TRIS Rating has affirmed the company rating of Home Product Center PLC (HMPRO) at “A+” with “stable” outlook. The rating reflects the company’s leading position in the home improvement retailing industry in Thailand, strong operating performance, and healthy financial position. The rating also takes into consideration the increasing competition among modern home improvement retailers. The “stable” outlook reflects the expectation that HMPRO will be able to maintain its strong operating performance and operating cash flows, while maintaining an acceptable leverage level, even as it continues to expand.
HMPRO is Thailand’s leading home improvement retailer, operating under the “HomePro” brand name. Currently, its major shareholders are Land & Houses PLC (LH) (30.12%) and Quality Houses PLC (QH) (19.79%). The company offers a wide range of home-related products and services, such as home improvement products, bathroom and sanitary ware, kitchen equipment, and home decorations. Since 2010, the company has successfully pursued its growth strategy by opening an average of six new stores every year. A shift in consumer preferences towards modern retail outlets has fuelled its expansion.
As of November 2012, HMPRO operated 53 stores, with 20 located in Greater Bangkok and 33 upcountry. In 2012, HMPRO opened eight stores, one in Greater Bangkok and seven upcountry. The company’s stores have a total sales area of approximately 367,000 square meters (sq.m.) and retail space for rent of 92,000 sq.m. Through its continual expansion, HMPRO has established a strong footprint in the modern home improvement retailing industry nationwide. HMPRO’s expansion plans over the next few years will focus on the major provinces in Thailand and the major cities in neighboring countries.
HMPRO’s total sales rose from Bt24,073 million in 2010 to Bt28,363 million in 2011. Sales continued to increase in the first nine months of 2012, climbing to Bt24,834 million, a 20.13% increase from the same period of 2011. Same-store sales grew by 6.70% in the first nine months of 2012. The sales growth for the first nine months of 2012 was due to operational improvements, dynamic changes in the product mix to serve customer preferences, and new store openings. The gross profit margin increased from 25.70% in 2011 to 25.89% in the first nine months of 2012, partly due to higher contributions from house-brand products. The proportion of private label products increased from 18.08% of total sales in 2011 to 19.22% for the first nine months of 2012.
HMPRO’s financial position has been strong. Funds from operations (FFOs) continued to rise, climbing from Bt2,644 million in 2010 to Bt3,154 million in 2011 and to Bt2,758 million for the first nine months of 2012. The rise in FFOs was driven by strong sales growth and improved profitability. Liquidity remained healthy, due to efficient cash management. Total debt increased from Bt3,012 million in 2011 to Bt4,322 million as of September 2012. Total debt rose in order to finance the construction of new stores and renovate existing stores. Despite the rise in total debt, the FFO to total debt ratio remained strong at 76.66% in 2011 and 50.24% (non-annualized) for the first nine months of 2012.
Company Rating: A+ Rating Outlook: Stable
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