MD & A

During the year 2017 the Company had continuously launched 2 high end property development projects namely Baan Issara Residence Rama 9 with Baht 1,800 million project value and the Baht 2,500 million Baan Issara Bangna project. It has gradually realized revenues from property sales from projects which had been completed in the past year. Despite the continued sluggish economy and the Company’s burden on operating expenses from two new hotels which were in construction during 2017 but the Company’s operating results still show Baht 45 million total net profit. Those two new hotels namely Baba Beach Club Hua Hin and Baba Beach Club Phuket had, however, been completed and operational in the 4th quarter of 2017 which will contribute as an additional revenue to the Company on top of existing revenues from hotel operation, property sales, rental and services in following years to come.

Due to the Company’s continued investment in new projects it required sourcing of additional investment for ongoing business development. In 2017 the Company had designed and issued 2 tranches of debentures in the 2nd and 4th quarter. There were Baht 439.7 million tree year debenture in the 2nd quarter followed by Baht 500 million 3 years 3 months debenture to pay back the existing debenture of Baht 200 which reached maturity and invest in business. The Company’s Debt to Equity ratio in 2017 stood at 2.11 times which is a reduction from 2.20 times in the year 2016. When calculate on Interest Burden Debt to Equity (IBD/E) in 2017 the ratio went down to only 1.57 times compare to 1.61 time in the year 2016 representing a reduction in liability ratio.

For details of assets, liabilities and equity including detailed operating results including important financial ratio can be summarized as follows:-

Financial Position

Asset

The Company has a total asset as of December 31, 2017 of Baht 7,857 million which was an increase of Baht 529 million from that of the year 2016 equivalent to 7.2% increase. Assets which had material change are as follow:-

  1. Cost of property development for sale was Baht 4,585 million equivalent to 58% of total assets. That was an increase of Baht 187 million from that of the year 2016 due to the fact that the Company has engaged in a total of 8 projects of property development for sale. Three of those projects are in Bangkok namely a residential condominium project “The Issara Collection Sathorn”, a single detach house project “Issara Residence Rama 9” and “Baan Issara Bangna”. One resort residential projects on Huahin – Cha Am beach namely Thew Talay Estate Villa. A condominium project in Chiangmai, “The Issara Chiangmai”, a resort home project at Pakchong-Khaoyai “ Baan Sitawan”, a resort home project at Phuket “Sripanwa Hotel” and a residential home on Na Tai beach, Phangha “Baba Beach Club Phuket” which include residential resort for sale and a hotel. Both Baba Beach Club Huahin and Baba Beach Club Phuket will be under the management of Sripanwa hotel.
  2. Property plant and equipment had increased by Baht 509 million came from the transfer of assets where constructions and decorations were completed at 2 hotels namely Baba Beach Club Phuket and Baba Beach Club Hua Hin- Cha Am which have started their operations since October 2017.

Liability

As of December 31, 2017 the Company has total liabilities of approximately Baht 5,332 million which was an increase of 5.8% from 2016. Liabilities with material changes come from the increased debentures of Baht 736 million for the investment in 2 new hotels namely Baba Beach Club Phuket and Baba Beach Club Hua Hin-Cha Am and also in other property development projects which has increased more than long term loan repayment to financial institution which had decreased by Baht 262 million from cash flow generated by property completed and transferred in various projects.

Shareholders’ equity

Shareholders’ equity in the year 2017 stood at Baht 2,525 million which had increased from Baht 236 million in the year 2016 made up net Shareholders’ equity in the year 2017 of Baht 1,453 million of which Baht 1,072 million attributable to non-controlling interests of the subsidiaries.

