TRIS Rating Co., Ltd. has assigned the rating of “A” to the proposed issues of up to Bt2,000 million in senior debentures of MBK PLC (MBK). At the same time, TRIS Rating has affirmed the company rating of MBK and the ratings of its current senior debentures at “A” with “stable” outlook. The proceeds from the new debentures will be used to repay debentures maturing in July 2011. The ratings reflect MBK’s strengthened position in the commercial property development industry, the stable cash flows from its contract-based retail space leasing business, a close relationship with Thanachart Group, the ability to maintain an acceptable level of leverage, and strong financial flexibility from its sizable investment in marketable securities. These strengths are partially offset by an upcoming rise in its operating cost from a new leasehold contract which will take effect in 2013 and the expansion into motorcycle financing business.
The “stable” outlook reflects the expectation that MBK will continue to receive stable cash flows from its retail properties to offset the weak performance of its hotel business. MBK is expected to maintain the quality of its motorcycle loan portfolio through its stringent approval and collection procedures. With the moderate amount of capital expenditures planned for 2010-2011, the company is expected to maintain its leverage level, as measured by the total debt to capitalization ratio.
TRIS Rating reported that MBK was founded in 1974. Thanachart Capital PLC (TCAP) and other companies in the TCAP Group are MBK’s current major shareholders, holding a 20% stake in total. MBK currently engaged in retail property for rent, hotel, golf course, residential property development, rice milling and finance businesses. MBK owns and operates MBK Center, a well-known shopping center in downtown Bangkok. The company’s performance is heavily reliant on its core properties, MBK Center and Pathumwan Princess Hotel, despite its diverse business portfolio. These properties are located on leasehold land close to the Siam Square area in Bangkok. In recent years, the two properties have generated approximately 40% of MBK’s revenue and 65% of cash flow.
To mitigate business concentration risk, MBK has gradually expanded its retail property business. The company has a 31% stake in Siam Piwat Co., Ltd., which owns and operates shopping centers in the Siam Square area. Siam Piwat owns 100% of Siam Center (18,700 square meters, sq.m.) and Siam Discovery Center (24,890 sq.m.), and has a 50% interest in Siam Paragon (186,010 sq.m.). In addition, a 50% joint venture (JV) between MBK and Siam Piwat has completely renovated the Paradise Park (formerly Seri Center) shopping mall (90,000 sq.m.), which was fully operated in July 2010. MBK is developing its first community mall on Rama IX road with a target opening date in mid-2011. As of December 2010, MBK’s net retail property portfolio stood at 192,786 sq.m. and will increase slightly after the opening of the community mall. The acquisition of an 8,223-sq.m. office building in June 2010 raised its office space holdings to a total of 48,921 sq.m.
TRIS Rating said, apart from the commercial property business, MBK acquired T Leasing Co., Ltd. (TLS), a motorcycle financing business in April 2010. TLS’s outstanding motorcycle loans were Bt796 million as of December 2010. The loan quality was satisfactory with the ratio of non-performing loans (NPL) to total loans of 3.55%. However, the ability to control asset quality, while expanding size of the loan portfolio, remains a challenge for MBK.
Although the tourism industry in Thailand has been negatively affected by global economic conditions and domestic political unrest, MBK’s operations have held at an acceptable level. Revenue accounted for around Bt5,800 million for the last three fiscal years. From July to December 2010, the first half of the 2010/2011 fiscal year (FY), revenue increased by 28% year-on-year (y-o-y) to Bt3,708 million, after Paradise Park shopping mall was fully operated and the finance business started up.
Net Profit also increased by 8% y-o-y to Bt567 million. However, the operating profit margin slightly decreased from 29.84% in FY2009/2010 to 29.08% for the first six months of FY2010/2011. Funds from operations (FFO) stayed at Bt1,700-Bt1,800 million for three consecutive fiscal years (FY2007-2009) but sharply increased to Bt3,458 million in FY2009/2010. The rise was the result of the Bt3,000 million raised through the execution of long-term leases in MBK Center in late 2009. The FFO to total debt ratio improved from 22.53% in FY2008/2009 to 45.47% in FY2009/2010. The level of debt increased from Bt7,604 million in June 2010 to Bt8,155 million in December 2010, but the total debt to capitalization ratio was relatively stable at 38.63% in December 2010. In FY2009/2010, MBK also realized gains on sales of investments in marketable securities amounting to Bt2,233 million, which helped strengthen its liquidity. Its marketable securities portfolio as of December 2010 was worth Bt5,572 million, said TRIS Rating. -- End
Company Rating: Affirmed at A Issue Ratings: MBK117A: Bt2,000 million senior debentures due 2011 Affirmed at A MBK137A: Bt3,000 million senior debentures due 2013 Affirmed at A Up to Bt2,000 million senior debentures due within 2016 A Rating Outlook: Stable
? Copyright 2011, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information. All methodologies used can be found at http://www.trisrating.com/en/rating_information/rating_criteria.html.