TRIS Rating has assigned a “BBB” rating to the proposed issue of up to Bt3,000 million in senior debentures of Sansiri PLC (SIRI). At the same time, TRIS Rating has affirmed the company rating of SIRI at “BBB+” and has affirmed SIRI’s existing issue ratings at “BBB”. The outlook remains “stable”. The ratings reflect the company’s leading position and proven record in the residential property development industry, well-recognized condominium and housing brands, diversified product portfolio, and strong backlog which partly secures the company’s future revenue stream. These strengths are partially offset by an increasing financial leverage and selling and administrative (SG&A) expenses. The ratings also take into consideration the cyclical nature of the property development industry and concerns over rising construction costs and the current labor shortage. The “stable” outlook reflects the expectation that SIRI will be able to deliver a large amount of its backlog on schedule. Although its profitability is under pressure due to rising construction costs, SIRI is expected to sustain its operating profit margin at a satisfactory level in the medium term. Despite an aggressive expansion plan, SIRI’s cash flow protection should not deteriorate further and financial leverage should not be higher than the current level.
SIRI is one of the leading property developers in Thailand. As of November 2012, the company had 88 residential projects in its portfolio, with total remaining value of Bt33,136 million. 55% of the value of the remaining projects was in single-detached house (SDH) projects, 25% was in condominium projects, and 20% was in townhouse projects. The average unit price across the portfolio was Bt3.8 million. At the end of September 2012, the company’s total backlog was approximately Bt50,000 million, mostly in condominium projects. SIRI’s main competitive edges are derived from its well-accepted brand, strong marketing strategies, and the good quality of its products, especially in the condominium segment.
Presales during the first eleven months of 2012 reached a peak of Bt39,283 million, much higher than Bt21,792 million of the full-year presales of 2011. A significant growth came mainly from a good response in several new projects launched in 2012, especially in condominium projects. Condominium presales achieved a record high of Bt26,130 million in the first eleven months of 2012, rising from Bt8,204 million in 2011 and Bt14,486 million in 2010. Presales of SDH units grew by 9% year-on-year (y-o-y) to Bt9,723 million in the first eleven months of 2012, while townhouse presales dropped by 13% y-o-y to Bt3,430 million. The high presales volume drove SIRI’s backlog considerably.
SIRI’s total revenue during the first nine months of 2012 was Bt15,795 million, 23% higher than Bt12,793 million during the same period of 2011. SIRI’s revenue rose in all three product categories. The gross profit margin improved to 33%-34% of total revenue during 2010 through the first nine months of 2012. However, the expiration of the government tax incentives and more marketing spending drove SG&A expenses higher. SG&A expenses increased to 20% of total revenue in 2011 and 24% in the first nine months of 2012, up from 16%-18% during 2008-2010. The ratio of operating income as a percentage of sales declined to 11% during the first nine months of 2012 from 15%-16% during 2009-2011. SIRI’s operating profit margin remained lower than most leading property developers. SIRI’s cash flow protection was weaker than its peers, as the ratio of funds from operations (FFOs) to total debt was 12% during 2009-2011 and 4.57% (non-annualized) in the first nine months of 2012. An aggressive expansion pushed financial leverage relatively higher than most listed property developers. The debt to capitalization ratio jumped to 67% as of September 2012 from 63% at the end of December 2010 and 2011.
Company Rating: BBB+ Issue Ratings: SIRI155A: Bt1,000 million senior debentures due 2015 BBB SIRI15OA: Bt1,000 million senior debentures due 2015 BBB SIRI167A: Bt1,000 million senior debentures due 2016 BBB SIRI16OA: Bt1,000 million senior debentures due 2016 BBB Up to Bt3,000 million senior debentures due within 2018 BBB Rating Outlook: Stable
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