Pruksa Term Paper Updated 3 April 2010

Strategic ManagementTerm Paper of Pruksa Public Company Limited

Proposed to

Dr. Sompot Sarakosa

Submitted by

1. Mr. Bowen Zhu ID No. 53391022. Mr. Jatuphat Chamapun ID No. 53391043. Mr. Pattarawin Chamapun ID No. 53391144. Ms. Pichanee Saeku ID No. 53391175. Mr. Tawaphol ID No. 53391206. Ms. Thanyarat Charoenkraisri ID No. 53391217. Ms. Mueanfun Mekhanurat ID No. 5339222

Strategic Management (BP6918)

Academic Year 3/2011 Assumption University

I.Executive Summary Som-o

Pruksa Real Estate company was founded in 1993 and concentrated company

concentrated on developing project about town home , single house and condominium which

focusing on Bangkok metropolis and suburbs area with high growth potential. In 2005,

Pruksa Real Estate company was approved by Extraordinary General Meeting of

Shareholders to registered in Thailand Stock Market and was changed to be Pruksa Real

Estate Public Company Limited and started trading its share value of 532.5 million on 6

December 2005. The company has become the leader in the real estate business with main

strategy of produci quality, afford price and efficient cost management. There are 3 main

product categories ; town home, single detached house and condominium under difference of

26 brands. In this report, it focuses on Pruksa business units only in Thailand, not include

Vietnam, Maldives, and India.

Even though Pruksa is successful in being the leader in property market with high

sales volume in Thailand. There are factors that will affect company strategies and growth.

First of all, natural factor like flooding disaster covered many Pruksa projects that partly had

been done the ownership transfer but some are on stage of selling. The second is the New

Town and country Planning Act that is tentative to be and effective in middle of 2013. This

Act will put more restriction in land development both in housing and condominium projects

and the plan of business center in Taksin area will be canceled and will be moved to

Changewattana area. The third is to have many new competitors entering in the real estate

market, including powerful new developer like CP and Central. In addion, the existing

competitors like Sansiri and AP are going to enter in the same segment that Pruksa takes

majority of market share. Fourthly, although Pruksa is a pioneer to import and create new

technology to save time and cost in construction but both big existing and new competitors

follow these technologies and are still seeking the latest one too. The main competitive

advantage of Pruksa is lower price offering that come from efficient cost management and

technologies supporting construction faster and cash receiving from ownership transfer faster.

If others developers can do the same as Pruksa, this will not be competitive advantages any

more. The last one, the increasing interest rate by Bank of Thailand affects on customer’s

decision in residence purchasing. However, there are also many good sign and support via

government by the measure of tax reduction of first house ownership and many consumers in

low-to-middle earner still consider Pruksa as 1 in 3 brands in their choices of residence

purchasing in term of valuable money and affordable price.

In part of evaluation and control, Pruksa has he Balanced Scorecard System

(Balanced Scorecard) and the Key Performance Indicators (KPI) performance in and between

departments and business units. In addition, the Operational Procedures have been issued to

provide guidelines for systematic and effective operations to prevent or mitigate risks caused

by the various departments. Management has clear direction of authorities and flexibility. It is

because Pruksa is registered in Thailand Stocks Exchange so the company has strictly

complied with the regulations on information disclosure of the Securities Exchange

Commission (SEC), Securities Exchange of Thailand (SET), and Thai Generally Accepted

Accounting Standard regarding connected/related persons or businesses.

Financial term, the revenue of year 2011 decreased from year 2010 around

3.5% from town home and 8.4 % from single detached house or total around 1,027.6 million

baht. While the revenue from condominium projects increased 26.3% or around 950 million

bath. Some customers delayed the booking and ownership transfer due to the flood in Q4 of

2011. In 2011, cost of real estate sales was 63.29% of the revenue from sale of real estate that

compared to 62.47% of last year, increased by 0.82% because the cost of construction

material was rose.

For Strategies formulation and implementation, Pruksa should must be in

growth strategy and follow its objective both gaining more market share in Thailand and

being one in top real estate companies of the world. Although, there are many risk factors but

there are also advantages from external factors and internal factors. The economy recession

will make small developers to slow their investment and there are only developers having

capacities in cash flow and land holding to still compete in market of year 2012. The strong

points of Pruksa in long-time experiences in real estate business and its own contractor

including efficient in cost management can take few years for others competitors to catch up.

Especially on condominium market of which demand is continually increasing and it can see

from many big developers like IDEO, Sansiri, Q-house and Pruksa launched many

condominium projects in the first quarter of year 2012.

II. Introduction Som-O

Thailand’s property market has been slowly expanding since 2010 due to Thailand’s

economy that is estimated to be growth at 0.4% more than 2009. In 2011, Thailand have to

face a problem of severe flood disaster that destroyed many areas in Bangkok, Ayudhaya,

Nontaburi, Lopbuiri and Pathumthani. These destroyed area are commercial, industrial and

residential area. In term of residential area, the real estate industry get bad effect seriously

and more than 100 housing project were flooded. Some of them were flooded whole project

so the resident had to leave their or stayed on second floor and waited for help. Even though,

some were flooded only on main road in front of villages but these villages were considered

as flooded area decreasing selling price and land value.

