TET: TRC has undergone strategic shifts in its business model, could you explain what the changes are and why they were made?

TRC began as a traditional contractor before transitioning into an EPC Contractor focusing on oil and gas sector. We specialize in engineering, design and construction for the gas pipeline networks, mid-stream to processing gas and this included bio-diesel, renewable plants, petrochemicals and oil and gas.In 2007, we acquired Sahakarn Wisavakorn Co., Ltd. (SKW), a pure civil works company, and during 2012-2016, we acquired APOT, the potash mine. In 2016 and 2017 as the oil prices declined, the projects launched decreased and there was an influx of Chinese competition and the price competition was severe. Therefore when we looked at the future of TRC, we wanted to return being at the forefront of an industry similar to where we were in the past.So today we position ourselves as “A Pioneer Organization Innovation who delivers innovation project solution in the region” (CLMVT). Innovation means we will do our best to exceed our clients’ expectation in quality, safety, speed and at reasonable cost. There are a few new sectors that we have identified where we can be leader such as intra-logistic and underground piping and cable laying.

TET: Could you explain further on what intra-logistics is and what has TRC achieved thus far?

Logistics comprises of three systems which are software trace, warehouse management and traffic management system. We will focus on the software systems and the warehouse management which is the intra-logistics. The difference between this and conventional logistics applies from the initial design of a warehouse, typical conventional warehouses are approximately 10 meters in height, whereas we are building a 40 meters height warehouse that has a higher load potential with an Automated Storage and Retrieval System (AS/RS) for PTT Oil and Retail Business Plc. (PTTOR).This will be the first of such projects that we aim to roll out in Thailand and are looking at working with other major logistic-related to improve efficiency of current warehouse systems. The positive for an intra-logistic focus is that we will be the first mover in Thailand with higher margins compared to other infrastructure contractors because we are part of the system which results in recurring income. The owners will benefit since the required amount of land is less, the efficiencies of such system are far above the conventional systems.

TET: Given that construction is still one of TRC’s core businesses, how are projects progressing and what type of projects does TRC typically look to bid for?

As of end of October 2018, our backlog value was THB 5.6 million. There are also several projects released such as Thai Oil Plc. that announce its USD 4.8billion investment expansion in the Clean Fuel Project (CFP). New projects from IRPC Plc. and the Thai Government’s Eastern Economic Corridor should provide opportunities as well. We are positioning ourselves as a contractor in those fields. SKW, our fully owned subsidiary, is more focused in this and has obtained several projects ranging from water pipelines, road works,interchanges, and is very diversified amongst the infrastructure projects. The key for us is not to do simple roads nor highways, but ones that require engineering solutions such as the recent project we won, the construction of the overpass bridge at the Na Ranong Intersection which is a complex project that takes 900 days and values THB 1.2 billion.Another interesting project is the Thailand Smart Metro project by the Metropolitan Electric Authority, TOT, CAT and Mass Rapid Transit Authority of Thailand. The government wants to bring the communication cables underground and is looking for private companies to do this 127.3 km project during the period of 2017-2021. So SKW has partnered with a Chinese firm specializing in underground piping systems and should we be able to own these lines, the telecommunication companies would have to rent the bandwidth which leads to another form of recurring income for us.

TET: TRC has been involved with the exciting Potash project, what is this project and where is the situation today?

Our viewpoint is that all the ingredients are coming together. We gradually invested in APOT during 2012-2016 when the potash prices had dropped significantly, and they have since recovered along with the other commodity prices. However, the continued price volatility is a risk that will have to be managed. APOT first needs an additional equity partner because it is a THB 40-60billion project which is too large for TRC to take it independently and we are seeing positive progress here.

TET: How do you view the industry in Thailand developing?

We see that the intra-logistics trend will begin in the next few years as many firms will start to utilize this technology. Companies are beginning to discuss outsourcing their warehouse management to us due to the concerns of manpower,theft, organization and so forth.Also, with the continued rapid growth of e-commerce, there will be a natural change for the industry to improve its warehouse management systems to what we offer. For construction, the EEC should be a positive development because there’s abroad range of potential from petrochemicals, to value based, to high tech projects and the government’s continued push to improve Thailand’s infrastructure will be positive for the construction companies in Thailand.

TET: What may investors misunderstand about TRC?

Investors and even some former customers still acknowledge TRC as a pipeline company which we no longer are. Our vision is to be a pioneer company and it will take time for the industry and investors to see this even though our portfolio is already well diversified with petrochemicals, oil & gas, industrials, intra-logistics, underground, pharmaceuticals and complex civil works.

TET: Where do you see TRC in the next three years?

In three years, we expect the recurring income to begin and that with our continued internal developments and expansions within our new segments. As a first mover, we have strong advantage ahead of the competition. With these success cases and future plans, we will be able to show that TRC is indeed a pioneer organization who delivers innovative project solutions for its customers throughout the region.

Source: Bloomberg

    • Look at the EPC market, it has been a disaster overall, cut throat chinese competititon coming in and taking alot of the work, all fine and good until thais starting dying from the shoddy infrastructure created by the chinese, just look at Sichuan during the earthquake. Substandard infrastructure everwhere.

  1. Merry New Year (belch). Jerry, please try not to hold back on your real feelings here. If you truly feel the industry is in the shit, this company in particular, why not just come out and say so? (Insert appropriate emoji, etc.)

    At my own risk–everybody (Thai) I know is underwater in consumer debt. (The delinquency rate is what?) In the event of a decent air-pocket, not unthinkable, that wad of dollars under BOT’s mattress might save the baht (for a while) and allow them to support certain banks (for a while). Because the consumer may have to, uh, suspend servicing the debt–credit card but commercial (and, uh, informal c/w, broken arms) as well. Could it be, the published NPL rates may turn out to have been wishful thinking?

    So, all else being equal (which it never is), it should be the banks that lead the way–down, if the bear continues on his way.

    PTTEP, what to say.

    CPF, what to say except 7-11.

    And so on and so forth.

    One can see certain parties looking for the exit, pursuing diversification abroad. Laudable except the selected foreign acquisition targets tend to jump for joy: “we’re being pursued by Who??? Praise Jaysus!” (With some sober exceptions, e.g., SMPC in DIY mode. Poor KCE building a new facility locally: the art of timing. The other day I heard a rumor of an Apple acquisition: why not?

    Contractors? You simply can’t go wrong with Louis Vuitton. With the caveat: just say Charge It.

    Any other forecasts out there? For now, it’s the banks, the NPL’s and the real NPL’s. The collateral damage.

    Or somehow muddling through….

    • One could argue the following:
      -Your viewpoints are based upon a small group of consumers
      -Banks may have already provisioned for the losses
      -Interest rates are still at lows 1.75%, inflation is minimal, economy is still ok, PE for the market at 14x with a div yield of mid 3%, why wouldn’t equities be attractive?

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