TRIS Rating Co., Ltd. has affirmed the company rating of Preuksa Real Estate Co., Ltd. (PREUKSA) and the rating of its Bt500 million senior debentures (PS069A) at "BBB". At the same time, TRIS Rating has assigned ratings for PREUKSA's proposed Bt500 million senior debentures and Bt100 million long-term bills of exchange (B/E) at "BBB". The ratings reflect PREUKSA's strong market position in the low-price residential market, its competitive construction cost and its strong financial position. These strengths are partially offset by high dependence on its owner to run the company and the cyclical nature and continued intense competition in the residential segment of the property development business. According to legal opinions regarding issues pertaining to the protection of the B/E holder's legal rights, the B/E rank pari passu with PREUKSA's all other present and future unsecured and unsubordinated indebtedness. However, there are no obligations from the issuer to perform various duties, which are normally included in the indenture of the debentures; therefore, the B/E holders have to closely monitor the issuer's status to protect their rights.
TRIS Rating reported that PREUKSA is a non-listed medium-sized housing developer founded by Mr. Thongma Vijitpongpun in 1993. PREUKSA established a very strong brand name in low-income townhouse segment under the name "Baan Preuksa". Since 2002, it has entered the single detached house (SDH) segment, which contributed 19% of its revenue in 2003. Since its establishment, the Vijitpongpun family has owned 100% of PREUKSA's shares. Mr.Thongma, who owns an 85% stake in the company, serves as managing director and is primarily responsible for directing the company's strategy and policy. After it reorganized its structure in 2003, PREUKSA has become more decentralized and has more professionals in its management team.
PREUKSA's competitive position is its low-price strategy, which stems from the owner's construction experiences, enabling PREUKSA to manage nearly all phases of construction. The tunnel load bearing wall structure method and the prefabrication method, which are used to construct townhouses and SDHs, respectively, save construction time and costs. In addition, PREUKSA has been granted investment promotion privileges by the Board of Investment, including a five-year corporate income tax exemption, for construction of low-price housing projects, and these incentives support PREUKSA's ability to pursue its low price strategy. In 2002, to diversify its products, PREUKSA successfully penetrated the SDH market by introducing the "Baan Passorn" brand, priced between Bt2 million to Bt3 million per unit. After the success of its first SDH project, the company introduced higher price SDH projects, ranging from Bt3 million to Bt10 million, to cover a wider customer base. However, by entering into the higher-priced SDH market, the company exposes itself to considerable intense competition from many strong, well-established brands.
To support its aggressive growth in both townhouse and SDH projects, the company has invested in two pre-cast factories, which will require a total investment of Bt1,000 million. The first factory is expected to operate at full capacity by November 2004. These factories are expected to shorten construction period from 75 days to 45 days, and to give the company higher construction capacity, about 3,600 units a year. The pre-cast housing parts from the factories will replace on-site pre-cast production for its SDH projects. PREUKSA's 2003 sales increased to Bt3,667 million from Bt2,528 million in 2002. The company's financial position remains strong, even though its performance weakened from 2002, with operating margin declining from 34.9% in 2002 to 29.2% in 2003, due mainly to increases in construction and land cost. The company's funds from operations to total debt ratio decreased to 52.7% in 2003 from 179.1% in 2002. PREUKSA's debt increased from Bt473 million in 2002 to Bt1,872 million in 2003. The company will require more external funding for its investment in pre-cast factories, which will result in higher leverage, TRIS Rating said.-- End
Preuksa Real Estate Co., Ltd. (PREUKSA)Company Rating: Affirmed at BBBIssue Ratings: PS069A: Bt500 million senior debentures due 2006 Affirmed at BBBBt500 million senior debentures due 2006 BBBBt100 million bills of exchange due 2007 BBB
TRIS Rating reported that PREUKSA is a non-listed medium-sized housing developer founded by Mr. Thongma Vijitpongpun in 1993. PREUKSA established a very strong brand name in low-income townhouse segment under the name "Baan Preuksa". Since 2002, it has entered the single detached house (SDH) segment, which contributed 19% of its revenue in 2003. Since its establishment, the Vijitpongpun family has owned 100% of PREUKSA's shares. Mr.Thongma, who owns an 85% stake in the company, serves as managing director and is primarily responsible for directing the company's strategy and policy. After it reorganized its structure in 2003, PREUKSA has become more decentralized and has more professionals in its management team.
PREUKSA's competitive position is its low-price strategy, which stems from the owner's construction experiences, enabling PREUKSA to manage nearly all phases of construction. The tunnel load bearing wall structure method and the prefabrication method, which are used to construct townhouses and SDHs, respectively, save construction time and costs. In addition, PREUKSA has been granted investment promotion privileges by the Board of Investment, including a five-year corporate income tax exemption, for construction of low-price housing projects, and these incentives support PREUKSA's ability to pursue its low price strategy. In 2002, to diversify its products, PREUKSA successfully penetrated the SDH market by introducing the "Baan Passorn" brand, priced between Bt2 million to Bt3 million per unit. After the success of its first SDH project, the company introduced higher price SDH projects, ranging from Bt3 million to Bt10 million, to cover a wider customer base. However, by entering into the higher-priced SDH market, the company exposes itself to considerable intense competition from many strong, well-established brands.
To support its aggressive growth in both townhouse and SDH projects, the company has invested in two pre-cast factories, which will require a total investment of Bt1,000 million. The first factory is expected to operate at full capacity by November 2004. These factories are expected to shorten construction period from 75 days to 45 days, and to give the company higher construction capacity, about 3,600 units a year. The pre-cast housing parts from the factories will replace on-site pre-cast production for its SDH projects. PREUKSA's 2003 sales increased to Bt3,667 million from Bt2,528 million in 2002. The company's financial position remains strong, even though its performance weakened from 2002, with operating margin declining from 34.9% in 2002 to 29.2% in 2003, due mainly to increases in construction and land cost. The company's funds from operations to total debt ratio decreased to 52.7% in 2003 from 179.1% in 2002. PREUKSA's debt increased from Bt473 million in 2002 to Bt1,872 million in 2003. The company will require more external funding for its investment in pre-cast factories, which will result in higher leverage, TRIS Rating said.-- End
Preuksa Real Estate Co., Ltd. (PREUKSA)Company Rating: Affirmed at BBBIssue Ratings: PS069A: Bt500 million senior debentures due 2006 Affirmed at BBBBt500 million senior debentures due 2006 BBBBt100 million bills of exchange due 2007 BBB