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Annual Report 2010
Vision To be Thailand’s top high-end real estate Development Company and a first choice to those seeking a superior class and higher standard of living. To focus on providing luxurious and exclusive accommodation with attention given to international standards of building and interior design, top quality materials, while meeting leisure, security and convenience needs. As a leading developer in high-end condominium, we focus on creating innovative project for a world-class lifestyle. We develop condominiums that people are proud to own.
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Major Development Public Company Limited
Contents Message from the Chairman Audit Committee Report Financial Highlights The Board of Director General Information of the Company and Subsidiary Nature of Busness Risk Factors Shareholders Structure Management and Internal Control Related party Transactions Last Year Activities Financial Statement
6 10 11 18 20 21 26 28 40 44 52
Leading Developer Additional Explanations to the Financial Statement
81
in High End Condominiums 3
Annual Report 2010
M Silom type Location
53 high-class condominiums. Nardhiwasrajanakarindra Road, near BTS station and BRT route Project value around Baht 2,200 million with 161 units Project status Expected to be completed by July 2013.
NEW Project
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Major Development Public Company Limited
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Annual Report 2010
Message From
THE CHAIRMAN In 2010, the Thai economy has admirably recovered from the global financial crisis during 2008-2009 with highest growth in over a decade. Even though there was some turmoil from the political crisis in the first half of the year, the GDP was still able to increase to 7.8%, resulting from the resurgence of the exporting sector and the confidence of the international investors on the potential of the Thai economy. At the same time the property climate has improved, especially during the second half of the year. Most of the real estate developers saw an increase in revenue and started to increase their investments both domestically and internationally.
In the middle of last year, the company also issued warrants entitled existing shareholders to buy the company’s common share at the ratio of 2 existing shares to 1 warrant. The value of the warrant was set at Baht 2.00 per share. The company also increased the registered capital from Baht 700 million to Baht 1,050 million to support these warrants in the future.
The company believes that the economic outlook of 2011 will continue to be good, even though the GDP growth rate may not be as high as 2010. The Thai economy is expected to grow by 4-5% in 2011. The company believes this will be a good year. As the economy continues to improve, it will create confidence As for Major Development Public Company Limited “MJD”, among our target customers, both Thai and overseas. The during the past year there have been many changes. company is ready to continue to launch new projects, which The company faced with continuing economic fluctuation. includes 2-3 projects, including a hotel business that is almost The change in strategy and product development to meet complete. These projects will provide a sustainable growth for customer needs, the caution in business operation in accordance the company. We believe that both existing and new projects with corporate governance and the adjustment in the will continue to receive positive response from our customers, in management to suit the situation have helped the company relation to the continuing growth of the real estate sector. With satisfactorily maintained its position in 2010. The company’s over 10 years of experience, international standard management revenue was Baht 2,942.87 million from 9 projects. These projects system, good corporate governance, transparency and quality were Manhattan Chidlom, Watermark Chaophraya River Tower control in all the projects, the company has a proven record of A and Tower B, Wind Sukhumvit 23, Wind Ratchayothin, Mykonos its commitment to provide quality products for its customers for Hua Hin, Aguston Sukhumvit 22, Marrakesh Hua Hin, Residences the stable and sustainable growth in the future and to meet the and Collezio Sathorn-Pipat. The company realised a profit of Baht company’s vision to become the leading real estate developer 189.47 million. There was unrealised revenue of Baht 4,812.35 in the country. million at the end of the year. The company was able to continue Finally, on behalf of Major Development Public Company Limited to transfer the ownerships of additional units in Aguston Sukhumvit and the Board of Directors, I would like to thank our shareholders, 22 and Wind Ratchayothin, which was another milestone of investors, customers, financial institutes, business partners and the the company’s success as promised. The company had continued with plans to expand the business. Last year, the company company’s employees for their continuing supports. The company launched 3 new projects, namely M Silom, M Phayathai and promises to continue to develop quality projects, build our Equinox Phahol-Vibha, which received good response from the reputation and create the greatest benefits, including fairness for all, which have always been of the greatest importance. customers.
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Major Development Public Company Limited
Mr. Chumroen Poolvoralaks Chairman of the Board of Directors Major Development Public Company Limited 7
Annual Report 2010
NEW Project
M Phyathai Type Location
35 high-class condominiums. close to Phyathai Road, only 100 metres from BTS station near Airport Link and expressway Project value around Baht 1,850 million with 215 units Project status Expected to be completed by June 2014.
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Major Development Public Company Limited
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Annual Report 2010
AUDIT COMMITTEE REPORT Audit Committee of Major Development Public Company Limited comprised three independent persons as follows: Mr. Chanin Roongsang (Chairman of the Audit Committee Member), Mr. Smith Banomyong (Audit Committee Member) and Mr. Sanguankiat Lewmanomont (Audit Committee Member) In 2010, the Audit Committee held 5 meetings. The Audit Committee provided comments and recommendations from an independent view points as follows: 1. Reviewed the Company’s financial reports quarterly and annually and commented on the said report by inviting the Company’s authorised auditor to every meetings to clarify and comments on important issues. The Audit Committee had the opinion that the Company’s financial statement had been produced according to the general accounting standards and to the official rules and regulations. The authorised auditor did not report any deficiencies in the Company’s financial statement. 2. Reviewed the company’s transactions with related business or report of any Conflict of Interest that there were full, correct, appropriate and fair disclosures. 3. Reviewed the appropriateness of the company’s internal audit control system and oversee the internal audit activities by approving the audit plan. Acknowledged auditing report and commented on good internal control system, including providing guidelines for improvement follow ups so that the internal audit could be conducted appropriately and efficiently. 4. Reviewed the company’s activities according to the regulations of the Securities and Exchange Commission and relevant business regulations, which the Audit Committee had the opinion that the company had conducted its businesses according to the relevant laws appropriately. 5. Considered seek and selected the authorised auditor for 2010 to propose to the Company’s Board of Directors and shareholders’ meeting for approval. 6. Considered and placed important emphasis on the audit activities that met good auditing practice of the Stock Exchange of Thailand that would create confidence among shareholders, investors and all relevant persons.
Mr. Chanin Roongsang Chairman of the Audit Committee Member
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Major Development Public Company Limited
FINANCIAL HIGHLIGHTS
Unit : Million Baht
2010
2009
2008
7,985.22 5,496.00 2,489.22 2,909.55 2,942.87 790.22 189.47 0.27 0.23
8,307.98 5,911.79 2,396.20 2,976.53 2,997.86 893.04 406.61 0.58 0.58
8,078.20 5,878.61 2,199.59 2,636.07 2,656.63 825.30 445.14 0.64 0.64
1.80 0.52 2.21 1.41
1.77 0.49 2.47 1.68
2.16 0.56 2.67 1.73
Financial Highlights Total Assets Total Liabilities Shareholders Equity Revenue from condominiums sold Total Revenues Gross Profit Net Profit Basic Earning per Share (Baht) Basic Earning per Share (Baht) (Fully Diluted)
Financial Ratio Current Ratio Quick Ratio Debt to Equity Ratio Intevest Bearing Debt to Equity Ratio
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Annual Report 2010
2010 Projects Fullerton Sukhumvit Manhattan Chidlom Watermark Chaophraya River Tower A Watermark Chaophraya River Tower B Wind Sukhumvit 23 Wind Ratchayothin Aguston Sukhumvit 22 Mykonos Hua Hin Reflection Jomtien Beach Pattaya Marrakesh Hua Hin Residences Royce Private Residences * Collezio Sathorn-Pipat M Silom M Phyathai EQUINOX Phahol-Vibha Total
Contractual Recoqnized Sale Revenue
58.63 230.62 75.10 116.01 206.04 351.43 11.63 235.98 388.93 417.34 43.34 307.44 437.01 720.12 3,599.63
58.63 260.84 111.66 234.46 525.36 441.57 17.87 1,231.77 27.39 2,909.55
Unit : Million Baht
2009 Backlog
108.16 5.14 38.28 11.88 1,535.02 113.93 1,279.10 256.27 307.44 437.01 720.12 4,812.35
Contractual Recoqnized Sale Revenue
58.86 89.59 52.76 108.19 209.37 297.27 92.13 47.41 28.93 250.98 261.76 240.31 1,737.57
58.86 89.59 471.95 115.96 372.18 761.13 744.41 190.26 172.19 2,976.53
Backlog
155.68 39.44 128.63 365.07 117.59 6.23 1,299.04 956.78 861.75 240.31 4,170.52
Remork : : * Developed by MJAI Development Co.,Ltd.
Presales
2010 was another great year for the Company in providing the right products for the customers. The presales value in condominium units amounted to Baht 3,599.63 million from total 14 condominium projects, an increased of Baht 1,862.06 million from 2009 or 107.16%. The main reason for increased of presales in 2010, was from the launching of 3 new projects, moreover the company still received the great feedback from the presales booking of the existing projects both the completed projects and the ongoing projects. The presales bookings also came from the other existing projects, not only from the new launching projects.
Presales
2010 / 3,599.62 MB. WTM A 6 % WTM B 2 % Wind_23 3 % Wind_RYT 6 % MKN 0% MHT 2% FLT 11.63 % AGT 10 % MRK 11 % RFT 7% Royce* 12 % COL 1% M_S 8% M_P 12 % EQN 20 %
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Major Development Public Company Limited
2009 / 1,737.57 MB. WTM A 3 % WTM B 6 % Wind_23 12 % Wind_RYT 17 % MKN 3% MHT 5% FLT 3% AGT 5% MRK 15 % RFT 2% Royce* 15 % COL 14 % M_S 0% M_P 0% EQN 0%
Revenue Recognition
In 2010, the Company had total revenue of Baht 2,942.87 million, an decreased of Baht 54.99 million from 2009 or 1.83%, 98.87% of total revenue in 2010 was realised revenue from the sales of condominium units. When considering the revenue from the sales of condominium units in 2010: comprising 8 existing projects from last year: Watermark Chaophraya River Tower A - Baht 260.84 million; Manhattan Chidlom - Baht 58.63 million; Watermark Chaophraya River Tower B - Baht 111.66 million and Wind Sukhumvit 23 Baht 234.46 million, Mykonos Hua Hin - Baht 17.87 million and Wind Ratchayothin - Baht 525.36 million, Aguston Sukhumvit 22 - Baht 441.57 million and Marrakesh Hua Hin Residences - Baht 1,231.77 million and another new project from this year Collezio Sathorn-Pipat Baht 27.39 million, totally 9 projects of revenue recognition.
Revenue Recognition from the sales of condominium units 2010 / 2,909.55 MB.
2009 / 2,976.53 MB. WTM A 16 % WTM B 4 % Wind_23 12 % Wind_RYT 26 % MKN 6% MHT 3% FLT 2% AGT 25 % MRK 6% RFT 0% Royce* 0 % COL 0% M_S 0% M_P 0% EQN 0%
WTM A 9 % WTM B 4 % Wind_23 8 % Wind_RYT 18 % MKN 1% MHT 2% FLT 0% AGT 15 % MRK 42 % RFT 0% Royce* 0 % COL 1% M_S 0% M_P 0% EQN 0%
Backlog
In 2010, the Company had unrealised revenue (backlog) of Baht 4,812.35 million, an increased from 2009 of Baht 641.83 million or 15.39%, that because in 2010 the company still recognized revenue under the percentage-of-completion method, the percentage of completion is determined based on the proportion of the actual cost already incurred up to the end of the period to the total anticipated development costs to be incurred to completion, excluding the cost of land. Therefore, most of the backlog in 2010 came from existing projects that were during the construction period and presales booking of the 3 new projects, these could guarantee the strength of revenue recognition in the future, which spread the risk and benefited the company’s growth as it lessened the risk from future recognized revenue.
Backlog 2010 / 4,812.35 MB. WTM A 2% WTM B 0% Wind_23 0% Wind_RYT 1% MKN 0% MHT 0% FLT 0% AGT 0% MRK 2% RFT 32% Royce* 27% COL 5% M_S 7% M_P 9% EQN 15%
2009 / 4,170.52 MB.
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Annual Report 2010
WTM A 4% WTM B 1% Wind_23 3% Wind_RYT 9% MKN 0% MHT 0% FLT 0% AGT 3% MRK 23% RFT 31% Royce* 20% COL 6% M_S 0% M_P 0% EQN 0%
Gross Profit (unit : Million Baht)
Net Profit (unit : Million Baht)
893.04
445.14
825.30
406.61
790.22 189.47
2010
2009
2010
2008
2009
2008
Gross Profit and Net Profit
In 2010, the company had a gross profit from the sales of all projects of Baht 790.22 million, a decreased from 2009 of Baht 102.82 million or 11.51%. The company had a net profit of Baht 189.47 million, a decreased from 2009 of Baht 217.14 million or 53.40%. The considerable decreased in gross profit was from the increased of cost of sales in condominium projects that be opposed to the decreased of revenue recognition which means the company gross profit was dropped and the net profit also decreased. The reduction of gross profit was from the increased cost, especially the “selling expenses� that mostly derived from cost of launching the new projects.
Liquidity Ratio and the Appropriateness of the Equity Structure Current Ratio Quick Ratio 3. 2. 2. 1. 1. 0. 0.
Debt to Equity Ratio Interest Bearing Debt to Equity Ratio 3.
2.16
1.77
2.
1.80
2. 0.56
2008
0.49
2.67
0.52
1. 1.
2009 2010
Current Ratio Quick Ratio
2.47 1.73
2.21
1.68 1.41
2008 2009 2010 Debt to Equity Ratio Interest Bearing Debt to Equity Ratio
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Major Development Public Company Limited
Liquidity Ratio and the Appropriateness of the Equity Structure
had a liquidity ratio of 1.80 times and the quick ratio of 0.52 times, a slight increased from previous year. This was due to during 2010, the company transferred ownership of the complete projects to our customers that the company could reduce the projects loan outstanding from many financial institutions, especially current portion of long-term loans. That makes the company’s liquidity ratio was be improved. The debt-to-equity ratio decreased from 2.47 times in 2009 to 2.21 times in 2010. The interest bearing debt to equity ratio decreased from 1.68 times in 2009 to 1.41 times in 2010. This was also due to the decreased of the company’s total debt and the increased in shareholders’ equity (from retained earnings). The improvement of these figures reflects the lower risk and the higher strength of the company.
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Annual Report 2010
EQUINOX Phahol-Vibha Type Location
42 high-class condominiums. Vibhavadirangsit Road, accessible from both Vibhavadirangsit and Phaholyothin Roads Project value around Baht 2,400 million with 490 units Project status Expected to be completed by 2013
NEW Project
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Major Development Public Company Limited
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Annual Report 2010
The Board
OF DIRECTORS
Mr. Chumroen Poolvoralaks (Age 79 )
Mrs. Prathin Poolvoralaks
Chairman of the Board of Directors and Chairman of the Executives Committee
Vice Chairman of the Board of Directors and Deputy Chairman of the Executives Committee
Education and Training - More than 30 years of experience in real estate business - DAP Course, Class of 50, on 25 January 2006 Working Experience - Chairman of the Board of Directors and Chairman of the Executives, Major Development Public Company Limited - Director, M J A I Development Co.,Ltd. - Director, Major Development Hotels and Resorts Co.,Ltd. - Director, Major Development Residences Co.,Ltd. - Honorary Chairman, Major Cineplex Public Company Limited
(Age 68)
Education and Training - More than 15 years of experience in real estate business - DAP Course, Class of 50, on 25 January 2006 Working Experience - Vice Chairman of the Board of Directors and Vice Chairman of the Executives, Major Development Public Company Limited - Director, Major Development Hotels and Resorts Co.,Ltd. - Director, Major Development Residences Co.,Ltd. - Director, Major Realty Co.,Ltd.
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Major Development Public Company Limited
Mr. Suriyon Poolvoralaks
Director, Executive Director and Chief Executive Officer
(Age 38)
Miss Petrada Poolvoralaks
Director, Executive Director and Executive Vice President
Education and Training - Master of Civil Engineering, Massachusetts Institute of Technology (MIT) - Master of Business Administration (MBA), Depaul University - DAP Course, Class of 50, on 25 January 2006 Working Experience - CEO, Major Development Public Company Limited - Director, M J A I Development Co.,Ltd. - Director, Major Development Hotels and Resorts Co.,Ltd. - Director, Major Development Residences Co.,Ltd. - Director, Major Realty Co.,Ltd.
Dr. Suriya Poolvoralaks
Director, Executive Director and Managing Director
(Age 35)
Education and Training - Doctor of Philosophy, Economics, University of Southern California (USC) - DAP Course, Class of 59, on 24 October 2006 Working Experience - Managing Director, Major Development Public Company Limited - Director, M J A I Development Co.,Ltd. - Director, Major Development Hotels and Resorts Co.,Ltd. - Director, Major Realty Co.,Ltd.
(Age 44)
Education and Training - Master of Business Administration (MBA), Illinois State University - DAP Course, Class of 49, on 2 December 2005 Working Experience - EVP-Corporate Development Division, Major Development Public Company Limited - Director, Major Development Hotels and Resorts Co.,Ltd. - Director, Major Development Residences Co.,Ltd.
Mrs. Jitradee Poolvoralaks
Director, Executive Director and Executive Vice President
(Age 36)
Education and Training - BA in Marketing, Faculty of Commerce and Accountancy, Chulalongkorn University - DAP Course, Class of 51, on 22 February 2006 Working Experience - EVP-Marketing Division, Major Development Public Company Limited - Deputy Managing Director, GC Distribution Co.,Ltd. - Director, Major Development Hotels and Resorts Co.,Ltd. - Director, Major Development Residences Co.,Ltd. - Director, Major Realty Co.,Ltd.
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Annual Report 2010
Mr. Chanin Roongsang
(Age 44)
Mr. Sanguankiat Lewmanomont (Age 36)
Chairman of the Audit Committee Member Education and Training - MA in Political Science, Kasetsart University - Certificate in Mini MPA, Thammasart University - Certificate in State Budget Management, University of California, Los Angeles (UCLA) - DAP Course, Class of 50, on 25 January 2006 Working Experience - Chairman of the Audit Committee Member, Major Development Public Company Limited - Member of Parliament for Bangkok Metropolitan
Mr. Smith Banomyong
Audit Committee
Audit Committee
Education and Training - MSc in Information Technology, Boston University - Master of Business Administration (MBA), Boston University - DAP Course, Class of 50, on 25 January 2006 Working Experience - Audit Committee Member, Major Development Public Company Limited - Executive Director, Manomont Real Estate Co.,Ltd. - Trade Mark Sub-Committee, Ministry of Commerce - Managing Director, Lewmanomont Law Office Co.,Ltd.
(Age 38)
Education and Training - Master of Economics, The London School of Economics and Political Science, London, UK - DAP Course, Class of 76, on 7 November 2008 Working Experience - Audit Committee Member, Major Development Public Company Limited - Executive Vice President, Head of Corporate Strategy, Siam Commercial Bank Public Company Limited - Board Member, SCB Securities Company Limited
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Major Development Public Company Limited
GENERAL INFORMATION OF THE COMPANY AND SUBSIDIARY Thai Name English Name Type of Business Head Office Registration No. Telephone Fax Website Securities Depository Center
: : : : : : : : :
Auditor
:
บริษัท เมเจอร ดีเวลลอปเมนท จํากัด (มหาชน) Major Development Public Company Limited Real Estate Development 141 Soi Sukhumvit 63 (Ekamai) Sukhumvit Rd., Kwang Klongton Nua, Khet Wattana, Bangkok 10110 0107548000692 0-2392-1111 0-2392-2255 www.majordevelopment.co.th Thailand Securities Depository Co.,Ltd. 62 The Stock Exchange of Thailand Building, Rachadapisek Road, Klongtoey, Bangkok 10110, Thailand Tel: (66 2) 229 2800 Fax: (66 2) 359 1259 Ms. Rungnapa Lertsuwankul CPA (Thailand) No.3516 Ernst & Young Office Limited 33rd Fl. Lake Rajada Office Complex Rajadapisek Rd. Klongtoey, Bangkok 10110 Tel: 0 2264 0777 Fax: 0 2264 0789-90
Subsidiary Name & Address M J A I Development Company Limited 141 Soi Sukhumvit 63 (Ekamai) Sukhumvit Rd., Kwang Klongton Nua, Khet Wattana, Bangkok 10110 Tel / Fax : 0-2392-1111 / 0-2392-2255 Major Development Hotels and Resorts Company Limited 141 Soi Sukhumvit 63 (Ekamai) Sukhumvit Rd., Kwang Klongton Nua, Khet Wattana, Bangkok 10110 Tel / Fax : 0-2392-1111 / 0-2392-2255 Major Development Residences Company Limited 141 Soi Sukhumvit 63 (Ekamai) Sukhumvit Rd., Kwang Klongton Nua, Khet Wattana, Bangkok 10110 Tel / Fax : 0-2392-1111 / 0-2392-2255 Major Realty Company Limited 6th Floor, Homeplace Building, Sukhumvit 55 Rd., Klong Ton Nua, Wattana, Bangkok 10110 Tel / Fax : 0-2185-3100 / 0-2712-9992
Registration No.
Type of Business
Registered Capital Percentage of (Baht) Shareholder
0105550111062
Real Estate Development
25,000,000
51
0105551063258
Hotel, Resort & Spa
60,000,000
99
0105551128686
Hotel, Serviced Apartment
100,000,000
99
Real Estate 150,000,000 For sale/lease release And / or a consultant, management, Real estate agents.
99
0105553061490
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Annual Report 2010
Completed in Year
2012
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Major Development Public Company Limited
Completed in Year
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Annual Report 2010
2012
NATURE OF BUSINESS Industry Overview The overall Thai economy and GDP grew by 7.8% in 2010, despite adverse factors, such as internal political situation or risks from the European financial crisis. The main reasons were the recovery of the global economy and domestic demands, particularly private investment and consumer consumption, which expanded by 13.8% and 4.8% respectively. The export sector also grew by 28.5% in dollar term, while the manufacturing sector grew by 13.9%, including manufacturing related activities. The tourism sector, such as hotel and restaurant, grew by 8.4%. The only contraction was the agricultural sector, which was affected by drought at the beginning of the year and flood at the end of 2010. It contracted by 2.2% Gross Domestic Product (GDP) 10.0%
7.0% 5.3%
7.8%
6.2% 4.5%
5.0%
5.0%
4.8% 2.6%
2.2% 0.0%
2544
2545
2546
2547
2548
2549
2550
2551
2552
2553
-2.3%
-5.0%
In 2011, the Office of National Economic and Social Development Board estimates that the Thai economy will grow by 3.5%-4.5%, which is a slowdown from 7.8% in 2010. The supporting factors are better global economy, increase consumer income, including the increase in the salary of civil servants and wages in the private sector. The income of farmers is also expected to rise from the increase in agricultural prices. However, there are still some factors that needed to be cautious about, particularly pressure from increase in inflation from higher oil prices, shortage of labour in some industry and the fluctuation in fund movement, which can have an effect on the stability of the Baht currency, stock market and real estate business. In general the inflation in 2010 was 3.3% with food and beverage and non-food and beverage indices increased by 5.4% respectively. The Government’s 15-year free education measure had reduced educational expenditures, comprising books, educational equipment and school uniforms. In 2010, it is estimated that the inflation will be around 2.8%-3.8%. The consumer consumption is estimated to increase by 4.0%, while private investment is estimated to increase by 8.5%. The export value in dollar term is estimated to increase by 12.5% and the current account is estimated to have a surplus of around 3.5% of GDP, a decrease from 4.6% of GDP in 2010.
