.

Analysts assess that liquidity risks have decreased, but they are concerned about future growth following a slowdown in investments.

The real estate sector is another group affected by the COVID-19 pandemic, which has impacted the economy and the purchasing power of the general public. As a result, many companies have had to adopt pricing strategies to clear existing stock, hoping to accumulate cash to handle the still highly uncertain situation ahead.

Recently, the real estate sector has been seen "raising funds" in various forms, including bond sales and listing shares on the stock exchange. Since the second quarter, which was the worst period for the economy due to the COVID crisis, until now and continuing into early October, a total of 24 real estate companies have offered bonds, amounting to 36 billion baht.

Among the large companies that have issued bonds are Magnolia with a value of 6 billion baht, Land and Houses Public Company Limited (LH) with 5.4 billion baht, and Ananda Development Public Company Limited (ANAN) with 5 billion baht.

Additionally, five companies are preparing to issue bonds from September to early October, with a total value of no less than 1.5 billion baht.

Four companies have submitted their registration statements for securities offerings (filings) to the Securities and Exchange Commission (SEC) to list on the stock exchange, including Siamese Asset Public Company Limited offering 290 million shares, Asset Wise Public Company Limited offering 206 million shares, D House Development Public Company Limited offering 217.2 million shares, and Chakrapong Estate Public Company Limited offering 82.7 million shares.

Furthermore, when considering the financial status and cash flow of listed companies, it can be seen that by the end of the second quarter, many companies had positive net cash from operations, which is a turnaround from the usual negative figures. This reflects that these companies are accelerating sales while simultaneously slowing down new project investments. For instance, Sansiri Public Company Limited (SIRI) had a net cash flow from operations of about 2.4 billion baht, compared to a negative 7.2 billion baht at the end of 2019. AP Thailand Public Company Limited (AP) had a net cash flow of 1.8 billion baht, up from a negative 9.8 billion baht the previous year. Origin Property Public Company Limited (ORI) had a net cash flow of 522 million baht, compared to a negative 1.7 billion baht the previous year.

At the same time, when looking at cash at the end of the second quarter, many companies show "increased" figures compared to the end of 2019, including SIRI, AP, ORI, ANAN, as well as companies like L.P.N. Development Public Company Limited (LPN), Supalai Public Company Limited (SPALI), and SC Asset Corporation Public Company Limited (SC), indicating that the real estate sector is actively accumulating liquidity to prepare for future situations.

Mr. Manpong Senanarong, Deputy Manager and Head of the Securities Issuer Department at the Stock Exchange of Thailand (SET), stated that small real estate developers are increasingly seeking to raise funds for projects in provincial areas. Before the COVID-19 outbreak, the government had policies to distribute development to regions and secondary cities. Typically, real estate developers require significant capital to operate, leading some operators to seek funding in the stock market.

Mr. Sorapong Jakthirakoon, Senior Director at Kasikorn Securities, revealed that during the second quarter, most companies in the real estate sector employed similar strategies, though the intensity varied based on each company's stance. The two main strategies were to accelerate inventory clearance to generate cash flow and to slow down new investments, particularly in land purchases or new project constructions, especially condominiums.

When examining the capital expenditure (CAPEX) of many companies, it is evident that there has been a significant reduction, leading to lower pre-development costs. Additionally, marketing strategies have been adjusted to reduce costs, resulting in positive cash flow for nearly all companies in the second quarter. However, some companies, like SPALI, have seen an increase in debt-to-equity ratios, while net cash from operations turned negative at 3.9 billion baht due to several ongoing construction projects.

“Currently, many companies are increasingly approaching financial institutions and are also drawing funds as reserves while reducing bond issuance, which lowers the risk of bond repayment and liquidity risks. Some large companies have issued bonds to replace older ones, reducing liquidity and default risks, but they may have to accept a decrease in sales in the future,” he said.

Although the overall liquidity of real estate companies has increased, one issue is that the growth outlook may not be favorable due to a slowdown in land purchases for project development, particularly for smaller operators who may not have accumulated land beforehand. At the same time, the accelerated sales in the second quarter may have drawn future demand forward.

Previously, Mr. Sethaput Thaveesin, CEO of Sansiri Public Company Limited, tweeted about the current real estate market situation, stating that anyone claiming the real estate market is still thriving is not being truthful. Currently, Sansiri's transfer rates are at a record high, not because the market is good, but because they are running promotions to accelerate sales and transfers, as they want cash to prepare for the worst-case scenario. He also mentioned the impact of the real estate market that will follow from the domestic economic issues if the government does not act quickly.

SOURCE: www.bangkokbiznews.com/news/detail/897496?utm_source=slide_topnews&utm_medium=internal_referral