However, Thai government have been stimulating the real estate business since year

of 2010 by the measure of ownership transfer reduction and the measure of tax reduction for

the first house ownership in 2011. Due to flood disaster, this measure is postponed to be

effective in 2012. Thai government hopes to see good sign in economy recovery from Europe

and America that will help Thailand’s economy recovering faster. The real estate business is

main indicator of national economy growth. The foreign investors spend their money in both

stock market and buying property for future profit. Compared to neighboring countries like

Hong Kong, Singapore and China for big cities like Shanghai and Beijing, Thailand has more

opportunities in making money from property because of lower price.

Among big property developers in Thailand, Pruksa company limited is the one

having highest share in stock market in year of 2011. Pruksa was well known in the market

that launched the most projects both in Thailand and aboard in 2011 even though there were

many risks to get loss or project not be able to be sold in estimated time like EU economic

crisis, Hamberger crisis in America, increasing interest rate from BOT (Bank of Thailand)

and flood disaster in the fourth quarter. In the market, Pruksa has the major sales in low to

middle price of housing project. Causing from flood disaster, the sales of single-detach house,

town house and town home are slowly continuously to the first quarter of 2012.

In this report, it focuses on Pruksa public company limit and its business unit in

Thailand only. The analysis are about company background, environmental scanning, IFAS,

EFAS, SFAS, strategic formulation, strategic implementation, evaluation and control,

financial analysis, discussion and conclusion and recommendation.

III. Company Background Fun

Pruksa Real Estate Plc. was founded by Mr.Thongma Vijitpongpun on April 20,

1993 with the initial registered capital of 50 million baht. The company concentrated on

developing project about town home , single house and condominium which focusing on

Bangkok metropolis and suburbs area with high growth potential. On April 22 , 2005 the

company was approved by Extraordinary General Meeting of Shareholders .Then company

increased register capital by issue new share amount 532.5 million shares with par value 1

baht. On April 27 , 2005 Pruksa Real Estate Plc.was converted to public company. Later on

December 6, 2005, it started trading on the Stock Exchange of Thailand (SET) under the

ticker “PS”.

Main business

The company has become the leader in the real estate business producing quality .

There are 3 main product ; town home , single house and condominium under difference of

brands.

Town home

For town home under the brands of Baan Pruksa”,“Pruksa Ville” , “The Connect” ,

"Pruksa Town" and "Urbano for low-to-middle income bracket market.

Town Home

Single house

For single house under the brands of Pruksa Village”, “Passorn” , “The Plant” ,

"PruksaNara" and "Pruksa Puri" for middle-to-high income bracket market.

Single Detached House

Condominium

For condominium under the brands of “Ivy Condominium”, “City Ville

Condominium” , "The Tree Condominium", “The Seed Condominium” , "Chapter One

Condo", "Condolette" , "be you" , "Fuse"  and  “the Urbano Absolute”

Condominium

Company profile

Pruksa Real Estate Public Company Limited

Main Business: Property Development

At the present, the company paid-up capital totals 2,228,812,000 baht.

Shares, Par Value : 1 Baht per share

Major Developments

Year 2004

- The company ‘s paid up capital increase from 1,388 million baht to 1,700 million

baht.

- The company had project about build Precast Concrete factory by use a semi –

automated pallet circulating system . It was most modern technology in Thailand. The

cost of this project was approximately 650 million baht. (Excluding the cost of land).

- The company started to use Employing Enterprise Resource Planning system ( ERP)

to operate work. And introduce SAP computer software to support company’s system

and upgrade its information technology system. The cost for this system around 30

million baht.

Year 2005

- The Precast Concrete Factory was completed and started producing housing part.

- The company set up Kaysorn Construction Company Limited as a contractor for

housing decoration.

- The company set up the Business Processes Improvement and Workforce

Management Systems , a solution offered by IBM (Thailand ) Co., Ltd. The cost of

project was 12.7 million baht. The company introduced the system for improve the

business process ( including construction , sales , marketing and services) of the

Company and personnel management. The main purpose of project was to support the

business expansion , to increase the competitive edge in the future and to reduce

operating cost.

- The company converted itself into public company and increase registered capital

from 1,700 million baht to 2,232.5 million baht and reduce the par value from 100

baht to 1 baht.

- The Pruksa Real Estate Public Company Limited was approved to list on the Stock

Exchange of Thailand on December 6 , 2005 under the ticker “ PS” and started

trading in the stock exchange market.

Year 2006

- On January 9 , 2009 , The company increased paid –up capital from 2,125 million

baht to 2,159.7 million baht.

- On July 5 , 2006 , The company increased paid –up capital to 2,166.7 million baht to

accommodate the first exercise of warrants from ESOP scheme.

- The company has adopted Business Process Improvement (BPI) , Business

Intelligence (BI) and Balance score card software to enhance the Company’s

operations and management Precast Concrete Factory was modified for more

efficiency in production process.

- The company set up 2 new subsidiaries named Puttachart Estate Company Limited

and Phanalee Estate Company Limited with initial registered share capital 1 million

baht each and later increase the authorize share capital to 50 million on November 2,

2006 .

- The company was approval of issuance of short – term bill of exchange (BE) (with in

270 days ) to investors at a total amount1,000 million baht.

