Report of operating results for the year 2007

-Translation-

Bor Chor Ngor 0103/2008

February 20, 2008

Subject Report of operating results for the year 2007

Attention President The Stock Exchange of Thailand

Quality Houses Public Company Limited ("the Company") would like to report the Company's operating results for the year ended December 31, 2007 as follows

I. Revenue from operations by business segment
The Company and its subsidiaries' operating results for land and houses sale business and rental property business for the year 2007 improved, comparing to the same period of year 2006 because the revenues from sales of land and houses : Casa Ville and Casa City, which are the projects for the middle-range target group, have much increased comparing to the same period of last year. These projects are profitable due to the high demand from the middle-range customers and good locations of the projects. The revenues from the rental business decreased comparing to the same period of last year because some parts of serviced apartments have been closed for the renovation in the rooms and common area. In addition, the economic situation slowed down because of political uncertainty. Due to the foreign investment restriction in Thailand from the suspending of the remedy of foreign business act and the 30% fund reserve issued by Bank of Thailand, the foreign investment also slowed down and the number of expatriates working in Thailand decreased. Besides, the revenues from rental of space in office buildings and related service charges and related service charges decreased comparing to the same period of last year because there were no revenues from rental of office space buildings of Q.House Ploenchit and Q.House Lumpini projects. The Company and the Company's subsidiary have leased Q.House Ploenchit project and sold out Q.House Lumpini project to Quality Houses Property Fund ("Property Fund"), respectively. The details classified by type of business are presented in the table below as follows:

 

The Company and its subsidiaries had total revenues for the year 2007 and 2006 for Baht 10,580.5 million and Baht 11,055.3 million, respectively, decreasing Baht 474.8 million or 4.3 % comparing to the same period of year 2006 with the following details.

1. Revenue from sales of land and houses for the year 2007 increased Baht 1,417.0 million or 18.5 % comparing to the same period of year 2006 because The Company and its subsidiaries launched 15 new projects during 2006 and 2007 and there were 7 existing projects sold out in year 2007. The number of net increased projects of The Company and its subsidiaries were 8 projects with the following details:

- Laddarom Elegance Pharam 5, in quarter 3 of year 2006

- Laddarom Ratchaphruk-Rattanathibet, in quarter 3 of year 2006

- Laddarom Watcharapol phase 3, in quarter 1 of year 2007

- Laddarom Ratchaphruk-Pinklao, in quarter 2 of year 2007

- Vararom Phahonyothin-Saimai, in quarter 4 of year 2006

- Vararom Kaewnavarat phase 1, in quarter 1 of year 2007

- Vararom Charoenmuang, in quarter 1 of year 2007

- Casa Ville Ratchaphruk-Rattanathibet, in quarter 2 of year 2006

- Casa Ville Watcharapol phase 2, in quarter 3 of year 2006

- Casa Ville Pharam 2, in quarter 4 of year 2006

- Casa Ville Srinakarindr, in quarter 1 of year 2007

- Casa City Ekamai-Ramintra Sukontasawat 1, in quarter 4 of year 2006

- Casa City Lat Prao, in quarter 4 of year 2006

- Casa City Eakamai Ramintra Nuanchan 1, in quarter 3 of year 2007

- Casa City Ramkhamhang, in quarter 3 of year 2007

2. Revenue from sales of condominiums The Company and its subsidiaries had no revenues from sales of condominiums in 2007 or decreased Baht 458.0 million or 100.0 % comparing to the same period of year 2006 because the Company sold out all remaining units of Cha-Am Long Beach project, situated in Cha-Am,Petchburi in 2006. However, The Company and its subsidiaries are now developing 2 residential condominium projects for sale. It is expected that the revenues from these projects will be realized in 2009 and 2010. There is still high demand for residential condominiums near BTS and MRT stations. Both of the developing projects are also near BTS stations.