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Major Development Public Company Limited
In first half of 2010, the interest rate policy was to keep this low to stimulate the economy with the interest rate at 1.25% per annum. When the economy had clearly recovered in the second half of the year, the Bank of Thailand gradually increase the interest rate 3 times. The latest in January 2011, the Bank of Thailand announced an increase in interest rate by 0.25 points to 2.25% per annum to reduce the increase in the inflationary pressure from continuing expansion in domestic and international demands. While the prices of oil and commodities continue to increase. This resulted in commercial banks increased their interest rates in line with the movement of the interest rate policy of the Bank of Thailand. Construction Price Index 150.0 140.0
All Commodities Cement Concrete Iron Products
130.0 120.0 110.0 100.0 90.0
2005
2006
2007
2008
2009
2010
In 2010, although the Thai economy grew by 7.8% but the overall building materials index increased only slightly. The building materials index increased from 110.8 in 2009 to 113.3 in 2010. While the cement index decreased from 112.8 in 2009 to 204.2 in 2010 and concrete product index decreased from 103.8 in 2009 to 102.5 in 2010, partly due to unfavourable global economy, risks from financial crisis, property crisis in the Middle East and the financial crisis in some European countries. The iron and steel index was the only one that increased, from 103.6 in 2009 to 110.9 in 2011.
Condominium Market Trend According to the data from Thailand’s Real Estate Information Centre, Agency for Real Estate Affairs, in 2010 there were 429 new projects in Bangkok Metropolitan Area with a total of 115,748 units worth Baht 299,036 million, the most in 16 years (the most new project launched was Baht 400,000 million in 1994). Residential property was the most new project launched with 424 projects, 114,150 units and worth Baht 291,743 million or an average price of Baht 2.556 million per unit, while other type of property launched only Baht 7,293 million over the past year. Of these new projects, condominium was the most to be launched with 154 projects, followed by town house with 153 projects, detached house with 93 projects, semi-detached house with 38 projects, commercial building with 27 projects and plots of land with 3 projects. There were some projects with mixed types. An interesting note was new town house project had increased in 2010. However, from 114,150 units of residential property, condominium was the most launched at 54.7%, followed by town house at 26.8%, detached house at 14.4%, semi-detached house at 3.2%, commercial building at 0.8% and land plots at only 0.1% or 117 plots. The reason for a small number for land plots was that most financial institutions were reluctant to lend in the case of empty land plots. These figures showed that condominium continued to have the highest market share.
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Annual Report 2010
The reason for the average price per residential unit of baht 2.556 million was because 41% out of the 114,450 units were prices in the Baht 1-2 million range. The residential unit with price less than Baht 2 million accounted for 58% of the total residential units, while there were only 1,176 units or 1% of the total residential units with the price of more than Baht 10 million, both condominium and detached house. More in depth report found that condominium with price of Baht 1-2 million was the most type to be launched with 27,800 units, while 16,900 units of town house with the same price range were launched. It can be said that the average price of residential unit in 2010 in Thailand was even less than in the residential price in Phnom Penh (Baht 3.0 million) and Ho Chi Minh City (Baht 4.5 million). When compared to 2009, new projects in 2010 increased by almost double (98%) in term of number of units and 50% in term of projects. This showed that there were more large project launched, while the value of the new development also increased by 59%. The large increase in number of new projects was one of the signs of growing economy. However, it also provided a warning index against potential over supply in the near future. The average price of new residential unit of Baht 2.556 million in 2010 was lower than Baht 3.177 million in 2009. It showed the focus in producing cheaper unit to persuade more buyers, which could be considered as a kind of bubble condition. However, the bubble has not burst, unless more projects are launched over the next few years. In 2011, it is estimated that there will be the similar number of new projects launched as in 2010. Investors, developers and buyer should beware of potential bubble condition that may have an effect in 2012. However, the high-end condominium market in 2011 should be at a similar level as in 2010. This is due to the developers place their focus on meeting the residential needs of the real demand and therefore are more cautious. There should not be much of a bubble condition for high-end condominium. There are only risks from impending increase in construction cost, fluctuation in global economy and oil prices.
Company’s Projects (As of 31 December 2010) 1. Fullerton Sukhumvit Location On Sukhumvit Road between Soi 59 and 61 Project value Baht 1,600 million, totaling 1138 units Project status 100% Transferred ownership 2. Manhattan Chidlom Project Location New Petchburi Road, between Chidlom Rd. and Rajaprasong Rd. Project value Baht 1,250 million, totaling 190 units Project status 100% of construction completed 3. Watermark Chaophraya River Tower A and B Projects Location Charoen-nakorn Road, between Soi Charoen-nakorn 39 and 41 Project value Baht 5,700 million, totaling 486 units (both Tower A and B) Project status 100% of construction completed 4. Wind Sukhumvit 23 (Soi Prasarnmitr) Project Location Soi Sukhumvit 23 (Soi Prasarnmitr), Project value Baht 1,200 million, totaling 220 units Project status 100% of construction completed 26
Major Development Public Company Limited
5. Wind Ratchayothin Project Location Project value Project status 6. Aguston Sukhumvit 22 Project Location Project value Project status 7. Mykonos Hua Hin Project Location Project value Project status 8. Reflection Jomtien Beach Pattaya Location Project value Project status 9. Marrakesh Hua Hin Residences Location Project value Project status 10. Collezio Sathorn-Pipat Location Project value Project status 11. M Silom Project Location Project value Project status 12. M Phyathai Project Location Project value Project status 13. Equinox Phahol-Vibha Location Project value Project status
Ratchayothin, near Major Cineplex Ratchayothin, Baht 1,600 million, totaling 390 units 96.23% of construction completed Sukhumvit 22 (near The Emporium Department Store) Baht 2,000 million, totaling 269 units 93.94% of construction completed Petchkasem Road, between Soi 75-75/1 Hua Hin, Prachuab Khirikhan Baht 450 million, totaling 122 units 100% of construction completed Jomtien Beach, Pattaya Baht 3,300 million, 2 buildings, totaling 332 units Construction in progress Petchkasem Road, Hua Hin, Prachuab Khirikhan Baht 2,400 million, 8 buildings, totaling 345 units 17.54% of construction completed Soi Pipat, Sathorn Road Baht 550 million, totaling 95 units 14.60% of construction completed Nardhiwasrajanakarindra Road, near BTS station and BRT route around Baht 2,200 million with 161 units under construction preparation close to Phyathai Road, only 100 metres from BTS station near Airport Link and expressway around Baht 1,850 million with 215 units under construction preparation Vibhavadirangsit Road, accessible from both Vibhavadirangsit and Phaholyothin Roads around Baht 2,400 million with 490 units under construction preparation
Condominium Project to be Developed under the Joint Venture Company (MJAI Development Co., Ltd) 14. Royce Private Residences Project Location Project value Project status
Sukhumvit 31 Baht 3,000 million, 2 buildings, totaling 160 units 35.16 of construction completed 27
Annual Report 2010
Overview of past performance In 2002, the Company started the development of Hampton Thonglor 10 Project, which is the Company’s first high-end high-rise condominium. As of the end of 2010, the Company has two completed projects ready to transfer the ownerships. They are Hampton Thonglor 10 and Fullerton Sukhumvit. There are also 8 completed projects, which are Watermark Chaophraya River Tower A and Tower B, Manhattan Chidlom, Mykonos Hua Hin, Wind Sukhumvit 23 (Soi Prasarnmitr), Aguston Sukhumvit 22, Wind Ratchayothin and Marrakesh Hua Hin Residences. The Company also has 6 other projects under development, which are Reflection Jomtien Beach Pattaya, Royce Private Residences, Collezio Sathorn-Pipat, M Silom, M Phyathai and Equinox Phahol-Vibha. The total value of the units that have yet to transfer the ownerships in these 14 projects amounts to Baht 27,900 million, as follows:
Summary of the Company’s condominium projects as of 31 December 2010 Project
Watermark Chaophraya River Tower A Manhattan Chidlom Watermark Chaophraya River Tower B Wind Sukhumvit 23 Wind Ratchayothin Aguston Sukhumvit 22 Mykonos Hua Hin Reflection Jomtien Beach Pattaya Marrakesh Hua Hin Residences Royce Private Residences Collezio Sathorn-Pipat M Silom M Phyathai Equinox Phahol-Vibha
Project Value Sales Area Avg. Price (Baht million) (sq.m.) per sq.m.
3,900 1,250 1,800 1,200 1,600 2,000 450 3,300 2,400 3,000 550 2,200 1,850 2,400
49,269 15,477 26,433 13,408 19,988 21,151 7,115 40,873 23,370 26,033 4,251 11,507 10,641 21,369
81,319 80,628 75,301 89,910 78,498 102,946 64,537 85,789 106,687 123,510 119,610 145,292 129,714 95,583
Note : 1 Percentage of Project Salable Area : 2 Percentage of Project Construction Cost : 3 Percentage of Project Value
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Major Development Public Company Limited
Sales Construction Recognized Progress1 Progress2 Progress3 %
85.13 99.63 57.06 86.53 98.09 54.54 96.77 43.78 60.88 39.78 55.79 18.39 31.66 35.26
100.00 100.00 100.00 100.00 100.00 100.00 100.00 6.93 94.00 35.16 14.60 -
84.69 99.46 62.38 86.50 93.46 60.36 98.75 54.00 4.98 -
Risk Factors Business Risks Risk from land procurement policy for future project development
The company does not have a policy to hold assets or lands, which are not ready to be developed. The company would plan to procure sufficient lands for a development cycle (2-3 years). The company would consider the location of each plot of land to suit the target customer before starting the development. The company therefore did not have many plots of land in stock for future development. By using this policy, there was a risk that the company might have some problems in procuring land for future developments. However, the company believed that holding lands in stock for future development might create direct risk and increase the development cost from the fund required to procure the lands. Also the development of a condominium project required less amount of land than other residential projects and was therefore easier to procure the required land. The wide network the company had also help in the procurement of land in good location at a reasonable price. The company also had a policy to develop projects in prime area that was not limited to the CBD area, for example; Hua Hin, Pattaya Beach. The risk in procuring land was therefore at an acceptable level.
Risk from the fluctuation in the building material price
From the trade economic statistics, if we use the price index in 2005 as a basement, the price of building materials had decreased from 113.3 in 2010, a slightly decreased from 110.8 in 2009. Most of the building material prices stayed at the same level when comparing with the last year (only the metal and the metal products price index that were increased from the 103.6 to 110.9). However there are many signs that indicate of index increasing. An increased of the price of building materials had a direct impact on the company’s construction cost and profit. However, the procurement of building materials could be divided into 2 parts; main building materials and building materials procured by the company. The main building materials, such as bricks, aggregate, cement, sand and steel etc., were procured by the contractor, calculated as part of the construction contract. Therefore, if the costs of the main building materials increased during the construction period, it would not have any impact to the company. The contractor would take all the risk. As for the building materials procured by the company, such as countable items with high per unit price liked lift, sanitary wares, generators etc., they accounted for only 8%-10% of the total construction cost for each project. Therefore if the prices of these items that the company had not agreed to the procurement contract increased, it would only have a minimal impact on the company’s operating profit.
Risk from having one type of product
At this moment, the company only developed high-end residential condominiums. There were therefore risks from the uncertainty in economy or political issues, which had direct impact on the confidence and purchasing power of the consumers. The change in requirement of the target customers to other kinds of projects could have some impact on the company’s profit. However, the company did not have the policy to focus developing only high-end residential condominium but also seek opportunities to develop other kinds of project that could contribute to the growth of the company, such as serviced apartment or hotel etc. 29
Annual Report 2010
The company had therefore established subsidiary companies to pursue business opportunities in these projects. Especially the hotel services that the company will start the operation within 2011. The company continued to follow the market closely and to seek market opportunities for other types of projects
Risk from having the Poolvoralaks Group as the major shareholder
The Poolvoralaks Group was the major shareholder of the Company, holding 72.12% of the total shares (as of 17 June 2010). The Poolvoralaks Group therefore controlled almost all of the decisions at the shareholders meeting, except those requiring three quarter majority. It was therefore difficult for other shareholders to collectively mount check-and-balance votes on issues proposed by the shareholders. However, the company had appointed 3 independent directors and auditor committee to review and check so that there was no conflict of interest and for the transparency in the management of the company. The majority shareholding by a group also lessened the risk of takeover by other persons, even though other shareholders might see an opportunity to increase the company’s worth.
External Risks Risk from interest rates
As of 31 December 2010, the company had a total debt of Baht 5,496.00 million (consolidated), with interest bearing debt accounted for Baht 3,516.12 million. The company’s interest bearing debt to equity ratio was 1.41 times, a slightly improve from previous year. The loans, which were used to develop various projects, had floating interest rates. Even though the interest rates were on a flattening trend, but in the future the interest rates could be increased, that could have direct impact on the cost of project development. However, most of our project constructions almost completed and waiting for transfer to our customer that could help us to reduce a lot of project loan and would help to reduce the debt burden ratio.
Risk from the change in policies from relevant government agencies
The changes in policies from relevant agencies such as city planning law, useable area for housing estate, floor area ratio or environmental impact assessment, especially for high-rise building attributed to the project risk. The company reduced these risks by studying in detailed the changes in the policies of relevant agencies and conducted feasibility studies of every projects, taking into account the new rules and regulations. All of the Company’s projects under construction had received necessary permissions from all relevant government agencies. Any changes in relevant laws should not impact those projects that are under construction.
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Major Development Public Company Limited
SHAREHOLDERS STRUCTURE, MANAGEMENT AND INTERNAL CONTROL Shareholders Structure The Company has paid-up registered capital of Baht 700 million from 700 million shares at par value of Baht 1 each. The names and shareholding ratio of the top 10 shareholders as of 13 November 2009 are as follows: Name 1. Mr. Chumroen Poolvoralaks 2. Mrs. Prathin Poolvoralaks 3. Thai NVDR CO., LTD. 4. Dr. Suriya Poolvoralaks 5. Miss Petrada Poolvoralaks 6. Mr. Suriyon Poolvoralaks 7. Mr. Itthi Chavalitdhamrong 8. SKANDINAVISKA ENSKILDA BANKEN A/S 9. Mrs. Piangjai Chayawiwatkul 10. CITIBANK NOMINEES SINGAPORE PTE LTD-UBS AG ZURICH Others Total
Shares
%
252,300,000 174,000,000 48,177,400 25,000,000 25,000,000 25,000,000 22,000,000 18,000,000 10,000,000 6,251,000 94,271,600 700,000,000
36.04 24.86 6.88 3.57 3.57 3.57 3.14 2.57 1.43 0.89 13.47 100.00
Dividend Policy The Company has a policy of paying dividend to the shareholders at the rate of not less than 40% of the annual netprofit after deduction of legal reserves and other reserves. The dividend may vary according to performance, expansion plan, liquidity, necessity and other appropriate plans of the Company in the future as considered by the Board of Directors that will have the greatest benefits to the shareholders.
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Annual Report 2010
ORGANIZATION Board of Director Risk Management Committee
Audit Committee Executive Committee
Nominating Compensation Committee
Chief Executive officer
Internal Audit and Control Department
Managing Director
Corporate Marketing Division
Finance & Accounting Division
Corporate Development Division
Poject Development Division 1
Poject Development Division 2
Business Development
Business Development
Corporate Marketing Division
Finance & Accounting Department
Human Resources & Administrative Department
Product Development & Quality Control Department
Product Development & Quality Control Department
Investor Relation Department
Management Accounting Department
Legal Department
Construction Management Department
Construction Management Department
Purchasing Department
Purchasing Department
Sales Department
Sales Department
Marketing Department
Marketing Department
Information Technology Department
32
Major Development Public Company Limited
Management structure The management structure of the Company comprised 5 committees: the Board of Directors, the Executives Committee, the Audit Committee, Selection and Remuneration Committee and Risk Management Committee. The Board of Directors and the Executives of the Company comprised of qualified persons according to Section 68 of Public Company Act 1992 and the notifications of the Securities and Exchange Committee. The committees of the Company were as follows: Board of Directors 9
1 2 3 4 5 6 7 8 9
Mr. Chumroen Mrs. Prathin Mr. Suriyon Dr. Suriya Miss Petrada Mrs. Jitradee Mr. Chanin Mr. Smith Mr. Sirot
หมายเหตุ
Executives Committee 6
Poolvoralaks Poolvoralaks Poolvoralaks Poolvoralaks Poolvoralaks Poolvoralaks Roongsang Banomyong Setabandhu
Selection and Risk Audit Remuneration Management Committee Committee Committee 3 5 4
-
-
-
Chairman Vice Chairman Independent Director Director
Mr. Sithipon Ratanaporn as Secretary to the Board of Directors/the Executives Committee/the Selection and Remuneration Committee/the Risk Management Committee and Miss Montakarn Thiennetinunt as Secretary to the Audit Committee Note: Please see details of responsibilities of committees and sub-committees in the Company’s annex 56-1
Authorised signatory directors of the Company were Mr. Chumroen Poolvoralaks together with Mrs. Prathin Poolvoralaks or Mr. Suriyon Poolvoralaks with the Company’s seal.
Executives Committee As of 31 December 2010, the Company had 6 directors No. 1. 2. 3. 4. 5. 6.
Name Mr. Suriyon Poolvoralaks Dr. Suriya Poolvoralaks Miss Petrada Poolvoralaks Mrs. Jitradee Poolvoralaks Mr. Sithipon Ratanaporn Mr. Jamorn Wongsathaporn
Position Chief Executive Officer Managing Director Executive Vice President - Corporate Development Division Executive Vice President - Marketing Division Vice President - Finance and Accounting Division Vice President - Project Development 1
Note: Please see details of responsibilities of the Chief Executive Officer in the Company’s annex 56-1
33
Annual Report 2010
Other details of non-board executives Mr. Sithipon Ratanaporn (Age 49) Vice President - Finance and Accounting Division Education: BA in Business Administration with accounting major, Ramkhamhaeng University Mr. Jamorn Wongsathaporn (Age 48) Vice President - Project Development 1 Education: MBA University of the Thai Chamber of Commerce BSc in Civil Engineering, Prince of Songkla University
Selection of Board of Directors and Executives The Company had appointed the Selection and Remuneration Committee to consider and propose qualify persons for the positions in the Board of Directors and the high level executives of the Company to the shareholders for approval. The Committee was also responsible for the consideration of policy pertaining to the remunerations and benefits of the Board of Directors, the Executives Committee, the Audit Committee, Selection and Remuneration Committee and Risk Management Committee and the employees. The criteria for the selection, appointment, impeachment or resignation of the Board of Directors were listed in the rules and regulations of the Company, which could be summarised as follows: The Board of Directors comprised at least 5 persons. At least half of the Directors must have their residence in Thailand. The Directors could be either shareholders or not. The Selection and Remuneration Committee would process the selection and appointment of the Board of Directors and propose its findings to the shareholders using the following regulations and procedures: (1) Each shareholder had 1 vote per 1 share (2) Each shareholder could use the votes as in 1 to select one or more directors but could not give more votes to one candidate than other candidates (3) The number of persons with the most votes respectively would be selected as the Directors according to the required number of Directors. In the case of more than one person had the same number of votes, the Chairman of the meeting would decide. At every annual shareholders meeting, at least one third of the member of the Board of Directors must resign. If the number of Directors could not be divided by 3, the closest number to one third would be used. The past Directors could be reelected. The Directors that had to resign in the first and second year after the registration of the Company must draw lots. After that the Director that served the longest must resign. Any Directors wished to resign must submit resignation letter to the Company. The resignation would take effect on the day that the Company received the resignation letter. The Director that resigned must also inform the registrar. At the shareholders meeting, any director could be voted to leave the position before his term ends with at least three quarter of the total number of shareholders with the voting rights and the total number of shares must be at least half of the total number of shares held by the shareholders attending the meeting.
34
Major Development Public Company Limited
Remuneration for the Directors and the Executives Remuneration Type
Position
No.
2010
Director Remunerations 1. Mr. Chumroen Poolvoralaks 2. Mrs. Prathin Poolvoralaks 3. Mr. Suriyon Poolvoralaks 4. Dr. Suriya Poolvoralaks 5. Miss. Petrada Poolvoralaks 6. Mrs. Jitradee Poolvoralaks 7. Mr. Chanin Roongsang
Chairman Vice Chairman Director Director Director Director Independent Director and Chairman of the Audit Committee 8. Mr. Sanguankiat Lewmanomont Independent Director and Director of the Audit Committee 1 9. Mr. Smith Banomyong Independent Director and Director of the Audit Committee Total
Amount (Baht)
2009
No.
Amount (Baht)
240,000 180,000 180,000 180,000 180,000 180,000 240,000
240,000 180,000 180,000 180,000 180,000 180,000 240,000
180,000
180,000
180,000
180,000
1,740,000
1,740,000
Other remunerations: - None -
Financial Remuneration for the Executives Remuneration Type
Salary Bonus Provident Fund Other Total
2010 No. Amount (Baht Million) 6 3 6 6 6
14.31 1.51 1.08 0.60 17.50
Other remunerations: - None -
35
Annual Report 2010
2009 No. Amount (Baht Million) 6 3 6 6 6
14.36 1.22 0.94 0.60 17.12
2008 No. Amount (Baht Million) 6 3 6 6 6
13.72 0.89 0.74 0.60 15.95
Principles of Good Corporate Governance The Company has prescribed the Principles of Good Corporate Governance in accordance with the guidelines provided by The Stock Exchange of Thailand in order to ensure efficient, transparent and able to be audited management systems, thus fostering trust and confidence among shareholders, stakeholders, and all other related parties. The Good Corporate Governance is a means to add a firm’s value and contribute to sustainable growth of the Company. The details of the Good Corporate Governance are as follows:
Chapter 1: Rights of Shareholders The Company protects the rights of shareholders and supports basic shareholder rights as stipulated by law. To illustrate, shareholders have right to share in the profit of the Company; buy, sell or transfer share; obtain relevant and adequate information on the Company; participate and vote in the shareholders meetings to elect or remove members of the board; determine the remuneration for members of the board; appoint an auditor; determine audit fee; and make decisions on any transactions that affect the Company. The Company has created a website to provide important information and news such as financial reports, the Company’s annual and quarter results, annual reports, etc. In addition, in shareholders meetings, the Company shall provide facilities and meeting venues that can be conveniently reached and allocate adequate time for meeting. During the meeting, shareholders shall be treated in an equal way. That is, they have right to express their opinions and ask questions equally. Moreover, any questions, issues, opinions or suggestions by the shareholders shall be noted down in a minute of meeting.
