Wednesday, April 18, 2012

Italian-Thai set to sell assets

Firm decides against borrowing as orders surge

To finance new projects, construction firm Italian-Thai Development (ITD) has set its sights on selling assets or stakes in its investment rather than borrowing.

Thanks to local political stability, ITD has gained construction concessions and mining projects at home and abroad, ITD president Premchai Karnasuta said recently.

Its backlog has now surged to orders worth Bt200 billion, compared to Bt10 billion in 2009 and Bt20 billion in 2010. The company will realise revenue on one-third of the backlog over the next three years.

Premchai said the firm's project load would increase next year, with major construction projects in Dawei, Myanmar, further afield in countries including Bangladesh, and on Thailand's mass transit programme.

ITD needs a large cash fund to finance the backlog of projects, including construction of basic infrastructure for the planned oil-shipment port in Dawei, he said, adding that the company preferred to sell assets or stakes in its investment projects rather than rely on lending, in order to soften its debt burden.

ITD has debt-to-equity ratio of 2.4 times.

The company would sell stakes locally in assets including land in the Dawei project, and its coal mine in Kalimantan, Indonesia, where the estimated production is 40 million tonnes of coal per year, in order to invest in a bigger operation of about 1 billion tonnes, he said.

"We will gain more than 100-per-cent profit from selling the coal mining operation, while the sale of other assets will boost the budget to buy into coal mining and other projects, he said.

He said ITD's efforts in surveying for and buying overseas coal-mining operations were driven by a profit margin of 200 per cent of construction costs. Premchai is now making coal mining ITD's core business after seeing that margin grow over the past few years. The company plans to develop coal-mining projects in Myanmar, Laos, Cambodia, Indonesia and Madagascar this year.

"We are not only a giant construction firm but also a giant coal-miner, with resources in Indonesia as well as plans to invest in coal mining in South Africa," he said.

He said that if the company received a large windfall from selling stakes in its investment projects, it might not increase its share capital.

However, the company recently decided to increase its share capital by issuing a further 1.67 billion shares, of which 1.256 billion would be sold to existing shareholders and 419 million allocated to private placement. The increase in share capital will be proposed at a shareholders' meeting on April 27.

The money from issuing additional shares would be paid principally to financial institutions in order to reduce the interest burden on debts.

Premchai said that the company expects a turnaround for profits this year after a loss of Bt1.69 billion last year, while 2012 revenue is forecast to grow by 50 per cent to more than Bt45 billion.