TRIS Rating Co., Ltd. has assigned the rating of “BBB” to the proposed issue of up to Bt1,500 million in senior debentures of Noble Development PLC (NOBLE). At the same time, TRIS Rating has affirmed the company rating of NOBLE at “BBB+” and has affirmed the existing rating of NOBLE’s senior debentures at “BBB”. The outlook remains “stable”. The proceeds from the new debentures will be used for debt repayment and residential project development. The ratings reflect the company’s well-accepted brand in the middle- to high-end segments of the residential property market, 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 and other new projects, the company is expected to maintain the debt to capitalization ratio at around its current level. In addition, the construction is expected to be completed as planned without significant cost overruns. The ratings could be revised downward if the absorption rate of its condominium projects is significantly below expectations or the company’s leverage is higher than the current level.
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 15% stake as of May 2012. The company has focused on developing condominium projects since 2006 as the market preference has shifted to urban living. At the end of May 2012, NOBLE had 17 existing projects available for sale with remaining value of approximately Bt12,400 million. The company has a backlog worth around Bt11,900 million to be delivered during the remainder of 2012 through 2017. The residential project portfolio comprises condominiums (82% of total project value), single detached houses (SDHs, 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 in 2011 sharply jumped to Bt7,860 million, more than double of presales value in 2010. The jump was due to the launch of a new condominium project, Noble Ploenchit. Total presales of Noble Ploenchit in the first five months of 2012 was only Bt280 million, somewhat lower than expectation. Total revenue in 2011 sharply decreased to Bt2,910 million, down by 43% from Bt5,105 million in 2010. The fall came as there were only two condominium projects, Noble Remix 2 and Noble Reveal, completed. In addition, the value of the units transferred to customers in the Noble Remix 2 and Noble Reveal were only 49% and 59% of each project value, respectively. Total revenue in the first three months of 2012 also declined to Bt447 million, compared with Bt523 million during the same period of 2011 as a result of lower transfer volume. The operating profit margin dropped to 14.41% in the first three months of 2012 from 20.87% in 2011 due to the lower operating performance and more marketing spending. NOBLE’s financial leverage was higher than other listed property developers at the end of March 2012. The total debt to capitalization ratio increased to 61.79% as of March 2012, from 57.53% in 2010. However, its net debt to capitalization increased slightly to 53.85% as of March 2012, from 51.58% in 2010. The rise in debt mainly came from the additional investment in the Noble Ploenchit project. The ratings of NOBLE’s senior debentures are one notch below the company rating due to a high level of secured debts compared with total assets.
The direct effect of the flood crisis in late 2011 on NOBLE was minimal as most of its projects are condominium projects located in inner Bangkok. However, several developers, especially those who focused on low-rise projects, saw significant drops in revenues and profits 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 enactment of the minimum-wage hike, and the elevated leverage levels of most property developers are the key downside risks for the industry, said TRIS Rating. — End
Company Rating: Affirmed at BBB+ Issue Ratings: NOBLE146A: Bt1,500 million senior debentures due 2014 Affirmed at BBB Up to Bt1,500 million senior debentures due within 2015 BBB Rating Outlook: Stable
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.