Year 2007

- On January 10 , 2007 , The company increase paid – up capital from 2,166.7 million

baht to 2,173.8 million baht as the second exercise of warrants from ESOP scheme.

- On April 20 , 2007 , Annual General shareholder ‘ Meeting ‘s approval , the company

registered the decrease in authorized share capital through eliminating non – traded

shares of the company in the amount of 7,7746,600 shares at a par of 1 baht . Also

registered the Amendment of Memorandum of Association Article no.4 for decrease

the company ‘s registered capital from 2,232.5 million baht to 2,224.75 million baht

with the Ministry of commerce.

- At the 2007 Annual General shareholders’ Meeting held on April 9 , 2007 , the share

holders approved the issuance and offer for sale of Debt Securities under the project

to decrease the financial cost of the company and to provide an alternative source of

fund for project development. The maximum amount of debt Securities must not

exceed 2,000 million baht within 3 years . The company issue unsubordinated and

unsecured debentures in an aggregate amount 1,000 million baht .

- On August 9 , 2007 , The company has adopted a SBU ( Strategic Business Unit)

Structure to accommodate long term growth. The company increased the paid – up

capital from 2,173.8 million baht to 2,180.2 million baht .

Year 2008

- Phanalee Estate Company which a subsidiary company had registered to increase

authorized share capital on September 22, 2007 from 50 million baht to 200 million

baht with the Ministry of Commerce without additional cash received.

- On June 2008 , the company built a plant manufacturing precast steel – reinforce

concrete panel with special element. The cost of the project around 90 million baht

( excluding coast of land and is on stream 400 cubic – meter – per – month capacity.

This project located on the same area with first and second plant.

- On August , 2008 , The company increase paid up capital from 2,185.95 million baht

to 2,191.39 million baht and accommodate the fifth exercise of warrants by the

company ‘s directors , employees and advisors and/or the subsidiaries (PS-WA) in a

total amount 5,441,500 units on July 31 , 2008.

Year 2009

- The company launched 3 new brands : The tree , The plant Citi and Be You.

- The company increase paid up capital from 2,191.39 million baht to 2,196.6 million

baht on 5 February 2009 , 7 August 2009 , December 2009 to accommodate the 6 th –

8 th exercise of warrants from ESOP scheme.

Year 2010

- The company change company ‘s English name from “ Preuksa Real Estate Pcl. “ to

Pruksa real Estate Pcl. “. And also change company ‘ s brand to reflect new name &

re – branding.

- After announcing 2009 audited financial statement , the company became the largest

residential developer in Thailand in term of revenue.

- The company launched local condominium under brand : Chapter one , Condolette ,

Fuse , Urbano ( Town home and condominium ) and first international brand “ Coral

Ville “ in Maldives.

- In Hulhurmale , Maldives after signing the JV agreement with Housing Development

Corporation (HDC), the company started launching low rise condominium “ Coral

Ville “ and achieved 93% sales.

- In Bangalore , India , the company buy the land 65 Rai , got all licenses approval and

started doing pre launch the first phase of row house and villas project at Budigere.

- In Mumbai , India , the company signed Joint Venture Agreement with SOHAM

Group of companies to start developing the first project of row houses , twin homes

and villas at Pimplas Thane.

- In Hai phong , Vietnam , the company signed 85 % Joint Venture Agreement with

Hoang Huy Service Investment Co.

Subsidiaries’ Shareholding Structure

Subsidiaries’ Management Structure

IV. Environmental Scanning (Som-O)

External Environmental Variables1.Natural Environment

Global warming causes many disasters in many countries, including Thailand.

Since September – December 2011, Thailand faced big flooding in many economic area,

Ayudhaya, Nontaburi and Bangkok. Many housing projects of Prueksa faced big flood

even though the company offered many assistances like living kits, sand bags and water

pumps for areas having risk in flood, shelter and hot line for emergency case. This event

changes living consumer trend. Condominium get more interest from consumers looking

for home, instead of the housing and town house using to take majority share of market.

Not only Thailand faces disaster, but also many countries like China, Myanmar and Japan also face disasters. This create high demand of material like cement, steel and others materials in Asia market and also lack of labor for construction during the year.

2. Societal Environment

Economical Forces

The interest rate was expected to rise during the year. Bank of Thailand has

still be watching and monitoring the real estate bubble situation by means of Loan to

Value (LTV) control for housing loan from Financial institutions. BOT announced the

LTV ratio measure for both low rise and condominium credit facilities. This will effect

low-income households heavily relying on debt financing to buy the property. Therefore,

this will bring down such houses, condominium sale volumes and also overall

speculation as more down payment is required.

Technological Forces

Nowaday, there are many new technologies supporting in saving time and cost

in construction, while maintaining work quality. One is the Cast-Institu Load Bearing

Wall Structure system from France that uses walls to bear the weight in place of pillars

and beams, skipping the step of cement pouring for pillars and beams. The walls are

assembled and installed at the construction site. Then the walls are tied with a steel

structure into which cement is poured. The steel frame is subsequently removed and a

bearing wall is created. By this method, the work is done more quickly. Pruksa was

among the first few developers which employed this system in the construction of one-

story townhouses which required about 30 days from the commencing date to complete

the construction of a house, which is more efficient than the conventional method of

construction which require about 180 days. The Company uses the Cast-Institu Load

Bearing Wall Structure system in the construction of Baan Pruksa projects.