Chapter 2: Equitable Treatment of Shareholders The Company has a policy to treat shareholders and facilitate them in an equal way in terms of opportunities to attend meetings, the supply of information and their rights to vote in the shareholders meeting. The Company shall send a meeting invitation letter approved by the board of directors as well as all information regarding the meeting to the shareholders at least 7 days before the date of meeting (pursuant to the stipulations of the Securities and Exchange Commission and The Stock Exchange of Thailand). Moreover, a notice of the meeting shall be posted in a newspaper no less than 3 days prior to the date of the meeting whereby no new issues for consideration in the meeting other than the ones already specified in the invitation letter are allowed to add to the notice. This is in order that the shareholders will have sufficient time to consider and study about the meeting agendas in order to vote properly. In case that any shareholders cannot attend the meeting, they can nominate other persons to participate in the meeting. Shareholders are provided with an option that they may appoint an independent director as their proxy to attend the meeting and vote, whereby a name list of nominated directors are specified in a letter of attorney attached to the meeting invitation letter. The Company has managed to supervise the use of corporate information. That is, the Company has right to prohibit any directors, executives, managers of departments and employees of the Company from using the corporate material information, including information about purchase of securities that has not been disclosed to the public and might have an effect on the stock’s price of the Company, for personal benefits. In the event that the Company finds that any shareholders, directors, executives, managers, and employees violate the regulations specified herein, the Company shall precede an action against and punish the violators.
Chapter 3: Roles of Stakeholders The Company has prescribed business ethics with the following details: 36
Major Development Public Company Limited
1. Conflict of Interests Code The Company’s directors and employees are encouraged to avoid engaging in any situation in which there is any conflict of interests between the Company and them. The guidelines are as follows: - A conflict of interests include any effort to disclose the Company’s confidential information to the third party during the period of employment by the Company and thereafter or while one’s taking a position in the Company. - Directors or employees shall avoid a conflict of interests between self-advantage and the benefit of the Company when dealing with the government sector or government agencies, partners and any related persons. - The board of directors and employees are prohibited from using corporate information for their own or others’ benefits. - During the period of time working for the Company and the time after work, directors and employees shall not disclose any corporate confidential information for other people’s benefits. - Directors and employees are prohibited from taking a position as a member of the board of directors or consultant for any other companies, which may result in the conflict of interests and conflict in business provided that the management team or shareholders have already been informed about this (as the case may be). - Directors and employees must use the Company’s resources for the sake of the Company and must not use them for personal benefit. - Directors or employees must inform the Company in writing immediately in the event that their family members engage in the business of other companies which may lead to a conflict of interests. - In the event that any employee wants to act as a director or consultant for another company, organization or business society, the act must have no conflict of interests in regard to their duties in the Company and they must obtain prior permission from the board of directors. - Directors and employees must fully devote themselves and their time to the Company’s activities without doing any other activities that are irrelevant to their duties for their own or others’ benefits. 2. Code of Ethics for Shareholders Any work, activities and decision-making carried out by directors and employees should be done for the utmost benefits of the shareholders. Shareholders have right to obtain any necessary information. Therefore, the Company shall provide a clear and accurate report on the management of the Company, its financial status and operating results to the shareholders on a regular basis in accordance with the regulations of the Securities and Exchange Commission and The Stock Exchange of Thailand. The Company shall treat all shareholders equally in shareholders meetings. 3. Code of Ethics for Clients In order to find out a method to respond to the needs of their clients more effectively and efficiently, the Company has set up a policy and guidelines as follows: 1. Customers shall be provided with quality products and services that correspond to their need. 2. Customers shall be provided with accurate and adequate information that is the most recent so that they learn about the Company’s products and services. The provided information shall not be exaggerated to avoid making them misunderstand about the products and services. 3. Customers shall be treated politely and efficiently. A person acting as the Company’s representative shall be reliable. In addition, there should be a complaint handling process available for customers. Moreover, customers shall be treated with fast action and best efforts to serve their needs. 4. Information about customers shall be kept in secret and not to be abused for personal or others’ benefits. 5. Advice about products and services should be provided effectively for the best benefit of customers. 37
Annual Report 2010
4. Code of Ethics for Partners The provision of products and services by the Company must represent the highest standards in order to develop and preserve good relationship with suppliers, government sector or government agencies, and parties to the contract. In addition, directors and employees are prohibited from accepting any personal benefits offered by suppliers, government sector or government agencies, and parties to the contract. 5. Code of Ethics for Commercial Competitors The Company’s policy supports a fair competition in doing business yet it shall engage in competitions with strong determination. The Company shall not use an illegal or unethical method to take advantage from the competitors. In addition, it is not permissible to steal information or use others’ important information that is either commercial information or commercial secret, without prior permission from its owner. Moreover, tricking present or former employees of another company into disclosing confidential information is prohibited. 6. Code of Ethics for Creditors The Company has a policy to obey the terms and conditions of the credit agreement that the Company has with all creditors. 7. Code of Ethics for Employees Through good cooperation from all employees, the Company shall prevent all employees from any accident, injury or sickness in connection with their work. The Company shall continue doing research and managing to cope with any harmful risks concerning work. The Company shall provide instruments, tools, equipment and trainings about safety for workers and property of the Company. In addition, in the case of any emergency or incident resulting from work, the Company shall get involved and take care of the incident efficiently. The Company shall strictly follow applicable laws, rules and regulations. Moreover, it shall develop and organize trainings to ensure that all employees have good understanding and obtain adequate information concerning working environment, work processes and sickness in connection with work. 8. Code of Ethics for Environment According to the Company’s policy, its business shall be carried out without sacrificing the obedience of the law and regulation about environment.
Chapter 4: Disclosure and Transparency The Company shall disclose important information relevant to the Company correctly and completely in a timely manner in accordance with the regulations of the Securities and Exchange Commission and The Stock Exchange of Thailand via different channels and corporate website both in Thai and English so that the information can be accessed equally by users. Actually, the Company disclosed its information in the Annual Registration Statement (Form 56-1) and Annual Report (Form 56-2) in accordance with the regulations of the Securities and Exchange Commission and The Stock Exchange of Thailand.
Chapter 5: Responsibilities of the Board The board of directors comprise 9 members: 4 management directors, 2 non-management directors, and 3 independent directors, all of whom are knowledgeable and expert in various professional fields which contribute to the growth of the business of the Company and are qualified to possess the position of director of listed companies in compliance with applicable law and the rules and regulations of the Company. The board of directors performs a leading role in determining the Company’s policies and taking part in making consideration and approval for the Company’s vision, mission, strategies, objectives, business plans and budgets as well as supervising the management team in implementing the policy effectively and efficiently. 38
Major Development Public Company Limited
The board of directors is responsible for supervising important business and corporate governance, as well as the Company’s financial statement and financial information to be disclosed to the public in the Annual Registration Statement (Form 56-1) and Annual Report (Form 56-2). The arrangement of the said forms shall be consistent with accounting standards used nationwide and shall be audited by a certified public account that is certified by the Securities and Exchange Commission. An appropriate financial policy shall be selected and practiced regularly with careful discretion. In addition, important information shall be adequately disclosed and specified in Notes to Financial Statement. The board of directors shall provide and maintain an effective internal control system to rationally ensure that financial data is recorded accurately and completely in order to prevent any dishonesty or wrongful act while audit committee comprising non-management directors and independent directors are responsible for the quality of the financial report. Meanwhile, the department of Internal Audit and Supervisory oversees and examines different businesses of the Company to ensure that the Company follows the rules and regulations of the government and those of the Company itself. To ensure their independent and objective audit and to balance power, the said department shall directly report their audit results to audit committee, develop measures to manage risks effectively, and follow up audit work regularly by themselves. The board of directors appoints sub-committee to carry out work in different areas as assigned. Moreover, the board defines the scope of responsibilities of committee, sub-committee and the management team by determining clearly the levels of authority regarding financial issues. The Company has 3 groups of the sub-committee as follows: 1. Audit committee comprises 3 members appointed on 12 November 2008 with 3-year term of service starting from 3 December 2008 until 2 December 2011 2. Nomination and remuneration committee comprises 5 members appointed on 4 May 2010 with 3-year term of service. 3. Risks management committee comprises 4 members appointed on 4 May 2010 with 2-year term of service. A board of directors meeting shall be organized every 3 months and special meetings may be arranged as needed. To organize a meeting, a meeting invitation letter and information necessary for the meeting shall be provided to the committee no less than 7 days prior of the date of the meeting in accordance with the regulations of the Company. No. of Meetings Attended No.
Name
Position Chairman Vice Chairman Director Director Director Director Chairman of the Audit Committee Member Independent Director and Audit Committee Member Independent Director and Audit Committee Member Independent Director and Audit Committee Member
1. 2. 3. 4. 5. 6. 7.
Mr. Chumroen Mrs. Prathin Mr. Suriyon Dr. Suriya Miss Petrada Mrs. Jitradee Mr. Chanin
Poolvoralaks Poolvoralaks Poolvoralaks Poolvoralaks Poolvoralaks Poolvoralaks Roongsang
8.
Mr. Sirot
Setabandhu *
Mr. Smith
Banomyong *
9.
Mr. Sanguankiat Lewmanomont
No. of Meetings Attended 2010 2009 2008 17/17 17/17 17/17 17/17 17/17 17/17 17/17
13/13 11/13 13/13 13/13 13/13 13/13 13/13
15/15 14/15 15/15 15/15 15/15 15/15 15/15
-
9/10
17/17
13/13
5/5
17/17
13/13
15/15
Note: * Mr. Sirot Setabandhu had resigned as Independent Director and the Audit Committee Member and Mr. Smith Banomyong was appointed as Independent Director and the Audit Committee Member effective as of 15 September 2008
39
Annual Report 2010
The Company prescribes good practices concerning the code of ethics for directors and employees so that all related parties shall use it as guidelines for performing duties and doing assignments of the Company with care, integrity, honesty and justice when dealing with the Company itself and all groups of stakeholders. The code of ethics has been announced to all related parties to acknowledge and follow. The Company provides measures to prevent conflict of interests whereby the Company strictly follows the Securities and Exchange Act, as well as regulations, announcements, orders or requirements of the Securities and Exchange Commission. In the event that any director, executive, shareholder or any other person with potential conflict of interests has interest in a transaction, that person shall have no right to vote and approve the related transaction. The said transaction shall be undertaken to support the main business of the Company whereby related prices and terms and conditions shall be determined according to the market to ensure that they are comparable to those commonly offered. Moreover, the policy requires directors and executives to report any changes in securities holdings to the board of the directors and the Securities and Exchange Commission in accordance with Section 59 of the Securities and Exchange Act B.E. 2535. The Company provides investors-protecting measures the process of which can be examined. The Company shall disclose related transactions in Notes to Financial Statement that have already been audited by an auditor and certified by audit committee members. The audit committee members shall express their opinions about the need and rationality of the related transactions in the financial statement audited by the auditor. Nomination and remuneration committee are responsible for determining clearly and transparently the remuneration for directors in an amount that is suitable for the responsibilities of each member of the board and that is comparable to the same industry. Managing directors are subject to an extra amount of remuneration due to their executive position that relates to the operating results of the Company and their work performance. The Company requires that the remuneration paid to directors and executives be disclosed in accordance with the regulations of the Securities and Exchange Commission. The Board of Directors always put great importance to the disclosure of financial and other relevant information that was correct, complete, transparent, trustworthy and on-time to investors and other relevant persons. The information was disseminated via the website of the Stock Exchange of Thailand and the Company’s owned website. The Company also set up an Investors Relation Unit to provide information and other news to the investors, analysts and the general public. Investors Relation Unit could be contacted at tel: 0-2392-1111 ext. 111 or www.majordevelopment.co.th
Internal Control Audit committee is responsible for investigating the carrying out of work to ensure that the work is performed correctly in accordance with the policy and rules of the Company as well as applicable law, and the regulations of the office of supervisory. The audit committee shall have duties to promote the development of the financial report and accounting system to be consistent with common audit standards, and ensure that the Company has strict, appropriate, modern and efficient internal control, internal audit and risks management systems. The audit committee able to perform their investigation and express their opinions independently whereby the department of Internal Audit and Supervisory reports to them. By having a preventive audit policy that the Company can benefit from, the department of Internal Audit and Supervisory is responsible for evaluating the internal control in accordance with the regulations prescribed by the audit committee. The department checks the accuracy and reliability of financial reports, discloses adequate information in order to achieve transparency, monitors the practices of the Good Corporate Governance, and enhances the effectiveness and productivity of work by following audit guidelines of international standards. 40
Major Development Public Company Limited
Taking into consideration the evaluation of internal control system of the Company in 5 areas, i.e. organization and environment, risks management, the supervision of work practices of the management team, information technology and communication, and follow-up system, the board of directors deem that the Company has adequate internal control system to oversee transactions undertaken with major shareholders, board of directors, executives and related persons. The board of directors also considers that the internal control system is efficient enough to oversee other aspects of management. The Company’s internal control system is briefly explained as follows: 1. Organization and Environment The Company has an appropriate organizational structure, enabling effective internal control. In addition, it has clear policies, work plans and business targets that can be evaluated, and shows efforts in promoting clear and transparent Good Corporate Governance and code of ethics. It is thus considered that the internal control system is adequate and practiced appropriately. Furthermore, the Company’s policies, work plans and targets are developed by taking into consideration fair treatment for employees, clients and commercial competitors, and responsibilities that the Company has for shareholders, the society and environment. What’s more, employees of the Company share good values and work guidelines continuously whereby they are prohibited from engaging in activities that may cause conflict of interests. Moreover, it is found that the Company’s written policy and rules and regulations concerning financial transactions, purchasing activities and good management can help prevent any dishonest act effectively. 2. Risks Management The board of directors focuses on risks management. The risks are determined and evaluated in order to provide preventive measures and efficiently manage risks including those having an impact on the performance of the Company. Risks management is supervised by the Company’s audit committee while its guiding policies are approved by the board of directors in order to provide guidelines and get the Company ready to cope with changing situations appropriately and timely. According to the risks management policy, - The board of directors and executives are responsible for evaluating, tracking and supporting the carrying out of effective risks management process; - The Company has risks management process in place, and evaluates and follows up the process continuously and systematically. The process is thus constantly improved to suit changing business situations; and - Audit committee has duties of evaluating risks management and proposing suggestions to the board of directors. The Company constantly determines internal and external risks that may affect its business by analyzing causes, providing guidelines and management measures to reduce risks. It also reviews risk management policy for improvement. Furthermore, the Company ensures that related employees are well informed of risks management measures and all divisions follow the risks management plan. 3. The Supervision of Work Practices of the Management Team The Company defines the scope of duties and responsibilities as well as approval authority of the members of the management team in different levels clearly in writing whereby the duties of making approval, making accounting records, managing information and looking after the Company’s property are clearly separated in order to balance power and enable effective examination. In the event that the Company makes transactions with directors and executives, common commercial terms and conditions shall be followed and the rights bestowed upon the Company’s employees shall be taken into consideration. In addition, the Company always sticks to its own measures in controlling such transactions. To undertake a transaction, prior approval shall be obtained from the management division or the board of directors or shareholders meeting according the regulations specified by The Stock Exchange of Thailand. In doing so, the Company shall also disclose the information in accordance with 41
Annual Report 2010
the said regulations. The approval for each transaction shall be made by those who are not interested persons as the utmost benefit for the Company is always taken into consideration. Such transactions are treated in the same way as transactions made with the third party. The Company constantly oversees the business of its subsidiary companies and joint venture companies, and provides directions and guidelines for those appointed as directors and executives in those companies. In addition, the Company ensures that the management teams have followed related laws in order to reduce risks in doing business and preserve the good reputation of the Company. 4. Information Technology and Communication The Company collects information and constantly provides important information to executives in each level by processing it through the reporting system in an adequate and timely manner so that executives can use it when making decisions. What’s more, the Company provides a network for supplying information to ensure that all employees have good understanding about the Company’s policies, rules and regulations, that the communication reaches all levels in the Company. The directors and executives shall obtain meeting invitation letters for a meeting of the board of directors and necessary documents in advance within the minimum period of time as stipulated by the law except in the event of an urgent meeting. Besides, minutes of directors meetings always contain adequate details that enable shareholders to check the work practices of directors. The Company arranges all documents about accounting systematically and has never been informed of any mistakes regarding this issue by an auditor. It has been deemed by the board of directors that the Company applies the accounting policy that is consistent with common accounting principles and appropriate for its business. 5. Follow-up System The Company monitors and compares business performances to see whether it achieves the target or not. In the event that corrections and improvements are required, the Company shall take action in a timely manner by analyzing and investigating the causes of the problem to initiate preventive measures and improve the situation. Moreover, the Company works to ensure that its internal audit system is strictly followed. In case of any mistake found, a report shall be made and submitted to the board of directors and audit committee for improvement. According to the Company’s policy, the management team is required to report to the board of directors any dishonesty or suspected dishonesty, illegal or wrongful act that may affect the Company’s reputation and financial status. Audit committee has examined internal control system and has it evaluated by executives and internal audit division. It is found that the Company’s internal audit control is sufficient and efficient enough; there are no significant problems or major mistakes. The Company ensured that the Executives at all level were aware and understood their responsibility in reporting the holding of shares by themselves, their spouses and under-aged children, including any changes in the share holding, to the Securities and Exchange Commission. The Company established regulations for the employees regarding the disclosing or gaining benefits of any confidential news, the protection of confidential information and the use of their position in the Company or information received for their own benefits or reduction of benefits to the Company. The Company had clear disciplinary procedures for breaching of these regulations. The Company had a policy that would not allow the Directors of the Executives to use important internal information, which had not been publicly disclosed for their own benefits or other persons’ benefits. This included the trading of the Company’s shares by Directors, Executives and employee within the department that had the internal information. They should avoid or refrain from trading the Company’s shares during the 1-month period prior to the public disclosure of the financial report. 42
Major Development Public Company Limited
RELATED PARTY TRANSACTIONS The related party transactions as of 31 December 2010 are as follows: (Please see more details in 56-1 form) Individuals/ juristic persons that may have conflict of interest
MJAI Development Co Ltd
relationships
An affiliated company with the company holding 51% of shares of the paid-up registered capital.
transactions description of for transactions 2010
The company - long-term loan - cash advance - interest receivable - interest earned
258.88 0.59 38.27 15.17
details of transactions
On 1 November 2007, the company provided a long-term loan to MJAI Development Co Ltd to develop Royce Private Residences Sukhumvit 31 Project with the same standard MLR interest rate as Tisco Bank. The payback due date was 1 November 2011 or when the project was completed and MJAI has paid the loan to Tisco Bank, whichever came first.
Audit Committee’s comments on necessity and reasons
MJAI Development Co Ltd was a joint venture between the company and an affiliated company of AIG Global Real Estate (Asia). The shareholding of MJAI Development has changed as follows: the company held 51% (Baht 12.75 million), Best Lead Investment Limited held 20% (Baht 5.0 million), AIG Global Real Estate (Asia) held 3.4% (Baht 0.84 million and T Milestone Limited held 26% (Baht 6.5 million). As for the long-term loan that was used to develop the project in Sukhumvit 31, the loan was approved out of the necessity and for benefits of the company. It was also under normal business practices with the market interest rate.
- management fee
9.00 The company entered into a management contract with MJAI Development Co Ltd
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Annual Report 2010
The transaction was approved as the management fee for MJAI Development Co Ltd
Individuals/ juristic persons that may have conflict of interest
transactions for 2010
relationships
description of transactions
An affiliated company with the company holding 99.99% of the paid-up registered capital
The company - long-term loan - interest receivable - interest earned - cash advance
1.37 25.87
Major An affiliated Development company Residences Co Ltd with the company holding 99.99% of the paid-up registered capital
The company - cash received in advance - cash advance
100.00 Cash received in advance for land from Major Development 0.48 Residences Co Ltd
The transaction was approved to develop the project of Major Development Residence Co Ltd
185.00 The company received a loan from Mr. Chumroen Poolvoralaks or the payment of land for the Equinox Phahol-Vibha Project with Tisco Bank standard MLR interest rate plus 0.5% and a due date of 29 March 2012.
The said transaction was approved out of the necessity and for the benefits of the company and was also under general business practice with the market interest rate.
Major Development Hotels and Resorts Co Ltd
Mr. Chumroen Poolvoralaks
shareholder and The company director - long-term loan
Mr Wicha Poolvoralaks
the son of Mr Chumroen Poolvoralaks
revenue from the sales of Wind Ratchayothin Condominium
39.93 3.06
details of transactions
Audit Committee’s comments on necessity and reasons
Major Development Hotels and On 20 June 2007, the company Resorts Co Ltd is an affiliated provided Major Development Hotels company. The company held and Resorts Co Ltd, which was an 99.99% of the paid-up registered affiliated company, with a loan to capital. The loan was part of acquire land for a hotel business within the investment to acquire land Marrakesh Hua Hin Project with and build a hotel within a Sri Ayudhaya Bank standard MLR Marrakesh Project. interest rate minus 1.75% and a due date of 19 June 2013. The said transaction was approved out of the necessity and for the benefits of the company and was also under general business practice with the market interest rate.
12.38 On 7 June 2007, the company entered The said transaction was approved into a sales contract with Mr. Wicha because the price in the contract Poolvoralaks, a relation of a shareholder was within the framework of the and director of the company, for a normal business transaction when condominium at Wind Ratchayothin compared to the reference price Condominium at a price and conditions for the general of Baht 16.50 million public that was fair and appropriate. In 2010, the company realised the amount of Baht 12.38 million from the said contract.
44
Major Development Public Company Limited
Individuals/ juristic persons that may have conflict of interest
Mr. Paisal Ungkasekvilai
relationships
The father of Mrs. Jitradee Poolvoralaks, who is a shareholder and director (Mrs. Jitradee is the wife of Mr. Suriyon Poolvoralaks)
description of transactions
Revenue from the sales of a condominium at Watermark Chaophraya River Project
transactions for 2010
details of transactions
0.26 On 3 May 2003, the company entered into a sales contract for a condominium at Watermark Chaophraya River Project with Mr. Paisal Ungkasekvilai who was related to a shareholder and director of the company with the price under the contract of Baht 6.07 million. The transfer of ownership of the said condominium was completed on 22 March 2010
Audit Committee’s comments on necessity and reasons
The said transaction occurred during the period prior to the company becoming a public company. The sale price was in accordance with the market price at the time, which in the future would be considered in accordance with the standard of transactions among companies.
In 2010, the company realised the amount of Baht 0.26 million from the sales of the said condominium. Mr. Sagnuankiat Lewmanomont
Audit Committee Revenue from Member the sales of condominiums at Marrakesh Hua Hin
10.10 On 12 June 2008, the company entered 6.14 into a sales contract for two condominium units at Marrakesh Hua Hin Project with Mr Sagnuankiat Lewmanomont at the price under the contract of Baht 13.21 million and Baht 8.03 million. The transfer of ownership of the said condominiums could be completed in 2011
The said transaction was approved because the price in the contract was within the framework of the normal business transaction when compared to the reference price and conditions for the general public that was fair and appropriate.
In 2010, the company realised the amount of Baht 16.24 million from the sales of the said condominiums. Mrs. Prathin Poolvoralaks Mr. Suriyon Poolvoralaks Miss Petrada Poolvoralaks
shareholders and directors
Guarantee bank overdrafts with financial institutions with credit lines of Baht 12.3 million
11.98 The Baht 12.3 million credit line was guaranteed by 3 shareholders and directors, comprising Mrs. Prathin Poolvoralaks, Mr Suriyon Poolvoralaks and Miss Petrada Poolvoralaks, with land and buildings owned by the directors as collateral.
