Tuesday, June 25, 2024
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Post-flood work to boost Thai builders, material firms

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BANGKOK: As water recedes in Thailand’s central provinces after weeks of flooding, construction, engineering and building materials firms are looking forward to a boom in demand for repair and restoration work in both the industrial and residential sectors.

Further out, there will be huge flood management projects from the government and smaller-scale work from companies and industrial estate operators wanting to beef up their own defences against natural disasters.

“Demand will be very strong because damaged factories need to recover and resume operations after the flood,” said Phonphatra Techakanokrak, assistant vice-president for the engineering division of Berli Jucker Pcl.

Berli Jucker, a consumer products conglomerate with liquor tycoon Charoen Sirivadhanabhakdi as chairman, is going to focus more on being a consultant to flooded factories and supply equipment such as power transmission systems and special doors.

“Revenue from the engineering business should grow twice as fast as in normal periods,” Phonphatra said, noting that the seven flood-hit industrial estates in the central provinces accounted for 17.2 per cent of Thailand’s industrial output. The Federation of Thai Industries says the cost of damage to flooded factories, both inside and outside the estates, could be at least 16 billion dollar, but many facilities are still flooded and the cost could go far higher. The bigger companies on the affected estates probably have insurance for business interruption, but small and medium-sized firms (SMEs), which probably don’t, could face losses of about 2.8-4.6 billion dollar, Kasikorn Research Center said in a report.

SMEs are estimated to need about 2.1-3.3 billion dollar for reconstruction and rebuilding their businesses, Kasikorn said.

As for the residential sector, the state-run Government Housing Bank (GHB) says about 1 million homes in the seven central provinces including Bangkok have been damaged by floods.

“Single detached houses that were flooded to knee level should require spending of over 3,200 dollar per unit for repairs, while town houses should need more than 10,000 baht,” said Samma Kitsin, director of GHB’s real estate information centre.

Demand for furniture and building materials such as cement and tile products will be strong. Prolonged exposure to floodwater can damage tile floors and make wooden doors swell until they are unusable.

All this should boost the outlook of Home Product Center Pcl , rival Siam Global House Pcl and tile maker Dynasty Ceramic Pcl, analysts said.

Analysts said the likely winners from flood management projects will be the country’s top cement producer, Siam Cement Pcl, second-ranked Siam City Cement Pcl and top contractor Italian-Thai Development Pcl.

“For construction materials, we like Siam Cement and Dynasty Ceramic,” said KGI Securities analyst Rakpong Chaisuparakul.

Siam Cement should benefit from increased cement demand in the first half of 2012, while Dynasty should see higher residential demand for low-end tile products, the broker said.

Shares in Siam Cement have risen 10 per cent in the past month, outperforming a rise of nearly 4 per cent in the main index. Home Pro rose 13 per cent in the same period.

“Homepro is, in our view, the only retail name benefiting from post-flood activity,” said Suchart Techaposai, head of Research at Citigroup in Thailand.

Corporate credit demand is expected to be strong in the first quarter as companies and industrial estates draw down more funds than usual to restore operations and ramp up capacity, KGI said, adding it liked banks with strong corporate business such as Kasikornbank and leader Bangkok Bank Pcl.

Once the government draws up plans for large infrastructure projects to prevent floods in the future, contractors such as Nawarat Patanakarn Pcl, a major listed construction company, should feel the benefit. “We should see a clearer picture about the government budget on post-flood large projects in the next financial year, starting from October 2012,” said Vajraput Vajrabhaya, the general manager of Nawarat Patanakarn. (Agencies)

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