Local businesses expanding overseas as a hedge against local downturn

Bangkok Condo Finder on November 13th, 2015 with

Thailand investment

Since the 1997 Asian Financial Crisis, which basically began in Thailand and spread like a contagion to the rest of the Southeast Asian region and beyond, it has been noticeable that many of the stronger and more financially cashed-up local companies have looked to spread their corporate wings beyond Thailand’s shores. Partly this is because they see opportunities in businesses overseas, but for many it may well be a desire to spread their investments so as to mitigate the effects of any future downturn within the Thai economy on their operations.

This expansion overseas has a number of potentially good results for local operations. First, and probably foremost, it means any financial downturn in Thailand may well be offset by an improved bottom line from external holdings and this, in its turn, can help the local operation/s to weather the economic storm without having to lay off large numbers of employees.

Second, the repatriation of profits from overseas businesses can potentially give the Thai-based headquarters the liquidity in funds to be able to snap up bargain deals in similar local businesses which may be looking to sell out because of a downturn.

Third, seeing how business is done in various jurisdictions can give a potential impetus to beneficial changes within the structure of the Thai-based operations, improving efficiencies and, of course, the financial bottom line.

Finally, the opportunity for highly-motivated local staff to perhaps take an overseas posting within the expanding organization can be of great benefit to both the employee as well as the company overall. It helps the company in terms of keeping good quality staff and can engender a sense of belonging for a staff member who feels he or she can grow within the framework of the organization.

Minor International pushes further into Australia

The Minor International PCL (MINT) company, which is heavily involved in the hotel and food and beverage market, has announced plans to spend 1.125 billion baht (AU$45 million) on acquiring an additional stake in the Australia-based Minor DKL Food Group Pty Ltd (Minor DKL) from a group of existing shareholders. The move will enhance its shareholding from 50 to 70 per cent. [1]

As the name might well suggest, Minor DKL is actually the Australian subsidiary of MINT. The Thai company first ventured into the Australian market in 2008 when it invested 50 percent in Coffee Club Holdings (Australia) Pty Ltd.

Thailand Investment 2015

That company currently consists of 439 outlets, 386 operating under The Coffee Club brand name, 13 operating under the Ribs and Rumps brand name and 40 other outlets operating under names such as The Groove Train, Coffee Hit, Think Tank Coffee, Veneziano Coffee Roasters and Creatures of Habit.

In July this year, MINT acquired a hotel and a management business in the northern city of Darwin for around 1.43 billion baht (AU$57.081 million).

Singha expands into the UK

The property developer Singha Estate, a Singha Corporation subsidiary, recently obtained a 6.2 billion baht loan from Krungthai Bank to allow it to complete its first acquisition in Europe, the purchase of British Jupiter Hotels. This company operates 26 Mercure-branded hotels in the United Kingdom.

The company announced the acquisition in October and stated it would take place as a joint venture between Singha Estate and FICO Holding (UK), with the total investment the equivalent of £154.77 million.

Due to its aggressive expansion Singha Estate management have revised the company’s planned revenue stream, increasing the amount to 30 billion baht per annum by 2019, up from its previously stated target of 20 billion baht. [2]

The company said its acquisition budget next year will be above the 15 billion baht allocated during 2015. The focus will be on acquiring commercial properties such as hotels and office buildings.

WHA eyes further Southeast Asian expansion

The country’s leading warehouse developer WHA Corp announced plans in late October to invest over 32 billion baht in expansion both within Thailand and the Asean region over the next five years.

WHA, which leads the marketplace as the constructor of bespoke warehouses for lease, already has investments in Indonesia but is now looking a little closer to home and wants to tap into the warehouse marketplace in Cambodia, Myanmar and Vietnam. [3]

The company told the Reuters news agency it planned on spending about 6.5 billion baht a year over the next five years with the aim of becoming a ‘one-stop service provider as a fully-integrated industrial estate and logistic facilities developer.’

WHA is undergoing a serious restructuring phase after acquiring the industrial land developer Hemaraj Land and Development Plc earlier this year. WHA announced that shares in Hemaraj will be delisted from the Stock Exchange of Thailand (SET) bourse in February next year.

WHA plans to focus on four key businesses: warehouse and distribution centres, industrial land development, utility and digital data centre services. The company is also planning to spin off its utility and energy divisions and sell around 25 to 30 percent of its shares in an initial public offering (IPO) in the second half of 2016.

The company is also looking to focus on renewable energy, especially in the solar rooftop and waste-to-energy sectors. WHA already has a combined capacity of two million square metres of roof area which is capable of generating almost 200 MW of electricity annually.

WHA is aiming to increase its annual revenue to 18.7 billion baht by 2019, which would represent an 80 percent increase on its expected turnover for this year.

[1] http://www.dealstreetasia.com/stories/thailands-minor-international-hikes-stake-to-70-in-australian-arm accessed 9/11/15

[2] http://www.dealstreetasia.com/stories/th-dealbook-singha-estate-gets-loan-for-uk-deal accessed 9/11/15

[3] http://www.dealstreetasia.com/stories/thailands-wha-to-invest-902m-on-building-warehouses-data-centres-in-asean accessed 9/11/15

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