TRIS Rating has affirmed the company and senior debenture ratings of Supalai PLC (SPALI) at “A-”. At the same time, TRIS Rating has revised the rating outlook of SPALI to “positive” from “stable”. The “positive” outlook reflects an expected improvement in the company’s operating performance over the next few years upon the delivery of condominium units, which have been secured by its huge backlog. The “A-” ratings continue to reflect SPALI’s proven track record in the residential property development in Thailand and accepted brand name in the middle-income segment. The ratings also take into consideration the company’s ability to control operating costs and its strong financial position. These strengths are partly offset by the cyclical and competitive nature of the property development industry, plus concerns over rising operating costs and the widespread labor shortage among contractors. The “positive” outlook reflects an expected improvement in SPALI’s operating performance during 2014-2015. The ratings could be upgraded should the company be able to manage the transfer of the condominium backlog as scheduled. With its current expansion plans, SPALI should be able to sustain its strong financial position in the medium term. A significant delay in projects’ cash inflows or a weaker financial profile could cause its ratings or outlook to be revised downward.
Established by the Tangmatitham family in 1989, SPALI is one of Thailand’s leading property developers. As of March 2013, the Tangmatitham family, the largest shareholder, held a 28% stake in SPALI. At the end of March 2013, SPALI had 82 existing residential projects, with a total remaining value of around Bt24,000 million available for sale. The company had a huge backlog, worth approximately Bt32,000 million or around 3 times its current revenue base. SPALI’s residential project portfolio comprises condominium projects (57% of total project value) and housing projects (43%). The company’s competitive edge is derived from its ability to control operating costs, and thus offer competitively-priced residential units to homebuyers.
SPALI’s presales were Bt22,442 million in 2012, up 24% from Bt18,026 million in 2011. The growth in presales was due mainly to good responses to new condominium projects launched in 2012. As of March 2013, more than 90% of the condominium projects launched in 2012 were sold. Consequently, condominium presales rose by 33% year-on-year (y-o-y) to Bt17,122 million in 2012. Presales from housing projects were Bt5,320 million in 2012, slightly up from Bt5,136 million in 2011. Presales during the first quarter of 2013 decreased by 27% y-o-y to Bt3,582 million. The drop came because condominium presales tumbled by 49% y-o-y to Bt1,864 million during the first three months of 2013. Only one condominium project was launched in late March 2013 while other six condominium projects are planned to be launched during the remainder of 2013.
Total revenue of SPALI was Bt11,513 million in 2012, slightly lower than Bt12,686 million in 2011. Revenue from condominium projects declined by 29% y-o-y to Bt5,696 million in 2012. Housing projects generated revenue of Bt5,564 million in 2012, up by 25% from Bt4,463 million in 2011. During the first quarter of 2013, SPALI’s revenue soared by 33% y-o-y to Bt2,106 million. Revenue from condominium and housing projects grew by 5% y-o-y and 54% y-o-y, respectively. Looking forward, based on its backlog of Bt32,000 million as of March 2013, the company plans to recognize Bt7,700 million of backlog as revenue during the remaining of 2013 and approximately Bt11,000 million per annum during 2014-2015.
SPALI’s financial position has been strong. Its profit margin has remained relatively higher than most property developers listed on the Stock Exchange of Thailand (SET). Operating income as a percentage of sales was 30%-33% during 2011 through the first three months of 2013. SPALI’s financial leverage had been maintained at a healthy level. The ratio of total debt to capitalization ranged from 30% to 34% during 2009-2012. The ratio of funds from operations (FFO) to total debt was high at 50%-54% during 2010-2012 and 13% (non-annualized) during the first three months of 2013. SPALI’s financial flexibility was supported by a sizable undrawn credit facility of Bt18,549 million as of March 2013.
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