TRIS Rating Co., Ltd. has revised the rating outlook of Prinsiri PLC (PRIN) to “stable” from “negative”, which reflects the significant improvement in the company’s operating performance in the first half of 2012, the solid recovery in PRIN’s presales, and the amount of revenue recognized in the first half of 2012. TRIS Rating expects that the company will be able to continually improve its operating performance and successfully transfer completed housing units to customers as planned. In addition, the company’s debt to capitalization ratio should not rise higher than its current level.
At the same time, TRIS Rating has affirmed the company rating of PRIN at “BBB-”. The rating reflects PRIN’s acceptable track record in the low-rise residential property development segment. These strengths are partially offset by an unfavorable track record in the condominium segment and a rising level of financial leverage. The rating also takes into consideration labour shortages, rising construction costs, and the cyclical nature of the property development industry.
TRIS Rating reported that PRIN is a medium-sized residential property developer in Thailand. The company was established in 2000 by the Kovitchindachai family and listed on the Stock Exchange of Thailand (SET) in November 2005. The Kovitchindachai family continues to be the largest shareholder, with a combined 46% stake at the end of February 2012. PRIN offers a wide range of products, including single detached houses (SDHs), townhouses, and condominiums. Its residential property projects focus on the middle-income segment in Greater Bangkok. Its low-rise projects with small sizes provide flexibility for the company to develop each project in response to changing market preferences.
TRIS Rating said, PRIN’s presales in 2011 dropped sharply to Bt2,116 million, tumbling by 47% from Bt4,017 million in 2010. The fall in the presales was due mainly to the delayed launches of several new projects and the impact from the severe flood in the last quarter of 2011. However, presales in the first half of 2012 leaped to Bt1,547 million, up 53% from the same period in 2011. The growth in presales in the first half of 2012 was the result of better performance across all product types. In the second half of 2012, the company planned to launch seven projects with a combined project value of Bt4,000 million. Thus, the level of presales for the full year of 2012 is expected to be satisfactory.
PRIN’s revenue decreased to Bt2,238 million in 2011, significantly lower than Bt4,449 million in 2010. The drop was mainly due to poorer presales performance and delays in project construction, which caused delivery delays to customers of finished SDH and townhouse units. However, the company was able to improve its construction process and transfer more townhouse units to its customers in the first half of 2012. Thus, revenue in the first half of 2012 jumped to Bt1,434 million, rising 46% from Bt982 million during the same period in 2011. The delivery rate for the SDH units in the backlog has remained slow and needs to be improved.
The gross profit margin of residential property sales of PRIN had held at a high level at around 37%-38% of sales during 2011 through the first half of 2012. Despite the higher gross profit margin in 2011, a significant drop in revenue, coupled with a relatively large amount of selling and administrative expenses (SG&A), caused PRIN’s operating profit margin to decrease. Operating income as a percentage of sales fell to 13.55% in 2011, from 16.09% in 2010. However, the operating profit margin recovered to 17.73% in the first half of 2012. Cash flow protection also improved in the first half of 2012. The funds from operations (FFOs) to total debt ratio increased to 6.74% (non-annualized) in the first half of 2012, from only 6.26% in 2011. The ratio of total debt to capitalization significantly increased from 31.67% as of December 2010 to around 47% in 2011 and the first half of 2012, said TRIS Rating. — End
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