TRIS Rating Co., Ltd. has affirmed the company rating of Supalai PLC (SPALI) at “A-”, and has affirmed the existing ratings of SPALI’s senior secured debentures at “A” and senior debentures at “A-”. The outlook remains “stable”. 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, labor shortages, 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. The company is one of Thailand’s leading property developers. As of May 2012, the Tangmatitham family, the largest shareholder, held a 28% stake in SPALI. As of April 2012, SPALI had around 70 existing residential projects with the remaining value of around Bt25,000 million available for sale. The company had a huge backlog, worth approximately Bt28,000 million or around two times its revenue base as of April 2012. 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, being able to offer competitively-priced residential units.
TRIS Rating said, SPALI’s presales was Bt18,026 million in 2011, up 25% from Bt14,366 million in 2010. The growth in presales was driven mainly by good responses to new condominium projects launched in 2011 which pushed presales of condominiums to a record high of Bt12,890 million. Presales during the first four months of 2012 grew to Bt8,759 million, a significant increase from Bt2,793 million during the same period in 2011. The rise in presales was primarily supported by the successful launches of the City Resort Ratchada Huaykwang, Asean City Resort, and Supalai Wellington projects, which generated a combined presales of around Bt4,400 million in the first four months of 2012.
SPALI’s total revenue was Bt12,686 million in 2011, 14% higher than Bt11,083 million in 2010. Revenue from condominiums grew by 28%, from the delivery of units in the City Home Rattanathibeth, City Resort Ramkhamhang, Supalai Park Tiwanon, and Supalai Park Kaset-Nawamint projects to customers. Revenue from housing projects was 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 came mainly from declining revenue from condominium. The revenue from condominium projects comprised Bt595 million in the first quarter of 2012, a sharp decrease from Bt2,298 million in the same period of 2011. However, SPALI plans to deliver a backlog of around Bt7,700 million during the rest nine months of 2012. As a result, revenue for the full year of 2012 is expected to be sound.
SPALI’s 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. However, SPALI’s profit margin remained relatively higher than most listed property developers. The company’s cash flow protection has deteriorated recently, 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 large portion of the backlog will be delivered during the remainder 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
TRIS Rating Co., Ltd./www.trisrating.com Contact: santaya@trisrating.com, Tel: 0-2231-3011 ext 500/Silom Complex Building, 24th Floor, 191 Silom Road, Bangkok 10500, Thailand Copyright 2012, 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.