3. Revenues from rental of space in the office buildings and related service charges for the year 2007 decreased Baht 184.6 million or 39.1% comparing to the same period of year 2006 because at the end of 2006, the Company entered into Land and Property Lease Agreement of Q.House Ploenchit, including utilities system,fixtures, fittings and related equipment situated on the property and the Company's subsidiary entered into Property Sales Agreement (including utilities system, fixtures, fittings and related equipment situated on the property) and Transfer of Leasehold Rights under Land Lease Agreement of Q.House Lumpini to Quality Houses Property Fund in December 2006. Therefore, the revenue from rental of spaces in the office buildings decreased.

4. Revenues from rental of space in the residential buildings and related service charges for the year 2007 decreased Baht 21.3 million or 2.3% comparing to the same period of year 2006 because of the decrease in occupancy rate caused by the slow-down economy and the renovation of some parts of Centre Point Petchburi, Centre Point Sukhumvit and Centre Point Silom. The renovation work at Centre Point Petchburi and Centre Point Sukhumvit was completed in the middle of 2007 while the renovation work at Centre Point Silom is expected to be completed at the beginning of 2009. Therefore, the Revenues from rental of space in the residential buildings and related service charges dropped.

5. Gain on sales building and transfer of the leasehold rights to land In 2007, The Company and its subsidiaries had no gain on sales building and transfer of the leasehold rights to land because the Company and its subsidiaries did not sell any buildings or transfer any leasehold rights to land to property funds. Thus,the profit from this part decreased Baht 1,516.0 million or 100.0% comparing to the same period of year 2006.The gain on sales building and transfer of the leasehold rights to land in 2006 was from the disposal of building,including fixtures, fittings and related equipment in the building, as well as transfer of the leasehold right of Q.House Lumpini to the Property Fund.

6. Profit sharing from investments accounted by equity method In 2007, the revenues of the Company from profit sharing from investments accounted by equity method increased Baht 276.7 million or 461.9% comparing to the same period of year 2006. In 2007, the profit sharing from investments accounted by equity method from 4 associated companies were as follows: the increase in revenue from an equity-method profit sharing in Home Product Center Public Company Limited, Baht 24.2 million, the increase in loss sharing from an equity-method in Quality Construction Products Public Company Limited, Baht 8.3 million, the increase in revenues from an equity-method profit sharing from Land and Houses Retail Bank Public Company Limited, Baht 191.4 million as well as the increase in revenues from an equity-method profit sharing in the Quality Houses Property Fund, Baht 69.4 million, comparing to the same period of year 2006.

7. Other revenues increased Baht 11.4 million or 10.8% in 2007, comparing to the same period of year 2006 because the Company's subsidiary recorded the estimated cost of construction too high in 2006.Therefore, the Company's subsidiary recorded the decrease in the cost of construction and then recorded the other revenues in the amount of Baht 40.0 million.

II. Cost of sale by business segment

Total costs of sale for the year 2007 increased Baht 126.2 million or 1.8%, comparing to the same period of year 2006 because:

1. The cost of land and houses increased Baht 594.8 million or 10.0% in accordance with the increase in the number of transferred houses for sale as well as the rise in construction material cost and project development cost.

2. The cost of sales of condominiums decreased Baht 315.1 million or 100.0% because the Company sold out the Cha-Am Long Beach project in 2006.

3. The cost of rental of office buildings and related service charges decreased Baht 180.2 million or 51.9% because the Company leased Q.House Ploenchit and the Company's subsidiary disposed building,including fixtures, fittings and related equipment in the building, as well as transferred the leasehold right of Q.House Lumpini to the Quality Houses Property Fund as mentioned above. Owing to this fact, the cost of rental of office buildings and related service charges decreased.

4. The cost of rental of units in residential buildings and related service charges increased Baht 26.7 million or 4.7% due to the increase in the rents of building, including fixtures, fittings and related equipment in the building of Centre Point Wireless and Centre Point Thong Lor from the conditions in the agreements as well as the increase in property tax.