Later, the Company has developed new construction technologies to boost

house construction efficiency. It has employed the Tunnel Technology in the

construction of two-story townhouses. The construction starts with the fitting of steel-

framed walls and the upper floor at the same time, followed by structure steel bar wire

tying and concrete pouring for the lower walls and the upper floor, also in one step. Then

the upper walls and roof frames are fitted in. By this method, the outside working period

is much shorter than the conventional method and a solid, strong and beautiful house is

obtained. By using Tunnel Technology in construction, a house is completed in about 60-

80 days. This method is much quicker, compared with the conventional method, which

requires about 180 days. The Company has used this technology in the construction of

Baan Pruksa 3 project and the subsequent projects. In addition to the construction of

townhouses, this technology can be used in the construction of 8-story condominiums.

Political legal Forces

The new governmental measure of “The first house owner project” stimulates

the persons who is on decision for his/her first house to be more interested in first-hand

property that the second one in order to gain benefit from this measure. It is because

there are many new projects launching during few years and it affects to oversupply of

property. This measure encourage the real estate business to recover from economic

recession and slow progression.

The New Town and country Planning Act that is on process of discussion

would be effective in mid of year 2013. The existing one in 1990 is extend to be effective

until 2013 and there are many changes in the new one because some areas will be

assigned to be floodway and some area will be strict to have more green area in case of

building the residential. In addition, some area in urban area like MeenBuri, Nong Chok

and some in Pathumthai would be reserved for agriculture and floodway. In addition,

some area will limit size or height of residential building. Developping area like Change

Wattana will be encouraged to be new residential area and center of business. Normally,

many developers including Pruksa buy pieces of land having trend in progression and

near mass transportation in advance when The New Town and country Planning Act is

effective, the developer have to adjust their strategies to new policies.

Socio-cultural Force

- Change in consumer demand residential.

The development in public mass transit (sky train, subway) has caused high

demand in condominiums. In addition, the big flood at the 4th quarter of 2011 critically

affects on consumers perception regarding residential selection. Condominium gains

more interest and advantages from consumer perception.

- Change in lifestyle of young generation.Nowadays, many young people start to separate from their family and live by

their own faster than previous day. This trend comes from many parents who stay in

country prefer to send their children to study in Bangkok and also some graduates from

up countries prefer to work in Bangkok for better earning and opportunities. To serve

these demands, some developers create new project of condominium pricing lower than

1 million or not more than 2 million baht. While the developers aim to serve the targeted

customer, they can get untargeted customer in the same time, new graduates who live in

Bangkok but would like to have their own property in early age or to invest their money

for better value in long run and short run.

- Increasing environmental awarenessDue to many disasters happening globally during past few years, many

people starts to pay more attention in global warming and to save environment. Then,

many companies including real estate developers, suppliers and construction companies

emphasize one of their selling points in using material or processes that are good and

safe for world and environment. For example, Pruksa uses concept of saving energy

building like more windows and heat-preventing glass for saving electricity use in day

time to be one of selling point in condominium and house advertisement.

- Growing health consciousnessDue to hurry living in big city like Bangkok, many people face health

problems from lack of exercises and limitation green area. Many developers starts to serve consumer need by providing huge green garden as extra facilities from fitness, swimming pool and others. This can fulfill Bangkokian who live in condominium to have big garden for walking and getting a bit fresh air.

3. Task Environment : Industry Analysis

New Entrants

There are many new developers, both small and big, entering in real estate

industry every year. For Pruksa, new small and big developers have to face an entry

barrier in term of cost management. Pruksa is one of the very few real estate developers

who manage construction work themselves. In running a project, it determines the

project concept and details of the design. For project construction, it manages the

construction work by dividing it into parts such as foundation work, masonry, parts

installation, floor tiling, and roofing. It hires specialized contractors to implement the

work and supervises the implementation by assigning its engineers and foremen to work

at the project site to ensure that construction specifications and standards are met. Pruksa

is also able to manage construction costs efficiently as it procures construction materials

itself. In low-to-middle earning market, Pruksa still takes majority of market share for

housing and town but Lumpini takes majority of market share of condominium.

However, CP group that still have capability in both capital and landlord

entered into this business too. Actually, one in subordinates of CP started to do first

housing project in Bangna “Magnolia”, compound of single-detach house and

condominium. Last year, Magnolia project was launched in Khao Yai. Now, CP group is

studying its land in stock both in Bangkok and upcountry for project development. CP

would to be the most new efficient developer in this industry because CP has its own

huge capital and strong relationship with China. China is well known in create new

technologies in cheap cost. The 20-storey condominium in Shanghai and Guangzhou can

be completed in 1 month.

Substitutes

There are many substitutes of product in the real estate industry. Especially on

developed areas having mass transportation, BTS and MRT, there are many companies

develop condominium projects. For example, there are 12 condominim projects closing

to Onnut BTS station and the price is not much different, depending on location and

positioning. In 1st quarter of 2012, there are 9 projects from different developers being

launched in area of Rama9 and Ratchada. Therefore, the location is not main

competitive advantage anymore. Pruksa change its strategy to be more specific on

lifestyle of consumer. Pruksa launched “IVY Ampio”, locating between True Tower and

MRT Thailand’s Cultural Center. This project has concept of luxury living and customer

target in middle earner with the price starting from 4.7 mb. The competitor having the

same starting price and luxurious concept like “The Address” by AP has less

competitiveness in location on Petchaburi road. The same positioning of location of

“Bell Avene” by Belle development set targeted customer between low to middle earner.