Operating results

Revenue

Charn Issara Development PCL and its subsidiaries has a consolidated revenue from operation in the year 2017 of Baht 2,317 million, an decrease from that of the year 2016 by Baht 770 million or equivalent to 24.9% where such revenues increase consists of both increase and decrease part of the Company’s operation which consist of revenues from 3 main businesses and other revenues as follows:-

  1. Revenues from property sales in the year 2017 was Baht 1,477 million, a decrease of Baht 431 million or equivalent to 23% decrease from that of the year 2016. This decrease due to the fact that the Company has a lot of pre-sales on project which had been completed toward the end of 4th quarter namely Thew Talay residential condominium phase 3 or Blu on Cha Am Beach while there were transfers of titles in projects which had been completed in previous year during the year 2016.
  2. The Baht 572 million revenue from hotel operation in Baht 2017 had increased from Baht 41 million in 2016 or 8% increase. In 2017 two new hotels namely Baba Beach Club Hua Hin and Baba Beach Club Phuket had been completed and operational in the 4th quarter which will contribute to the revenue from hotel operation in following years.
  3. Revenues from rental and services in 2017 was Baht 81 million, a slight increase f Baht 1 million from that of 2016 or equivalent to 1% increase. This due to lease expiration and renewal with increased rental on some tenants and new leases signed with new tenants.
  4. In addition to 3 main businesses as mentioned above the Company had other revenues of Baht 45 million from project consultancy in Hainan, PRC project.

(Unit: Baht million)

Revenue Description 2017 2016 Increase/(Decrease) % Change
Revenue from property sales 1,477 1,908 (431) (23)
Revenue from rental and services 81 80 1 1
Revenue from hotel operation

572

531

41 8
Profit from the sale of hotel and residential villas - 429 (429) (100)
Revenue from management fees 68 74 (6) (8)
Revenue from services and utilities from property projects 30 29 1 3
Interest income and others 89 36 53 147
Total Revenue 2,317 3,087 (770) (25)


Gross profit

The Company had approximately 38.73% of gross profit from property sales in 2017 which was an increase of 38.73 % from the gross profit of 35.18% in 2016. Gross profit from rental and services in Charn Issara Tower 1 and 2 and condominium, The Issara Ladprao of 46.24% has increased from that of the year 2016 when the gross profit was 44.10% due to the adjusted rental. On hotel operation, the gross profit had decreased from 7.02% to only 4.79% due to the increased manpower for two hotel operations namely Baba Beach club Hua Hin and Baba Beach Club Phuket, both of which have started their operation since the 4th quarter of 2017.

Details of gross profits are shown in the table below:-

(Unit : Million Baht)

Gross Profit 2017 2016 increase/(decrease)
From property sales 38.73% 35.18% 3.55%
From rental and services 46.24% 44.10% 2.15%
From hotel operation 4.79% 7.02% (2.23)%
Total gross profit 29.90% 29.53% 0.37%


Expenses

The Company has increased expenses following the increased revenue as follow:-

  1. The Company had sales and administrative expenses of Baht 714.7 million in 2017 which is a reduction by Baht 56.60 million or 7.3 % reduction when compare to that of the same period of previous year. The Company has effectively controlled its costs and its specific business tax and transfer fees has reduced.
  2. Financial expenses in the year 2017 had been reduced from that of the year 2016 by Baht 10 million due to long term loan repayments to financial institution following continued transfer of property titles in various projects.
  3. Income tax expenses in the year 2017 was Baht 35 million which was a reduction from Baht 126 million in the year 2016.

Net profit/ (loss)

The Company has operating profit in the year 2017 of Baht 45 million of which Baht 19 million was net profit attributable to the Company’s equity holders equivalent to Baht 0.02 profit per share.

Important financial ratios

  1. Earnings before interest, tax, depreciation and amortization (EBITDA) in the year 2017 was 9.40% of which net profit attributable to the Company’s equity holder was 0.80% commensurate with the change in revenue as mentioned above
  2. Debt service capability (EBIT/Interest Expenses) in the year 2017 was 1.87 times represented a reduction when compare to 5.61 times in the year 2016.
  3. Liquidity ratio in the year 2017 was 2.17 times, a increase from 1.81 times in the year 2016 due to the repayment of matured promissory notes of Baht 297 million in 2017.
  4. Debt to equity ratio was 2.11 times represented a reduction from 2.20 times in 2016. When taking into account only interest burden liability to equity (IBD/E) the ratio in 2017 came down to only 1.57 times compare to 1.61 times in 2016 represented a reduced liability due to the long term loan repayments to financial institutions following continued transfer of property titles in various projects.
  5. Book value per share in 2017 was Baht 1.63 per share, a reduction from Baht 1.84 per share in 2016 due to interim dividend payment in 2017.