Management Discussion and Analysis 3Q15 Performance

Transcription

1 Management Discussion and Analysis 3Q15 Performance Overall Market Situation Overall Thai economy remained weak in 3Q15. Also, there was no explicitly recovery sign since early of this year. Although, the number of tourist arrivals had high growth in the first half of this year, it started to decelerate since August after the bomb incident in Bangkok. As a result, the hotel business was also slow down. In addition, the residential real estate market recessed as consumers delayed their decision in buying houses, waiting for the government s property stimulus package. In the past 9 months of 2015, Singha Estate Public Company Limited ( the Company ) had showed a gradual improvement in its operating performance and expanded its business as planned. In 2Q15, the Company invested 51% in a well-established landed residential developer Nirvana Development Co., Ltd. ( Nirvana ). A quarter later, the Company expanded its footprint to office building business through an investment in Suntowers Office Complex ( Suntowers ) a large scale office complex with consistent good operating performance by way of Entire Business Transfer. In 3Q15, the EU stagnant economy continued hammering hotel business of the Company, reflecting in a slight drop in occupancy rate compared to last year. Property for sale business, managed by Nirvana Development Co., Ltd., recorded a qoq revenue growth with increases in discounts and selling expenses in order to stimulate sales during the hiccup period of residential property as above-mentioned. In 9M15, the Company recorded a consolidated total revenues Bt.1,439.9mn, increased by Bt.1,256.2mn., or 684% yoy. This was due to continuous business expansion after the business integration on 12 September 2015 (see The Company s Business Integration ). 3Q15 total revenues amounted to Bt.663.7mn, up by Bt.605.7mn., or 1,043% yoy, owing to the success in M&A. Compared to the preceding quarter, total revenues grew by 45%, due to a full-quarter contribution from Nirvana and additional revenue from Suntowers. Page 1 of 10

2 Change in Accounting Policy The Company applies the TAS 40 (revised 2014) Investment Property. In 2014, the Company used the cost model as a measurement basis. But during 3Q15, the Company changed the accounting policy for investment property measurement to a fair value model assessed by independent appraisal and retrospectively adjusted for this change. The change in accounting policy is shown in the notes to financial statement item. 3. As of 30 September 2015, the Company s Investment Property consisted of commercial properties, namely The Lighthouse, Suntowers, and Singha Complex. Recent Developments Highlighted in its 5-yeared plan ( ), the Company targets to grow its revenues via greenfield development, joint-investment, and M&A. Since the inception, the said business plan has been prudently executed. The following events marked the Company s milestones. Value Enhancement at Santiburi Beach Resort & Spa Santiburi completed it major refurbishment in December 2014 with new rooms launched in April 2015 During 7 September to 19 December 2014, Santiburi Beach Resort & Spa ( Santiburi ) was fully closed for a Bt.200mn all-rounded renovation and room expansion. The resort re-opened on schedule with new looks on the 20 December However, construction of new room type villas the Spa Villa was still on until April 2015 when the 6 new Spa Villas were launched. Acquisition of Phi Phi Island Village Beach Resort Acquired a 4-star resort Phi Phi Island Village Beach Resort on Phi Phi Island in November 2014 and the new 45 keys expected to complete in November 2015 On 28 November 2014, the Company acquired a 4-star beachfront resort Phi Phi Island Village Beach Resort ( Phi Phi Village ) comprising 112 villas and 5 clusters. The resort is sitting on a private beach of Phi Phi Island, one of Thailand s top tourist destinations. Its 167-rai freehold land, which only half has been developed, provides potential for future expansion. Page 2 of 10

3 In early July 2015, phase 1 of value enhancement projects was kicked-off; approximately 46 keys will be added and due to complete in November Investment in Nirvana Development Co., Ltd. Invested 51% in Nirvana a well-established property developer on 27 April 2015 On 27 April 2015, the Company strategically invested 51% in a well-established landed residential developer Nirvana Development Co., Ltd. ( Nirvana ). Performance of this company has been incorporated in the Company s consolidated financial statements, starting 27 April 2015 onwards. Capital Increase Approved at the AGM 1/2015, the Company completed its capital increase through Rights Offering ( RO ) and Private Placement ( PP ) in 2Q15. Totaling 1,003mn. new shares were issued and 186.5mn. of those shares were allotted in exchange of 51% stake in Nirvana. The remaining new shares were offered to existing shareholders under RO fund raising scheme. Investment in Suntowers Invested in Suntowers, grade A twin-tower office compex with net leasable area of 62,640 sq.m. on 10 August 2015 On 10 August 2015, the Company invested in Suntowers Complex ( Suntowers ) by way of Entire Business Transfer. Suntowers located on Vibhavadi- Rangsit Road is grade A twin-tower office complex, with a 122,965-sq.m gross floor area and a 62,640- sq.m net leasable area an average occupancy rate of 90%. Operational Summary Following the business integration, the Company restructured its business operations and continuously expanded its business. As of 30 September 2015, the Company currently engages in residential, commercial, and hospitality. Page 3 of 10