Suppliers

Many suppliers of material construction keep develop and invent new products

to serve high demand from both exiting and new developers. SCG is one big material

supplier in real estate industry. SGC set its own R&D in both develop and invent

product, and also seek new material from aboard to serve purpose of saving cost, energy

and time. Including the big investors from China. “Mega Bangna” and from Sweden

“Ikea” invest a lot of money in Thailand because they see an opportunities in this

industry in Thailand. Even though, there are many developers, there are many material

suppliers. The big developers like Pruksa, Land & House, Lumpini and Sansiri have

bargaining power via suppliers because these developers orders materials in advance for

new projects whole year. Pruksa already signed contract with steel supplier last year to

commit the price for its own new project in year 2012. Pruksa can claim the increasing

material cost through selling price but the company can control the cost to be slight

increasing via labor and some materials.

Buyers

Affected from many channels of information, customer loyalty nowadays is

hard to keep. The consumer can check various information including comments from

website. They can compare information of every projects in area in that they are

interested. If they used to be one company customer, it can not be guarantied that they

keep buying the company project in next purchase. They will compare the benefits and

choose the best value money and the most fitting in their lifestyle.

In the housing and town house project, Pruksa faces existing competitors

entering in low-end price like BaanMai by L&H, Town Plus by Sansiri and Baan Klang

Muang by AP. The buyer has many choices.

In low-price condominium, there are big competitors like Lumpini and

Supalai, Pruksa just started to enter in condominium market last few years. Therefore,

Pruksa offers low-price condominium project including with lifestyle concept as value

adding. However, consumer in this market still keep following Supalai and Lumpini. If

one person would like to buy condominium pricing not more than 1.5 mb., he thinks of

Lumpini first and then Supalai will be second alternative. Pruksa would be the third

alternative but now IDEO started to play in this market too by launching 4 projects of

IDEO Mobi, condominium starting from 1.29 mb.in the first quarter of year 2012 with

the same concept of matching lifestyle.

Internal Environmental Variables Efficiency in cost control management

Pruksa has its own construction department and purchasing department. Generally,

The company is given a considerable discount as its purchases are of high volumes. After the

company has agreed with the producer on the material quantities and prices, it will order the

materials through the producer’s agent for delivery to the project sites. In addition, the

entering into long-term price agreements for one year or 3-6 months have reduced the risks

of price fluctuations. Having good relationship with many suppliers, the company is able to

obtain construction materials at a desired quantity and has never suffered a shortage of

construction materials. However, it does not rely on any one supplier of construction

materials.

The Company is one of the very few real estate developers who manage construction

work themselves. In running a project, it determines the project concept and details of the

design. It hires specialized contractors to implement the work and supervises the

implementation by assigning its engineers and foremen to work at the project site to ensure

that construction specifications and standards are met. The Company is also able to manage

construction costs efficiently as it procures construction material by itself.

Efficiency in cash flow management and capital gained from the stock market.

Pruksa has a good strategy in cash flow management. It can manage portion of

various products being launched in one year. For housing and town home project, they

are good in term of fast return because the construction will be done within 4 -6 months

and can do ownership transfer within 1 years. In addition, Pruksa has pricing competitive

advantages in this market and some project can be closed within 1 -2 months. While,

condominium project has to take at least 2 – 4 years to receive the total revenue because

of big amount of units and long construction period. Viewing from Pruksa annual report,

the portion and revenues of housing and town home project launch is higher than

condominium project.

Continuing in construction and house development

Pruksa keep developing construction technologies to be faster and saving in cost

and time and also to be friendly with environment by saving energy and using

substitutive material reducing natural resources material. In addition, the company

focuses on developing the projects to meet customer demand. In House Design, in

designing housing units for each project, the Marketing and Sales Department will

coordinate with the Project Development Department to determine conceptual design

guidelines, including the construction budgets and techniques. After that the Project

Development Department will assign outside architects to design the project under the

guidelines on the agreed conceptual design.

Pricing strategies

The Company has focused on a niche in the real estate market for low-to-middle

income earners. The Company’s construction costs are also lower than those of other

developers as it manages construction work itself and uses advanced and efficient

construction technologies. It is therefore able to maintain low production costs and

shorten the construction time. Therefore, it is able to offer prices lower

than those of other developers by 15-20% for townhouses and single-detached houses.

And since its main objective is to build housing units for low income earners, in order to

help society, it is one of the very few real estate developers granted BOI promotional

privileges, with corporate income tax exemption for income from sales of housing units

with a price not exceeding Baht 1,200,000 each.

Advertising and public relations strategies

To support sales, the Company has launched advertising and public relations

campaigns through

1) Medias such as radio, television, newspaper

2) Mass transportation such as BTS, MRT

3) show booths

4) Billboards that advertise the Company’s projects in the localities

5) Brand Building Aiming to boost public awareness, the Company has been sponsoring

various TV programs, such as “Faen Phan Thae” and applying the concept of Customer

Relations Management, through various activities, such as offering scholarships to children

of dwellers in the Company’s housing projects, providing mobile medical services to the

Company’s housing project dwellers for free health check-ups and organizing various

activities in the housing projects.

