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Bangkok--27 Jan--L.P.N. DEVELOPMENT
LPN has set the strategy for 2020 to upscale profitability under the Year of Proficiency theme by expanding revenue from service business and increasing financial liquidity to achieve sustainable growth.
Mr. Opas Sripayak, Chief Executive Officer and Managing Director of LPN Development PCL, said LPN is stepping into the 31st anniversary and entering its 4th decade. It's a year of challenges for developing and improving work efficiency due to the pressure on the real estate business as a result of slowing economy and the Bank of Thailand's regulatory measures, resulting in a decrease in purchasing power.
"This year, we focus on work efficiency by placing priority on three issues: increasing profitability from real estate business, expanding recurring income from service business including building management, construction management and consultancy service, and improving the management of the company's financial liquidity. This is despite the fact that the overall real estate market this year is likely to slow down and expected to contract by 3 percent compared to the figure in 2019 in line with the projected economic growth of 2.5 - 3.0 percent in 2020."
- Increasing profitability by focusing on the management of existing assets to increase revenue. For example, the company will rent out completely-built condominiums to earn income from existing assets and speed up sales and transfer of completely-built projects worth approximately Bt10 billion, consisting of projects priced no more than Bt3 million per unit, whereas LPN expects to release at least 50 percent of them in terms of value.
- Expanding recurring income base from service business, including building management, construction, consultancy, research and development through LPN subsidiaries, namely, Lumpini Property Management Company Limited, Lumpini Project Management Services Company Limited and Lumpini Wisdom and Solution Company Limited. LPN will expand the consumer base in terms of building management and engineering services initially provided to LPN to the outside market to expand the revenue base of this segment. The company aims to see the revenue in this segment up at least 20 percent in 2020 from 2019.
Currently, the property management market for both residential and office condominiums has grown steadily with at least Bt44 billion of market capitalization in 2019 and a growth rate of at least 10 percent per year, presenting growth opportunity for this business which is expected to rise to 10 percent of total revenue within 2020.
- Regarding financial liquidity management, the company has the policy to manage debt to equity ratio at below 1:1 in order to ensure financial stability. At the same time, the company has an effective financial cost management in place, with low interest rates at 3 percent, dropping from 4 percent, after TRIS Rating has assigned A- rating to LPN, reflecting the company's proven solid financial record.
In addition, the company in 2020 has the budget worth Bt4 billion for land purchases with the strategy to "buy land plots in the alleys" by choosing land plots in the alleys in close proximity to the main roads or mass transit stations for project development to maintain development costs. Hence, LPN can develop residential property projects with affordable prices which are competitive with other developers, matching the purchasing power and demand of customers.
In 2020, the company plans to launch 10 projects with a combined value of Bt12-13 billion. They include four low-rise projects worth Bt5 billion and six high-rise projects worth approximately Bt7-8 billion.
"This year, we focus on low-rise projects which are still in high demand. LPN aims to enjoy at least 20 percent increase of low-rise projects sales in 2020 versus 2019. LPN plans to launch a "Semi-Detached House" that gives a homey vibe of detached home in the city at the starting price of Bt5 million to meet the needs of customers who want to live in the urban environment. Regarding condominiums, LPN focuses on condominiums with functional designs to respond to every preference of consumers, priced Bt1-3 million, where there are still demand on the market. The easing of loan to value (LTV) ratio requirement by the Bank of Thailand last week has contributed to better sentiment of the condominium market priced less than Bt10 million. The revenue from condo sales in 2020 is expected to surpass the revenue of 2019."
LPN is confident that, with the above strategy, 2020 will be another year that the company will be able to maintain steady business growth in spite of the grim outlook of the real estate business due to the increasing household debt and the Bank of Thailand's debt to income ratio (DSR) measures effective this year, which will make financial institutions more cautious in granting loans. LPN believes that this year the company will be able to maintain our ability to generate greater income and profits than 2019.
Although 2019 is a difficult year for real estate business which was directly affected by economic slowdown and the LTV regulations, LPN's income merely drops slightly from 2018. Moreover, the company's ability to generate profits in 2019 is better than 2018.
"We can increase the company's profitability in 2019 when compared to 2018, amid the slowing real estate business, as a result of the company's constant adjustment of our business strategy from 2017-2019. 2020 will be the "Year of Proficiency" that we will continue to increase efficiency and profitability, stepping towards becoming a sustainable organization in all aspects," said Mr Opas.