The said transaction was approved to support the liquidity of the company in its business.
Mrs. Prathin Poolvoralaks
shareholders and directors
advisor
2.40 The company contracted Mrs. Prathin Poolvoralaks as management and marketing consultant since March 2009 with a monthly consulting fee of Baht 200,000 per month.
The said transaction was approved because the company’s business would benefit from the transaction.
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Annual Report 2010
Related transactions policy and future trend In the future, the Company may need to enter into related transactions as necessary. The Company will comply with the Securities Exchange Act, rules, notices, orders or regulations of the Stock Exchange of Thailand and in accordance with accounting standards regarding the disclosure of information pertaining to person(s) or related activities as stipulated by the Institute of Certified Accountants and Auditors of Thailand.
Normal related transactions
For normal related transactions of the Company that continues to occur in the future, the Company has established the following frameworks for these transactions. These transactions must be in accordance with general trading practices with reference to general pricing and conditions that are appropriate, fair, reasonable and accountable without conflict of interest. The frameworks has been submitted and approved by the Audit Committee so that the Company can record the transactions that fall within these frameworks. In the case of transactions that fall within the above policy, the management of the Company can proceed with the transactions without prior approval from the Audit Committee. However, to comply with the principles of good governance practive, the Company must report these normal related transactions to the Audit Committee for acknowledgement every quarter. These normal transactions of the Company must be normal trade transactions in accordance with the definitions of the Stock Exchange of Thailand. It should be transactions that the Company would normally conduct with other persons that are not related to the Company, such as procuring building materials and hiring construction contractors. The conditions of these transactions must be the same as normal general trade conditions with pricing and conditions that do not create a conflict of interest. These conditions include the following pricing and conditions: 1) The pricing and conditions that the Company receives are similar to those given to others. 2) The pricing and conditions that the related person(s) receive are similar to those given to the others. 3) The pricing and conditions that the Company could show that other companies would give to the others.
Unusual related transactions
In cases of unusual related transactions, the Company must submit them to the Audit Committee for approval on a case by case basis. If the Audit Committee does not have the expertise regarding the related transactions, the Company must identify an expert, such as an independent auditor or asset assessor to advise about the transactions. The comments of the Audit Committee or the expert will be used for consideration by the Board of Directors or shareholders as the case may warrant. This will ensure that there is no conflict of interest between the Company or shareholders but the transactions occur for the greatest benefits of all shareholders.
46
Major Development Public Company Limited
As for the personal guarantee by shareholder(s) and/or director(s) for loans from financial institutions in the past and in the future, the Company will not pay any remuneration in any forms for these personal guarantees. As for loans that the Company borrows from director(s) or shareholder(s) who have a conflict of interest with the Company in the past and in the future, the Company must submit these transactions to the Audit Committee for approval to ensure that these transactions are necessary and appropriate. The loans must also receive approval from the Board of Directors. These transactions must also comply with the Securities Exchange Act, rules, notices, orders or regulations of the Stock Exchange of Thailand. The Company will also comply with the accounting standards regarding the disclosure of information pertaining to person(s) or related activities as stipulated by the Institute of Accountants and Auditors of Thailand. In addition, the interest rate paid to the person(s) with the conflict of interest must be at the rate not higher than the rate the Company receives from the financial institutions.
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Annual Report 2010
Ready to Move In
48
Major Development Public Company Limited
Completed in Year
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Annual Report 2010
2013
Last Year Activities
The highlight of High Living 2010 The highlight campaign of high-end condominium projects worth Baht 17,000 million returned again at the launch of EQUINOX, a luxury condominium in Phaholyothin-Vibhavadirangsit. A number of ready-to-own and readyto-move-in condominiums in the centre of Bangkok and Hua Hin were on offered at highlight prices with special offers of the year. Enjoyed special activities with Jenny Tienposuwan, Smart-Krisada Pornveroj, Waravuth Laohapongchana, Benjapan, Benjarongkul, A. Chang-Tossapol Sritula and A. Katha Chinbunchorn speaking at the event during 20-29 August 2010 at Hall of Fame, M Floor, Siam Paragon, which was a sounding success.
“MJD” shareholders’ meeting Mr Chumroen Poolvoralaks (4th from right), Chairman of Major Development Public Co Ltd or MJD presided over the general shareholders’ meeting with Mr Suriyon Poolvoralaks (3rd from left), Chief Executive Officer, Directors and shareholders attending the meeting at Swissotel Le Concord, Bangkok.
50
Major Development Public Company Limited
Last Year Activities
“Siam Miracle Sale & Mid Year X 4 Sale� Mr Suriyon Poolvoralaks, Chief Executive Officer of Major Development Public Co Ltd presented the Collezio Condominium prize to the lucky winner from the Siam Miracle Sale & Mid Year X 4 Sale, Ms Sakulratna Jaruwattanasakul, with Ms Mayuree Chaipromprasit, Executive Vice President -Market Promotion, Siam Paragon Development Co Ltd (2nd from right) and Mrs Jitradee Poolvoralaks, Executive Vice President - Sales and Marketing, Major Development Public Co Ltd (2nd from left) as witnesses.
Exclusive Preview Show Suites & Sales Gallery ROYCE Wine Tasting Party MJAI Development Co Ltd, a subsidiary company of MJD a leader in high-end condominium development, organised a Wine Tasting Party at Royce Private Residences Sukhumvit 31 with Mr Anuchit Seng-Orn, Wine Expert, to provide advices and demonstrate wine tasting to thank the customers who bought the condominium and to introduce a special promotion for those who were interested in making a reservation at the event.
Throughout last November, Equinox Project organised an Exclusive Preview Show Suites & Sales Gallery for a special group of customers to experience the opening of the sample unit at this high-end condominium in the city centre on PhahoyothinVibhavadirangsit Roads and the perfect combination of office building and community mall within the same area together with special offers from Siam Commercial Bank and Kasikornbank and cash back promotion from the project when making the reservation at the event, which received good responses from the customers.
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Annual Report 2010
Last Year Activities
Exclusive for JLL @ WIND Sukhumvit Last October, Wind Sukhumvit 23 organised an exclusive sales promotion for customers that came to view the sample unit on the actual building and received special offers worth more than Baht 200,000.
Breezy Bossa Beach Live @ Marrakesh Hua Hin Residences Organised special activities for Songkran Festival “Breezy Bossa Beach Live� in 2010 for customers that came to view the sample unit and listening to sweet music from Viyada Komarakul Na Nakorn and Calories Blah Blah and enjoy many hip activities and savoring the famous foods of Hua Hin.
52
Ready for Luxury Living @ Star Dome Paragon MJD organised a sales promotion for completed projects with a concept of Ready for Luxury Living at Star Dome, Siam Paragon, which received good responses from the customers.
Major Development Public Company Limited
Last Year Activities
Siam Paragon Luxury Property Show Case During 21-31 December 2010, Marrakesh Hua Hin Residences and Royce Private Residences projects organised a combined sales promotion, Siam Paragon Luxury Property Show Case, at M Floor, Hall of Fame, Siam Paragon with many special offers, which received good responses from the customers.
Equinox Phahol-Vibha @ House and CBRE Elite Living 2010 Condo Show During 16-26 September 2010, Marrakesh Hua Hin Residences Organised a sales promotion at the House and Condo Show at Queen Sirikit National Convention Centre to stimulate sales of the city centre condominium on PhaholyothinVibhavadirangsit Roads with the perfect combination of office building and community mall within the same area together, which received good responses from the customers.
and Royce Private Residences projects organised a combined sales promotion at the CBRE Elite Living 2010, at M Floor, Hall of Fame, Siam Paragon, which received good responses from the customers at the booth and created large number of sales.
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Annual Report 2010
Last Year Activities
Dive and preserve the sea with “Pattaya Dive Festival 2010 by Reflection Super Luxury Condominium”
Aguston Sukhumvit 22 During 27 September-3 October 2010, Aguston Sukhumvit 22 participated in the 7 Days Sales, M Floor, Hall of Fame, Siam Paragon with special price offers starting from Baht 79,000 per sq.m. and very special premium gift, such as BMW X1, Spanish Trip Package and many others together with fun and educational activities with celebrities such as Shape-Ig Bun and Secret Recipe Menu, chilled with City Bossa music from Lula, discussed Feng Shui with A. ChangTossapol Sritula and ended with Easy Listening Concert with Ben Supol.
Reflection Jomtien Beach Pattaya Condominium and the City of Pattaya, Tourism Authority of Thailand and 5 leading diving institutions in Thailand organised the “Pattaya Dive Festival 2010” during 13-14 November 2010 at Pattaya. This event was co-organised to promote the awareness in marine environment by focusing on diving activities, such as diving to collect garbage, undersea photography and built artificial reef using areas surrounding Koh Larn and Koh Krok as the locations for these activities. There were more than 500 divers participating and exchanging diving experiences with the audiences. There were also many entertaining shows to help the audiences relax at the end of the event.
Major Development PCL joined Lunch Project with World Vision Thailand Major Development PCL and World Vision Thailand organised Lunch Project at Baan Kao Thonlang School, Amphur Swang Arom, Uthaithani on 8 October 2010. There were a number of the company’s employees participated in the event, which comprised providing lunch, donating stationary, giving scholarships, planting vegetables and feeding fishes in earth pond. This supported the students’ learning and capabilities in fish and vegetable farming and used them to cook lunch. The students could then use their spare time away from drugs and earned revenue for the school by selling the produces.
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Major Development Public Company Limited
Last Year Activities
M Project, Signature of Me, Press Conference Major Development invested Baht 120 million in creating a new high-end condominium brand, “M”, targeting new generation workers with high salary with the launching of 2 new projects in the city centre, “M Phyathai” and “M Silom” worth over Baht 4,050 million, which officially opened for sales during 5-8 August 2010.
Major Development created the Talk of the Town trend by organising a grand party “M Signature Party” to launch “M Projects”. After the re-launch soon and say “M” brand luxury condominium clan together to express, “said Dr. Suriya Poolvoralaks” Managing Director, Major Development Plc. is the current sense. Closed courtyard with Paragon Park held a “M Signature Party” on Thursday, August 5, 2553, to celebrate the re-launch of M, which is a big event that grand spectacular. By showing a model and fashion model from many leading.
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Annual Report 2010
Completed
56
Major Development Public Company Limited
Ready to move in
57
Annual Report 2010
Completed
58
Major Development Public Company Limited
Completed
59
Annual Report 2010
Completed
60
Major Development Public Company Limited
Ready to Move In
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Annual Report 2010
Completed
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Major Development Public Company Limited
Completed
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Annual Report 2010
Report of Independent Auditor
To the Shareholders of Major Development Public Company Limited I have audited the accompanying consolidated balance sheets of Major Development Public Company Limited and its subsidiaries as at 31 December 2010 and 2009, and the related consolidated statements of income, changes in shareholders’ equity and cash flows for the years then ended, and the separate financial statements of Major Development Public Company Limited for the same periods. These financial statements are the responsibility of the management of the Company and subsidiaries as to their correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Major Development Public Company Limited and its subsidiaries and of Major Development Public Company Limited as at 31 December 2010 and 2009, and the results of their operations and cash flows for the years then ended, in accordance with generally accepted accounting principles.
Rungnapa Lertsuwankul Certified Public Accountant (Thailand) No. 3516 Ernst & Young Office Limited Bangkok: 24 February 2011 64
Major Development Public Company Limited
Balance sheets Major Development Public Company Limited and its subsidiaries As at 31 December 2010 and 2009
(Unit: Baht) Note
Assets Current assets Cash and cash equivalents Trade accounts receivable Accounts receivable and advances to related parties Current portion of long-term loans to subsidiaries Land and construction in progress - net Advances for construction Other receivables - advance payments Deposits for purchase of land Advances paid on behalf of Condominium Juristic Other current assets Total current assets Non-current assets Pledged deposits at banks Investments in subsidiaries Long-term loans to subsidiaries Deposits for purchase of equipment and office rental Property, plant and equipment - net Intangible assets - net Land awaiting development Total non-current assets Total assets
Consolidated financial statements Separate financial statements 2010 2009 2010 2009
6 7, 16
100,039,865 1,099,411,305
16
5,019,661
16 8
5,383,508,523 127,788,446 56,602,508 25,789,000
- 258,876,000 5,369,590,805 4,181,345,623 4,480,542,508 45,420,829 57,215,656 45,238,078 59,934,073 56,602,508 59,934,073 22,600,000 25,789,000 22,600,000
1,442,370 24,830,629 6,824,432,307
2,396,846 1,442,370 2,396,846 8,720,323 14,832,878 6,263,407 7,639,697,651 5,808,087,453 6,787,114,337
16 15, 26 9 16 10 11 12
20,678,800 1,725,160 916,649,756 6,721,172 215,009,615 1,160,784,503 7,985,216,810
The accompanying notes are an integral part of the financial statements.
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Annual Report 2010
53,994,952 38,478,805 47,350,058 2,077,039,823 1,099,411,305 2,077,039,823 -
9,709,000 -
74,093,308
20,678,800 322,748,660 39,926,000
45,749,544
9,709,000 172,748,700 243,989,000
1,440,000 436,729,266 577,080,478 178,831,880 6,836,266 6,613,656 6,836,266 215,009,615 215,009,615 215,009,615 668,284,147 1,183,497,209 827,124,461 8,307,981,798 6,991,584,662 7,614,238,798
Balance sheets (continued) Major Development Public Company Limited and its subsidiaries As at 31 December 2010 and 2009 (Unit: Baht) Note
Liabilities and shareholders’ equity Current liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Current portion of liabilities under finance lease agreements Current portion of long-term loans Other payables Deposits and advances from customers Retention payables Accrued specific business tax and transfer fee Corporate income tax payable Accrued expenses Advances received on behalf of Condominium Juristic Advance received from sale of land Other current liabilities Total current liabilities Non-current liabilities Liabilities under finance lease agreements Long-term loans from financial institutions Long-term loan from director Long-term loans from minority shareholders of a subsidiary Total non-current liabilities Total liabilities
Consolidated financial statements Separate financial statements 2010 2009 2010 2009
13
93,910,930 661,380,907
14 15
1,295,483 1,713,441,774 76,528,322 853,696,025 201,426,877 35,858,328 42,280,505 61,827,052
129,869 1,198,567 75,792 2,214,818,940 1,713,441,774 2,214,818,940 20,452,445 31,516,432 11,938,287 883,963,298 565,824,958 714,721,910 235,258,836 179,428,999 221,427,349 45,215,416 35,858,328 45,215,416 153,714,401 42,280,505 153,714,401 51,582,355 21,810,773 27,595,369
5,019,890 41,861,403 3,788,527,496
20,888 5,019,890 20,888 - 100,000,000 100,000,000 29,921,763 39,338,602 29,266,213 4,325,689,212 3,387,464,443 4,149,997,649
14 15 16
5,206,068 1,268,541,000 185,000,000
79,341 1,370,613,783 -
16
248,724,000 1,707,471,068 5,495,998,564
215,404,000 1,586,097,124 990,329,344 997,639,047 5,911,786,336 4,377,793,787 5,147,636,696
16
16 16
220,513,818 470,097,183
The accompanying notes are an integral part of the financial statements.
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Major Development Public Company Limited
84,247,470 567,498,145
5,129,344 800,200,000 185,000,000
210,556,567 420,646,517
25,264 997,613,783 -
Balance sheets (continued) Major Development Public Company Limited and its subsidiaries As at 31 December 2010 and 2009 (Unit: Baht) Consolidated financial statements Separate financial statements Note 2010 2009 2010 2009
Shareholders’ equity Share capital 17 Registered 1,050,000,000 ordinary shares of Baht 1 each (2009: 700,000,000 ordinary shares of Baht 1 each) Issued and paid-up 704,058,000 ordinary shares of Baht 1 each (2009: 700,000,000 ordinary shares of Baht 1 each) Cash receipts from share subscription 21 Premium on ordinary shares 17 Retained earnings Appropriated - statutory reserve 18 Unappropriated Equity attributable to the Company’s shareholders Minority interest - equity attributable to minority shareholders of subsidiaries Total shareholders’ equity Total liabilities and shareholders’ equity
1,050,000,000
704,058,000 441,000 718,913,000
700,000,000 1,050,000,000
700,000,000
700,000,000 714,855,000
700,000,000 714,855,000
704,058,000 441,000 718,913,000
82,181,600 983,623,306 2,489,216,906
70,000,000 82,181,600 70,000,000 911,339,162 1,108,197,275 981,747,102 2,396,194,162 2,613,790,875 2,466,602,102
1,340 2,489,218,246 7,985,216,810
1,300 2,396,195,462 2,613,790,875 2,466,602,102 8,307,981,798 6,991,584,662 7,614,238,798
The accompanying notes are an integral part of the financial statements.
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Annual Report 2010
Income statements Major Development Public Company Limited and its subsidiaries For the years ended 31 December 2010 and 2009 (Unit: Baht) Note
Revenues Sales of units in condominium projects Management fee income Other income Total revenues Expenses Cost of units in condominium projects sold Selling expenses Administrative expenses Management benefit expenses Other expenses Total expenses Income before finance cost and corporate income tax Finance cost Income before corporate income tax Corporate income tax Net income for the year
16 16 16
16
16 20
Net income attributable to: Equity holders of the parent Minority interests of the subsidiaries Earnings per share Basic earnings per share Net income attributable to equity holders of the parent
Consolidated financial statements Separate financial statements 2010 2009 2010 2009
2,909,552,117 33,315,093 2,942,867,210
2,976,532,537 2,909,552,117 2,976,532,537 9,000,000 9,000,000 21,328,136 48,847,245 30,180,042 2,997,860,673 2,967,399,362 3,015,712,579
2,119,330,492 253,843,903 185,747,211 20,930,075 1,843,488 2,581,695,169
2,083,496,721 2,119,330,492 2,083,496,721 104,099,197 243,149,817 92,111,968 157,583,541 167,416,336 150,090,500 20,159,729 20,930,075 20,159,729 1,404,460 1,843,488 1,404,460 2,366,743,648 2,552,670,208 2,347,263,378
361,172,041 (86,022,481) 275,149,560 (85,683,816) 189,465,744
631,117,025 (70,589,466) 560,527,559 (153,919,008) 406,608,551
414,729,154 668,449,201 (85,413,565) (69,721,700) 329,315,589 598,727,501 (85,683,816) (153,919,008) 243,631,773 444,808,493
189,465,744 189,465,744
406,608,551 406,608,551
243,631,773
444,808,493
0.27
0.58
0.35
0.64
0.23
-
0.29
-
24
Diluted earnings per share Net income attributable to equity holders of the parent The accompanying notes are an integral part of the financial statements.
68
Major Development Public Company Limited
Statements of changes in shareholders’ equity Major Development Public Company Limited and its subsidiaries For the years ended 31 December 2010 and 2009 (Unit: Baht) Consolidated financial statements Equity attributable to the parent’s shareholders Retained earnings
Balance as at 31 December 2008 Net income for the year 2009 Total income for the year Dividends paid Unappropriated retained earnings transferred to statutory reserve Balance as at 31 December 2009 Balance as at 31 December 2009 Net income for the year 2010 Total income for the year Ordinary share capital increase from warrants exercised Cash receipts from share subscription Cash received from minority shareholders for investment in a subsidiary Dividends paid Unappropriated retained earnings transferred to statutory reserve Balance as at 31 December 2010
Minority interest - equity Total equity attributable to Appropriated attributable to minority statutory Un the parent’s shareholders reserve appropriated shareholders of subsidiaries
Note
Cash Issued and receipts paid-up from share share capita subscription
22
700,000,000 -
- 714,855,000 54,255,352 730,474,089 2,199,584,441 - 406,608,551 406,608,551 - 406,608,551 406,608,551 - (209,998,830) (209,998,830)
1,300 2,199,585,741 - 406,608,551 - 406,608,551 - (209,998,830)
18
700,000,000 700,000,000 -
- 15,744,648 (15,744,648) - 714,855,000 70,000,000 911,339,162 2,396,194,162 - 714,855,000 70,000,000 911,339,162 2,396,194,162 - 189,465,744 189,465,744 - 189,465,744 189,465,744
1,300 2,396,195,462 1,300 2,396,195,462 - 189,465,744 - 189,465,744
17
4,058,000
-
4,058,000
-
-
8,116,000
-
8,116,000
21
-
441,000
-
-
-
441,000
-
441,000
22
-
-
-
- (105,000,000) (105,000,000)
40 40 - (105,000,000)
- 12,181,600 (12,181,600) 441,000 718,913,000 82,181,600 983,623,306 2,489,216,906
1,340 2,489,218,246
18
704,058,000
Premium on ordinary shares
The accompanying notes are an integral part of the financial statements.
69
Annual Report 2010
Total
Statements of changes in shareholders’ equity (continued) Major Development Public Company Limited and its subsidiaries For the years ended 31 December 2010 and 2009 (Unit: Baht)
Separate financial statements Cash Retained earnings Issued and receipts Premium on Appropriated paid-up from share ordinary - statutory Un Note share capital subscription shares reserve appropriated
Balance as at 31 December 2008 Net income for the year 2009 Total income for the year Dividends paid Unappropriated retained earnings transferred to statutory reserve Balance as at 31 December 2009 Balance as at 31 December 2009 Net income for the year 2010 Total income for the year Ordinary share capital increase from warrants execised Cash receipts from share subscription Dividends paid Unappropriated retained earnings transferred to statutory reserve Balance as at 31 December 2010
22 18
Total
700,000,000 -
- 714,855,000 54,255,352 762,682,087 2,231,792,439 - 444,808,493 444,808,493 - 444,808,493 444,808,493 - (209,998,830) (209,998,830)
700,000,000
- 15,744,648 (15,744,648) - 714,855,000 70,000,000 981,747,102 2,466,602,102
700,000,000 -
- 714,855,000 70,000,000 981,747,102 2,466,602,102 - 243,631,773 243,631,773 - 243,631,773 243,631,773
17 21 22
4,058,000 -
18
704,058,000
441,000 -
- 8,116,000 441,000 - (105,000,000) (105,000,000)
- 12,181,600 (12,181,600) 441,000 718,913,000 82,181,600 1,108,197,275 2,613,790,875
The accompanying notes are an integral part of the financial statements.