6) Mobile telephone systems

7) The Internet (e.g., the Company’s website www.pruksa.

com or through www.facebook.com).

V. EFAS, IFAS and SFAS

VI. Evaluation and Control SOM

1.1 Control Activities

The Balanced Scorecard System (Balanced Scorecard) and the Key

Performance Indicators (KPI) have been introduced as planning and control tools,

whereby lines of responsibility and accountability between departments have been

clearly defined to achieve proper checks and balances. The Operational Procedures have

been issued to provide guidelines for systematic and effective operations to prevent or

mitigate risks caused by the various departments in the course of performing their duties.

Management Authorities have been established, where the scope, authority and financial

approval limit at each level has been defined for the purpose of flexibility and clarity. In

regard to compliance, the Company has devised methods to ensure compliance with

related laws and regulations. For example, stringent measures have been implemented in

cases where the Company transacts business with major shareholders, directors etc,

including the requirement that such a transaction be subject to approval by persons

having no vested interest. Moreover, the Company has strictly complied with the

regulations on information disclosure of the Securities Exchange Commission (SEC),

Securities Exchange of Thailand (SET), and Thai Generally Accepted Accounting

Standard regarding connected/related persons or businesses.

1.2 Follow–Up and Evaluation

The Company has the system and procedure to follow-up its operations. The

executives in each division always compare actual results with the target periodically.

The purpose is to be able to change strategy in time. The Board of director attending

quarterly board meeting will get such comparative results of the operations are in the line

with plan.

1.3 Audit Committee

The Company’s Audit Committee consists of Independent Directors with

qualifications in accordance with Section 68 the Public Company Act B.E.2535, the

Announcements of the Capital Market Supervisory Board and the regulations of the

Office of the Securities and Exchange Commission and the Stock Exchange of Thailand.

The Committee must consist of at least 3 members, with at least one who is qualified in

accounting or finance and has adequate experience to ascertain the integrity of the

financial statements of the Company. The current Audit Committee comprises three

Independent Directors as follows:

OSITION

1. Professor Emeritus Dr.Trungjai Buranasomphop Chairman of the Audit Committee

2. Mr. Adul Chandanachulaka Member

3. Mr.Weerachai Ngamdeevilaisak Member

Scope of Powers, Duties and Responsibilities of the Audit Committee

VII. Strategic Formulation Jeep GROWTH STRATEGY

Pros:

1. Pruksa Real Estate Plc. will expand the business to cover all channels and also

protect their market share from the current and new competitors in the market

2. Pruksa Real Estate Plc. will continue gain the profit margin from the business and

also increase the profit of the company in the long run because of the decreasing of

the operating and fix cost of the company.

3. Pruksa Real Estate Plc. will join the new political policy such as “first home owner”

and can gain more in sales volume of real estate business

Cons:

1. The cost of construction will be increase from the increasing of the material and labor

cost that will effect to the sales volume and cost control of the company

2. The political crisis in Thailand still continues. The changing of the government in

short term effect to all business especially the real estate. So the company will suffer

from that problem

STABILITY STRATEGY

Pros:

1. Pruksa Real Estate Plc. will be safe from the risk of new investment because the

current business is strong enough to continue without growing.

2. Pruksa Real Estate Plc. will protect their market share of the business from the new

competitor by using the good promotion and advertising campaign

3. Pruksa Real Estate Plc. will focus in improving their quality in service and solve the

problem of the current business to be continue as a leader with this strong point

Cons:

1. The new and current competitors of Pruksa Real Estate Plc. will come to gain the

market share of the business because the real estate business continues grow in every

year.

2. The management and staff team will transfer to the competitor that have a good future

signal with growth in this business

RETRENCHMENT STRATEGY

Pros:

1. Pruksa Real Estate Plc. can change the business into the new product and service that

may have more profit margin than the real estate.

2. Pruksa Real Estate Plc. can transfer their assets into the very large amount of cash to

the owner and shareholder.

Cons:

1. The brand Pruksa Real Estate Plc. which used to be very strong in the real estate

business will be gone from the market

2. The competitor both current and new entrant will gain all market share of Pruksa Real

Estate Plc. because the real estate business is at the recovery phase that mean Pruksa

Real Estate Plc. will loss the opportunity to gain the profit and cannot come back to

this business anymore.

VIII. Strategic Implementation Chev

Minority strategy

Objective

To gain more market share in property market in Thailand

Strategy

1. To expand more target of property market by focusing low-medium income market.

2. To invest (Acquisition) more share from property companies such as Q-House, Land

and House and etc.

Implement Strategy

1. We are strong in efficient supply chain management and also cost-efficient

management so we can provide the properly house and condominium for low-medium

income people and gain only few margins to support low income people.

2. We should create more support service such as CRM we also have the call center and

web-board to discuss about house and condominium all 24 hours. And also provide

the technology and development to support all customers who needs.

3. We should focus on CSR also by creating more activities about environment and

remain the website about CSR to promote about brand to create more brand

awareness.

4. We should launch more promotion of buying any property for most comfortable to

our customers.

