TRIS Rating has assigned the rating of “BBB-” to the proposed issue of up to Bt1,500 million in senior debentures of Noble Development PLC (NOBLE). At the same time, TRIS Rating has affirmed the company rating of NOBLE at “BBB” and has affirmed the ratings of NOBLE’s senior debentures at “BBB-”. The outlook remains “stable”. The proceeds from the new debentures will be used to repay the debentures due in June 2014 and for business expansion.
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 and the cyclical and competitive nature of the property development industry. The ratings also take into consideration the expected slowdown in the domestic economy resulting from prolonged political turmoil. 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 14% stake in the company as of April 2014. 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 December 2013, NOBLE had 16 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 2014 through 2017. As of December 2013, the residential project portfolio comprises condominiums (85% of total project value), single detached houses (SDHs, 7%), townhouses (6%), and land plots (2%).
NOBLE’s presales in 2013 sharply increased to Bt7,101 million from Bt2,852 million in 2012. The increasing in presales due to introduction of a new condominium project, Noble Revolve Ratchada, Noble Revolve Ratchaba 2, and Noble Revo Silom. The new condominium project presale values contributed 70% of total presale value in 2013. Total revenues in 2013 increase to Bt3,085 million from Bt2,560 million in 2012 due to the transfer of finished units in the Noble Reform and Noble RE D project worth around Bt1,700 million.
NOBLE’s gross profit margins had remained high, at 38%-39% during 2008 to 2013. The operating margins (operating income before depreciation and amortization as a percentage of sales) decreased to 18.22% in 2013 from 20.44% in 2012. As of December 2013, total debt increased to Bt9,796 million from Bt7,806 million at the end of 2012. Most of the debts came from the investment in the Noble Ploenchit project. NOBLE’s total debt to capitalization ratio was 70% at the end of 2013, increased from 66% at the end of 2012. However, NOBLE’s cash on hand was relatively high at Bt3,443 million. NOBLE’s funds from operations (FFO) to total debt ratio slightly decline to 4% at the end of 2013 from 5% at the end of 2012. 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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