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Investor Relations

Chairman Message

Owing to the increased investors’ confidence in the Thai economy which registered a GDP growth of 3.2% in 2016 as compared with 2.9% in 2015, overall demand for factory and warehouse space increased noticeable in 2016. The demand was also underpinned by the increase in foreign direct investments following the more attractive stimulus package offered by Thailand’s Board of Investment under the country’s Digital Economy Policy or Thailand 4.0. TICON also benefitted from this development as our new factory and warehouse space lease in 2016 increased significantly from last year. With more than half of the new leased warehouses in 2016 were built to suit third party logistics business requirements, we expect to see demand for built-to-suit type of warehouse continuing to grow in 2017 and are pleased to have, with the support from our new strategic shareholder, developed the built-to-suit capability ready to capture this business opportunity.

Factory Lease

TICON let out 60,175 square meters of new factory space in 2016 while returned space from expiring warehouse lease totalled 26,650 square meters bringing a net increase in new leased factory space for 2016 of 33,525 square meters which was 91.3% increase over the new leased factory space of 17,525 square meters in 2015. About two-thirds of the tenants of the new leased factory space in 2016 were supply chain manufacturers in the electronics, automobile, and auto parts industries.

Warehouse Lease

In 2016, demand for new warehouse space mostly came from third party logistics providers. Approximately 55% of the 122,858 square meters of new warehouse space in 2016 were leased to them. Manufacturers of food and beverages accounted for about 16% whilst E-commerce business accounted for another 6% of the total new leased warehouse space. Nearly 32% of the tenants of the new leased warehouse space in 2016 were German companies followed by Thai tenants in second place at 25%.

Investment Activity

In 2016, TICON invested a total of 1.86 billion Baht in construction of factory and warehouse buildings. No land was bought during the year.

PT SLP Surya TICON Internusa (or “SLP”), which is the joint venture company in Indonesia between TICON and two other business partners, namely Surya Semesta Internusa and Mitsui & Co., increased investment in Indonesia as it is constructing two built-to-suit warehouse facilities, at Kalimantan and Sulawesi, for lease to one tenant. Construction of both facilities is expected to be completed in 2017.

In the fourth quarter of 2016, our subsidiary company, TICON Logistics Park (“TPARK”), set up a joint venture with Prospect Development Company Limited. The new joint venture company was named TPARK BFTZ Company Limited and is a developer of built-to-suit warehouse facilities for lease in the Bangkok Free Trade Zone area near Bangplee, Samutprakan. The project, which covers an area of 800 rai, has received strong interest of investors who have demand for built-to-suit warehouse space. TPARK holds a 60% stake in TPARK BFTZ while the remaining 40% belongs to Prospect Development Company Limited.

Operational Result

In 2016, TICON deferred selling of assets to TICON REIT because TICON was about to finalize a deal with a potential strategic shareholder which will enable the company to receive new funds from a capital increase in an amount sufficient to finance TICON’s on-going working capital requirement, future business expansion as well as reducing debt to equity ratio from 2.16 times, estimated for the end of 2016, to just 0.34 times. As a result, TICON’s property sales income in 2016 was lower at 251 million Baht.

TICON managed to grow its rental and related service income from 1,048 million Baht in 2015 to 1,172 million Baht in 2016, giving a 12% increase. With additional income from sales of undeveloped land in the fourth quarter, income from sales of investment in unit trusts in the first quarter, and property management fee income in 2016 totaling 737 million Baht, TICON’s total revenues in 2016 were 1,873 million Baht. Consequently, the company’s net profit for the year was 278 million Baht; a 64% drop from the net profit in 2015.

Strategic Development and Business Outlook

A development that was significance and will be beneficial for TICON to achieve sustainable growth in the long run took place in the fourth quarter of 2016 when Frasers Property Holding Thailand Company Limited (or “FPHT”) acquired approximately 40% of TICON’s shares by subscribing to 735 million new shares issued by TICON. The capital increase was completed and TICON received payment for the new shares totaling 13.2 billion Baht from the new investor, FPHT, on January 16, 2017.

FPHT is a company in the Group led by Frasers Centrepoint Limited (or “FCL”) which is a listed on Singapore’s stock market and is a developer of industrial, housing, commercial, and retail properties in Singapore, Australia, China, UK, Thailand and Vietnam. FCL also has extensive experience and expertise in developing and managing large scale factory and high quality logistics facilities in the Australian market.

FPHT, as TICON’s major shareholder, will support TICON in every area of business - finance, marketing, and networks within and outside Thailand. Experienced industrial property professionals will be brought in from FCL Group to join TICON’s management team and share their knowledge with TICON’s staff on how to develop built-to-suit warehouse facility for modern logistics business and how to effectively provide total business solution for factory and warehouse customers both in Thailand and overseas which should give TICON the competitive edge over every competitor.

Subsequent to the share acquisition by FPHT, the new strategic shareholder, TICON has revised its business strategy from only leasing factory and warehouse buildings to providing Total Solutions for the Factory and Warehouse tenants. TICON now has a full range of products and services to accommodate all the industrial property needs of each customer. The revised strategic plan will capitalize on the strengths and network of FPHT and emphasize development of built-to-suit warehouse to capture increasing market demand.

With respect to overseas expansion, It can be expected that FPHT and FCL Group’s network will be instrumental for TICON to seek more investment opportunities in AEC countries other than just Indonesia. TICON anticipated that the domestic economy will continue to recover in 2017 and the manufacturing industry’s excess capacity in Thailand will correspondingly decrease thereby investors will soon begin to expand capacity again. However the conventional labor intensive type of production facility will be transformed to use more automation and robots which will result in more demand for larger factory and warehouse space. More trades in the economy will increase demand for warehouses and distribution centers, especially the on-line trades which could see substantial growth in 2017.

Last, but not least, as Chairman of the Board, I would like to thank our shareholders and business allies for their continuous support for TICON, and thank our Board of Directors, management executives, and employees for their collective efforts and hard work in making 2016 another successful year for TICON. I believe that with the strengths of all shareholders and management team, the much stronger financial structure of the company and the revised business strategy TICON will become one of the leading developers and providers of international standard quality factories and warehouses together with effective total solution for its customers and be able to achieve a sustainable growth in the long run.

(Mr. Chainoi Puankosoom)
Chairman of the Board