70
4,058,000 -
Major Development Public Company Limited
Statements of cash flows Major Development Public Company Limited and its subsidiaries For the years ended 31 December 2010 and 2009 (Unit: Baht) Consolidated financial statements Separate financial statements 2010 2009 2010 2009
Cash flows from operating activities Net income before tax Adjustments to reconcile net income before tax to net cash provided by (paid from) operating activities: Depreciation Amortisation of intangible assets Write-off buildings, equipment and intangible assets Loss (gain) on sales of equipment Interest income Interest expense Income from operating activities before changes in operating assets and liabilities Operating assets (increase) decrease Trade accounts receivable Accounts receivable and advances to related parties Land and construction in progress Advances for construction Other receivables - advance payments Deposits for purchase of land Advances paid on behalf of Condominium Juristic Other current assets Operating liabilities increase (decrease) Trade accounts payable Other payables Deposits and advances from customers Retention payables Accrued specific business tax and transfer fee Accrued expenses Advances received on behalf of Condominium Juristic Other current liabilities Cash flows from operating activities Cash paid for interest Cash paid for corporate income Net cash flows from (used in) operating activities
275,149,560
560,527,559
329,315,589
598,727,501
39,292,238 635,302 1,761,430 247,909 (546,674) 63,511,275
42,826,320 255,853 1,415,091 (79,105) (1,026,621) 47,629,558
33,881,613 630,836 1,761,430 247,909 (16,824,741) 62,902,359
38,563,505 255,853 1,404,461 (79,105) (13,141,276) 46,761,792
380,051,040
651,548,655
411,914,995
672,492,731
977,628,518
(214,829,943)
977,628,518 (214,829,943)
(5,019,661) (267,489,271) 18,540,367 3,331,565 (3,189,000) 954,476 (16,107,726)
149,537,615 52,694,315 (47,483,483) (15,000,000) (1,303,239) 9,012,274
(11,807,660) 15,208,373 33,930,406 3,331,565 (3,189,000) 954,476 (8,569,471)
90,375,740 56,175,386 (30,267,273) (33,831,959) (9,357,088) (3,444,436)
(240,179,809) 100,943,643 (248,155,293) (4,896,398) 19,677,654 (8,087,717) (50,933,338) (148,896,952) (124,847,766) 72,192,633 (41,998,350) 61,094,838 1,676,979 (9,357,088) 1,676,979 18,559,835 (4,804,970) 17,776,554
4,999,002 11,939,640 1,175,289,320 (189,286,088) (197,120,292) 788,882,940
(8,412,046) 4,999,002 (8,412,046) 20,626,086 10,072,389 20,824,055 392,810,136 1,350,037,530 522,247,398 (234,599,395) (167,126,040) (212,405,481) (159,852,004) (197,117,712) (159,852,004) (1,641,263) 985,793,778 149,989,913
The accompanying notes are an integral part of the financial statements.
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Annual Report 2010
(18,398,146) 375,100,529 52,877,066 (47,483,483) (15,000,000) (1,303,239) 6,922,279
Statements of cash flows (continued) Major Development Public Company Limited and its subsidiaries For the years ended 31 December 2010 and 2009 (Unit: Baht) Consolidated financial statements Separate financial statements 2010 2009 2010 2009
Cash flows from investing activities Decrease (increase) in pledged deposits at banks Acquistion of property, plant and equipment Acquisition of intangible assets Cash paid for deposits for purchase of equipment and office rental Cash received from sales of equipment Cash payment for investment in a subsidiary Cash received from minority shareholders for investment in a subsidiary Increase in long-term loans to subsidiaries Interest income Net cash flows used in investing activities Cash flows from financing activities Increase (decrease) in overdrafts and short-term loans from financial institutions Repayment of liabilities under finance lease agreements Cash received from long-term loans from financial institutions Repayment of long-term loans from financial institutions Cash received from long-term loan from director Repayment of long-term loan from director Cash received from the exercise of warrants to purchase ordinary shares Cash received from long-term loans from minority shareholders of a subsidiary Dividends paid Net cash flows from (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Supplemental cash flows information Non-cash items: Dividend payable Equipment purchased under finance lease agreements Transferred land and construction in progress to property, plant and equipment Cancellation of acquisition of intangible assets Accrued payables for advances for construction
(10,969,800) (120,503,765) (791,030)
23,428,000 (23,399,996) (4,584,243)
(10,969,800) (39,349,040) (679,048)
23,428,000 (3,363,106) (4,584,243)
(1,725,160) 30,000 -
(1,440,000) 211,254 30,000 - (149,999,960)
211,254 -
40 546,674 (133,413,041)
- (54,813,000) 1,026,621 288,638 (3,318,364) (256,932,210)
(81,843,000) 949,304 (65,201,791)
(126,602,888) (1,101,805)
29,769,113 (126,309,097) (1,523,745) (1,042,431)
26,934,013 (1,469,667)
3,212,126,918 2,432,863,040 3,116,785,918 2,432,863,040 (3,815,576,867) (2,320,752,098) (3,815,576,867) (2,320,752,098) 342,000,000 - 342,000,000 (157,000,000) - (157,000,000) 8,557,000 33,320,000 (105,147,344) (609,424,986) 46,044,913 53,994,952 100,039,865
-
8,557,000
-
80,654,000 (209,891,343) (105,147,344) (209,891,343) 11,118,967 (737,732,821) (72,316,055) 6,159,340 (8,871,253) 12,472,067 47,835,612 47,350,058 34,877,991 53,994,952 38,478,805 47,350,058
76,028
223,372
76,028
223,372
7,394,146
162,232
7,269,286
-
381,849,531 99,510 100,907,984
6,914,833 -
381,849,531 99,510 45,907,984
6,914,833 -
The accompanying notes are an integral part of the financial statements.
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Major Development Public Company Limited
Notes to consolidated financial statements Major Development Public Company Limited and its subsidiaries For the years ended 31 December 2010 and 2009
1. General information
Major Development Public Company Limited (“the Company”) is a public company incorporated and domiciled in Thailand. The Company and its subsidiaries are principally engaged in the development of properties for sales and hotel business. The registered office of the Company is at 141 Soi Sukhumvit 63 (Ekamai), Sukhumvit Road, Klongton Nua, Wattana, Bangkok. On 24 April 2008, the 2008 Annual General Meeting of the Company’s shareholders approved the issuance and offer of debenture of not exceed Baht 1,500 million with a period not exceed 3 years.
2. Basis of preparation
2.1 The financial statements have been prepared in accordance with accounting standards enunciated under the Accounting Professions Act B.E. 2547 and their presentation has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 30 January 2009, issued under the Accounting Act B.E. 2543. The financial statements in Thai language are the official statutory financial statements of the Company. The financial statements in English language have been translated from the Thai language financial statements. The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the accounting policies. 2.2 Basis of consolidation a) The consolidated financial statements include the financial statements of Major Development Public Company Limited (“the Company”) and the following subsidiary companies (“the subsidiaries”).
Company’s name
M J A I Development Company Limited Major Development Hotels and Resorts Company Limited Major Development Residense Company Limited Major Realty Development Company Limited
Nature of business
Assets as a percentage to the consolidated Country of Percentage of total assets as at incorporation shareholding 31 December 2010 2009 2010 2009 Percent Percent Percent Percent
Thailand
Revenues as a percentage to the consolidated total revenues for the year ended 31 December 2010 2009 Percent Percent
Development of properties for sales Hotel
51
51
15
11
-
-
Thailand 100
100
4
3
-
-
Property rental
Thailand 100
100
-
-
-
-
Development of properties for sales
Thailand 100
-
2
-
-
-
73
Annual Report 2010
b) Subsidiaries are fully consolidated as from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date when such control ceases. c) The financial statements of the subsidiaries are prepared using the same significant accounting policies as the Company. d) Material balances and transactions between the Company and its subsidiaries have been eliminated from the consolidated financial statements. e) Investments in the subsidiaries as recorded in the Company’s books of account are eliminated against the equity of the subsidiaries in the consolidated financial statements. f)
Minority interests represent the portion of net income or loss and net assets of the subsidiaries that are not held by the Company and are presented separately in the consolidated income statement and within equity in the consolidated balance sheet.
2.3 The separate financial statements, which present investments in subsidiaries under the cost method, have been prepared solely for the benefit of the public.
3. Adoption of new accounting standards
During the current year, the Federation of Accounting Professions issued a number of revised and new accounting standards as listed below. a) Accounting standards that are effective for fiscal years beginning on or after 1 January 2011 (except Framework for the Preparation and Presentation of Financial Statements, which is immediately effective): Framework for the Preparation and Presentation of Financial Statements (revised 2009) TAS 1 (revised 2009) Presentation of Financial Statements TAS 2 (revised 2009) Inventories TAS 7 (revised 2009) Statement of Cash Flows TAS 8 (revised 2009) Accounting Policies, Changes in Accounting Estimates and Errors TAS 10 (revised 2009) Events after the Reporting Period TAS 11 (revised 2009) Construction Contracts TAS 16 (revised 2009) Property, Plant and Equipment TAS 17 (revised 2009) Leases TAS 18 (revised 2009) Revenue TAS 19 Employee Benefits TAS 23 (revised 2009) Borrowing Costs TAS 24 (revised 2009) Related Party Disclosures TAS 26 Accounting and Reporting by Retirement Benefit Plans TAS 27 (revised 2009) Consolidated and Separate Financial Statements TAS 28 (revised 2009) Investments in Associates TAS 29 Financial Reporting in Hyperinflationary Economies TAS 31 (revised 2009) Interests in Joint Ventures TAS 33 (revised 2009) Earnings per Share TAS 34 (revised 2009) Interim Financial Reporting TAS 36 (revised 2009) Impairment of Assets TAS 37 (revised 2009) Provisions, Contingent Liabilities and Contingent Assets TAS 38 (revised 2009) Intangible Assets 74
Major Development Public Company Limited
TAS 40 (revised 2009) TFRS 2 TFRS 3 (revised 2009) TFRS 5 (revised 2009) TFRS 6 TFRIC 15
Investment Property Share-Based Payment Business Combinations Non-current Assets Held for Sale and Discontinued Operations Exploration for and Evaluation of Mineral Resources Agreements for the Construction of Real Estate
b) Accounting standards that are effective for fiscal years beginning on or after 1 January 2013: TAS 20 (revised 2009) Accounting for Government Grants and Disclosure of Government Assistance TAS 21 (revised 2009) The Effects of Changes in Foreign Exchange Rates The Company’s management believes that these accounting standards will not have any significant impact on the financial statements for the year when they are initially applied, except for the following accounting standards which management expects the impact on the financial statements in the year when they are adopted.
TAS 12 Income Taxes
This accounting standard requires an entity to identify temporary differences, which are differences between the carrying amount of an asset or liability in the accounting records and its tax base, and to recognise deferred tax assets and liabilities under the stipulated guidelines. At present, the management is evaluating the impact on the financial statements in the year when this standard is adopted.
TAS 18 (revised 2009) Revenue
This accounting standard requires entities to recognise revenue from sale of goods, which includes real estate developed for sale, when significant risks and rewards are transferred to the buyer. Currently, the Company can elect to use the percentage-ofcompletion method in recognising revenue from real estate sales. The change in this accounting policy in 2011 will have the effect of decreasing the beginning balance of retained earnings by Baht 468 million.
TAS 19 Employee Benefits
This accounting standard requires employee benefits to be recognised as expense in the period in which the service is performed by the employee. In particular, an entity has to evaluate and make a provision for post-employment benefits using actuarial techniques. Currently, the Company accounts for such employee benefits when they are incurred. At present, the management is evaluating the impact on the financial statements in the year when this standard is adopted.
4. Significant accounting policies 4.1 Revenue recognition from sales of units in condominium projects Sales of units in condominium projects are recognised as revenue under the percentage-of-completion method when contracts to purchase and to sell condominium units have been executed for not less than 40% of the area opened for sales, initial payments have been received totaling at least 20% of the sales price under the contract, and development of the project is at least 10% complete. The percentage of completion is determined based on the proportion of the actual cost already incurred up to the end of the period to the total anticipated development costs to be incurred to completion, excluding the cost of land. No income is recognised from contracts for which installments are overdue for more than 3 continuous periods, and for which the percentage of completion of construction work exceeds the percentage of total payment received. 75
Annual Report 2010
4.2 Cost of units in condominium projects sold In determining the cost of units in condominium projects sold, the total anticipated development costs (which include considerations of actual costs incurred) are allocated to the units already sold on the basis of the selling price and then recognised as cost in the income statement on a percentage of completion basis. Development costs are stated at cost, consisting of cost of land, design fees, utilities, construction and related interest.
4.3 Selling expenses Selling expenses directly associated with projects, such as specific business tax and transfer fees are charged to income statement in proportion to the percentage of total revenue recognised.
4.4 Cash and cash equivalents Cash and cash equivalents consist of cash in hand and at banks, and all highly liquid investments with an original maturity of 3 months or less and not subject to withdrawal restrictions.
4.5 Trade accounts receivable Trade accounts receivable are stated at the net realisable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in the collection of receivables. The allowance is generally based on collection experiences and analysis of debt aging.
4.6 Land and construction in progress Land and construction in progress are valued at the lower of cost and net realisable value. The details of cost calculation are as follows: Land - Land consists of the cost of land and the related expenses for acquired land on the actual cost incurred, calculating it separately for each project. Construction in progress - Construction in progress consists of the cost of design fees, construction, public utility costs and interest capitalised to cost of projects. The Company and its subsidiaries record cost of construction in progress based on the actual cost incurred.
4.7 Investments in subsidiaries Investments in subsidiaries are accounted for in the separate financial statements using the cost method.
4.8 Property, plant and equipment and depreciation Land is stated at cost. Building and equipment are stated at cost less accumulated depreciation and allowance for loss on impairment of assets (if any). Depreciation of plant and equipment is calculated by reference to their costs on the straight-line basis over the following estimated useful lives. Office building 4 ป Condominium units 20 ป Temporary buildings and temporary building improvement 2 - 5 ป Office building improvement and other fixed assets 5 ป 76
Major Development Public Company Limited
Depreciation is included in determining income. No depreciation is provided on land and construction in progress. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on disposal of an asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the income statement when the asset is derecognised.
4.9 Intangible assets Intangible assets acquired through business combination are initially recognised at their fair value on the date of business acquisition while acquired intangible assets are measured at cost. Following initial recognition, the intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets with finite lives are amortised on a systematic basis over the economic useful life and tested for impairment whenever there is an indication that the intangible asset may be impaired. The amortisation period and the amortisation method of such intangible assets are reviewed at least at each financial year end. The amortisation expense is charged to the income statement. Computer software has useful life of 10 years
4.10 Land awaiting development Land awaiting development is valued at the lower of cost and net realisable value.
4.11 Related party transactions Related parties comprise enterprises and individuals that control, or are controlled by, the Company, whether directly or indirectly, or which are under common control with the Company. They also include associated companies and individuals which directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, key management personnel, and directors and officers with authority in the planning and direction of the Company’s operations.
4.12 Borrowing costs Borrowing costs directly attributable to the acquisition, construction or production of an asset that necessarily takes a substantial period of time to get ready for its intended use or sale are capitalised as part of the cost of the respective assets. All other borrowing costs are expensed in the period they are incurred. Borrowing costs consist of interest and other costs that an entity incurs in connection with the borrowing of funds.
4.13 Long-term leases Leases of property, plant or equipment which transfer substantially all the risks and rewards of ownership to the lessee are classified as finance leases. Finance leases are capitalised at the lower of the fair value of the leased assets and the present value of the minimum lease payments. The outstanding rental obligations, net of finance charges, are included in other long-term payables, while the interest element is charged to the income statements over the lease period. The property, plant or equipment acquired under finance leases is depreciated over the useful life of the asset. Operating lease payments are recognised as an expense in the income statement on a straight line basis over the lease term. 77
Annual Report 2010
4.14 Impairment of assets At each reporting date, the Company and its subsidiaries perform impairment reviews in respect of the property, plant and equipment and intangible assets whenever events or changes in circumstances indicate that an asset may be impaired. An impairment loss is recognised when the recoverable amount of an asset, which is the higher of the asset’s fair value less costs to sell and its value in use, is less than the carrying amount. In determining value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by a valuation model that, based on information available, reflects the amount that the Company and its subsidiaries could obtain from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. An impairment loss is recognised in the income statement.
4.15 Employee benefits Salaries, bonuses and contributions to the social security fund and provident fund are recognised as expenses when incurred.
4.16 Provisions Provisions are recognised when the Company and its subsidiaries have a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.
4.17 Income tax Income tax is provided in the accounts at the amount expected to be paid to the taxation authorities, based on the taxable profits determined in accordance with tax legislation.
5. Significant accounting judgments and estimates
The preparation of financial statements in conformity with generally accepted accounting principles at times requires management to make subjective judgments and estimates regarding matters that are inherently uncertain. These judgments and estimates affect reported amounts and disclosures and actual results could differ from these estimates. Significant judgments and estimates are as follows:
Lease
In determining whether a lease is to be classified as an operating lease or finance lease, the management is required to use judgment regarding whether significant risk and rewards of ownership of the leased asset has been transferred, taking into consideration terms and conditions of the arrangement.
Allowance for doubtful accounts
In determining an allowance for doubtful accounts, the management needs to make judgment and estimates based upon, among other things, past collection history, aging profile of outstanding debts and the prevailing economic condition.
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Major Development Public Company Limited
Property plant and equipment and depreciation
In determining depreciation of plant and equipment, the management is required to make estimates of the useful lives and salvage values of the Company and its subsidiaries’ plant and equipment and to review estimate useful lives and salvage values when there are any changes. In addition, the management is required to review property, plant and equipment for impairment on a periodical basis and record impairment losses in the period when it is determined that their recoverable amount is lower than the carrying amount. This requires judgments regarding forecast of future revenues and expenses relating to the assets subject to the review.
Intangible assets
The initial recognition and measurement of intangible assets, and subsequent impairment testing, require management to make estimates of cash flows to be generated by the asset or the cash generating units and to choose a suitable discount rate in order to calculate the present value of those cash flows.
Litigation
The Company has contingent liabilities as a result of litigation. The Company’s management has used judgment to assess of the results of the litigation and believes that no loss will result. Therefore no contingent liabilities are recorded as at the balance sheet date.
6. Cash and cash equivalents (Unit: Baht)
Consolidated financial 2010 2009
Cash Bank deposits Total
134,213 99,905,652 100,039,865
104,492 53,890,460 53,994,952
Separate financial statements 2010 2009
109,072 38,369,733 38,478,805
99,010 47,251,048 47,350,058
As at 31 December 2010, bank deposits in savings accounts and fixed deposits carried interest between 0.50% to 1.75% per annum (2009: between 0.50% to 1.75% per annum).
7. Trade accounts receivable (Unit: Baht)
Consolidated financial 2010 2009
Trade accounts receivable - sales of property - Installments due - Unbilled completed work Total
6,167,352 1,093,243,953 1,099,411,305
79
Annual Report 2010
12,480,197 2,064,559,626 2,077,039,823
Separate financial statements 2010 2009
6,167,352 12,480,197 1,093,243,953 2,064,559,626 1,099,411,305 2,077,039,823
The balances of trade accounts receivable as at 31 December 2010 and 2009, aged on the basis of due dates, are summarised below. (Unit: Baht)
Consolidated financial 2010 2009
Trade accounts receivable - sales of property Not over 3 months 3 - 6 months 6 - 12 months Over 12 months
3,838,703 391,060 992,534 945,055 6,167,352 1,093,243,953 1,099,411,305
Add: Unbilled completed work Total
8,986,348 221,018 1,113,101 2,159,730 12,480,197 2,064,559,626 2,077,039,823
Separate financial statements 2010 2009
3,838,703 8,986,348 391,060 221,018 992,534 1,113,101 945,055 2,159,730 6,167,352 12,480,197 1,093,243,953 2,064,559,626 1,099,411,305 2,077,039,823
Additional information on trade accounts receivable - sales of property. (Unit: Baht)
Consolidated financial 2010 2009
Total estimated project value Total value of contracts signed Percentage of total project sales Installments due Less: Collections Accounts receivable installments due Revenues recognised Less: Installments due Installment received in advance Unbilled completed work
Separate financial statements 2010 2009
27,319,035,000 21,650,000,000 24,319,035,000 18,650,000,000 16,191,076,724 12,591,442,590 14,911,977,859 11,729,687,629 59% 58% 61% 63% 10,257,095,159 6,296,633,173 10,257,095,159 6,296,633,173 (10,250,927,807) (6,284,152,976) (10,250,927,807) (6,284,152,976) 6,167,352 12,480,197 6,167,352 12,480,197 11,378,726,318 8,420,921,097 11,378,726,318 8,420,921,097 (10,257,095,159) (6,296,633,173) (10,257,095,159) (6,296,633,173) (28,387,206) (59,728,298) (28,387,206) (59,728,298) 1,093,243,953 2,064,559,626 1,093,243,953 2,064,559,626
As at 31 December 2010, the Company has 1 debtor (2009: 4 debtors) of Baht 0.93 million (2009: Baht 2.75 million) in default of payment of which the recognition of income has ceased.
80
Major Development Public Company Limited
8. Land and construction in progress As at 31 December 2010 and 2009, details of the land and construction in progress are as follows: (Unit: Baht)
Consolidated financial 2010 2009
Land cost Construction in progress Capitalised interest Total Less: Accumulated transferred to cost of sales Transferred to property, plant and equipment Net
Separate financial statements 2010 2009
4,420,864,294 3,492,119,294 3,835,344,294 2,995,139,294 8,547,044,748 7,088,969,985 8,018,474,264 6,754,557,144 702,213,862 573,935,885 614,141,446 516,280,429 13,670,122,904 11,155,025,164 12,467,960,004 10,265,976,867 (7,897,850,017) (5,778,519,526) (7,897,850,017) (5,778,519,526) (388,764,364) (6,914,833) (388,764,364) (6,914,833) 5,383,508,523 5,369,590,805 4,181,345,623 4,480,542,508
Land and construction thereon with carrying values as at 31 December 2010 amounting to Baht 5,206.40 million (Separate financial statements: Baht 4,093.40 million) (2009: Baht 5,285.45 million, Separate financial statements: Baht 4,396.40 million) have been mortgaged with local commercial banks as collateral against bank overdrafts and long-term loans as described in Notes 13 and 15 to the financial statements. During the year 2010, the Company and its subsidiaries capitalised interest amounting to Baht 119.39 million (Separate financial statements: Baht 88.97 million) (2009: Baht 190.35 million, Separate financial statements: Baht 163.94 million) to the costs of land and construction in progress. The capitalisation rates of interest are based on the borrowing costs of the specific loans, as described in Notes 13, 15 and 16 to the financial statements.
9. Investments in subsidiaries
Details of investments in subsidiaries as presented in separate financial statements are as follows: (Unit: Baht)
Company’s name
Paid-up capital Shareholding percentage Cost 2009 2010 2009 2010 2009 2010
Percent Percent M J A I Development Company Limited Major Development Hotels and Resorts Company Limited Major Development Residense Company Limited Major Realty Company Limited Total
12,750,000
12,750,000
51
51
12,750,000
12,750,000
60,000,000 100,000,000 150,000,000
60,000,000 100,000,000 -
100 100 100
100 100 -
59,999,300 99,999,400 149,999,960 322,748,660
59,999,300 99,999,400 172,748,700
In May and September 2010, the Company invested in the ordinary shares of Major Realty Company Limited, which is engaged in the development of properties for sales, with a registered and paid-up share capital of Baht 150 million. The Company holds 14,999,996 ordinary shares of this subsidiary with a par value of Baht 10 per share, representing a 99.99% shareholding. Its subsidiary has no income from operation.
