As the real estate business remains attractive and generates a higher net profit margin than construction, SET-listed contractor Pre-Built Plc (PREB) continues investing in property development after selling off subsidiary developer Builtland Co last year.
A digital rendition of Ren Sukhumvit 39, a condo project worth 2.6 billion baht with two seven-storey buildings and 298 units.
Wirot Charoentra, managing director of Pre-Built, said the company is still interested in property development, but it requires much higher capital than the construction business.
"Construction remains our core strength. The return on equity is better than from property development," he said.
Pre-Built plans to both develop projects alone and invest through joint ventures with local and foreign partners for property development. This year it wants to launch three new residential projects worth a combined 4.3 billion baht, using both methods.
After setting up a new wholly owned subsidiary, Is Am Are Co, last year with registered capital of 200 million baht, Pre-Built plans to launch an eight-storey condominium on a 300-square-wah plot on Sukhumvit Soi 26 worth 900 million baht in the second half.
The subsidiary will also spend 1 billion baht to buy a new plot near a mass transit station to develop a new condo project that will be launched next year, said Mr Wirot.
In February 2017 Pre-Built divested Builtland Co for around 900 million baht and recorded a gain of 289 million from the divestment. A month later it set up Pre-Built Holding Co with registered capital of 500 million baht as an investment arm.
Pre-Built Holding last year had a joint venture with Premium Place Group Co in P&P Asset Group where they hold 49% and 51%, respectively.
The joint venture launched an eight-storey condo project worth 1.5 billion baht near BTS Sena Nikhom station (still under construction) last year and plans to launch a townhouse project worth 800 million baht in the second half of 2018.
"We will start gaining from the new investment in property development from 2020 on in the form of net profit," said Mr Wirot. "As we are not realising property revenue this year, consolidated revenue will drop from last year but revenue from construction will grow by 10%."
Pre-Built yesterday signed a joint venture contract with two Japanese firms. They comprise Shinwa Real Estate Thailand, a subsidiary of Japanese large contractor Shinwa Group, and Pressance Corporation, which developed and sold the second-highest number of residential units in Japan and the highest number in the Kansai region.
They set up a joint venture firm, Shinwa S39 Co, with registered capital of 600 million baht, in which Pre-Built, Shinwa and Pressance hold 49%, 26% and 25%, respectively.
The joint venture plans to launch Ren Sukhumvit 39, a low-rise condo project worth 2.6 billion baht, on a 2.5-rai plot on Sukhumvit Soi 39 in the third quarter. It will have 298 units sized between 42-84 square metres and priced lower than 250,000 baht per sq m.
Wichai Chula-Olarnkun, Shinwa Real Estate's executive director, said all units at the project will be developed with dual floors, a so-called Runesu structure, a model that Shinwa Group has applied in Japan for over two decades.
This structure allows for recessed space between the floor of one level and the ceiling under it, which will maximise unit areas by up to 40%.
Shinwa Group's director Tomoyasu Yamabe said Shinwa is not just an investor but a developer bringing innovative know-how.
PREB shares closed yesterday on the SET at 11.70 baht, up 10 satang, in trade worth 4.59 million baht.