TRIS Rating Co., Ltd. has upgraded the ratings of Seacon Development PLC's (SEACON) Bt650 and Bt550 million senior secured debentures (SCON047A and SCON061A) to "A-" from "BBB+". The ratings reflect SEACON's improved financial position, its high quality retail property, and the adequate collateral value of its shopping center. The debentureholders are adequately protected by a low loan to collateral value ratio, which stood at 18.4% as of December 2003, and the right to directly access the rental and service income from shopping center tenants in the event of default. However, the ratings also take into consideration the concentration risk of owning only one income producing property, the illiquidity of the collateral, and intensified competition in the retail industry.
TRIS Rating reported that SEACON was incorporated in 1990 as a joint venture between the Sosothikul family and their partners to develop and operate Seacon Square Shopping and Entertainment Center. SEACON's current shareholders are the Sosothikul family (70%), five financial institutions (27%) and other investors (3%). The center has a gross area of 509,412 square meters (sq.m.), with 168,018 sq.m. of commercial area as of December 2003. The center is located in a good location on Srinakarin Road and has a strong, diversified tenant base including major anchors. In 2003, the rental and service income from the 10 tenants was about 24% of total rental and service income, and the largest tenant contributed less than 6% of total rental and service income. However, having only one income producing property exposes SEACON to high concentration risk. The occupancy rate at SEACON's shopping center stayed at average of 98% during 2000-2003, which was continuously better than the industry as a whole, which averaged 91% over the same period. SEACON's rental and service income increased 9.4% in 2002 and 5.5% in 2003, mainly due to the increase of average rental and service rates and the development of new zones. Operating income before depreciation and amortization as a percentage of rental and service income and sales increased from 58.8% in 2002 to 62.2% in 2003.
TRIS Rating said that SEACON's cash protection significantly improved due to relatively stable cash flow generation and a decreasing debt burden. Its earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio also improved from 5.6 times in 2002 to 8.2 times in 2003. The ratio of funds from operations to total debt increased significantly from 26.9% in 2002 to 43.3% in 2003. As the company used internal cash flow to repay debt, its total debt to capitalization ratio dropped to 21.4% in 2003 from 27.7% in 2002.
The continuous growth of GDP and private consumption has been positive for the retail industry, as it has resulted in increased consumer spending. Despite the impact of the avian flu epidemic in the first half of 2004, the National Economic and Social Development Board (NESDB) estimated Thai GDP growth would be in the range of 7% to 8% in 2004. The new zoning regulations, which will limit the new supply of large-scale retail centers, will benefit existing developers. However, competition in the retail industry continues to be intense, especially from superstores, which are expected to launch many smaller-scale centers to overcome zoning regulations. The competition is expected to further intensify after the completion of several shopping centers in 2005, such as Siam Paragon and Central World Plaza (formerly called the World Trade Center), TRIS Rating said. -- End
Seacon Development PLC (SEACON)Issue Ratings: SCON047A: Bt650 million senior secured debentures due 2004 Upgraded to A- from BBB+SCON061A: Bt550 million senior secured debentures due 2006 Upgraded to A- from BBB+
TRIS Rating reported that SEACON was incorporated in 1990 as a joint venture between the Sosothikul family and their partners to develop and operate Seacon Square Shopping and Entertainment Center. SEACON's current shareholders are the Sosothikul family (70%), five financial institutions (27%) and other investors (3%). The center has a gross area of 509,412 square meters (sq.m.), with 168,018 sq.m. of commercial area as of December 2003. The center is located in a good location on Srinakarin Road and has a strong, diversified tenant base including major anchors. In 2003, the rental and service income from the 10 tenants was about 24% of total rental and service income, and the largest tenant contributed less than 6% of total rental and service income. However, having only one income producing property exposes SEACON to high concentration risk. The occupancy rate at SEACON's shopping center stayed at average of 98% during 2000-2003, which was continuously better than the industry as a whole, which averaged 91% over the same period. SEACON's rental and service income increased 9.4% in 2002 and 5.5% in 2003, mainly due to the increase of average rental and service rates and the development of new zones. Operating income before depreciation and amortization as a percentage of rental and service income and sales increased from 58.8% in 2002 to 62.2% in 2003.
TRIS Rating said that SEACON's cash protection significantly improved due to relatively stable cash flow generation and a decreasing debt burden. Its earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio also improved from 5.6 times in 2002 to 8.2 times in 2003. The ratio of funds from operations to total debt increased significantly from 26.9% in 2002 to 43.3% in 2003. As the company used internal cash flow to repay debt, its total debt to capitalization ratio dropped to 21.4% in 2003 from 27.7% in 2002.
The continuous growth of GDP and private consumption has been positive for the retail industry, as it has resulted in increased consumer spending. Despite the impact of the avian flu epidemic in the first half of 2004, the National Economic and Social Development Board (NESDB) estimated Thai GDP growth would be in the range of 7% to 8% in 2004. The new zoning regulations, which will limit the new supply of large-scale retail centers, will benefit existing developers. However, competition in the retail industry continues to be intense, especially from superstores, which are expected to launch many smaller-scale centers to overcome zoning regulations. The competition is expected to further intensify after the completion of several shopping centers in 2005, such as Siam Paragon and Central World Plaza (formerly called the World Trade Center), TRIS Rating said. -- End
Seacon Development PLC (SEACON)Issue Ratings: SCON047A: Bt650 million senior secured debentures due 2004 Upgraded to A- from BBB+SCON061A: Bt550 million senior secured debentures due 2006 Upgraded to A- from BBB+