MD & A

During the year 2016 the company’s revenue growth was 12.5% with a net profit of up to 20.8%. Property development for sales had been completed on time for targeted handling over to customers. The Company had launched 4 new projects which were the Baht 1,800 million Baba Beach Club Huahin and 3 other high end residential projects namely Issara Residence Rama 9, Issara Bangna, and Thew Talay Estate with project value of Baht 1,820, 2,600 and 300 million respectively. In addition, towards the end of 2016 the Company has established Charn Issara REIT Management Co.,Ltd. wherein the Company own 100% shares for the purpose of managing Sripanwa Real Estate Investment Trust which was converted from Sripanwa Hotel Property Fund. During the same period one of its subsidiary company, Charn Issara Residence Co., Ltd. had sold operating assets in the operation of Sripanwa Hotel (phase 2) and X29 residential villas to the Sripanwa Real Estate Investment Trust.

During the first 4 months of 2016 the Company had still been benefited from the Government’s measure to stimulate the economy by reducing registration and mortgage fees including tax reduction for first home buyer and tourism such as the tax deduction for expenses associated with domestic travel and supporting inbound tourism which made revenue from hotel operation increased by 13.9% from previous year.

As a result of taking on more projects the Company need to continuously source fund for development. During the fiscal year 2016 the Company had issued 3 years debenture worth Baht 300 million for the purpose of re-payment of the existing debenture of the same value which was matured. As at year end the Company’s Debt to Equity ratio (D/E) was reduced from 2.36 times to 2.20 times but under the Interest Burden Debt to Equity ratio (IBD/E) the figure stood at merely 1.61 times. The Company expects to gradually make loan repayment in two completed projects during the course of 2017 when transfers to customers are taking effect. Those two projects are BLU Residential Condominium and The Issara Collection Sathorn.

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, 2016 of Baht 7,328 million which was an increase of Baht 514 million from that of the year 2015 equivalent to 7.5% increase. Assets which had material change are as follow:-

  1. Cash and cash equivalent increased by Baht 401 million. Most increase in cash derived from the transaction of a subsidiary company which sold its operating assets in the operation of Sripanwa hotel (phase 2) and the resort residence X29 to Sripanwa Hotel Real Estate Investment Trust. During the 4th quarter
  2. Cost of property development for sale was Baht 4,398 million equivalent to 60% of total assets. That was an increase of Baht 174 million from that of the year 2015 due to the fact that the Company has engaged in a total of 8 projects of property development for sale and 2 hotel projects. 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”. Two resort condominium projects on Huahin – Cha Am beach namely Thew Talay Estate Villa and Baba Beach Club Huahin. A condominium project in Chiangmai, “The Issara Chiangmai”, a resort home project at Pakchong-Khaoyai “ Baan Sitawan” 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.
  3. Land bank for development has increased by Baht 255 million due to the acquisition of land on Huahin- Cha Am beach from a third party. Such land plot is under design for development.
  4. Property, plant and equipment reduced by Baht 308 million caused by a subsidiary company which sold its operating assets in the operation of Sri panwa hotel (phase 2) and X29 residential villa to Sri panwa Hotel Real Estate Investment Trust in the 4th Quarter.

Liability

As of December 31, 2016 the Company has total liabilities of approximately Baht 5,040 million which was an increase of 5%. Material changes in liabilities were as follow:-

  1. Promissory notes of Baht 297 million were those promissory notes that the Company and its subsidiaries issued for limited investors for the purpose of land acquisitions which were in the process of applying for bank loans.
  2. Long term loan with maturity within 1 year of Baht 973 million was a decrease from that of the year 2015 by Baht 165 million as most loans had been repaid during the year 2016. The majority of those were liabilities associated with loans in two projects which have been in the process of transfer to customers, namely Baan Thew Talay Phase 3 project (BLU) and the residential condominium “Issara Collection Sathorn “ which are expected to be transferred to existing customers and thus make loan repayment in total within the year 2017.
  3. A Debenture of Baht 200 million with a maturity within 1 year will be matured in November 2017. The Company has planned to issue new debentures to repay the existing ones or else the Company has already set aside reserve to meet such maturity.
  4. Short term loan from associate companies had increased by Baht 84 million represented shareholders’ loan in subsidiary companies which loan those companies pro rata to their respective investments.
  5. Income tax payable of Baht 118 million was an increase from that of the year 2015 by approximately Baht 72 million due to the fact that the Company’s profit had increased from the year 2015 thus caused a corporate income tax burden to be settled within May 2017.
  6. Long term loan from related companies had increased by Baht 12 million was similar to the short term loan from associated companies, they represented loan pro rata to respective shareholders’ interests in those companies.

Shareholders’ equity

The Company’s Shareholders’ equity in the year 2015 was Baht 1,456 million, an increase from that of the year 2014 by Baht 133 million due to the Company had an operating profit in the year 2015 of Baht 159 million while there was a dividend payment during the year 2016 of Baht 14.20 million and a structural adjustment to other elements of shareholders’ equity by approximately Baht 12 million.