81
Annual Report 2010
10. Property, plant and equipment
(Unit: Baht) Consolidated financial statements
Land
Temporary Office buildings building and and office temporary Furniture building building and Office improvement improvement fixtures equipment
Cost 31 December 2009 288,751,187 16,638,295 127,045,023 Acquisitions - 1,417,741 160,000 Disposals Write off - (65,087,316) Transfer in (out) - 12,751,344 Transfer from land and construction in progress 365,638,155 Capitalised interest for transfer from land and construction in progress Capitalised interest 31 December 2010 654,389,342 18,056,036 74,869,051 Accumulated depreciation 31 December 2009 - 16,638,274 82,838,542 Depreciation for the year - 104,097 20,194,203 Depreciation on disposals Depreciation on write off - (64,347,933) 31 December 2010 - 16,742,371 38,684,812 Net book value 31 December 2009 288,751,187 21 44,206,481 31 December 2010 654,389,342 1,313,665 36,184,239 Depreciation charge included in income statements for the years 2009 2010
Furniture and fixtures
Construction in Vehicles progress
Total
34,957,081 19,164,788 67,788,282 18,398,600 30,543,004 603,286,260 - 4,724,612 6,208,981 7,220,300 108,166,277 127,897,911 - (325,953) (325,953) - (5,367,964) (15,406,479) - (680,154) (86,541,913) - (12,751,344) 7,321,243
-
-
-
-
372,959,398
- 8,890,133 8,890,133 - 11,333,313 11,333,313 42,278,324 18,521,436 58,264,831 25,618,900 145,501,229 1,037,499,149 5,688,327 12,564,948 34,808,005 14,018,898 1,778,944 2,750,957 11,025,338 3,438,699 - (48,044) - (5,264,662) (15,339,200) 7,467,271 10,051,243 30,446,099 17,457,597 29,268,754 34,811,053
6,599,840 32,980,277 8,470,193 27,818,732
- 166,556,994 - 39,292,238 (48,044) - (84,951,795) - 120,849,393
4,379,702 30,543,004 8,161,303 145,501,229
436,729,266 916,649,756 42,826,320 39,292,238
82
Major Development Public Company Limited
(Unit: Baht) Separate financial statements
Land
Temporary Office buildings building and and office temporary Furniture building building and Office improvement improvement fixtures equipment
Cost 31 December 2009 81,147,900 16,638,295 120,049,128 Acquisitions - 160,000 Disposals Write off - (65,087,316) Transfer in (out) - 12,194,792 Transfer from land and construction in progress 365,638,155 Capitalised interest for transfer from land and construction in progress Capitalised interest 31 December 2010 446,786,055 16,638,295 67,316,604 Accumulated depreciation 31 December 2009 - 16,638,274 82,485,873 Depreciation for the year - 18,701,706 Depreciation on disposals Depreciation on write off - (64,347,933) 31 December 2010 - 16,638,274 36,839,646 Net book value 31 December 2009 81,147,900 21 37,563,255 31 December 2010 446,786,055 21 30,476,958 Depreciation charge included in income statements for the years 2009 2010
Furniture and fixtures
Construction in Vehicles progress
Total
34,957,081 18,594,677 49,851,657 18,398,600 670,154 340,307,492 - 3,354,367 6,099,225 7,220,300 29,784,434 46,618,326 - (325,953) (325,953) - (5,367,964) (15,406,479) - (680,154) (86,541,913) - (12,194,792) 7,321,243
-
-
-
-
372,959,398
- 8,890,133 - 5,530,381 42,278,324 16,581,080 40,218,450 25,618,900 32,000,156
8,890,133 5,530,381 687,437,864
5,688,327 12,409,490 30,234,750 14,018,898 1,778,944 2,530,532 7,431,732 3,438,699 - (48,044) - (5,264,662) (15,339,200) 7,467,271 9,675,360 22,279,238 17,457,597 29,268,754 34,811,053
6,185,187 19,616,907 6,905,720 17,939,212
- 161,475,612 - 33,881,613 (48,044) - (84,951,795) - 110,357,386
4,379,702 670,154 8,161,303 32,000,156
178,831,880 577,080,478 38,563,505 33,881,613
83
Annual Report 2010
During the year 2010, the Company transferred land and work under construction of Baht 372.64 million from land and construction in progress account of Equinox Phahol-Vibha project to property, plant and equipment account because it intends to develop the land and construction for the Equinox Office and Mall Project, which is an office and shop rental project. As at 31 December 2010, a subsidiary had an outstanding balance of land and work under construction of a hotel of Baht 321.10 million (2009: Baht 237.48 million). The hotel facility is financed by a financial institution and the Company and the amount of borrowing costs capitalised during the year ended 31 December 2010 was Baht 5.80 million (2009: Baht 5.82 million). The weighted average rate used to determine the amount of borrowing costs eligible for capitalisation was 4.50% to 4.75% (2009: 4.50% to 5.25%). As at 31 December 2010, the Company and its subsidiaries had vehicles and equipment under finance lease agreements with net book values amounting to Baht 8.50 million (2009: Baht 3.95 million) and in separate financial statements amounting to Baht 8.29 million (2009: Baht 3.82 million). As at 31 December 2010, certain plant and equipment items have been fully depreciated but are still in use. The gross carrying amount (before deducting accumulated depreciation) of those assets amounted to Baht 31.50 million (2009: Baht 105.83 million). Land, buildings and condominium units with carrying values as at 31 December 2010 amounting to Baht 870.89 million (2009: Baht 384.82 million) (Separate financial statements: Baht 544.07 million, 2009: Baht 140.35 million) have been mortgaged with local commercial banks as collateral against bank overdrafts, short-term and long-term loans, as described in Notes 13 and 15 to the financial statements.
11. Intangible assets Details of intangible assets which are computer software are as follows : (Unit: Baht)
Consolidated Separate financial statements financial statements
Cost 31 December 2009 Acquisitions Write-off 31 December 2010
7,444,561 791,030 (271,031) 7,964,560
7,444,561 679,048 (271,031) 7,852,578 (Unit: Baht)
Consolidated Separate financial statements financial statements
Amortisation and impairment 31 December 2009 Amortisation for the year Write-off 31 December 2010 Net book value 31 December 2009 31 December 2010
12. Land awaiting development
608,295 635,302 (209) 1,243,388
608,295 630,836 (209) 1,238,922
6,836,266 6,721,172
6,836,266 6,613,656
Land awaiting development is a plot of land in Nontaburi Province awaiting use in a future project. It is presented at cost, which consists of the cost of land and related expenses. 84
Major Development Public Company Limited
13. Bank overdrafts and short-term loans from financial institutions (Unit: Baht)
Consolidated financial 2010 2009
Bank overdrafts Short-term loans from financial institutions Total
41,410,930 52,500,000 93,910,930
90,763,318 129,750,500 220,513,818
Separate financial statements 2010 2009
31,747,470 52,500,000 84,247,470
80,806,067 129,750,500 210,556,567
As at 31 December 2010, short-term loans obtained from a local commercial bank matured in January 2011, and carried interest rate at 2.25% per annum. The short-term loans are secured by the mortgage of the land, buildings and a condominium unit (Note 10 to the financial statements), land awaiting development (Note 12 to the financial statements) and by the guarantees of the directors. Bank overdrafts carry interest at MOR per annum and are secured by the mortgage of the Company’s and subsidiaries’ land and construction and a condominium unit, as described in Notes 8 and 10 to the financial statements, and the land of the director and by the guarantees of the directors.
14. Liabilities under finance lease agreements (Unit: Baht)
Consolidated financial 2010 2009
Liabilities under financial lease agreements Less: Deferred interest expenses Total Less: Portion due within one year Liabilities under finance lease agreements long-term portion
Separate financial statements 2010 2009
7,479,045 (977,494) 6,501,551 (1,295,483)
242,094 (32,884) 209,210 (129,869)
7,279,365 (951,454) 6,327,911 (1,198,567)
117,443 (16,387) 101,056 (75,792)
5,206,068
79,341
5,129,344
25,264
The Company and its subsidiaries have entered into finance lease agreements with leasing companies for rental of vehicles and equipment for use in their operations, whereby they are committed to pay rental on a monthly basis. The term of the agreements is generally 3 years. As at 31 December 2010, future minimum lease payments of the Company and its subsidiaries required under the finance lease agreements were as follows: Less than 1 year Future minimum lease payments Deferred interest expenses Present value of future minimum lease payments
1.55 (0.25) 1.30
1-3 years 5.93 (0.73) 5.20
(Unit: Million Baht)
Total
7.48 (0.98) 6.50
As at 31 December 2010, future minimum lease payments of the Company required under the finance lease agreements were as follows: Less than 1 year Future minimum lease payments Deferred interest expenses Present value of future minimum lease payments
85
Annual Report 2010
1.43 (0.23) 1.20
1-3 years 5.85 (0.72) 5.13
(Unit: Million Baht)
Total
7.28 (0.95) 6.33
15. Long-term loans from financial institutions
These long-term loans from financial institutions are secured loans which the Company and its subsidiaries obtained from local commercial banks, as detailed below.
Total credit facility (1) Baht 1,200 million (2009: Baht 1,000 million)
Credit facilities which have yet to be drawn down as at Interest rate 31 December 2010 per annum 125,500,000
(2) Baht 670 million
-
(3) Baht 820 million
-
(4) Baht 690 million
-
(5) Baht 1,055 million
-
(6) Baht 287 million
227,000,000
(7) Baht 646 million
443,000,000
(8) Baht 90 million (2009: Baht 50 million)
-
Principal repayment condition
Separate financial financial statements
2010
2010
31 December 31 December 31 December 31 December
MLR Repayment when the mortgage of 307,793,075 which is repayable the condominium units in the monthly Watermark Chaophraya River project is redeemed, at the higher amount of a rate of not less than 55% of the selling price of a unit, or at a rate of not less than Baht 54,000 per square metre calculated on the basis of the title deed to the condominium, and to be repaid within December 2012. MLR-0.50%, Repayment when the mortgage of which is repayable the condominium units in the monthly Wind Ratchayothin project is redeemed, at a rate of not less than 65% of the selling price of a unit, and to be repaid within 3 years commencing from the date on which the loan is drawn down. MLR, Repayment when the mortgage of which is repayable the condominium units in the monthly Aguston Sukhumvit 22 project is redeemed, at a rate of not less than 65% of the selling price of a unit, and to be repaid within 48 months commencing from the date on which the loan is drawn down. MLR - 0.50%, Repayment when the mortgage of which is repayable the condominium units in the monthly Wind Sukhumvit 23 project is redeemed, at a rate of not less than 65% of the selling price of a unit, and to be repaid within February 2012. MLR - 1.75%, Repayment when the mortgage of 1,055,000,000 which is repayable the condominium units in the monthly Marrakesh Hua Hin Residences project is redeemed, at a rate of not less than 65% of the selling price of a unit, and to be repaid within 3 years commencing from the date on which the loan is drawn down. MLR - 0.25%, Repayment when the mortgage of 60,000,000 which is repayable the condominium units in the monthly Phayathai project is redeemed at a rate of not less than 60% of selling price of a unit, and to be repaid within March 2012. MLR - 0.25%, Repayment when the mortgage of 203,000,000 which is repayable the condominium units in the monthly Surawong project is redeemed, at a rate of not less than 60% of selling price of a unit, and to be repaid within September 2012. MLR(SCB) + 2.00% Repayment not less than installments which is repayable of Baht 7.3 million within 1 year commencing quarterly from the agreement date and to be repaid within 4 years commencing from the agreement date.
86
Major Development Public Company Limited
(Unit: Baht)
Consolidated financial statements 2009
2009
-
307,793,075
-
655,232,000
-
655,232,000
819,986,815
-
819,986,815
425,577,475
-
425,577,475
475,000,000 1,055,000,000
475,000,000
60,000,000
60,000,000
60,000,000
203,000,000
203,000,000
203,000,000
15,836,275
-
15,836,275
Total credit facility
Credit facilities which have yet to be drawn down as at Interest rate 31 December 2010 per annum
(9) Baht 1,083.75 million
-
(10) Baht 303 million
-
(11) Baht 207 million
135,500,000
(12) Baht 813 million
619,000,000
(13) Baht 642 million
441,000,000
(14) Baht 566 million
98,891,162
(15) Baht 778 million
707,300,000
(16) Baht 948 million
643,000,000
Principal repayment condition
87
Separate financial financial statements
2010
2010
31 December 31 December 31 December 31 December
MLR(SCB) + 1.00%, Repayment when the mortgage of which is repayable the condominium units in the Watermark quarterly Chaophraya River project is redeemed, at a rate of not less than Baht 50,000 per s quare metre and to be repaid within 72 months commencing from the agreement date. MLR(SCB) + 2.00%, Repayment as from November 2009, in which is repayable quarterly and to be repaid within 72 months quarterly commencing from the agreement date. MLR - 0.25%, Repayment when the mortgage of which is repayable the condominium units in the Collezio project monthly is redeemed, at the higher amount of a rate of the 65% of selling price of a unit or at a rate of not less than Baht 84,500 per square metre calculated on the basis of the title deed to the condominium or the mortgage value per unit sold. MLR – 0.25%, Repayment when the mortgage of which is repayable the condominium units in the Equinox monthly Phahol-Vibha project is redeemed, at the higher amount of a rate of the 65% of selling price of a unit or at a rate of not less than Baht 62,700 per square metre calculated on the basis of the title deed to the condominium or the mortgage value per unit sold. MLR – 0.25%, Repayment as from September 2014, which is repayable in quarterly and to be repaid within monthly 31 December 2019. MLR + 0.25%, Repayment when the mortgage of which is repayable the condominium units in the Aguston monthly Sukhumvit 22 project is redeemed, at a rate of the 65% of selling price of a unit for sold unit, at the higher amount of a rate of 70% of selling price of a unit or a rate of not less than Baht 59,500 per square metre for unsold unit and to be repaid within 18 months commencing from the agreement date. MLR-0.50% Repayment when the mortgage of the for the first and condominium units in the M Ladprao project second years and is redeemed, at the higher amount of a rate MLR from the of 70% of selling price of a unit or at the rate third years onwards, of Baht 85,050 per square metre calculated which is repayable on the basis of the contract to purchase monthly and to sell, and to be repaid within 42 months commencing from the agreement date. MLR for the Repayment when the mortgage of first facility the condominium units in the Royce Private amounting to Residences Sukhumvit 31 project is Baht 248 million redeemed at the higher amount of a rate and MOR for the of not less than 60% of the selling price of second facility a unit, or at the rate of Baht 72,000 per amounting to Baht square metre calculated on the basis of 700 million, which is the title deed to the condominium or the repayable monthly mortgage value per unit sold.
Annual Report 2010
(Unit: Baht)
Consolidated financial statements 2009
-
254,910,155
-
- 302,890,003 71,500,000
2009
-
254,910,155
- 302,890,003 71,500,000
-
194,000,000
-
194,000,000
-
201,000,000
-
201,000,000
-
350,648,699
-
350,648,699
-
70,700,000
-
70,700,000
-
305,000,000
248,000,000
-
-
Total credit facility
Credit facilities which have yet to be drawn down as at Interest rate 31 December 2010 per annum
(17) Baht 398 million
234,659,000
(18) Baht 1,000 million
1,000,000,000
Principal repayment condition
(Unit: Baht)
Consolidated financial statements
Separate financial financial statements
2010
2010
31 December 31 December 31 December 31 December
MLR-1.75%, Baht 150 million is to be paid after 163,341,000 which is repayable Major Development Public Company Limited monthly (the parent company) completes redemption of the condominium units of the Marakesh Hua Hin Residences project from mortgage and makes full payment of the loan for this project. The balance of the loan is to be repaid in quarterly installments, from March 2012 with settlement scheduled to be completed in 31 December 2020. MLR-1.00%, Repayment when the mortgage of which is repayable the condominium units in the Reflection Pattaya monthly project is redeemed, at the rate of not less than 65% of the selling price of a unit, and to be repaid within 4 years commencing from the date on which loan is first drawn down.
Total long-term loans Less: Current portion Long-term portion
2009
2009
125,000,000
-
-
-
-
-
2,981,982,774 3,585,432,723 2,513,641,774 3,212,432,723 (1,713,441,774) (2,214,818,940) (1,713,441,774) (2,214,818,940) 1,268,541,000 1,370,613,783 800,200,000 997,613,783
The Company and its subsidiaries have mortgaged the land and construction thereon of condominium projects (Note 8 to the financial statements), the land, buildings and condominium units (Note 10 to the financial statements) and land awaiting development (Note 12 to the financial statements), with banks to secure the long-term loans. In addition, long-term loans of the Company are guaranteed by the Company’s directors, and a fixed deposit of the Company has been placed as collateral. Long-term loan of subsidiary is guaranteed by the Company. Some loan agreements contain covenants that, among other things, require the Company to maintain certain debt to equity ratio.
16. Related party transactions
During the years, the Company and its subsidiaries had significant business transactions with related parties. Such transactions, which are summarised below, arose in the ordinary course of business and were concluded on commercial terms and bases agreed upon between the Company and those related parties. (Unit: Baht)
Consolidated Separate Transfer pricing policy financial statements financial statements 2010 2009 2010 2009 Transaction with subsidiaries (Eliminated from the consolidated financial statements) Interest income Management fee income Transactions with related persons Sales of units in condominium projects Interest expense (partly charged to project costs) Consulting fee
-
- 16,536,104 12,191,972
-
-
9,000,000
9,000,000
28,874,543 26,247,597
5,042,141 28,874,543 10,670,673 11,600,095
5,042,141 -
2,400,000
1,200,000
1,200,000
88
2,400,000
Major Development Public Company Limited
4.50% to 6.50% per annum (2009: 4.50% to 7.00% per annum) Contract value Contract value 4.55% to 7.00% per annum (2009: 4.50% to 7.00% per annum) Contract value
As at 31 December 2010 and 2009, the balances of the accounts between the Company and those related parties are as follows: (Unit: Baht)
Consolidated financial 2010 2009
Trade accounts receivable Related persons Accounts receivable and advances to related parties Subsidiaries M J A I Development Company Limited Major Development Hotels and Resorts Company Limited Major Development Residense Company Limited Related persons Other current assets - prepaid consulting fee Related persons Long-term loans to subsidiaries Subsidiaries M J A I Development Company Limited Major Development Hotels and Resorts Company Limited Less: Current portion Long-term portion Deposits and advances from customers Related persons Accrued expenses - advances received and accrued interest on loans from related parties Related persons Minority shareholders of subsidiary Tmilestone Limited Base Lead Investment AIG Asian Real Estate Partner II Advance received from sale of land Subsidiary Major Development Residense Company Limited Long-term loan from director Director Long-term loans from minority shareholders of subsidiary Tmilestone Limited Base Lead Investment AIG Asian Real Estate Partner II
Separate financial statements 2010 2009
-
825,000
-
825,000
5,019,661 5,019,661
-
39,664,627 28,928,580 480,440 5,019,661 74,093,308
30,931,652 14,437,772 380,120 45,749,544
-
100,000
-
100,000
-
-
258,876,000 39,926,000 298,802,000 (258,876,000) 39,926,000
222,093,000 21,896,000 243,989,000 243,989,000
546,020
2,314,703
346,020
2,114,703
4,464,110
-
3,264,110
-
19,635,136 14,822,942 2,601,578 41,523,766
22,411,255 22,411,255
3,264,110
-
-
-
100,000,000
100,000,000
185,000,000
-
185,000,000
-
131,772,960 99,489,600 17,461,440 248,724,000
215,404,000 215,404,000
-
-
On 22 December 2008, the Company entered into the contract to purchase and to sell land with its subsidiary. Selling price set at Baht 119.1 million, which was cost of land. On the agreement date the Company received a deposit of Baht 100 million, with the remaining amount to be paid and the possessory right transferred in April 2011. 89
Annual Report 2010
During 2010, movements of long-term loans to subsidiaries, long-term loan from director and long-term loans from minority shareholders of subsidiary are as follows: (Unit: Baht)
Separate financial statements 1 January 31 December 2010 Increase Decrease 2010 Long-term loans to subsidiaries M J A I Development Company Limited Major Development Hotels and Resorts Company Limited Long-term loan from director Director
222,093,000 21,896,000 243,989,000
36,783,000 18,030,000 54,813,000
-
258,876,000 39,926,000 298,802,000
-
342,000,000
(157,000,000)
185,000,000 (Unit: Baht)
Consolidate financial statements 1 January 31 December 2010 Increase Decrease 2010 Long-term loans from minority shareholders of subsidiary Tmilestone Limited Base Lead Investment AIG Asian Real Estate Partner II Long-term loan from director Director
215,404,000 215,404,000
23,067,200 99,489,600 17,461,440 140,018,240
(106,698,240) (106,698,240)
131,772,960 99,489,600 17,461,440 248,724,000
-
342,000,000
(157,000,000)
185,000,000
Long-term loan to M J A I Development Company Limited and long-term loans from minority shareholders of a subsidiary are for using in Royce Private Residence Sukhumvit 31 condominium project. They carry interest at the rate of TISCO’s standard loan (MLR) and mature at the earlier of 1 November 2011 or the date of the development of the project is completed and all liabilities are completely discharged to TISCO Bank Public Company Limited. Long-term loan to Major Development Hotels and Resorts Company Limited carries interest at the rate of MLR of Bank of Ayudhya Public Company Limited less 1.75% and matures on 19 June 2013. Long-term loan from director carries interest at the rate of TISCO’s standard loan (MLR) plus 0.50% and matures on 29 March 2012.
Guarantee obligations with related parties
The Company had Baht 398 million and Baht 10 million outstanding guarantees of a long-term loan and overdraft facilities of Major Development Hotels and Resorts Company Limited, respectively, which obtained from a local commercial bank. No fee charge for such guarantees.
90
Major Development Public Company Limited
17. Share capital
On 19 May 2010, the Company increased its registered share capital from Baht 700 million to Baht 1,050 million by increasing additional 350 million ordinary shares at par value of Baht 1.00 per share to support the exercise of the warrants described in Note 21 to the financial statements. During 2010, movements of the number of issued and paid-up ordinary shares, issued and paid-up share capital and premium on ordinary shares are as follows: Number of issued and paid-up shares (Shares)
Balance as at 31 December 2009 Increase from warrants No. 1 exercised Balance as at 31 December 2010
700,000,000 4,058,000 704,058,000
Issued and paid-up Premium on share capital ordinary shares (Baht) (Baht)
700,000,000 4,058,000 704,058,000
714,855,000 4,058,000 718,913,000
18. Statutory reserve
Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside to a statutory reserve at least 5% of its net income after deducting accumulated deficit brought forward (if any), until the reserve reaches 10% of its registered share capital. The statutory reserve is not available for dividend distribution. As at 31 December 2010 and 2009, the Company has transferred net income amounting to Baht 12.2 million and Baht 15.7 million, respectively, to the statutory reserve.
19. Expenses by nature
Significant expenses by nature are as follows: (Unit: Baht)
Consolidated financial 2010 2009
Salary and wages and other employee benefits Depreciation Commission expenses Advertising and promotion expenses Specific business tax Surcharges of income tax
102,573,584 39,292,238 41,314,884 108,709,904 67,322,031 10,050,796
20. Corporate income tax
86,965,002 42,826,320 30,672,424 63,078,604 5,057,982 11,025,157
Separate financial statements 2010 2009
94,464,930 33,881,613 35,501,564 105,085,131 67,322,031 10,050,796
86,965,002 38,563,505 26,244,216 56,466,547 5,057,982 11,025,157
Corporate income tax for the years 2010 and 2009 have been calculated at the rate of 25% of net income, after adding back certain provisions and expenses which are not deductible for tax computation purposes. This tax rate is in compliance with the provisions of Royal Decree 475 (B.E. 2551) dated 6 August 2008, issued under the Revenue Code, regarding the reduction of income tax rates.