4 Residential Property for Sale Business The Company targets to grow this business through its 99.99% subsidiaries via land acquisition and development of high-rise residential and the 51%-stake Nirvana in landed housing property and home office businesses. Business slowdown in 3Q15 due to a hiccup in residential property market All active projects in 3Q15 were Nirvana s. Like other developers, Nirvana s business suffered from the pent-up housing demand. Thanks to its modern and innovative design, from its 13 active projects, Nirvana achieved sales and transfer of 55 housing units. This is in addition to the sales of 2 built-to-order housing units, whereby revenues from the sales of the corresponding land plots were recognized in this quarter. Hotel Business Impact from the bomb incident in Bangkok was miniscule Though, Santiburi and Phi Phi Village got a small impact from the bomb incident in Bangkok, their businesses were still pressured by the stagnant economy of EU, which is the key market of their businesses. 3Q15 occupancy rate of Santiburi declined yoy while ARR was slightly up upon completion of the hotel facelift and the launch of new room type. On a qoq basis, occupancy rate and ARR slightly increased. As for Phi Phi Village, occupancy rate and ARR were up yoy. Thanks to the proactive marketing plan which was well executed and managed to grow Chinese visitors to fill the drop of EU guests. Compared to the preceding quarter, though occupancy rate increased, ARR went down, reflecting seasonality of the hotel business and special promotion during construction of new villas. Page 4 of 10

5 Operation statistics 3Q14 2Q15 3Q15 Santiburi No.of keys Occupancy rate 71 68% 78 59% 78 60% Phi Phi Village / 1 No.of keys Occupancy rate % % % Note: 1 Acquired on 28 November Commercial Property Business The Lighthouse was under renovation and strategic merchandising-mixed change projects to enhance its competitiveness. Due to complete by 2015 yearend In this quarter, the Company successfully expanded its business into commercial property via an investment in Suntowers by way of the entire business transfer. This project consists of office buildings for rent (monthly rental contract and 3-year term) and small retail/plaza areas, in a day market format, with monthly basis rental collection. As for The Lighthouse the retail podium of Lighthouse Condominium (sold out), its renovation and merchandizing-mixed change projects were progressing as planned with a tentative completion in December Operation statistics 3Q14 2Q15 3Q15 The Lighthouse Net leasable area (sq.m.) Occupancy rate 3,038 79% 3,038 79% 3,038 79% Suntowers / 1 Net leasable area (sq.m.) Occupancy rate ,640 90% Note: 1 The entire business transfer was complete on 10 August Page 5 of 10

6 Financial Summary The Company s financial performance comprises those of 1) Residential property for sales business, 2) Hotel business, and 3) Commercial property business. Residential Property for Sale Business Performance of this business constituted that of Nirvana (a 51%-stake subsidiary), of which performance has been incorporated in S s consolidated financial statements starting 27 April 2015 onwards. As for the ready-to-sell format, revenues and costs were booked as revenues from sales and costs of unit sold, respectively. This standard was also applied to land of the built-to-order houses while the building were booked as revenues and costs from services. In 3Q15, S recorded consolidated revenues from residential property of Bt mn, increasing by Bt.395.9mn yoy, with an increase in costs of Bt.333.5mn. These were mainly from the consolidation of Nirnava s. On a qoq basis, revenues increased by Bt.105.8mn, or 34%, from a full-quarter contribution of Nirvana whilst costs of the business went up Bt.117.9mn, or 51%, from further discount during the hiccup of residential property market. Hotel Business Performance of this business constituted those of Santiburi and Phi Phi Village. 3Q15 consolidated revenues of hotel business stood at Bt mn, increased by Bt.126.1mn or 273% yoy. This was owing to revenue stream of the new hotel Phi Phi Village. Likewise, cost of the business increased by Bt.77.7mn, or 111% yoy, mainly from Phi Phi Village and higher depreciation of Santiburi post renovation and room addition. A qoq comparison showed an increase of Bt.19.2mn, or 14% qoq in revenues. Thanks to the higher Page 6 of 10

