TRIS Rating has assigned a rating of “A-” to the proposed issue of up to Bt3,000 million in senior debentures of Siam Global House PLC (GLOBAL). At the same time, TRIS Rating has affirmed the company rating of GLOBAL at “A-”. The outlook remains “stable”. The proceeds from the issuance of debentures will be used to repay existing debt and for planned capital expenditures.
The “A-” ratings continue to reflect the company’s proven record in the home improvement retailing industry in Thailand, its successful strategy of expanding its warehouse-format stores in provincial areas, and its low operating costs. These strengths are partially offset by the company’s long cash conversion cycle and increasing competition among modern home improvement retailers. The “stable” outlook reflects the expectation that GLOBAL will be able to maintain its position in the home improvement retailing industry. The company is expected to improve its inventory and logistics management abilities while it expands. The economies of scale from store expansion and cost control policy should help GLOBAL maintain its profitability despite rising competition in the home improvement retailing industry.
GLOBAL is one of the leading home improvement retailers in Thailand. It was established in 1997 by Mr. Witoon Suriyawanakul. The company was listed on the Stock Exchange of Thailand (SET) in August 2009. In November 2012, SCG Distribution Co., Ltd. (SCGD), 100% owned by Siam Cement Group PLC (SCG), became a strategic partner of GLOBAL after spending about Bt9,000 million to buy a 31% equity stake in GLOBAL. As of March 2013, GLOBAL’s major shareholders were the Suriyawanakul family (37.36%) and SCGD (31.25%).
The company’s first branch is located in Roi-Et province, which is the founder’s hometown. The company operated eight stores by the end of 2009 and the number of stores climbed to 19 stores at the end of 2012. As of September 2013, GLOBAL owned and operated 26 stores, mainly located in the Northeastern region. The company’s total store area was 628,662 square meters (sq.m.) as of September 2013.
The company offers a wide range of construction materials, hardware tools, and home decorations with approximately 100,000 stock keeping units (SKUs). The company’s stores are designed to be large-scale warehouse style. Each store has an average selling area of 22,000 sq.m.
Sales have continuously increased, rising from Bt3,967 million in 2008 to Bt10,783 million in 2012, a compound annual growth rate (CAGR) of 28%. For the first nine months of 2013, total sales grew by 38% over the same period in 2012, climbing to Bt10,809 million. The growth was mainly from seven new stores and 4.3% growth from existing stores. The company’s gross profit margin remained relatively stable at 15%, while its operating margin before depreciation and amortization slightly declined to 8.5% due to higher selling and administration cost. The company’s inventory level was relatively high, resulting in a long cash conversion cycle of more than 100 days. This long cycle was partly due to the company’s policy to stock a wide variety of products.
GLOBAL’s financial profile remained healthy in 2013. Earnings before interest, tax, depreciation, and amortization (EBITDA) climbed to Bt1,226 million in the first nine months of 2013, from Bt924 million in the first nine months of 2012. Despite the company’s total debt increased to Bt2,951 million, its total debt to capitalization ratio continued to be satisfactory at 22.6% as of September 2013. GLOBAL has opened 7 new stores during the first nine months of 2013, from its original plan of 12 new stores in 2013. GLOBAL maintained its plans to open at least 12 stores per year during the next three to five years. It is developing a distribution centre (DC) in Ayudhya province with a target to operate in the second quarter of 2014. With SCGD as a strategic partner, GLOBAL should leverage SCGD’s expertise in logistics management, human resources development, and bargaining power enhancement with suppliers.
TRIS Rating Co., Ltd./www.trisrating.com Contact: santaya@trisrating.com, Tel: 0-2231-3011 ext 500/Silom Complex Building, 24th Floor, 191 Silom Road, Bangkok 10500, Thailand Copyright 2014, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information. All methodologies used can be found at http://www.trisrating.com/en/rating_information/rating_criteria.html