TRIS Rating has affirmed the company rating of Noble Development PLC (NOBLE) at “BBB” and has affirmed the ratings of NOBLE’s senior debentures at “BBB-”. The outlook remains “stable”. 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 are constrained by concentration risk from a huge investment in the Noble Ploenchit condominium project, worth Bt16,366 million, as well as relatively high financial leverage, the cyclical and competitive nature of the property development industry, concerns over rising operating costs, and the widespread labor shortage among contractors. The “stable” outlook reflects the expectation that NOBLE will be able to launch and deliver its projects as planned. Over the next three years, its financial leverage is expected to rise as the construction of several condominium projects proceeds according to schedule. However, the net interest-bearing debt to equity ratio is expected to stay 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 held a combined 12% stake in the company as of May 2013. 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 2013, NOBLE had 15 existing projects available for sale with remaining value of approximately Bt13,000 million. The company had a backlog worth around Bt15,000 million. The units in the backlog will be completed and ready to transfer to customers during the remainder of 2013 through 2017. As of October 2013, the residential project portfolio comprises condominiums (84% of total project value), single detached houses (SDHs, 7%), townhouses (6%), and land plots (3%).
NOBLE’s presales in the first 10 months of 2013 was Bt5,161 million, sharply increasing from the full year presales of Bt2,852 million in 2012. The rise in presales was due mainly to a good response to the Noble Revolve Ratchada project. The project was 81% sold as of October 2013 and generated presales of Bt2,253 million. Total revenue during the first nine months of 2013 grew by 70% year-on-year (y-o-y) to Bt2,131 million, since most of the units in Noble Reform were finished and transferred to buyers.
NOBLE’s gross profit margin has remained high, at 38%-39% during 2008 through the first nine months of 2013. The operating margin, as measured by operating income before depreciation and amortization as a percentage of sales, ranged from 19% to 21% during 2011 through the first nine months of 2013. Total debt increased to Bt10,164 million as of September 2013, from Bt7,806 million in 2012 and Bt6,279 million in 2011. Most of its debt was needed to fund the investment in the Noble Ploenchit project. The ratio of total debt to capitalization stepped up to 71% as of September 2013, from 66% in 2012 and 62% in 2011. However, NOBLE’s cash on hand was relatively high at Bt3,927 million. Thus, the net debt to capitalization ratio was only 60%, slightly higher than last year. NOBLE’s cash flow protection remained acceptable as the ratio of funds from operations (FFO) to total debt held steady at 5%-6% during 2011 through the first nine months of 2013. The earnings before interest, tax, depreciation, and amortization (EBITDA) interest coverage ratio ranged from 2 to 3 times during the past three years. NOBLE has no liquidity concerns since the company maintains a substantial amount of cash on hand.
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