7 contribution from Phi Phi Village. Costs were also up Bt.20.9mn or 22% qoq. Commercial Property Business Performance of this business constituted those of the Lighthouse, which is a legacy projects of Rasa Property Development Company Limited, and Suntowers, of which performances have been incorporated in S s consolidated financial statements starting 10 August 2015 onwards. In 3Q15, S experienced increases in revenues from the business of Bt.83.7mn yoy and Bt.80.5mn qoq, mainly from the consolidation of Suntowers. Selling and Administrative Expenses In 3Q15, S recorded consolidated selling and administration expenses of Bt.267.9mn, increased by Bt.164.4mn, or 59% yoy, mainly due to expenses of the M&A assets Phi Phi Village, Nirvana, and Suntowers in addition to increased number of employees at head office to support business expansion after the business integration, and professional fees of the previous M&As. On a qoq basis, the expenses increased by Bt.93.9mn, or 54%, mainly on Suntowers expenses, the fullquarter consolidation of Nirvana s, and professional fees of the previous M&As. Net Profit (Loss) In 3Q15, S recorded net loss of Bt.63.9mn, improved from the net loss of Bt.93.6mn. in the preceding quarter. Thanks to performance of Suntowers. Page 7 of 10

8 Consolidated Statement of Comprehensive Income Restated Proforma 3Q14 2Q15 3Q15 yoy qoq (Unit: Bt.mn) change change Revenues Hotel Residential Commercial Gross profit Selling and admin expenses Profit (loss) from operation (73.6) (42.8) (93.0) (19.4) (50.1) Other income Profit (loss) before interest and income taxes (66.5) (34.9) (16.1) Financial costs (1.8) Income taxes (2.0) Profit (loss) for the period (67.0) (85.4) (70.2) (3.2) 15.2 Non-controlling interests (8.2) Net Profit (loss) (67.0) (93.6) (63.9) Financial Position As at 30 September 2015, S reported consolidated total assets of Bt. 22,578.6mn., a Bt. 11,290.9mn increase from end of FY2014. This mainly attributed to the investment in Nirvana, the entire business transfer of Suntowers, and an acquisition of new land plot for future development. Total liabilities increased Bt. 6,371.2mn, mainly from the consolidation of Nirvana s existing liabilities and new debts issued to finance the business acquisition. Page 8 of 10

9 Consolidated Statement of Financial Position Restated (Unit: Bt.mn / % to total assets) End of 2014 End of 3Q15 Assets Cash and Short-term investments % % Costs of property development % 4, % Inventories % % Others % % Total current assets 1, % 6, % Land held for development 1, % 2, % Investment property 4, % 9, % PP&E 3, % 3, % Others % 1, % Total assets 11, % 22, % Liabilities Short-term loans 3, % 8, % Current portion of long-term loans % % Others % % Total current liabilities 3, % 9, % Long-term loans % % Others % % Total liabilities 4, % 10, % Shareholders' equity Paid-up capital 4, % 5, % Retained eanrings 1, % 1, % Others % 4, % Total shareholders' equity 7, % 12, % Capital Structure Net interest-bearing debt to equity stood at 0.69x At the initial stage of S and with the strategy to grow its business via M&A, short-term debts collateral-free bridging loans are designated sources of funds, particularly in acquiring lands and assets. Postacquisition, long-term debts project financing loans will be used to refinance the short-term debts. As at 30 September 2015, interest-bearing debts stood at Bt.9,159.4mn., of which 92% were short-term bank loans. Net interest-bearing debt to equity ratio went up to 0.69 times, from the 0.39 times at the FY2014 Page 9 of 10

10 (based on the restated financial statement). This was mainly due to loan issued to finance business acquisition. The Company s Business Integration Singha Estate Public Company Limited ( the Company or S ) is a real estate investment and development company. Formerly Rasa Property Development Company Limited ( RASA ), S is incepted through entire business transfer process between RASA, Santiburi Company Limited ( STB ) the owner and operator of Santiburi Beach Resort and Spa and S Bright Future Company Limited ( SBF ) a real estate investment company. The business integration was completed on 12 September 2014, and soon afterwards the Company underwent a name change to Singha Estate Public Company Limited with a new security symbol S. At the inception, key assets were as follows: RASA s inventories backlogs of RASA Maxx Ville ( Maxx Ville ) and Intro Condominium ( Intro ) the residential projects developed by RASA A 71-key 5-star beachfront resort Santiburi Beach Resort & Spa ( Santiburi ) on Samui Island A 3,500-sqm NLA retail space The Lighthouse developed by RASA Land banks in prime locations for near-term development Following the business integration, S restructured its business operations and continuously expanded its business through acquisitions of assets and new land plots for future development as well as refurbishment of its existing assets. The Company currently engages in residential, commercial, and hospitality. Basis of Accounting While from a legal standpoint RASA is the acquirer of shares in STB and SBF, the accounting standard views the business integration as a reverse acquisition whereby STB and SBF are acquirers and RASA is an acquiree. As a result, the consolidated financial information of S were prepared as if STB and SBF were amalgamated with one another from the start and acquired RASA on 12 September Singha Estate Investor Relations choenporn.s@singhaestate.co.th Tel: Ext.101 Page 10 of 10