TRIS Rating Co., Ltd. has affirmed the company rating of Sansiri PLC (SIRI) at “BBB+” and has affirmed SIRI’s existing issue ratings at “BBB”. At the same time, TRIS Rating has assigned a “BBB” rating to SIRI’s proposed issue of up to Bt1,000 million in senior debentures. The outlook remains “stable”. The ratings reflect the company’s leading position and proven record in the residential property development industry, well-recognized condominium and housing brands, diversified product portfolio, and strong backlog which partly secures the company’s future revenue stream. These strengths are partially offset by an increasing financial leverage and selling and administrative (SG&A) expenses. The ratings also take into consideration the cyclical nature of the property development industry and rising construction costs, resulting from increasing construction material prices and the recent minimum wage hike. The “stable” outlook reflects the expectation that SIRI will be able to deliver a large amount of its backlog on schedule. Although its profitability is under pressure due to rising construction costs, SIRI is expected to sustain its operating profit margin at a satisfactory level in the medium term. Despite an aggressive expansion plan, SIRI’s cash flow protection should not deteriorate further. Financial leverage is not expected to be higher than the current level.
TRIS Rating reported that SIRI is one of the leading property developers in Thailand. As of March 2012, the company had 63 residential projects in its portfolio, worth a total of around Bt78,000 million. The portfolio consists of condominium (49% of the total portfolio value), single-detached house (SDH, 39%), and townhouse (12%) projects. The average unit price across the portfolio was Bt3.5 million. At the end of March 2012, the company’s total backlog was approximately Bt32,000 million, while the value of the unsold units in its existing residential projects was around Bt21,000 million. SIRI’s main competitive edges are derived from its well-accepted brand, strong marketing strategies, and the good quality of its products, especially in the condominium segment.
TRIS Rating said, SIRI’s presales in 2011 diminished by 13% to Bt21,792 million, down from a record high of Bt24,995 million in 2010. The drop was due mainly to declining presales of condominiums. After opening a number of condominium projects in the second half of 2010, SIRI launched fewer condominium projects in 2011. Condominium presales plunged by 43% year-on-year (y-o-y) to Bt8,204 million in 2011. Presales of SDHs and townhouses in 2011 grew by 35% and 18% y-o-y, respectively. During the first quarter of 2012, SIRI’s presales reached Bt10,963 million, significantly increasing from Bt4,436 million during the same period of 2011. The growth was primarily driven by the successful launches of new condominium projects. Condominium presales in the first three months of 2012 totaled Bt7,053 million, nearly equal to the value of condominium presales for the whole year of 2011. The high presales volume increased SIRI’s backlog considerably. SIRI’s total revenue increased to Bt20,542 million in 2011, up 10% from Bt18,596 million in 2010. Total revenue during the first quarter of 2012 was Bt5,109 million, up sharply from Bt3,614 million during the same period of 2011. SIRI’s revenue rose in all three product categories. The gross profit margin improved to 33%-34% of total revenue during 2010 through the first quarter of 2012. However, the expiration of the government tax incentives and more marketing spending drove SG&A expenses higher. SG&A expenses increased to 18%-20% of total revenue during 2010-2011 and 25% in the first three months of 2012 from 16% during 2008-2009. The ratio of operating income as a percentage of sales was maintained at 15%-16% during 2009-2011, before declining to 10% in the first three months of 2012. SIRI’s operating profit margin remained lower than most leading property developers. Cash flow protection had been weaker than its peers, as the ratio of funds from operations (FFOs) to total debt was 12% during 2009-2011 and 2.25% (non-annualized) in the first quarter of 2012. An aggressive expansion plan pushed financial leverage relatively higher than most listed property developers. The debt to capitalization ratio was 63%-64% at the end of 2010 through March 2012, said TRIS Rating. — End
Company Rating: Affirmed at BBB+ Issue Ratings: SIRI126A: Bt1,000 million senior debentures due 2012 Affirmed at BBB SIRI167A: Bt1,000 million senior debentures due 2016 Affirmed at BBB SIRI16OA: Bt1,000 million senior debentures due 2016 Affirmed at BBB Up to Bt1,000 million senior debentures due within 2015 BBB Rating Outlook: Stable
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