TRIS Rating has affirmed the company rating of Sansiri PLC (SIRI) at “BBB+” and has affirmed SIRI’s existing senior debenture ratings at “BBB”. At the same time, TRIS Rating has assigned the rating of “BBB” to SIRI’s proposed issue of up to Bt1,000 million in senior debentures. The proceeds from the new debentures will be used to repay the debentures due in the third quarter of 2013.
TRIS Rating has also revised upward the rating outlook of SIRI to “positive” from “stable”. The “positive” outlook reflects the significant improvement in the company’s operating performance in the past three years. SIRI’s revenues ranked no. 1 among the property developers in 2012, reflecting its dominant position in both condominium and housing segments.
The ratings continue to reflect the company’s leading position and proven record in the residential property development industry, well-recognized condominium and housing brands, diverse product portfolio, and strong backlog which partly secures the company’s future revenue stream. These strengths are partially offset by rising financial leverage in the past three years and relatively high selling and administrative (SG&A) expenses. The ratings also take into consideration the cyclical nature of the property development industry, plus concerns over rising construction costs and the current labor shortage.
The “positive” outlook reflects SIRI’s improving operating performance in terms of sales and profit. The ratings could be upgraded should the company lower its interest-bearing debt to equity ratio to less than 1.5 times on a sustainable basis. On the contrary, a sharply weaker financial position could cause its ratings or outlook to be revised downward.
SIRI is one of the leading property developers in Thailand. As of March 2013, the company had 99 residential projects in its portfolio, worth a total of around Bt127,000 million. The portfolio consists of condominium (61% of the total portfolio value), single-detached house (SDH, 31%), and townhouse (8%) projects. The average unit price across the portfolio was Bt3.5 million. At the end of March 2013, SIRI had a huge backlog worth Bt56,000 million or nearly two times its revenue in 2012. The value of the unsold units in its existing residential projects was approximately Bt40,000 million. SIRI’s main competitive edge is derived from its well-accepted brand name, well-executed marketing strategies, and the good quality of its products, especially in the condominium segment.
Presales reached a record high of Bt42,593 million in 2012, doubled the Bt21,792 million booked in 2011. During the first quarter of 2013, presales totaled Bt20,900 million, around half of a full-year level of presales in 2012. Presales grew because SIRI launched a large number of condominium projects in 2012 and in the first three months of 2013. The new project launches received good responses from customers. Condominium presales peaked at Bt28,553 million in 2012, and was still high at Bt17,836 million in the first quarter of 2013. Presales of SDH projects have been Bt2,400-Bt2,900 million per quarter during the latest five quarters. However, presales of townhouse units were slower than in the past. Townhouse presales dropped by 14% year-on-year (y-o-y) to Bt3,614 million in 2012, and declined to Bt515 million during the first three months of 2013 from Bt1,195 million during the same period of 2012. The high level of condominium presales pushed SIRI’s backlog significantly higher.
Total revenue of SIRI climbed to Bt29,821 million in 2012, up by 45% from Bt20,542 million in 2011. Revenue rose across all product types. Revenue from condominiums soared by 60% y-o-y to Bt14,913 million in 2012, making the company’s record. Revenue in the SDH and townhouse segments grew by 32% and 37%, respectively, compared with the levels in 2011. SIRI’s gross profit margin had been 33%-34% of total revenue during the past three years, up from 28%-29% during 2006-2009. SIRI’s operating profit margin dropped slightly to 14% in 2012 from 15%-16% during 2009-2011 since its SG&A expenses remained high. These levels were lower than most leading property developers. SIRI’s financial leverage was relatively high. Its interest-bearing debt to equity ratio was around 1.7 times during 2010-2012, rising from around 1-1.3 times during 2007-2009. SIRI’s liquidity is acceptable. The ratio of funds from operations (FFO) to total debt was 12% during 2009-2011 and 14% in 2012. SIRI’s financial flexibility was enhanced by the FFO of Bt2,000-Bt3,000 million per annum during 2011-2012, plus a sizable undrawn credit facility of around Bt22,000 million as of December 2012. In addition, cash received from the transfer of its backlog will help lower its debt required to fund its expansion plans. Thus, its interest-bearing debt to equity ratio should be lower than 1.5 times by 2014.
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