TRIS Rating Assigns “A-” Rating to Senior Unsecured Debt Worth Up to THB1.5

TRIS Rating affirms the company rating on AP (Thailand) PLC (AP) and the ratings on its outstanding senior unsecured debentures at ?A-? with a ?stable? rating outlook. At the same time, TRIS Rating assigns the rating of ?A-? to AP?s proposed issue of up to THB1.5 billion senior unsecured debentures and an additional greenshoe portion of up to THB0.5 billion due within three years. The company plans to use the proceeds from the debenture issuance to repay some of its existing loans and fund business expansion.

The ratings reflect AP?s strong market position, its diverse product line, and strong operating performance resulting from revenue growth in the housing segment and substantial shared profits from joint-venture (JV) projects. The ratings also take into consideration the company?s moderate financial leverage, and the effects of the prolonged Coronavirus Disease 2019 (COVID-19) pandemic, which could lead to weakening demand for residential properties.

AP recorded strong operating performance in the first nine months of 2021 despite a resurgence of the COVID-19 pandemic. AP?s revenue rose 9.2% year-on-year (y-o-y) to THB24.5 billion. Given its wide-ranging product portfolio, revenues from the landed property segment increased by 22% y-o-y to reach THB22.5 billion, contributing 92% of total revenue. The remainder was derived from condominium sales and management fee and service income.

During the first ten months of 2021, AP?s projects (including projects under JV) generated presales of THB31.2 billion, increasing by 14.4% from the same period in 2020. Presales from landed property projects contributed 92% of total presales. As of October 2021, AP had a total backlog (including JV) worth THB34.5 billion. Around THB12 billion of the backlog is expected to be transferred in the remainder of 2021 and the rest in the next two years. The earnings before interest, tax, depreciation, and amortization (EBITDA) margin has held steady at 19%-20% over the past three years. We expect AP to keep its EBITDA margin in this range.

AP has moderately high financial leverage. The debt to capitalization ratio (including 51% of JV debts) at the end of September 2021 was 41.2%, down from 46.6% in 2020. The ratio of debt to EBITDA stood at 3.2 times while the funds from operations (FFO) to debt ratio was 23.3% in the first nine months of 2021, improving from 4.3 times and 17.6%, respectively, in 2020.

We assess AP to have adequate liquidity over the next 12 months. At the end of September 2021, the company?s liquidity sources comprised cash on hand of THB3.5 billion and available credit facilities of THB7.5 billion. AP?s FFO is expected to be in the THB3.2-THB3.5 billion range. AP?s uses of funds over the next 12 months will amount to THB5.6 billion, comprising repayments of THB0.1 billion for financial leases and THB5.5 billion for maturing debentures.

As of September 2021, AP had THB20.5 billion in total debt, of which THB1.2 billion was priority debt according to TRIS Rating?s ?Issue Rating Criteria?. AP?s priority debts, which were secured debts at the company and subsidiary levels, translated into a ratio of priority debt to total debt of 6%. As the company?s priority debt ratio was below the threshold of 50%, we view that the company?s senior unsecured creditors are not significantly disadvantaged to its priority debt holders.

RATING OUTLOOK

The ?stable? outlook reflects TRIS Rating?s expectations that AP will remain competitive in its core market segments and will rebalance its product portfolio as market conditions and customer needs change. The outlook is also based on our expectation that AP will maintain its prudent financial policies and keep its debt to capitalization ratio below 55% over the next three years. Its FFO to debt ratio is expected to stay at around 10%-15%.

RATING SENSITIVITIES

The ratings and/or outlook of AP could be revised downward should its financial profile deteriorate significantly from the current level or if the debt to capitalization ratio stays above 55% and FFO to debt ratio stays below 10% on a sustained basis. In contrast, the ratings could be revised upward if the company can improve its profitability while its debt to capitalization ratio declines to the 40%-45% range and FFO to debt ratio stays around 20% on a sustained basis.

RELATED CRITERIA

- Issue Rating Criteria, 15 June 2021

- Rating Methodology ? Corporate, 26 July 2019

- Key Financial Ratios and Adjustments, 5 September 2018

AP (Thailand) PLC (AP)

Company Rating: A-

Issue Ratings:

AP221A: THB1,500 million senior unsecured debentures due 2022 A-

AP222A: THB500 million senior unsecured debentures due 2022 A-

AP228A: THB1,500 million senior unsecured debentures due 2022 A-

AP238A: THB1,230 million senior unsecured debentures due 2023 A-

AP238B: THB400 million senior unsecured debentures due 2023 A-

AP241A: THB2,500 million senior unsecured debentures due 2024 A-

AP247A: THB1,500 million senior unsecured debentures due 2024 A-

AP248A: THB770 million senior unsecured debentures due 2024 A-

AP257A: THB2,000 million senior unsecured debentures due 2025 A-

AP258A: THB850 million senior unsecured debentures due 2025 A-

AP261A: THB1,500 million senior unsecured debentures due 2026 A-

Up to THB1,500 million senior unsecured debentures and additional greenshoe portion of up to THB500 million due within 3 years A-

Rating Outlook: Stable

TRIS Rating Co., Ltd./www.trisrating.com

Contact: santaya@trisrating.com, Tel: +66 2 098 3000/Silom Complex Building, 24th Floor, 191 Silom Road, Bangkok 10500, Thailand

? Copyright 2022, 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 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, without the prior written permission of TRIS Rating Co., Ltd. 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 www.trisrating.com/rating-information/rating-criteria

TRIS Rating Assigns “A-” Rating to Senior Unsecured Debt Worth Up to THB1.5 Billion and Additional Greenshoe Portion Worth Up to THB0.5 Billion of “AP”