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Annual Report 2010
21. Warrants
On 29 June 2010, the Company issued warrants to purchase the Company’s ordinary shares No 1. (MJD-W1) to its existing shareholders at the ratio of 2 existing ordinary shares per 1 unit of warrant, the category of which is registered and transferable. The details of the warrants are summarised below. Number of warrants : 349,999,983 units Offering price : Baht 0 per unit Exercise ratio and price : 1 unit of warrant per 1 ordinary share, at a price of Baht 2.00 per share Term of the warrant : 3 years from the issuance date (29 June 2010 to 28 June 2013) with the first exercise date being 30 September 2010 The Company lists the warrants on the Stock Exchange of Thailand, with the trading permitted to commence from 15 July 2010. During the year 2010, shareholders exercised warrants to purchase ordinary shares as follows.
Exercise period
Number of ordinary shares Exercise price Amount (Million shares) (Baht per share) (Million Baht)
30 September 2010 30 December 2010 Total
4.0 0.2 4.2
2.0 2.0
8.1 0.4 8.5
Date trading Date registered commenced on with the Ministry the Stock of Commerce Exchange of Thailand
11 October 2010 13 January 2011
18 October 2010 18 January 2011
The Company recorded the total of Baht 0.4 million received as a result of the exercise of warrants on 30 December 2010 under the caption “Cash receipts from share subscription”, presenting it under shareholders’ equity in the balance sheet. During 2010, movements of warrants are as follows: Units
Number of warrants as at 29 June 2010 Number of warrants exercised during the period Number of warrants as at 31 December 2010
349,999,983 (4,278,500) 345,721,483
22. Dividends paid (Unit: Baht)
Dividends Final dividends for 2008 Interim dividends for 2009 Total for 2009 Final dividends for 2009 Total for 2010
Approved by
Total dividends
Dividend per share
Annual General Meeting of the shareholders on 24 April 2009 Board of Director Meeting on 28 October 2009
105,000,000
0.15
104,998,830
0.15
209,998,830
0.30
105,000,000 105,000,000
0.15 0.15
Annual General Meeting of shareholders on 30 April 2010
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Major Development Public Company Limited
23. Provident fund
The Company and its employees have jointly established a provident fund in accordance with the Provident Fund Act B.E. 2530. Both employees and the Company contributed to the fund monthly at the rates of 3% to 10% of basic salary. The fund which is managed by Thai Military Bank Public Company Limited will be paid to employees upon termination in accordance with the fund rules. During the year 2010, the Company contributed Baht 2.8 million (2009: Baht 2.5 million) to the fund.
24. Earnings per share
Basic earnings per share is calculated by dividing net income for the year by the weighted average number of ordinary shares in issue during the year. Diluted earnings per share is calculated by dividing net income for the year by the weighted average number of ordinary shares in issue during the year plus the weighted average number of ordinary shares which would need to be issued to convert all dilutive potential ordinary shares into ordinary shares. The calculation assumes that the conversion took place either at the beginning of the year or on the date the potential ordinary shares were issued. The following table sets forth the computation of basic and diluted earnings per share: Consolidated financial statements Weighted average Earnings per share Net income number of ordinary shares 2010 2009 2010 2009 2010 2009
(Thousand (Thousand (Thousand (Thousand Baht) Baht) shares) shares)
Basic earnings per share Net income attributable to equity holders of the parent Effect of dilutive potential ordinary shares Warrants to be allotted to existing shareholders Diluted earnings per share Net income of ordinary shareholders assuming the conversion of warrants to ordinary shares
189,466
406,609
701,035
-
127,036
189,466
828,071
700,000
(Baht)
(Baht)
0.27
0.58
0.23
Separate financial statements Weighted average Earnings per share Net income number of ordinary shares 2010 2009 2010 2009 2010 2009
(Thousand (Thousand (Thousand (Thousand Baht) Baht) shares) shares)
Basic earnings per share Net income attributable to equity holders of the parent 243,632 Effect of dilutive potential ordinary shares Warrants to be allotted to existing shareholders Diluted earnings per share Net income of ordinary shareholders assuming the conversion of warrant ordinary shares 243,632
444,808
701,035
700,000
(Baht)
0.35
127,036
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Annual Report 2010
828,071
0.29
(Baht)
0.64
25. Commitments
a) As at 31 December 2010, the Company and its subsidiary had outstanding commitments of Baht 2,827.2 million (Separate financial statements: Baht 1,374.6 million) (2009: Baht 1,439.5 million, Separate financial statements: Baht 1,363.6 million) with respect to construction costs of condominium projects and service agreements. b) As at 31 December 2010, the Company has outstanding commitments of Baht 72.8 million and Baht 68.4 million within March 2011 and June 2011, respectively, with respect to the purchases of land under contracts to purchase and to sell made with other persons. A subsidiary has outstanding commitment of Baht 19.1 million within April 2011 with respect to the purchase of land under contract to purchase and to sell made with the Company. c) On 18 July 2008, Major Development Hotels and Resorts Company Limited (subsidiary) entered into a management agreement with a company in Thailand, who is engaged to operate the subsidiary’s hotel for a period of 5 years commencing at the opening date of the Hotel. Under the management agreement, the subsidiary is obliged to pay a management fee at a rate of 1% of adjusted gross revenue and an incentive fee at a rate of 6% of gross operating profit. d) On 22 November 2010, the Company entered into a memorandum to a loan agreement with a local commercial bank. Under this memorandum the Company is obligated to settle Baht 150 million of a subsidiary’s loan from such bank, when the Company has redeemed the condominium units of the Marrakesh Hua Hin Residences project from mortgage and settled the Company’s loan, as described in Note 15(5) to the financial statements.
26. Bank guarantees
As at 31 December 2010, there were outstanding bank guarantees to guarantee electricity use totaling Baht 11.7 million (2009: Baht 16.3 million) (Separate financial statements: Baht 11.6 million, 2009: Baht 16.2 million) which had been issued by the bank on behalf of the Company and its subsidiary. The Company placed deposits at banks of Baht 9.7 million with the bank to secure the issuance of bank guarantees. As at 31 December 2010, there was outstanding bank guarantee of Baht 11 million issued by a bank on behalf of the Company in respect of debt guarantee in accordance with the court’s verdict. The Company pledged deposit at bank of Baht 11 million to secure the issuance of bank guarantee. On 28 January 2011, the Company redeemed such deposit because the case was finished.
27. Litigation
As at 31 December 2010, the following lawsuits have been filed against the Company. a) Four of the Company’s customers sued the Company seeking refunds of payments totaling Baht 20.5 million made for condominiums purchased in the Company’s projects. The lawsuits are currently in the process of being investigated by the Court of First Instance and the Appeal Court. b) Creditors sued the Company for payment of construction expenses and compensation totaling Baht 112.4 million, in 5 cases. However, the Company has lodged disputes of those lawsuits with claims totaling Baht 177.7 million on the grounds that creditors could not perform the work that met the quality and deadlines. The lawsuits are currently in the process of being investigated by the Court of First Instance, the Appeal Court and the Office of Arbitration. The management believes that no material liabilities are likely to arise as a result of the above litigations and therefore no provision has been made in the accounts.
28. Financial instruments 28.1 Financial risk management
The Company and its subsidiaries’ financial instruments, as defined under Thai Accounting Standard No. 107 “Financial Instruments: Disclosure and Presentations”, principally comprise cash and cash equivalents, trade accounts receivable and payable, loans lending, liabilities under finance lease agreements, short-term loans and long-term loans. The financial risks associated with these financial instruments and how they are managed are described below. 94
Major Development Public Company Limited
Credit risk
The Company and its subsidiaries are exposed to credit risk primarily with respect to trade accounts receivable and other receivables. The Company manages the risk by adopting appropriate credit control policies and procedures and therefore does not expect to incur material financial losses. In addition, the Company and its subsidiaries do not have high concentrations of credit risk since they have a large customer base. The maximum exposure to credit risk is limited to the carrying amounts of trade accounts receivable and other receivables as stated in the balance sheet.
Interest rate risk
The Company and its subsidiaries’ exposure to interest rate risk relates primarily to their deposits at banks, loans lending, overdrafts, liabilities under finance lease agreements, short-term and long-term borrowings. However, since most of these financial assets and liabilities bear floating interest rates or fixed interest rates which are close to the current market rate, the interest rate risk is expected to be minimal. Significant financial assets and liabilities as at 31 December 2010 classified by type of interest rates are summarised in the table below, with those financial assets and liabilities that carry fixed interest rates further classified based on the maturity date or the repricing date if this occurs before the maturity date. Consolidated financial statements
Fixed interest rates within 1 year Financial assets Cash and cash equivalents Trade accounts receivable Pledged deposits at banks Financial liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Liabilities under finance lease agreements Long-term loans from financial institutions Long-term loan from director Long-term loans from minority shareholders of subsidiary
Floating Non-interest interest rate bearing (Million Baht)
Total
Interest rate (% p.a.)
0.4 14.2 14.6
99.5 6.5 106.0
0.1 1,099.4 1,099.5
100.0 1,099.4 20.7 1,220.1
0.50 - 1.75 0.75 - 1.75
-
93.9 -
661.4
93.9 661.4
2.00 - 6.875 -
6.5
-
-
6.5
3.10 - 5.50
-
2,982.0 185.0
-
2,982.0 185.0
4.50 - 8.00 6.65 - 7.00
6.5
248.7 3,509.6
661.4
248.7 4,177.5
6.15 - 6.50
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Annual Report 2010
Separate financial statements
Fixed interest rates within 1 year Financial assets Cash and cash equivalents Trade accounts receivable Pledged deposits at banks Long-term loans to subsidiaries Financial liabilities Bank overdrafts and short-term loans from financial institutions Trade accounts payable Liabilities under finance lease agreements Long-term loans from financial institutions Long-term loan from director
Floating Non-interest interest rate bearing (Million Baht)
Total
Interest rate (% p.a.)
0.4 14.2 14.6
38.0 6.5 298.8 343.3
0.1 1,099.4 1,099.5
38.5 1,099.4 20.7 298.8 1,457.4
0.50 - 1.75 0.75 - 1.75 4.50 - 6.50
-
84.2 -
567.5
84.2 567.5
2.00 - 6.875 -
6.3
-
-
6.3
3.10 - 5.50
6.3
2,513.6 185.0 2,782.8
567.5
2,513.6 185.0 3,356.6
4.50 - 8.00 6.65 - 7.00
Foreign currency risk
As at 31 December 2010 the Company and its subsidiaries have no significant financial instruments in foreign currency.
28.2 Fair values of financial instruments
Since the majority of the Company and its subsidiaries’ financial instruments are short-term in nature, loans receivable and payable bear interest rates which are close to the market rate, their fair values are not expected to be materially different from the amounts presented in the balance sheets. A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. The fair value is determined by reference to the market price of the financial instrument or by using an appropriate valuation technique, depending on the nature of the instrument.
29. Segment information
The Company’s and its subsidiaries’ business operations involve 2 principal segments: (1) development of properties for sales and (2) hotel business and related services. These operations are mainly carried on in Thailand. Below is the consolidated financial information of the Company and its subsidiaries by segment.
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Major Development Public Company Limited
(Unit: Million Baht)
For the years ended 31 December 2010 and 2009 Development of Hotel business and Elimination of interConsolidated properties for sales related services segment revenues financial statements 2010 2009 2010 2009 2010 2009 2010 2009
Revenue from external customers Segment income Unallocated income and expenses: Other income Selling expenses Administrative expenses Management benefit expenses Finance cost Corporate income tax Net income
2,910 790
2,977 893
-
-
-
Trade accounts receivable Land and construction in progress - net Property, plant and equipment - net Unallocated assets Total assets
1,099
2,077
-
-
-
5,420 596 1,253
5,391 200 -
32 124
239 -
(37) (3) (791)
-
2,910 790
2,977 893
33 (254) (187) (21) (86) (86) 189
21 (104) (158) (20) (71) (154) 407
-
1,099
2,077
(2) (2) -
5,383 917 586 7,985
5,369 437 425 8,308
30. Capital management
The primary objective of the Company’s capital management is to ensure that it has an appropriate financial structure and preserves the ability to continue its business as a going concern. The Company manages its capital position with reference to its debt-to-equity ratio in order to comply with a condition in long-term loan agreements with financial institutions, which require the Company to maintain a debt-to-equity ratio of not more than 2:1. The Company’s capital used to calculate above financial ratio includes shareholders’ equity and long-term loans from minority shareholders of a subsidiary. No changes were made in the objectives, policies or processes during the years end 31 December 2010 and 2009.
31. Approval of financial statements
The financial statements were authorised for issue by the Company’s Board of Directors on 24 February 2011.
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Annual Report 2010
Explanation and analysis of financial statement and performance (1) Overview of past performance In 2002, the Company started the development of Hampton Thonglor 10 Project, which is the Company’s first high-end highrise condominium. As of the end of 2010, the Company has two completed projects ready to transfer the ownerships. They are Hampton Thonglor 10 and Fullerton Sukhumvit. There are also 8 completed projects, which are Watermark Chaophraya River Tower A and Tower B, Manhattan Chidlom, Mykonos Hua Hin, Wind Sukhumvit 23 (Soi Prasarnmitr), Aguston Sukhumvit 22, Wind Ratchayothin and Marrakesh Hua Hin Residences. The Company also has 6 other projects under development, which are Reflection Jomtien Beach Pattaya, Royce Private Residences, Collezio Sathorn-Pipat, M Silom, M Phyathai and Equinox Phahol-Vibha. The total value of the units that have yet to transfer the ownerships in these 14 projects amounts to Baht 27,900 million, as follows:
Summary of the Company’s condominium projects as of 31 December 2010 Project
Watermark Chaophraya River Tower A Manhattan Chidlom Watermark Chaophraya River Tower B Wind Sukhumvit 23 Wind Ratchayothin Aguston Sukhumvit 22 Mykonos Hua Hin Reflection Jomtien Beach Pattaya Marrakesh Hua Hin Residences Royce Private Residences Collezio Sathorn-Pipat M Silom M Phyathai EQUINOX Phahol-Vibha Note
Project Average Value Sales Area Price per (Baht million) (sq.m.) sq.m. 3,900 1,250 1,800 1,200 1,600 2,000 450 3,300 2,400 3,000 550 2,200 1,850 2,400
49,269 15,477 26,433 13,408 19,988 21,151 7,115 40,873 23,370 26,033 4,251 11,507 10,641 21,369
81,319 80,628 75,301 89,910 78,498 102,946 64,537 85,789 106,687 123,510 119,610 145,292 129,714 95,583
: 1 Percentage of contracted area to total sales area : 2 Percentage of total construction value : 3 Percentage of total project value
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Major Development Public Company Limited
Realised Sales Construction Revenue Progress1 Progress2 Ratio3 % 85.13 100.00 84.69 99.63 100.00 99.46 57.06 100.00 62.38 86.53 100.00 86.50 98.09 100.00 93.46 54.54 100.00 60.36 96.77 100.00 98.75 43.78 6.93 60.88 94.00 54.00 39.78 35.16 55.79 14.60 4.98 18.39 31.66 35.26 -
(2) Performance and financial status Past performance of the business
Last year the total revenue of the Company was at a similar level to the previous year. In 2010, the Company had total realised revenue of Baht 2,942.87 million, slightly down from Baht 2,997.89 million in 2009. The total revenue of the Company comprises sales of condominium units, rental and services revenue and other revenues. Revenue from sales of condominium units Revenue
Revenue from sales Hamton Thong Lor 10 Fullerton Sukhumvit Watermark Chaophraya River Tower A Manhattan Chidlom Watermark Chaophraya River Tower B Wind Sukhumvit 23 Wind Ratchayothin Aguston Sukhumvit 22 Mykonos Hua Hin Marrakesh Hua Hin Residences Collezio Sathorn-Pipat Reflection Jomtien Beach Pattaya Royce Private Residences Sukhumvit 31 M Silom M Phyathai EQUINOX Phahol-Vibha Rental income Other Income Total Revenue
2010 2009 2008 Consolidated Consolidated Consolidated Financial Statement Financial Statement Financial Statement M. Baht % M. Baht % M. Baht %
260.84 58.63 111.66 234.46 525.36 441.57 17.87 1,231.77 27.39
8.86 1.99 3.79 7.97 17.85 15.00 0.61 41.86 0.93
33.32 2,942.87
1.13 100.00
58.89 471.95 89.59 115.96 372.18 761.13 744.41 190.26 172.19
1.96 15.74 2.99 3.87 12.41 25.39 24.83 6.35 5.74
13.22 1,026.52 89.59 595.12 382.04 294.92
0.50 38.64 3.37 22.40 14.38 11.10
234.66
8.83
21.33 2,997.89
0.71 100.00
20.56 2,656.63
0.77 100.00
Remark: 1. Accounting period 1 January to 31 December 2. Other revenues of the company were mainly from, deposit interest earned, the sales of parking rights, deposit from the customer cancellation and revenue from sales of construction bids.
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Annual Report 2010
Revenue from sales of condominium units
In 2008, the revenue from the sales of condominium units was Baht 2,636.07 million, an increase from Baht 2,198.65 million in 2007 or an increase of 19.89%. This was due to the additional realised revenue from 2 projects, namely Wind Ratchayothin and Mykonos Hua Hin of Baht 294.92 million and Baht 235.99 million respectively. In addition, the Company continued to realise revenue from Fullerton Sukhumvit, Watermark Chaophraya River Tower A and Tower B, Manhattan Chidlom and Wind Sukhumvit 23 (Prasarnmitr). In 2008, the Company was therefore able to realise revenue from 7 projects. In 2009, the revenue from the sales of condominium units was Baht 2,976.56 million, an increase from Baht 2,636.07 million in 2008 or an increase of 12.92%. This was due to the additional realised revenue from 2 projects, namely Marrakesh Hua Hin and Aguston Sukhumvit 22 of Baht 172.19 million and Baht 750.11 million respectively. In addition, the Company continued to realise revenue from Fullerton Sukhumvit, Watermark Chaophraya River Tower A and Tower B, Manhattan Chidlom, Wind Sukhumvit 23 (Prasarnmitr), Wind Ratchayothin and Mykonos Hua Hin. In 2009, the Company was therefore able to realise revenue from 9 projects. In 2010, the revenue from the sales of condominium units was Baht 2,909.55 million, a slight decrease from Baht 2,976.56 million in 2009 or a decrease of 2.25. The Company continued to realise revenue from, Watermark Chaophraya River Tower A and Tower B, Manhattan Chidlom, Wind Sukhumvit 23 (Prasarnmitr), Wind Ratchayothin, Mykonos Hua Hin, Aguston Sukhumvit 22 and Marrakesh Hua Hin Residences. At the same time, the Company ceased to realise revenue from Fullerton Sukhumvit, as the project was completely sold out. In 2010, the Company was therefore able to realise revenue from 9 projects. Sold Units (at the end of 2010) Project Watermark Chaophraya River Tower A Manhattan Chidlom Watermark Chaophraya River Tower B Wind Sukhumvit 23 Wind Ratchayothin Aguston Sukhumvit 22 Mykonos Hua Hin Marrakesh Hua Hin Residences Collezio Sathorn-Pipat Reflection Jomtien Beach Pattaya Royce Private Residences M Silom M Phyathai EQUINOX Phahol-Vibha Total
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Major Development Public Company Limited
Total (Units)
Sold (Units)
282 190 204 220 390 269 122 345 95 332 160 161 215 490 3,475
241 189 134 195 381 160 118 210 50 132 64 32 72 178 2,156
The additional sales must received payment of at least 20% of the sales contract in order to realise as revenue. Considering the revenue structure of the Company in 2008, 2009, 2010, the main revenue came from sales of condominium units, which accounted for 99.23%, 99.29% and 98.87% of total revenue respectively. In term of the policy for realised revenue, the Company will realise the revenue when the total area under the sales contracts is not less than 40% of the total sales area, the payment received is not less than 20% of the selling price in the contract and the amount of development works completed is not less than 10% of total development works using the percentage of completion method. The completion work percentage is calculated by comparing the actual construction costs up until the last day of the period with the total estimated development costs, excluding land cost. The Company will cease to realise the revenue for sales contracts that miss more than 3 consecutive payments and the percentage of work completed is higher than the payment that has been paid.
Other revenue
In 2008, the Company had Baht 20.56 million in other revenue, mainly from the sales of parking rights, interest earned and sales of construction bidding documents. The sales of parking rights were from the sales of parking spaces that the customers may wish to have in addition to the parking space received from buying the condominium unit. In 2009, the Company had Baht 21.33 million in other revenue, an increase of Baht 0.77 million from 2008, from the increase in sales of parking rights, interest earned and sales of construction bidding documents in relation to new projects. In 2010, the Company had Baht 33.32 million in other revenue, an increase of Baht 11.99 million from 2009, from the confiscation of deposits in the cases of reservation or sales contract cancellation, interest earned and sales of construction bidding documents that increased with new projects.
Cost of sales
In 2008, the Company had Baht 1,810.76 million in cost of sales from sales of condominium units, an increase of Baht 329.95 million from 2007 or an increase of 22.28%. This was due to the Company started to realise revenue from sales of condominium units in 2 projects; Wind Ratchayothin and Mykonos Hua Hin, which resulted in the Company realising the cost of sales for these projects of Baht 641.34 million and Baht 75.65 million respectively. In 2009, the Company had Baht 2,083.50 million in cost of sales from sales of condominium units, an increase of Baht 272.72 million from 2008 or an increase of 15.06%. This was due to the Company started to realise revenue from sales of condominium units in 2 projects; Marrakesh Hua Hin and Aguston Sukhumvit 22, which resulted in the Company realising the cost of sales for these projects of Baht72.40 million and Baht 500.29 million respectively. In 2010, the Company had Baht 2,119.33 million in cost of sales from sales of condominium units, an increase of Baht 35.83 million from 2009 or an increase of 1.72%. This was due to the Company started to realise revenue from sales of condominium units in 1 projects; Collezio Sathorn-Pipat, which resulted in the Company realising the cost of sales for these projects of Baht 24.18 million.
Gross profit
In 2008, the Company had a gross profit of Baht 845.86 million, an increase of Baht 128.02 million from 2007. This was due to the Company started to realise increase in revenue and cost of sales from Wind Ratchayothin and Mykonos Hua Hin as well as continuing to realise revenue from Fullerton Sukhumvit, Watermark Chaophraya Tower A and B, Manhattan Chidlom and Wind Sukhumvit 23 (Prasarnmitr). 101
Annual Report 2010
In 2009, the Company had a gross profit of Baht 914.36 million, an increase of Baht 68.51 million from 2008. This was due to the Company started to realise increase in revenue and cost of sales from Marrakesh Hua Hin and Aguston Sukhumvit 22 as well as continuing to realise revenue from Fullerton Sukhumvit, Watermark Chaophraya Tower A and B, Manhattan Chidlom, Wind Sukhumvit 23 (Prasarnmitr), Wind Ratchayothin and Mykonos Hua Hin. In 2010, the Company had a gross profit of Baht 790.22 million, a decrease of Baht 124.14 million from 2009. This was due to the Company gave the customers more discounts to promote sales.
