TRIS Rating Co., Ltd. has affirmed the company rating of Noble Development PLC (NOBLE) at “BBB+”. At the same time, TRIS Rating has affirmed the rating of NOBLE’s senior debentures at “BBB”. The rating outlook remains “stable”. The ratings reflect NOBLE’s well-accepted brand in the middle- to high-end segments of the residential property market, its product differentiation strategy, and large backlog of condominium projects. These strengths are partially offset by concentration risk from a huge investment in a single project, Noble Ploenchit, the company’s largest residential project worth approximately Bt15,000 million, and its relatively high level of debt incurred during the development period of this condominium project. The ratings also take into consideration the cyclical nature of the property development industry and increasing raw material and labor costs. The “stable” outlook reflects the expectation that NOBLE will be able to deliver the backlog on schedule. Cash flow protection is expected to be strengthened when several condominium projects are transferred. Despite the substantial capital requirements needed for Noble Ploenchit, the company is expected to maintain the debt to capitalization ratio at around its current level during the development period. The absorption rate of the Noble Ploenchit project is expected to be in line with the company’s track records. In addition, the construction is expected to be completed as planned without significant cost overruns to maintain its current credit profile, as the company has invested a substantial amount of money in this project, mostly through debt financing.
TRIS Rating reported that NOBLE is a medium-sized property developer in Thailand. The company was established in 1991 and listed on the Stock Exchange of Thailand (SET) in 1996. The Thanakitamnuay family and related families remain the company’s major shareholders with a combined 13% stake as of May 2011. The company has focused on developing condominium projects since 2006 as market preferences have shifted to urban living. At the end of September 2011, NOBLE had 17 existing projects available for sale with a remaining value of approximately Bt12,700 million. The company had a backlog worth around Bt12,200 million to be delivered during the remainder of 2011 through 2017. The residential project portfolio comprises condominiums (82% of total project value), single detached houses (SDH, 8%), townhouses (7%), and land plots (3%). NOBLE’s unique designs for every product type differentiate its products from other developers.
TRIS Rating said, NOBLE’s presales during the first nine months of 2011 sharply jumped to Bt7,689 million, more than double of presales value in the same period of 2010. The jump was due to the launch of a new condominium project, Noble Ploenchit. At the end of September 2011, total presales of Noble Ploenchit accounted for 43% of total project value. Total revenue reached a record high of Bt5,105 million in 2010, up from Bt1,938 million in 2009. The growth was due primarily to the large numbers of units in the Noble Remix, Noble Solo, and Noble Reflex projects which were transferred to customers. However, total revenue during the first nine months of 2011 tumbled to Bt2,228 million from Bt4,062 million, compared with the same period of 2010 as a result of lower transfer volume. The operating profit margin also declined, falling from 27.66% in 2010 to 22.28% in the first nine months of 2011 due to the expiration of government tax incentives in mid-2010. NOBLE’s financial leverage at the end of September 2011 was higher than other listed property developers. The total debt to capitalization ratio increased to 62.87% as of September 2011, from 57.53% in 2010 and 54.07% in 2009. The rise in debt mainly came from the additional investment in the Noble Ploenchit project.
Due to the heavy flooding which started to hit Bangkok and the vicinity in October 2011, the sale of residential properties is expected to slow down, especially for the heavy flooded zones. The direct effect of the flood crisis on NOBLE was minimal since most of its projects are condominium projects located in inner Bangkok. However, presales and transfer volumes are expected to slow down in the last quarter of 2011. Several developers, especially those focusing on low-rise projects, might see drops in revenue or even net losses in the last quarter of 2011. The government’s tax incentive scheme and zero-rate mortgage financing plans may not have a significant effect on the demand for residential property in the coming quarters, due to the negative consumer sentiment. Global economic uncertainties, the threat of rising costs from the possible enactment of the minimum-wage hike, and the elevated leverage levels of most property developers, are key downside risks for the industry, said TRIS Rating. — End
Company Rating: Affirmed at BBB+ Issue Rating: NOBLE146A: Bt1,500 million senior debentures due 2014 Affirmed at BBB Rating Outlook: Stable
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