Majority strategy

Objective

To be the one leading of property developers in the world

Strategy

1. To expand more sub brand or branches or joint venture in each countries firstly in

Asia

2. To make the world standardization of development of property market firstly in Asia

Implement Strategy

1. We should focus more on expanding market in worldwide by firstly focusing on Asia.

To make this successful, we should focus in Joint venture with high quality brand in

each country to create more margins by adapting our innovative, up-to-date

technology, and world class product and service management with local company to

create the highest maximize benefit.

2. We should offering products and services maximizing customers’ satisfaction and

impression. In this case, the local company will support us by sharing knowledge and

knowhow of local area and we will support the technology and high development

from our company to create highest standard and also satisfy our customers in each

country.

3. We still focus on every strategy such as efficient supply chain management, cost-

efficient management, and continuous operational process improvement as same as in

Thailand but for worldwide.

4. We should send the top management level to learn about culture and traditional from

other countries for understanding more and create the most valuable and benefit for

our customers in each country.

1. To review the Charter of the Audit Committee at least once a year and make adjustments

as deemed necessary and appropriate.

2. To conduct reviews of financial reports and disclosure of financial statements in

accordance with accounting standards stipulated by laws in a transparent, accurate and

sufficient manner.

3. To consider and approve any changes in significant accounting principles or procedures as

proposed by management of the Company.

4. To conduct reviews to ensure that the Company has appropriate and effective internal

control and an internal audit system in accordance with generally accepted procedures and

standards.

5. To review the independency of the Internal Audit Unit and to give consent to the

appointment, transfer and termination of the Vice President, Internal Audit.

6. To review Internal Audit reports submitted to management and to review management’s

action plan to correct the Internal audit finding.

7. To have unrestricted access to management and employees and relevant information.

8. To conduct reviews with relevant units (such as Legal) to ensure that the Company

complies with laws related to securities and the Stock Exchange and any other laws related

to the Company’s business.

9. To select and nominate independent persons to act as External Auditors of the Company

and propose their remuneration.

10. To have at least one meeting a year with External Auditors without management’s

presence.

11. To review any connected transactions or any transactions with potential conflict of

interest for compliance with the laws and requirements of the Stock Exchange in

order to ensure that the transactions are reasonable and most beneficial to the Company.

12. To prepare a report of the Audit Committee for disclosure in the Company’s annual

report. The report, which is to be signed by the Chairman of the Audit Committee, shall

include at least the following information;

12.1 An opinion regarding accuracy, completeness and integrity of the Company’s financial

reports.

12.2 An opinion regarding adequacy of the internal control system of the Company.

12.3 An opinion regarding compliance with the laws relevant to securities and the stock

market, the requirements of the Stock Exchange of Thailand or the laws related to the

business of the Company.

12.4 An opinion regarding the suitability of the auditors.

12.5 An opinion regarding transactions which may have conflict of interest.

12.6 The number of Audit Committee’s meetings and the attendance of each member of the

Audit Committee.

12.7 An opinion or an observation of the Audit Committee drawn from the performance of

their duties according to the Charter.

12.8 Any other matters within the scope of duties and responsibilities specified by the

Company’s Board of Directors which the shareholders and general investors should know.

13. To perform other tasks within the scope of its duties and responsibilities stipulated in its

Charter, including any tasks as may be assigned by the Board of Directors upon which the

Audit Committee agrees.

14. In performing the duties, if the Audit Committee finds or suspects that there is a

transactions with conflict of interest, a fraud case, an irregularity, or deficiency of a

significant magnitude in the internal audit system or any violation of laws and regulations

related to securities or the Stock Exchange or any laws related to the business of the

Company which may significantly affect the financial position and the performance of

the Company, the Audit Committee is required to submit a report to the Board of Directors

for improvement or correction within a timeframe considered appropriate by the Audit

Committee.

IX. Financial Analysis Bowen

Note 2011 2010

(Restated)

Continuing Operations

Income

Revenue from sale of real estate 24 23,262,984,548 23,307,115,013

Revenue from sale of raw materials 7 - -

Dividend income 7, 11 - -

Other income 159,330,208 99,848,970

Total income 23,422,314,756 23,406,963,983

Expenses

Cost of real estate sales 14,724,493,757 14,560,829,237

Cost of raw material sales - -

Selling expenses 25 2,178,243,481 2,034,033,141

Administrative expenses 26 2,475,900,603 2,208,766,656

Finance costs 29 137,437,564 67,087,878

Total expenses 19,516,075,405 18,870,716,912

Profit before income tax expense 3,906,239,351 4,536,247,071

Income tax expense 30 (1,071,423,754) (1,048,100,172)

Profit for the year 2,834,815,597 3,488,146,899

(in Baht)

financial statements

Consolidated

Total Revenue

In 2011, the company and its subsidiaries earned 23,422.3 million Baht, slightly changed

from year 2010. The main source of the revenue was from sale of real estate consists of

townhouse which decreased 450.8 million baht or 3.5% comparing with year 2010, the single

detached houses decreased by 576.8 million or 8.4% and condominium increased by 950

million or 26.3%.

Some customers delayed the booking and ownership transfer due to the flood in Q4 of 2011.

