TRIS Rating downgrades the company rating of Noble Development PLC (NOBLE) to “BBB” from “BBB+”. At the same time, TRIS Rating also downgrades the ratings of NOBLE’s senior debentures to “BBB-” from “BBB”. The outlook remains “stable”. The downgrade is due to the company’s operating performance which is lower than expectation and its rising financial leverage. The ratings reflect the company’s well-accepted brand in the middle- to high-end segments of the residential property market and its product differentiation strategy. The ratings also take into consideration the concentration risk from a huge investment from the Noble Ploenchit project with the project value of Bt15,600 million, along with the cyclical nature of the property development industry, and concerns over the increasing construction cost and labor shortage problem. The ratings of NOBLE’s senior debentures are one notch below the company rating due to the high levels of secured debts compared with NOBLE’s total assets. The “stable” outlook reflects the expectation that NOBLE will be able to launch and deliver its projects as planned. Leverage is expected to rise during the construction period of the Noble Ploenchit project. However, the company is anticipated to keep its net debt to equity ratio at or below 2 times.
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 13% stake as of May 2012. NOBLE’s unique designs for every product type differentiate its products from other developers. The company has focused on developing condominium projects since 2006 as market preferences have shifted to urban living. At the end of October 2012, NOBLE had 16 existing projects available for sale with a remaining value of approximately Bt12,000 million. The company had a backlog worth around Bt12,600 million. The units in backlog will be delivered to customers from now 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 presales during the first 10 months of 2012 sharply decreased to Bt2,437 million from Bt7,453 million in the same period of 2011. The drop in presales was due in part to the fact that NOBLE launched only one condominium project in 2012: Noble Revolve. In addition, presales at the Noble Ploenchit project were lower than expected. Total revenue plunged to Bt2,910 million in 2011, falling by 43% from Bt5,105 million in 2010. The fall came because the company completed only two condominium projects in 2011, Noble Remix 2 and Noble Reveal. In addition, the value of the units transferred to customers in the Noble Remix 2 and Noble Reveal amounted to only 49% and 59% of each project’s value, respectively. Total revenue continued to drop in 2012, falling to Bt1,252 million for the first nine months of 2012, compared with Bt2,228 million during the same period of 2011. The company suffered from the delays in the transfer of finished units to customers in the Noble Reform project.
Despite the recent drops in revenue, the company’s gross profit margin has remained high since 2010, at 38%-40% of sales during 2010 through the third quarter of 2012. However, the operating profit margin dropped to 13.33% in the first nine months of 2012 from 20.87% in 2011, due mainly to the lower revenue base. As of September 2012, total debt increased to Bt7,778 million from Bt6,279 million in 2011. The rise in debt mainly came from the investment in the Noble Ploenchit project. NOBLE’s financial leverage ratio has increased steadily in the past few years. The net debt to equity ratio rose from less than 1 times in 2009 to 1.4 times at the end of September 2012. Cash flow protection has also declined significantly. The funds from operations (FFO) to total debt ratio plunged to 0.94% (non-annualized) for the first nine months of 2012 from 25.46% and 5.60% in 2010 and 2011, respectively. The earnings before interest, taxes, depreciation, and amortization (EBITDA) interest coverage ratio dropped to 1.72 times in the first nine months of 2012 from 9.26 times and 2.81 times in 2010 and 2011, respectively. ? Noble Development PLC (NOBLE)
Company Rating: BBB Issue Ratings: NOBLE146A: Bt1,500 million senior debentures due 2014 BBB- NOBLE158A: Bt1,500 million senior debentures due 2015 BBB- Rating Outlook: Stable
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