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Bangkok--27 Jan--L.P.N. DEVELOPMENT
LPN has set the strategy for 2020 to upscale profitability under the Year of Proficiency theme by expanding revenue from service business and increasing financial liquidity to achieve sustainable growth.
Mr. Opas Sripayak, Chief Executive Officer and Managing Director of LPN Development PCL, said LPN is stepping into the 31st anniversary and entering its 4th decade. It's a year of challenges for developing and improving work efficiency due to the pressure on the real estate business as a result of slowing economy and the Bank of Thailand's regulatory measures, resulting in a decrease in purchasing power.
"This year, we focus on work efficiency by placing priority on three issues: increasing profitability from real estate business, expanding recurring income from service business including building management, construction management and consultancy service, and improving the management of the company's financial liquidity. This is despite the fact that the overall real estate market this year is likely to slow down and expected to contract by 3 percent compared to the figure in 2019 in line with the projected economic growth of 2.5 - 3.0 percent in 2020."
- Increasing profitability by focusing on the management of existing assets to increase revenue. For example, the company will rent out completely-built condominiums to earn income from existing assets and speed up sales and transfer of completely-built projects worth approximately Bt10 billion, consisting of projects priced no more than Bt3 million per unit, whereas LPN expects to release at least 50 percent of them in terms of value.
- Expanding recurring income base from service business, including building management, construction, consultancy, research and development through LPN subsidiaries, namely, Lumpini Property Management Company Limited, Lumpini Project Management Services Company Limited and Lumpini Wisdom and Solution Company Limited. LPN will expand the consumer base in terms of building management and engineering services initially provided to LPN to the outside market to expand the revenue base of this segment. The company aims to see the revenue in this segment up at least 20 percent in 2020 from 2019.
Currently, the property management market for both residential and office condominiums has grown steadily with at least Bt44 billion of market capitalization in 2019 and a growth rate of at least 10 percent per year, presenting growth opportunity for this business which is expected to rise to 10 percent of total revenue within 2020.
- Regarding financial liquidity management, the company has the policy to manage debt to equity ratio at below 1:1 in order to ensure financial stability. At the same time, the company has an effective financial cost management in place, with low interest rates at 3 percent, dropping from 4 percent, after TRIS Rating has assigned A- rating to LPN, reflecting the company's proven solid financial record.
In addition, the company in 2020 has the budget worth Bt4 billion for land purchases with the strategy to "buy land plots in the alleys" by choosing land plots in the alleys in close proximity to the main roads or mass transit stations for project development to maintain development costs. Hence, LPN can develop residential property projects with affordable prices which are competitive with other developers, matching the purchasing power and demand of customers.
In 2020, the company plans to launch 10 projects with a combined value of Bt12-13 billion. They include four low-rise projects worth Bt5 billion and six high-rise projects worth approximately Bt7-8 billion.
"This year, we focus on low-rise projects which are still in high demand. LPN aims to enjoy at least 20 percent increase of low-rise projects sales in 2020 versus 2019. LPN plans to launch a "Semi-Detached House" that gives a homey vibe of detached home in the city at the starting price of Bt5 million to meet the needs of customers who want to live in the urban environment. Regarding condominiums, LPN focuses on condominiums with functional designs to respond to every preference of consumers, priced Bt1-3 million, where there are still demand on the market. The easing of loan to value (LTV) ratio requirement by the Bank of Thailand last week has contributed to better sentiment of the condominium market priced less than Bt10 million. The revenue from condo sales in 2020 is expected to surpass the revenue of 2019."
LPN is confident that, with the above strategy, 2020 will be another year that the company will be able to maintain steady business growth in spite of the grim outlook of the real estate business due to the increasing household debt and the Bank of Thailand's debt to income ratio (DSR) measures effective this year, which will make financial institutions more cautious in granting loans. LPN believes that this year the company will be able to maintain our ability to generate greater income and profits than 2019.
Although 2019 is a difficult year for real estate business which was directly affected by economic slowdown and the LTV regulations, LPN's income merely drops slightly from 2018. Moreover, the company's ability to generate profits in 2019 is better than 2018.
"We can increase the company's profitability in 2019 when compared to 2018, amid the slowing real estate business, as a result of the company's constant adjustment of our business strategy from 2017-2019. 2020 will be the "Year of Proficiency" that we will continue to increase efficiency and profitability, stepping towards becoming a sustainable organization in all aspects," said Mr Opas.
