Stonehenge advises project investment
As construction prices have dropped 10-15% during the pandemic, project owners in less affected sectors should take a chance by making investments, according to MAI-listed construction consultant Stonehenge Inter.
Chief executive Somkiat Silawatanawong said this is the best time for large firms, listed companies or those whose businesses have had minimal impact from the crisis to invest in project development.
“Many individual business owners and small to medium-sized enterprises [SMEs] are delaying new project investment as the pandemic has affected the economy and their businesses,” he said.
This has reduced new construction jobs in the private sector, lowering prices.
With higher competition in the construction sector, many contractors are reducing gross and net profit margins to win bids.
Mr Somkiat said some contractors decided to absorb losses in renting large machines and took jobs with lower prices because it was better than leaving machines idle.
The lower construction prices comprise both overhead costs that contractors try to cut and lower prices for construction materials.
For example, steel rod is priced 16 baht per kilogramme, down from 21 baht in the pre-virus market.
Concrete manufacturers also offer a discount of 20-30%, he said.
However, labour wages rose slightly as most workers are foreigners who returned to their home countries and cannot come back to Thailand.
“These lower prices will last until the end of the year at least, based on current sentiment,” said Mr Somkiat.
He said financial institutions are more cautious in approving project loans for businesses affected by the pandemic, such as hotels and those in the entertainment or tourist attraction business.
“There will be some projects owned by SMEs released for acquisition by large firms or investors, but chain hotel projects should continue,” said
Mr Somkiat.
As the government has many construction projects underway, Stonehenge is shifting to the public sector with 30% of jobs from the government agencies, up from less than 10%.
The company expects to have revenue growth of 80% by the end of the year, a total of around 1.3-1.5 billion baht, driven by revenue from Asian Engineering Consultants Corp, an engineering consulting firm Stonehenge acquired in April 2020.
In the first quarter of 2020, Stonehenge posted 27.3 million baht in net profit on revenue of 233 million, a 50% increase from the same period last year.
‘‘ Many individual business owners and SMEs are delaying new project investment. SOMKIAT SILAWATANAWONG
Chief executive, Stonehenge Inter