Sales and administrative expenses
The sales and administrative expenses comprised mainly marketing expenses, including commissions, expenses related to employees, depreciations, taxes and ownership transfer fees and office expenses. In 2008, the sales and administration expenses were Baht 259.18 million, a decrease of 15.54% and accounted for 9.75% of total revenue respectively. The reason for the decrease in sales and administrative expenses was from the business tax reduction measure, specifically for the real estate business, from 3.3% to 0.11% and in the transfer fee from 2.0% to 0.1%. In 2009, the sales and administration expenses were Baht 283.25 million, an increase of 9.28% and accounted for 9.45% of total revenue respectively. The reason for the increase in sales and administrative expenses was from the new projects launched during the period. In 2010, the sales and administration expenses were Baht 462.36 million, an increase of 63.23% and accounted for 15.71% of total revenue respectively. The reason for the increase in sales and administrative expenses was from the cancellation of the business tax reduction measure in quarter 1 of 2010, which increased the business tax for the real estate business, from 0.11% to 3.33% and the transfer fee from 0.1% to 2.0%. In addition, the Company launched new projects during the period, which increased the sales and administrative expenses.
Financial expenses
In 2010, the Company had financial expenses of Baht 86.02 million or 2.92% of the total revenue, increase of Baht 2.37 million and Baht 70.59 million from 2008 and 2009 respectively. This was in accordance with the accounting standards, which stipulated that the interest paid in those projects that started the ownership transfer must be recorded as financial expenses. During 2010 and 2009, the Company had an increase in projects that started the ownership transfer. In addition the interest rates in 2010 had increased from 2009, which increased the financial expenses.
Operating profit
In 2008, the Company had a profit before financial expenses and tax of Baht 586.67 million, an increase from Baht 428.26 million in 2007, which resulted in the operating profit rate of 22.08%. This was an increase from 2007 due to the reduction in sales and administrative expenses. In 2009, the Company had a profit before financial expenses and tax of Baht 631.12 million, an increase from Baht 586.67 million in 2008, which resulted in the operating profit rate of 21.05%. This was a decrease from 2008 due to the increase in cost of sales. In 2010, the Company had a profit before financial expenses and tax of Baht 361.17 million, a decrease from Baht 631.12 million in 2009, which resulted in the operating profit rate of 12.27%. This was a decrease from 2009 due to the increase in cost of sales and sales and administrative expenses.
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Major Development Public Company Limited
Net Profit (Loss)
In 2008, the Company had a net profit of Baht 433.19 million with a net profit rate of 16.31%, an increase from 12.61% the previous year, as the Company realised an increase in revenue. In 2009, the Company had a net profit of Baht 406.61 million with a net profit rate of 13.56%, a decrease from 16.31% the previous year, as the Company realised an increase in revenue. This was due to the increase in interest paid, which were recorded as expenses in accordance with the accounting standards, which stipulated that the interest paid in those projects that started the ownership transfer must be recorded as financial expenses. In 2010, the Company had a net profit of Baht 189.47 million with a net profit rate of 6.44%, a decrease from 13.56% the previous year, as the cost of sales and sales and administrative expenses increased.
Rate of return on investment
From 2008-2009, the rates of return on investment for the shareholders increased with the increase in net profit at 19.69% and 16.97% in 2008 and 2009 respectively. In 2010, the rate of return on investment for the shareholders was 7.61%
(3) Financial Status Assets, composition of assets and quality of assets The total assets of the Company continued to grow. As of the end of 31 December 2008, 2009 and 2010, the Company had a total assets of Baht 8,078.20 million, Baht 8,307.98 million and Baht 7,985.22 million respectively. The increase in total assets was to support the growth of the Company and to develop new projects. In 2010, the total assets decreased due to completion of some project with increasing ownership transfer, which resulted in decrease in account receivables. The details of the main assets were as follows: Lands and costs of projects under construction As of 31 December 2008, the Company had lands and costs of projects under construction of Baht 5,335.64 million. They comprised Fullerton Sukhumvit - 0.64%, Watermark Chaophraya River Tower A and B - 9.61% and 12.53%, Manhattan Chidlom - 2.08%, Wind Sukhumvit 23 - 5.92%, Wind Ratchayothin - 12.02%, Aguston Sukhumvit 22 - 15.77%, Mykonos Hua Hin - 1.42%, Reflection Jomtien Beach Pattaya - 5.32%, Marrakesh Hua Hin - 13.45%, M Phyathai - 2.98%, M Silom 6.33% and Royce Private Residences Sukhumvit 31 - 11.94%. As of 31 December 2009, the Company had lands and costs of projects under construction of Baht 5,369.59 million. They comprised Watermark Chaophraya River Tower A and B - 8.24% and 11.60%, Manhattan Chidlom - 0.87%, Wind Sukhumvit 23 - 4.80%, Wind Ratchayothin - 7.27%, Aguston Sukhumvit 22 - 17.62%, Mykonos Hua Hin - 0.31%, Reflection Jomtien Beach Pattaya - 5.49%, Marrakesh Hua Hin - 13.89%, M Phyathai - 3.07%, M Silom - 6.58%, Collezio Sathorn-Pipat - 3.70% and Royce Private Residences Sukhumvit 31 - 16.56%. As of 31 December 2010, the Company had lands and costs of projects under construction of Baht 5,383.51 million. They comprised Watermark Chaophraya River Tower A and B - 6.40% and 10.05%, Manhattan Chidlom - 0.09%, Wind Sukhumvit 23 - 2.21%, Wind Ratchayothin - 1.43%, Aguston Sukhumvit 22 - 12.33%, Mykonos Hua Hin - 0.11%, Reflection Jomtien Beach Pattaya - 7.87%, Marrakesh Hua Hin - 13.56%, M Phyathai - 2.68%, M Silom - 7.49, Collezio Sathorn-Pipat - 3.77%, Equinox Phahol-Vibha - 7.57%, M Ladprao - 2.10%, Royce Private Residences Sukhumvit 31 - 20.68% and project around Soi Thonglor - 1.66%.
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lands and costs of projects
Cost of lands Projects under construction Interest paid recorded as costs Total Deduct: transfer to accumulated cost of sales Transfer to permanent assets Total
As of 31 Dec 2010 As of 31 Dec 2009 consolidated consolidated financial statement financial statement Baht million % Baht million % 4,420.86 8,547.05 702.21 13,670.12 (7,897.85) (388.76) 5,383.51
32.34 62.52 5.14 100.00 100.00
3,672.77 7,949.71 592.54 12,215.02 (6,826.38) (19.05) 5,369.59
30.07 65.08 4.85 100.00 100.00
As of 31 Dec 2000 consolidated financial statement Baht million % 3,489.05 6,196.41 402.19 10,087.65 (4,739.87) (12.14) 5,335.64
38.57 57.94 3.49 100.00 100.00
Prepaid construction expenses As of 31 December 2008, the Company’s prepaid construction expenses decreased from the end of 2007 to Baht 98.12 million due to the ownership transfer had started in Watermark Chaophraya River Tower A and B and the prepaid construction expenses had been transferred to cost of sales. As of 31 December 2009, the Company’s prepaid construction expenses decreased from the end of 2008 to Baht 45.42 million due to the construction of Watermark Chaophraya River Tower A and B, Wind Sukhumvit 23 (Soi Prasarnmitr) and Mykonos Hua Hin were almost complete and the prepaid construction expenses had been transferred to cost of sales in relation to the actual construction completed. As of 31 December 2010, the Company’s prepaid construction expenses increased from the end of 2009 to Baht 127.79 million due to the construction of Reflection Jomtien Beach Pattaya and Royce Private Residences had started and the prepaid construction expenses had therefore increased. Undeveloped Land In 2003, the Company acquired land in Nonthaburi for future development. It had a total area of 5,283 square wah and worth Baht 215.01 million as of 31 December 2010 or 2.69% of the total assets, which comprised land cost and related expenses. Land Down Payment In 2010, the Company entered into a contract to purchase plots of land in Phyathai and Ladprao areas of Bangkok Metropolitan for future project expansion. The Company paid down payment of Baht 25.79 million and expected to transfer the ownership of the land in March 2011 and June 2011. Account receivables As of 31 December 2008, 2009 and 2010, the Company had net account receivables of Baht 1,862.21 million, 2,077.04 million and 1,099.41 million respectively, which accounted for 23.05%, 25.00% and 13.77% of the total assets. The details of account receivables according to debt period as of 31 December 2008, 2009 and 2010 were as follows:
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Major Development Public Company Limited
Trade accounts receivable-sales of property Not over 3 months 3 - 6 months 6 - 12 months Over 12 months Add: Unbilled completed work Total
2010
2009
3,838,703 391,060 992,534 945,055 6,167,352 1,093,243,953 1,099,411,305
8,986,348 221,018 1,113,101 2,159,730 12,480,197 2,064,559,626 2,077,039,823
2010
2009
27,319,035,000 16,191,076,724 59% 10,257,095,159 (10,250,927,807) 6,167,352 11,378,726,318 (10,257,095,159) (28,387,206) 1,093,243,953
23,246,861,228 14,188,303,818 61% 7,893,494,401 (7,881,014,204) 12,480,197 10,017,782,325 (7,893,494,401) (59,728,298) 2,064,559,626
Additional information on trade accounts receivable - sales of property
Total estimated project value Total value of contracts signed Percentage of total project sales Installments due Less: Collections Accounts receivable - installments due Revenues recognized Less: Installments due Installment received in advance Unbilled completed work
Average debt collection period The average debt collection periods as of 31 December 2008, 2009 and 2010 were 255.85 days, 254.70 days and 137.92 days respectively. The average debt collection period in 2008 increased significantly compared to the end of 2007. This was due to the customers of Watermark Chaophraya River Tower A and B had completed their down payments and only the remaining amount to be paid upon transfer of ownerships. When the ownership transfer was completed, the account receivables for the projects were therefore reduced. The average debt collection period in 2009 decreased slightly compared to the end of 2008. This was due to the increase in number of condominium units completed and ready to for transfer of ownership. When the units were transferred to the customers, the account receivables and the average debt collection period were therefore reduced. The average debt collection period in 2010 decreased slightly compared to the end of 2009. This was due to the increase in number of condominium units completed and transferred to the customers, resulting in the reduction of average debt collection period. 105
Annual Report 2010
Net value of land, building and equipment (permanent assets of the Company) As of 31 December 2008, the net land, building and equipment amounted to Baht 444.81 million. The main land, building and equipment comprised land, temporary buildings and improvement to the temporary buildings, condominium units, office equipment, furniture and fixtures, vehicles and others, which accounted for 64.69%, 13.74%, 5.56%, 1.90%, 9.62%, 1.48% and 2.98% respectively. As of 31 December 2009, the net land, building and equipment amounted to Baht 436.73 million. The main land, building and equipment comprised land, temporary buildings and improvement to the temporary buildings, condominium units, office equipment, furniture and fixtures, vehicles and others, which accounted for 66.12%, 10.12%, 6.70%, 1.51%, 7.55%, 1.00% and 7.00% respectively. As of 31 December 2010, the net land, building and equipment amounted to Baht 916.65 million. The main land, building and equipment comprised land, office buildings and improvement to the office buildings, temporary buildings and improvement to the temporary buildings, condominium units, office equipment, furniture and fixtures, vehicles and others, which accounted for 71.39%, 0.14%, 3.95%, 3.80%, 0.92%, 3.04%, 0.89% and 15.87% respectively. Liabilities As of 31 December 2008, the Company had long-term debt amounted to Baht 3,473.32 million. This was due to the Company’s subsidiary developed 1 new project, which used part of the debt to acquire land for project development worth Baht 373 million. As of 31 December 2009, the Company’s long-term debt increased to Baht 3,585.43 million due to the increase in the loan draw-down to develop project under construction and to acquire land for project development. As of 31 December 2010, the Company’s long-term debt decreased to Baht 3,075.89 million due to the completion of project and the increase in the number of condominium units transferred to the customers resulting in the ability of the Company to increase the payment of the long-term debt. In addition, the Company increased the loan draw-down to develop project under construction and to acquire land for project development. However, this draw –down amount was less than the debt payment amount and hence the decrease in the long-term debt. The Company has debt from financial institutions structure as follows: Debt from Financial Institutions
Short-term loans Bank overdrafts Short-term loans from banks Long-term loans Long-term loans from banks - Current portion of long-term loans - Long-term loans from financial institutions Total
As of 31 Dec 2010 As of 31 Dec 2009 consolidated consolidated financial statement financial statement Baht million % Baht million %
As of 31 Dec 2000 consolidated financial statement Baht million %
41.41 52.50
1.34 1.71
90.76 129.75
2.44 3.49
90.74 100.00
2.48 2.73
2,981.98 1,713.44 1,268.54 3,075.89
96.95 55.71 41.24 100.00
3,585.43 2,214.82 1,370.61 3,715.18
96.51 59.62 36.89 100.00
3,473.32 1,153.30 2,320.02 3,664.06
94.79 31.48 63.32 100.00
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Major Development Public Company Limited
The sources of cash flow fund used in the Company’s business were in the form of bank overdrafts from financial institutions. As of the end of 2008, 2009 and 2010, the Company had bank overdrafts of Baht 90.74 million, Baht 90.76 million and Baht 41.41 million respectively. Deposits and advance payment from customers As of 31 December 2008, deposits and advance payments from customers increased from the end of 2007 to Baht 934.90 million. This was due to the Company’s policy for deposits, contractual fees and down payment of 30%-35% resulting in high deposits and advance payment from customers. As of 31 December 2009, deposits and advance payments from customers decreased from the end of 2008 to Baht 883.96 million. This was due to the increase in projects with realised revenue and transfer of ownership compared to 2008, hence more deposits, contractual fees and advance payments from these projects were recorded as realised revenue. As of 31 December 2010, deposits and advance payments from customers decreased from the end of 2009 to Baht 853.70 million. This was due to the increase in projects with realised revenue and transfer of ownership compared to 2009, hence more deposits, contractual fees and advance payments from these projects were recorded as realised revenue. Account payables As of 31 December 2008, the Company’s account payables increased by Baht 349.86 million compared to 2007. Most of the account payables came from Fullerton Sukhumvit - Baht 11.46 million, Watermark Chaophraya River Tower A and B - Baht 215.51 million, Manhattan Chidlom - Baht 17.83 million, Wind Sukhumvit 23 - Baht 20.86 million, Wind Ratchayothin - Baht 58.21 million, Aguston Sukhumvit 22 - Baht 25.05 million, Mykonos Hua Hin - Baht 7.36 million and other account receivables - Baht 3.67 million. As of 31 December 2009, the Company’s account payables decreased by Baht 240.18 million compared to 2007. Most of the account payables came from Watermark Chaophraya River Tower A and B - Baht 87.30 million, Wind Sukhumvit 23 - Baht 31.07 million, Wind Ratchayothin - Baht 133.40 million, Aguston Sukhumvit 22 - Baht 90.50 million, Mykonos Hua Hin - Baht 15.10 million, Marrakesh Hua Hin - Baht 44.00 million, Royce Private Residences Sukhumvit 31- Baht 49.00 million and other account receivables - Baht 19.63 million. As of 31 December 2010, the Company’s account payables increased by Baht 191.28 million compared to 2009. Most of the account payables came from Watermark Chaophraya River Tower A and B - Baht 16.06 million, Wind Sukhumvit 23 - Baht 11.91 million, Wind Ratchayothin - Baht 23.66 million, Aguston Sukhumvit 22 - Baht 39.91 million, Mykonos Hua Hin - Baht 12.37 million, Marrakesh Hua Hin - Baht 317.93 million, Royce Private Residences Sukhumvit 31- Baht 93.88 million, Reflection Jomtien Beach Pattaya - Baht 116.45 million, Equinox Phahol-Vibha - Baht 7.64 million and other account receivables - Baht 11.57 million. Potential commitments and liabilities As of 31 December 2010, the Company and affiliated companies had contractual commitments for the construction of condominiums and services amounting to Baht 2,827.20 million. As of 31 December 2010, the Company had commitments to pay for land according to the land purchase contract amounting to Baht 72.8 million and Baht 68.4 million within March 2011 and June 2011 respectively. The subsidiary company had a commitment to pay for land according to the land purchase contract with the Company amounting to Baht 19.1 million within April 2011. 107
Annual Report 2010
On 18 July 2008, Major Development Hotels and Resorts Co Ltd (a subsidiary) entered into a management contract with a company in Thailand to operate a hotel of the subsidiary company for a period of 5 years from the date of the hotel opening. Under the said contract, the subsidiary company had a commitment to pay the management fee at a rate of 1% of the revenue after deducting designated expenses and an incentive fee at the rate of 6% of gross profit from the operation. On 22 November 2010, the Company entered into an addendum agreement to the loan agreement of a commercial bank in Thailand. The Company had a commitment to pay back loan of a subsidiary company amounting to Baht 150 million to the said bank when the Company cleared the mortgage of condominiums in Marrakesh Hua Hin Residences and paid back the Company’s loan, as stated in 15(5) of the notes to consolidate with the financial statements. Shareholders’ equity At the end of 2008, the Company had shareholders’ equity amounted to Baht 2,199.58 million, an increase of Baht 165.13 million from the end of 2007 or an increase of 8.11%. The increase was due to better Company’s performance with increase in appropriate retained earning amounting to Baht 54.26 million and increase in un-appropriated earnings to Baht 730.47 million. At the end of 2009, the Company had shareholders’ equity amounted to Baht 2,396.19 million, an increase of Baht 196.61 million from the end of 2008 or an increase of 8.94%. The increase was due to better Company’s performance with increase in appropriate retained earning amounting to Baht 70.00 million and increase in un-appropriated earnings to Baht 911.34 million. At the end of 2010, the Company had shareholders’ equity amounted to Baht 2,489.22 million, an increase of Baht 93.03 million from the end of 2009 or an increase of 3.88%. The increase was due to better Company’s performance with increase in appropriate retained earning amounting to Baht 82.18 million and increase in un-appropriated earnings to Baht 983.62 million. In addition the Company’s ordinary shares and premium on ordinary shares increased to Baht 8.12million because during 2010 the shareholders exercised their right to buy ordinary shares during the 1st offering totaling 4.25 million shares. Appropriateness of equity structure As of 31 December from 2008 to 2010, the Company had a debt-to-equity ratio of 2.67 times, 2.47 times and 2.21 times respectively. The main reason for the increase in the ratio in 2008 was because of the loan that the Company used to continue to develop projects, including 2 new projects in Phyathai and Suriwong areas. In 2009, the said ration decreased due to the pay back of loans from the transfer of ownership in various projects comprising Watermark Chaophraya River Tower A and B, Manhattan Chidlom, Wind Sukhumvit 23 (Soi Prasarnmitr) and Mykonos Hua Hin. In 2010, the said ratio decreased due to the pay back of loans from the transfer of ownership in various projects comprising Watermark Chaophraya River Tower A and B, Manhattan Chidlom, Wind Sukhumvit 23 (Soi Prasarnmitr), Wind Ratchayothin and Aguston Sukhumvit 22. In addition, the Company drew down addition loans for the development of projects where construction had started. Part of the loan was also used to acquire lands for development of new projects. However, as the loan pay back amount was more than the loan draw down coupled with the increase in shareholders’ equity, the Company’s debt-to-equity ratio in 2010 had therefore decreased. In considering the interest bearing debt of the Company, the debt-to-equity ratio was 1.73 times, 1.68 times and 1.41 times at the end of 2008, 2009 and 2010 respectively. The reason for the increase in the said ration in 2008 was the launching of 3 new projects, which the Company used part of the loans to acquire lands for 2 of the said projects. In addition, the Company drew down additional loan for the construction of Wind Sukhumvit 23 (Soi Prasarnmitr), Wind Ratchayothin and 108
Major Development Public Company Limited
Aguston Sukhumvit 22. The reduction in the debt-to-equity ratio from 1.73 times to 1.68 times in 2009 was due to the increase in the Company’s total liabilities was less than the increase in shareholders’ equity, which was due to increase in retained earnings. While the reduction in the debt-to-equity ratio from 1.68 times in 2009 to 1.41 times in 2010 was due to the increase in loan pay back during the year was higher that the loan draw down coupled with the increase in shareholders’ equity resulting from the exercising of the rights to buy ordinary shares during the Company’s 1st offering and the increase in retained earnings. The improvement of these figures reflected the lower risk and the higher strength of the Company. Cash flow statement In 2008, the Company used the cash flow for its operation to the amount of Baht 1,414.65 million due to additional development of projects under construction. In addition the Company had deposits and advance payment from the customers from sales of project mentioned earlier in the separate financial statements and the subsidiary company started to develop Royce Private Residences. The cash flow used in the operations shown in the consolidated statement was therefore more than those shown in the separate financial statements. The total cash flow used in the Company’s investment showed a deficit of Baht 314.08 million, which was mostly used in the construction of sales offices and sample units. As for the cash flow used in fund raising events of Baht 1,384.53 million, this was due to the Company receiving loans from financial institutions to the amount of Baht 2,898.96 million, resulting in the increase in net cash of Baht 47.84 million at the end of 2008. In 2009, the Company used cash flow for its operations to the amount of Baht 1.64 million due to a significant increase in turning works under construction into costs than in previous year. This reduced the amount in the cash flow. As for the cash flow used in fund raising events of Baht 11.12 million, this was due to the Company receiving loans from financial institutions to the amount of Baht 2,432.8 million and the loan pay back of Baht 2,320.70 million, resulting in the increase in net cash of Baht 53.99 million at the end of 2009. In 2010, the Company had net cash flow from its operations to the amount of Baht 788.88 million due to the Company increased the transfer of ownerships to the customers. This resulted in increase in cash received. The Company used the said cash to acquire lands to develop additional projects, namely Equinox Phahol-Vibha and M Ladprao, to pay back loans and to invest in the construction of hotels of the subsidiary company and the Liquidity ratio In 2008, the Company had a current ratio of 2.16 times, a decrease compared to 2007 due to the increase in new project development, which required more current assets and hence significantly increased the current liability. This resulted in the slightly decrease in the quick ratio of 0.56 times in 2008. In 2009, the Company had a current ratio of 1.77 times, a decrease compared to 2008 due to the increase in new project development, which required more current assets and hence significantly increased the current liability. This resulted in the slightly decrease in the quick ratio of 0.49 times in 2009. The increase in current liability was mainly from loans were due within one year. Because these loans were used to develop projects and the constructions were almost completed and ready to transfer the ownership to the customers, the loan due date for those projects were therefore less than one year. However, once the ownerships were transferred to the customers, the current liability should decrease resulting in better liquidity ratio. In 2010, the Company had a current ratio of 1.80 times, an increase compared to 2009 due to the increase in the ownership transfer to the customers, resulting in the high loan pay back amount and hence the increase in the said ratio. The Company used cash to develop new projects, which resulted in a quick ratio of 0.32, a decrease compared to 2009 109
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Major Development Public Company Limited
Major Development Public Company Limited
Head office 141 Soi Sukhumvit 63 (Ekamai), Sukhumvit Road, Klongton Nua, Wattana, Bangkok 10110, Thailand Tel. : +66(0) 2392 1111 Fax. +66(0) 2392 2255