Cost of sales

In 2011, cost of real estate sales was 63.29% of the revenue from sale of real estate that

compared to 62.47% of last year, increased by 0.82% because the cost of construction

material was rose.

Selling and administration expenses and financial cost

In 2011, selling and administration expense, and finance cost rose by 481.7 million or 11.2%

from last year. The main reason was selling expense increased by 144.2 million baht or 7.1%

that consists of special business tax and transfer fee increased by 274 million due to the ended

of the tax’s privileges whereas the advertising and promotion expenses decreased by 148

million. In addition, the administrative expense rose by 267.1 million or 12.1% that the

devaluation of assets increased by 76 million, the provision of litigations increased by 94

million and the others increased by 97.1 million. The finance cost rose by 70.3 million or

104.8% due the increased in the interest bearing debt for supporting the business expansion.

Income tax

In 2011, income tax was 1071.4 million or 4.6% of total revenue was higher than last year

which shown the amount 1048.1 million or 4.5% of total revenue due to the ended of a

reduction in the corporate income tax rate from 30% to 25% for the newly listed company.

Net profit

In 2011, the consolidated net profit was 2834.8 million, decreased by 653.3 million baht or

18.7 from last year.

Liquidity Measurement Ratios

Year 2011 Year 2010Current ratio 2.81 3.24Quick Ratio 0.15 0.17Cash Ratio 0.15 0.17

The total current assets were increased by 7,558 million due to the value of Real estate

projects under development rose. But the debt rose worsen the liquidity of the company. The

Short-term loans and Current portion of long-term loans were raised by 2,487.24 million and

1,338.40 million baht respectively. The current ratio decreased from 3.24 times to 2, 81, but

the quick ratio and cash ratio was decreased slightly. Pruksa still can pay its debts that are

coming due in the near future and still fund its ongoing operations. 

Profitability Indicator Ratios

Profit Margin Analysis Year 2011 Year 2010Gross Profit Margin 0.37 0.38Operating Profit Margin 0.17 0.19Pretax Profit Margin 0.17 0.19Net Profit Margin 0.12 0.15

All of the four ratios were decreased in year 2011. As the cost of material, administration and selling expenditure were increased by 1.32%, 7.29% and 12.31%. But in consideration of the big amount of the sales, Pruksa still utilities its resources to generate profit very well.

Year 2011 Year 2010ROA 0.02 0.03ROE 0.04 0.06ROCE 0.02 0.03

The net income of Pruksa changed slightly, but the assets, liabilities and shareholders’ equity

changed a lot. This is the main reason to cause all of the three rations weaken than year 2010.

The mainly increased on assets was under the code of “Real estate projects under

development”. Pruksa also raised more debt for its operation. In the next year, Pruksa has to

face 9,333 million baht debt which is going to due next year. As all of the three ratios are

positive percentage, so Pruksa still have a good utilities on its assets , liabilities and

shareholders’ equity.

Year 2011 Year 2010Debt Ratio 0.60 0.55Debt-Equity Ratio 1.47 1.23Capitalization Ratio 0.40 0.37Interest Coverage Ratio 143.00 282.28

The debt ratio increased from 0.55 to be 0.60, it represented that Pruksa face the higher risk

associated with its operation than 2010. And the ratio was higher than 0.5, it means most of

the assets of Pruksa was financed by debt rather than equity. The Debt to Equity ratio

increased from 1.23 to be 1.47, it represented that Pruksa is using more leverage and has a

weaker equity position. The Capitalization Ratio is also increased by 0.03. But the Interest

Coverage Ratio decreased from 282.28 to be 143.00. Pruksa still easily to repay the interest

but the ability is weaker than year 2010.

X. Discussion and Conclusion Fun & Som

Pruksa real estate concentrate on developing project in 3 main businesses including

town home, single house and condominium under varieties of brands. The company focus on

Bangkok metropolis and suburbs area with higher demand from potential growth in

population. The company has become the leader in the real estate business by providing high

quality products with lower price.

Sales revenues of the company is continuously increasing year by year. The strategies

that lead company to successful is the company always launch many projects and develop

houses to best satisfy home buyers with appropriate pricing.

Net profit is decreasing because there are high competition in this industry and labors

and material costs, selling and administration expenditure were increased. Net profit can be

improved by well management and control of selling and administration expense.

Business strategy of Pruksa real estate company is to expand to all market segments in

local and international market and growth in long term. For local market, the company could

implement attractive marketing campaign with high quality and lower price and more

promotion of buying any property for most comfortable to our customers. Also, the company

will join the new political policy such as “first home owner” to be the company opportunities.

For above implementation could gain more in sales revenues of company. To expand to the

international market, the company can make joint venture to other companies in each

countries by initially focusing in Asia. The company should select the joint venture that can

support for innovation and technology of construction and could learn for standard,

regulation, and local customer requirement in each countries.

XI.RecommendationGrowth strategy

Pruksa Real Estate Plc. is the strong brand in real estate business which customer

trusts. So the company should use growth strategy to protect and gain the market share from

the new and current competitor. Launching the new product with improving the staff in term

of knowledge and service mind combines with the new and attractive marketing campaign

will help Pruksa Real Estate Plc. to continue growing and stay in this business as the one of

the leader for a long time although there is the external factor effect such as political crisis,

economic crisis etc. because the demand house, condominium, townhome still growing.