Operating results

Revenue

Charn Issara Development PCL and its subsidiaries has a consolidated revenue from operation in the year 2016 of Baht 3,087 million, an increase from that of the year 2015 by Baht 344 million or equivalent to 12.5% 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 2016 was Baht 1,908 million, a decrease of Baht 132 million or equivalent to 6% decrease from that of the year 2015. That was due to the fact that during 2016 there were delays in property transfer in 2 projects which had just been completed by the end of quarter 4 but only some part of sales had been transferred to customers. Those two projects are Thew Talay phase3 (BLU) residential condominium on Cha Am beach. However, the remaining balance of revenues from those two projects will be gradually realized from the first quarter of 2017 onwards.
  2. Revenues from Sri panwa hotel operation, Phuket province in 2016 was Baht 531 million which was an increase of Baht 65 million from that of the year 2015 or equivalent to 14% due to Sri panwa hotel phase 2 was partially operational but full operation had not been achieved since the facilities was still under trial run.
  3. Revenue from rental and services in 2016 was Baht 80 million, a slight increase of Baht 2 million or 2 % increase from that of the year 2015. The increase was due to rental adjustment for those renewals of expired lease agreements and partially from new tenants.
  4. In addition to 3 main businesses mentioned above the Company also had other revenues increase from 2 sources as follow:-
    1. Revenue from the sales of operating assets in the operation of Sripanwa hotel (phase 2) and X29 residential Villas of Charn Issara Residence Co.,Ltd. which is a subsidiary company to the Sripanwa Real Estate Investment Trust at Baht 1,293 million. This sale gave Charn Issara Residence Co.,Ltd a gross profit of Baht 704 million and that profit from such assets sale is shown in the consolidated financial statement after deduction of proportionate investment of the Company and its subsidiaries in the trust, selling expenses and deferred revenue as profit from sales of hotel and residential villa of Baht 429 million.
    2. Revenue from fees of Baht 53.30 million collected from Tienyuan (Thailand) Co.,Ltd. which has a parent company in China in exchange for them to joint venture in the Issara Chiangmai residential condominium project with Charn Issara Viphaphol Co.,Ltd. which is a subsidiary company. This was similar to the case in 2015 when the Company received a fee of Baht 56 million from Junfa Real Estate from China for the right to joint venture with the Company in the residential development project at Na Tai beach, Phangha province under the name of “Baba Beach Club Phuket” with a project value of Baht 3 billion.

(Unit: Baht million)

Revenue Description 2016 2015 Increase/(Decrease) % Change
Revenue from property sales 1,908 2,041 (133) (6.5)
Revenue from rental and services 80 78 2 2.6
Revenue from hotel operation 531 466 65 13.9
Profit from the sale of hotel and residential villas 429 - 429 100.0
Revenue from management fees 74 63 11 17.5
Revenue from services and utilities from property projects 29 30 (1) (3.3)
Interest income and others 36 66 (30) (45.5)
Total Revenue 3,087 2,744 343 12.5


Gross profit

The Company had an approximate of 35.18 % gross profit from property sale in 2016, a decrease from that of 2015 when gross profit was 38.09%. The rental and office building services in the office condominium Charn Issara Tower 1 and 2 yielded a gross profit of 44.10 % which was an increase from 39.45% in the year 2015 as a result of rental adjustment. The gross profit from hotel business decreased from 12.03% to only 7.02% as a result of manpower expansion in preparation for the operation of Sri panwa hotel phase 2 which has been completed and partially operational since early 2016 but still in trial run period to rectify and improve all systems for their maximum efficiency.

(Unit : Million Baht)

Gross Profit 2016 2015 increase/(decrease)
From property sales 35.18% 38.09% (2.91%)
From rental and services 44.10% 39.45% 4.65%
From hotel operation 7.02% 12.03% (5.01)%
Total gross profit 29.53% 33.44% (3.91)%


Expenses

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

  1. Sales and administration expenses in 2016 has increased by Baht 121 million from that of 2015. Most of those increases, approximately Baht 30 million came from consultancy fees, audit fee and other expenses from the sale of operating assets in the operation of Sri panwa hotel (phase 2) and residential villa X29 to Sri panwa Hospital Real Estate Investment Trust. There were also an increase of Baht 30 million in advertising and public relation expenses for new projects, staff expenses for extend other project including Sri panwan hotel (phase 2) and other expenses Baht 61 million.
  2. Financial expenses in the year 2016 had increased from that of the year 2015 by Baht 48 million as the Company had an increased project finance during the year. However, gradual repayment on part of that loan has been made pro rata to the transfer of titles in property sales while another part of loan repayment was made out of Baht 600 million additional issuance of debenture in mid 2015 of which its interest was booked as interest expense in 2016.
  3. The Company had an increased income tax of Baht 162 million from Baht 87 million in the year 2015 resulting from its increased earnings before tax of Baht 116 million from previous year.

Net profit/ (loss)

The Company has net profit from operation in 2016 of Baht 159 million, an increase of Baht 27 million when compare to the operating results of 2015 representing 20% increase with net earnings per share of Baht 0.20

Important financial ratios

  1. Earnings before interest, tax, depreciation and amortization (EBITDA) in the fiscal year 2016 was 21.08%, an increase from Baht 16.53% in the fiscal year 2015 representing 4.55% increase. The same for net profit of 5.15% in the year 2016 was an increase of 0.35% from that of the year 2015.
  2. Debt services capability (EBITDA/Interest Expenses) in 2016 was 5.83 times, a slight decrease from 7.17 times of the year 2015.
  3. Liquidity ratio in the year 2016 was 1.81 which was an increase from 1.68 in the year 2015 resulting from the fact that the Company had increased current assets particularly cash and cash equivalents which was increased by Baht 401 million.
  4. Debt to equity ratio stood at 2.20 times, a decrease from 2.36 times in 2015 as the Company had increased operating profit which made the equity part increase but when taking into account only debt with interest expenses the ratio will be only 1.61 times.
  5. Book value per share stood equal to that of 2015 at 1.84 per share due to dividend payments from the operation of 2015 to shareholders.