III. Selling and administrative expenses and interest expenses

1. Selling and administrative expenses for the year 2007 increased Baht 48.0 million or 3.0%, comparing to the same period of year 2006 due to the increase in specific business tax and property transfer fee from selling land and houses as well as condominium units, Baht 34.3 million, the decrease in specific business tax in selling the building and transfer of the leasehold right of Q.House Lumpini, Baht 160.5 million, the increase in selling and marketing expenses, Baht 10.7 million, the increase in after-sale service (maintenance expenses for amenities in projects), Baht 52.8 million. In addition, the expenses related to employee increased Baht 52.3 million because the Company and its subsidiaries recorded these expenses in accordance with the performance of employees as they could achieve the target of the Company and its subsidiaries. Besides, the administrative expenses and other operating expenses increased Baht 58.4 million.

2. Provision for contingent liability from litigation decreased Baht 16.7 million or 97.1% in 2007,comparing to the same period of year 2006 because The Company and its subsidiaries had no contingent liability from litigation in 2007. Except that, the lawsuit of the termination of a rental agreement before the expiration with one tenant at Centre Point Lang Suan is currently in the judicial process. The Company made a provision for contingent liability from litigation in 2007 in the amount of Baht 0.5 million.

3. Interest expenses for the year 2007 decreased Baht 149.9 million or 51.1%, comparing to the same period of year 2006 because the Company's subsidiary disposed the building and transferred the leasehold right to land of Q.House Lumpini project and the Company leased Q.House Ploenchit project for 30 years to Quality Houses Property Fund. The Company and the Company's subsidiary repaid the outstanding loans from banks financial institutions at the end of 2006. Thus, the interest expenses of the Company and its subsidiaries decreased in 2007. Moreover, the interest expenses of The Company and its subsidiaries recorded as the cost of sales of land and houses increased due to the expedition of development in land bank for the future projects.

4. Corporate income tax decreased Baht 522.6 million or 56.4 % comparing to the same period of year 2006 because the Company's subsidiary disposed the building and transferred the leasehold right to land of Q.House Lumpini project in 2007. The profit from selling the property was Baht 2,039.0 million. Therefore, the Company's subsidiary paid the corporate income tax, Baht 611.7 million.

IV. Net Profit

The Company and its subsidiaries' net profit for year 2007 increased Baht 60.2 million or 6.0%, comparing to the same period of year 2006 due to the following details:

1. The revenue from sales of land and houses of the Company and its subsidiaries increased and the gross profit also increased from 2006 to be 27.9% in 2007 while the gross profit in 2006 was 22.4%.Therefore, the increase in gross profit in 2007 was Baht 822.2 million. In 2007, there were no revenues from residential condominiums so the gross profit from sale of condominiums decreased Baht 142.9 million because the Cha-Am Long Beach project was sold out in the second quarter of 2006.

2. The gross profit from the rental properties of the Company and its subsidiaries in 2007 decreased Baht 52.3 million, comparing to the same period of 2006 because the gross profit of the revenues from rental of space in the residential buildings and related service charges decreased Baht 48.0 million.

3.The profit (loss) sharing from investments accounted by equity method in associated companies in year 2007 increased Baht 276.7 million, comparing to the same period of year 2006.

4.There was no gain on sales of property to the Property Fund in 2007. Thus, the gain on sales of property decreased Baht 1,516.0 million.

5.The interest expenses of the Company and its subsidiaries in 2007 decreased Baht 149.9 million.

6.The corporate income tax of the Company and its subsidiaries in 2007 decreased Baht 522.6 million.

V. Financial Status

- Financial Status
As of December 31, 2007, the Company and its subsidiaries' total assets increased Baht 3,552.8 million or 17.5%, comparing to the same period of year 2006 (as of December 31, 2006) because The Company and its subsidiaries had a net increase in the investment in some plots of land and project development cost in housing projects, Baht 3,325.9 million for the expansion of sale of land and houses projects and condominium projects in future. The total liabilities increased Baht 3,069.0 million or 26.1% , comparing to the same period of year 2006 (as of December 31, 2006) because of the increase in the short-term loans from the banks and financial institutions, Baht 2,406.0 million and the issue of debentures, Baht 3,000 million for investment in land and project development cost in housing projects, construction cost of high-rise building for sale and lease in accordance with the growth of revenues and sales of the Company and its subsidiaries' targets, and repayment of some outstanding loans. The wholly-owned subsidiary sold the building, including fixtures, fittings and related equipment in the building, as well as transferred the leasehold right of Q.House Lumpini to the Quality Houses Property Fund in the amount of Baht 5,086.0 million (after deducting specific business tax) and the Company leased Q.House Ploenchit, including utilities system, fixtures, fittings and related equipment situated on the property to Quality Houses Property Fund in the amount of Baht 819.0 million. The total amount was used to repay outstanding loans and to be the working capital. Therefore, the total liabilities in 2006 were less than that in 2007.

