TRIS Rating Co., Ltd. has assigned the rating of “A-” to the proposed issue of up to Bt500 million in senior debentures of Supalai PLC (SPALI). At the same time, TRIS Rating has affirmed the company and senior debentures ratings of SPALI at “A-” and has affirmed the rating of SPALI’s senior secured debentures at “A”. The outlook remains “stable”. The proceeds from the new debentures will be used for business expansion. The ratings reflect SPALI’s proven track record in the residential property development industry, accepted brand name in the middle-income segment, ability to efficiently control operating costs, and strong financial position. The strengths are partly offset by the cyclical nature of the property development industry and rising construction costs. The rating of the senior secured debentures incorporates the estimated market value of Supalai Grand Tower, which is pledged as collateral at 1.7 times the value of the outstanding debentures throughout the life of the issue. The “stable” outlook reflects the expectation that SPALI will be able to sustain its strong financial position in the medium term. Despite increasing construction costs and more intense competition in the residential property segment, SPALI’s profitability is expected to remain at a relatively higher level compared with its peers. With continued project expansion, the company’s cash flow protection and financial leverage should remain at acceptable levels.
TRIS Rating reported that SPALI was established by the Tangmatitham family in 1989, SPALI is one of Thailand’s leading property developers. As of March 2012, the Tangmatitham family, the largest shareholder, held a 28% stake in SPALI. As of March 2012, SPALI had around 70 existing residential projects with the remaining value of around Bt26,000 million available for sale. The company had a huge backlog worth approximately Bt25,000 million, about two times its revenue base. SPALI’s residential project portfolio comprises condominium projects (63% of total project value) and housing projects (37%). The company’s competitive edge is derived from its ability to control operating costs efficiently. As a result, SPALI is able to offer its residential units at competitive prices.
TRIS Rating said, SPALI’s presales value was Bt17,416 million in 2011, up 21% from Bt14,366 million in 2010. The growth in presales was driven mainly by a good response in new condominium projects launched in 2011 which pushed condominium presales to reach a record high of Bt12,879 million. Presales during the first quarter of 2012 sharply increased to Bt4,921 million from Bt1,975 million during the same period in 2011. Rising presales were primarily supported by a successful launch of City Resort Ratchada Huaykwang, which generated presales of around Bt1,600 million in the first three months of 2012. Total revenue was Bt12,686 million in 2011, 14% higher than Bt11,083 million in 2010. Revenue growth from condominiums was 28%, which reflected units delivered in the City Home Rattanathibeth, City Resort Ramkhamhang, and Supalai Park Tiwanon projects to the customers. Revenue from housing projects had been around Bt4,900 million per year during 2010-2011. Revenue during the first three months of 2012 plunged by 52% to Bt1,578 million from Bt3,286 million during the same period of 2011. The drop mainly came from declining revenue from condominium. Condominium generated a revenue of Bt595 million in the first quarter of 2012, sharply decreasing from Bt2,298 million in the same period of 2011. However, SPALI plans to deliver a backlog of around Bt8,000 million during the rest nine months of 2012. As a result, the company’s revenue for the full year of 2012 is expected to be sound. Although operating income as a percentage of sales decreased to 32.33% in 2011 and 29.13% in the first quarter of 2012 from 34.90% in 2010, SPALI’s profit margin remained relatively higher than most listed property developers. The company’s cash flow protection had been deteriorated as the funds from operations (FFOs) to total debt ratio declined to 7.49% (non-annualized) in the first three months of 2012 from 23.14% (non-annualized) in the same period of 2011. However, SPALI’s cash flow protection is likely to improve because a number of backlog will be delivered during the rest nine months of 2012. Financial leverage was still low as the debt to capitalization ratio was 33.33% at the end of 2011 and 30.05% as of March 2012, said TRIS Rating. — End
Company Rating: Affirmed at A- Issue Ratings: SPALI133A: Bt1,000 million senior secured debentures due 2013 Affirmed at A SPALI141A: Bt500 million senior debentures due 2014 Affirmed at A- SPALI14OA: Bt700 million senior debentures due 2014 Affirmed at A- SPALI15OA: Bt745 million senior debentures due 2015 Affirmed at A- Up to Bt500 million senior debentures due within 2014 A- Rating Outlook: Stable
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