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TCC plans to establish three property funds in 2016

TCC Land Group has announced plans to establish three property funds with a value of 80 billion baht in 2016, the funds to be invested in TCC projects between 2016 and 2019.

The property funds will be divided into three sections covering hotels, retail and office buildings said TCC Land’s CEO Sommapat Trisorat.

He is quoted as saying the company will “spend 15 billion baht to renovate existing projects, with the rest of the investment budget to be spent on new projects from 2016 to 2019.” [1]

TCC Land, which is the non-listed property arm of TCC Land Group, has two subsidiaries in which it holds a 100 percent stake. These are TCC Land Asset World Leisure, which develops and manages its hotel businesses, and TCC Land Asset World Estate, which develops and manages the group’s retail businesses.

The two subsidiaries were only established in June this year and were aimed at increasing TCC Land Group’s overall management efficiency.

TCC Land Asset World Estate oversees six retail property brands, most of which are quite well-known in the Bangkok retail marketplace. The six are Asiatique, Gateway,

Central Point @ Siam, OP Place, Pantip and Boxspace. Between them they had 150,000 square metes of retail space.

The management of TCC Land have made it a target to expand this retail space to 220,000 square metres by the end of 2019. They estimate it will cost around 20 billion baht for this expansion but the funds will be drawn from its current cash flow.

Over the 2016 to 2019 period the company will launch three new Asiatiques outside Bangkok. One will be in Chiang Mai, another in Hua Hin and a third in Pattaya. Around 2.2 billion baht will be spent on these three properties.

The company aims at providing further infrastructure to help drive customers to these three planned projects by setting aside 11 billion baht to develop hotels nearby the three Asiatiques. The main focus of these hotels will be to attract the Chinese tourist market, understanding that the Chinese are not only an ever-growing tourist demographic but also they are more likely to spend substantial amounts of time shopping while on holiday.

On the hotel side of the TCC fence, the company announced it will spend 3.6 billion baht on renovating the Imperial Queenspark Hotel in Bangkok, as well as the area around it, looking to create what the company calls an ‘art space’.

Some 40 million baht will be allocated to renovating the long-established Montien Hotel in Pattaya.

The company is looking to boost its revenue from an expected 900 million baht this year to three billion baht by 2019.

 Berli Jucker aiming to expand across Asean

Although its shareholders recently rejected a proposal by the SET-listed retail and trading firm Berli Jucker Co (BJC) to acquire the Vietnamese division of the German retailer Metro Cash & Carry for the equivalent of 26.35 billion baht (655 million Euros) the company’s management has announced it remains in talks to acquire other companies within the Asean region. [2]

It has set out a business plan which aims to increase revenues from overseas operations from its current 20 percent to 50 percent by 2019.

Management had twice proposed its Vietnamese acquisition plans to shareholders but on both occasions the proposal was met with rejection by the majority. The primary reason for the rejection it appears is the financing risk to the company involved in the deal. Basically, a majority of shareholders believed the risks outweighed the potential benefits, especially given the current economic situation.

Nonetheless, TCC Holding, which is the major shareholder in BJC, has stepped in to continue negotiating the acquisition deal with Metro Vietnam. It may be that a third proposal will be put before shareholders at some time in the next few months, depending on the results of the negotiations, but also depending on further external factors involving BJC.

The BJC company president is quoted as saying the company does not need to be concerned about the fundraising risks associated with the Metro Vietnam deal since the offer was now essentially off the table. Instead, BJC now has enough money to acquire other assets with lower risk.

Due to slow demand within Thailand, the company has widened its outlook and apart from the potential Vietnam deal was also looking for other assets to buy within the Southeast Asian region.

The companies BJC is looking at acquiring are all in the consumer-goods and packaging fields. By concentrating on these areas rather than looking to diversify, BJC is seeking companies which can complement and support the growth of its existing businesses. Thailand and Vietnam are designated as production bases from which it can export to Laos and Cambodia.

BJC is looking at growing its revenue growth by at least 10 percent this year, jumping from the 44.2 billion baht it earned in 2014. This growth will come on the back of higher sales and new product launches.

In 2014, BJC generated a net profit of 1.67 billion baht, but this year lower production costs and cheaper prices for raw materials suggests the net profit will be higher.

In one production area BJC said it plans to boost annual production from two billion cans to 2.96 billion cans by the middle of 2016, investing around one billion baht to achieve this goal. Already this year the company has outlaid four billion baht on raising its Thailand-based production capacity of can lids from two billion units to three billion units. A further 500 million baht has been spent on expanding the production capacity of cans and glasses in the plants in Vietnam. [3]

The company says its long-term plan is have its production plants in Laos and Cambodia be in a position to serve the fast-growing demand in those countries. Over time BJC believes revenue from neighbouring countries will grow to the point where it becomes the company’s main source of income.

BJC’s current debt-to-equity ratio is 0.83 times and it has promised to not let this expand beyond a figure of 1.75.

[1] http://www.dealstreetasia.com/stories/thailands-tcc-land-to-launch-three-property-funds accessed 22/9/15

[2] http://www.dealstreetasia.com/stories/thailand-retail-player-berli-jucker-eyes-acquisitions-in-asean accessed 22/9/15

[3] ibid.

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