- Shareholders' Equity
As of December 31, 2007, the shareholders' equity of the Company increased Baht 483.8 million or 5.7%, comparing to the year 2006 (as of December 31, 2006) because:

- the Company's net profit for the year 2007 was Baht 1,066.3 million.

- the Company received cash from the exercise of warrants (QH-W4) and ESOP warrants (ESOP-W3) in the amount of Baht 61.9 million. The Company has used such fund for working capital.

- Revaluation increased (decreased) investments increased Baht 7.4 million.

- In May 2007, the Company paid the dividend in the amount of Baht 651.8 million from the net profit of year 2006 as the resolution of an Annual General Meeting of shareholders of year 2007 held on April 18, 2007.

VI. Summary of significant change and development in the Company in 2007

- For the sales of land and houses business, The Company and its subsidiaries launched 8 new projects with the estimated total sales of projects in the amount of Baht 10,110.0 million in 2007,comprising of 4 projects of the Company with the estimated total sales of projects Baht 6,780.0 million and 4 projects of the Company subsidiaries with the estimated total sales of projects in the amount of Baht 3,330 million. Besides, the Company and its subsidiaries paid the deposit and the transfer amount for 11 plots of land for developing 11 projects as well as the plots of land for the future expansion of existing 5 projects in 2006, in the total amount of Baht 4,111.0 million.

- For the sales of condominiums, The Company and its subsidiaries were developing 2 residential condominium projects : Q.House Condo Sathon and Casa Condo Ratchada-Tapra. It is expected to be recognized the revenue from the projects mentioned above in 2009 and 2010, respectively. Both of projects are situated near BTS stations.

- For the rental residence business in 2007, the Company did the major renovation at Centre Point Petchburi, Centre Point Sukhumvit and Centre Point Silom. The renovation work at Centre Point Petchburi and Centre Point Sukhumvit was completed in the mid of 2007. The renovation work at Centre Point Silom is expected to be completed at the beginning of 2009. The major renovation has been done in order to maintain standard and improve the condition of serviced apartments. Due to this fact, it is expected to have an increase in revenues and increase in competitive edge in the market. The renovation has been gradually done without closing the entire building and without disturbing the tenants so there was little effect on the revenue. Besides, the Company and/or the Company subsidiaries entered into the management agreement of Grande Centre Point Hotel and Residence Ratchadamri. This project is the hotel and rentalresidential building with 50 storeys, 526 units, at Ratchadamri. The term of the agreement is 3 years with the right to extend the term of agreement for 3 years in each time. The Company and/or the Company subsidiaries receive the fee from operating software fee, annual fee, incentive fee varied with the revenue and the net profit, remuneration for the employees related to management of this project from the actual expenses occurred and operating expenses related to the project, with the estimated total amount of Baht 76.9 million for 3 years. The board of director of the Company appointed the managing director to negotiate and sign in the agreement and other related documents, including management fee negotiation and other details with the appropriate discretion.

- Unsubordinated and unsecured debentures No. 1/2007 in November 2007, the Company issued 3-year debentures with maturity date of 15 November 2010, bearing interest at a fixed rate of 4.9 percent per annum. It is rated as BBB+ by TRIS Rating Co., Ltd.

Please be informed accordingly,

 

Sincerely yours

Mrs. Suwanna Bhuddhaprasart

(Mrs. Suwanna Bhuddhaprasart)
Senior Executive Vice President

Attachments

• Attachment 1