TRIS Rating Co., Ltd. has assigned a "BBB+" rating to Lalin Property PLC's (LALIN) Bt400 million senior debentures. The rating reflects LALIN's record in the middle income housing market, its capability in controlling operating costs and its conservative financial policy and strong financial position. These strengths are partially offset by LALIN's relatively dependence on its owner to run the company, the cyclical nature and continued intense competition of the real estate industry.
TRIS Rating reported that LALIN is a medium-sized housing developer, established in 1988 by Mr. Taveesak Watcharakkawongse and Mr. Chaiyan Chakarakul who have owned the majority of shares, controlling a combined stake of approximately 68% in 2003. Mr. Chaiyan has been LALIN's managing director and directs the company's strategy and policy. LALIN entered the market by focusing on the middle-income segment with its target customers being young first-time home buyers. LALIN has developed 24 housing projects, delivering more than 7,800 units to homebuyers during its 15 years track record. Single detached houses (SDH) accounted for 71% of its sales in 2003. LALIN has expanded its development location to cover all of the Greater Bangkok Metropolitan Area (BMA). LALIN's strategy to redevelop distressed assets purchased from financial institutes is successful. Its lower land cost increases LALIN's ability to offer its products at a competitive price thereby enhancing its market position. Its price-competitive strategy combined with its management experience in construction has driven LALIN to be one of leading developers of mid-market housing with sales prices ranging from Bt2-Bt6 million per unit. In 2003, the company delivered 1,335 units of housing to customers and recorded sales of Bt3,130 million. The semi-pre-built strategy is used for more than 50% of its housing construction which creates a win-win solution for the company and its customers. This strategy builds customer confidence by partially housing construction while enabling the company to lock in sale as well as generate some revenues.
TRIS Rating said that LALIN's performance has improved since 2001. Its sales grew dramatically to Bt3,130 million in 2003, nearly triple the 2001 sales figure. LALIN's adjusted operating margin increased from 8.4% in 2001 to 27.6% in 2002 and to 33.4% in 2003. The cash flow protection was also strong, with the ratio of adjusted funds from operations to total debt at 221.4% in 2003. EBITDA interest coverage increased to 64.9 times in 2003, up from 14.4 times in 2002 and 4.4 times in 2001. With its low debt obligations and increased capital from an initial public offering in 2002, LALIN has low leverage, with a total debt to capitalization ratio of 13.3% in 2003, down from 36.6% in 2001 although slightly higher than the 8.6% reported in 2002. As the company plans to acquire substantial land for developing during the next two to three years, internal cash generation will not sufficient to fund this investment, therefore its leverage and cash flow projection are expected to weaken from strong levels in 2003.
The residential segment of the property development business is highly cyclical, exhibiting much greater volatility than the general economy. Demand for housing is expected to grow for the next few years due to a favorable national economy, although the government stimulus packages expired in December 2003. Housing prices are expected to increase by 5%-15% in the near future as costs of major raw materials namely steel and concrete have been rising while the developer business and transfer tax burden resumed since January 2004. Competition is still intense for developers in the Greater BMA as more developers have completed their debt restructuring and have resumed operations, TRIS Rating said. -- End
Lalin Property PLC (LALIN) Issue Rating:Bt400 million senior debentures due 2007 BBB+
TRIS Rating reported that LALIN is a medium-sized housing developer, established in 1988 by Mr. Taveesak Watcharakkawongse and Mr. Chaiyan Chakarakul who have owned the majority of shares, controlling a combined stake of approximately 68% in 2003. Mr. Chaiyan has been LALIN's managing director and directs the company's strategy and policy. LALIN entered the market by focusing on the middle-income segment with its target customers being young first-time home buyers. LALIN has developed 24 housing projects, delivering more than 7,800 units to homebuyers during its 15 years track record. Single detached houses (SDH) accounted for 71% of its sales in 2003. LALIN has expanded its development location to cover all of the Greater Bangkok Metropolitan Area (BMA). LALIN's strategy to redevelop distressed assets purchased from financial institutes is successful. Its lower land cost increases LALIN's ability to offer its products at a competitive price thereby enhancing its market position. Its price-competitive strategy combined with its management experience in construction has driven LALIN to be one of leading developers of mid-market housing with sales prices ranging from Bt2-Bt6 million per unit. In 2003, the company delivered 1,335 units of housing to customers and recorded sales of Bt3,130 million. The semi-pre-built strategy is used for more than 50% of its housing construction which creates a win-win solution for the company and its customers. This strategy builds customer confidence by partially housing construction while enabling the company to lock in sale as well as generate some revenues.
TRIS Rating said that LALIN's performance has improved since 2001. Its sales grew dramatically to Bt3,130 million in 2003, nearly triple the 2001 sales figure. LALIN's adjusted operating margin increased from 8.4% in 2001 to 27.6% in 2002 and to 33.4% in 2003. The cash flow protection was also strong, with the ratio of adjusted funds from operations to total debt at 221.4% in 2003. EBITDA interest coverage increased to 64.9 times in 2003, up from 14.4 times in 2002 and 4.4 times in 2001. With its low debt obligations and increased capital from an initial public offering in 2002, LALIN has low leverage, with a total debt to capitalization ratio of 13.3% in 2003, down from 36.6% in 2001 although slightly higher than the 8.6% reported in 2002. As the company plans to acquire substantial land for developing during the next two to three years, internal cash generation will not sufficient to fund this investment, therefore its leverage and cash flow projection are expected to weaken from strong levels in 2003.
The residential segment of the property development business is highly cyclical, exhibiting much greater volatility than the general economy. Demand for housing is expected to grow for the next few years due to a favorable national economy, although the government stimulus packages expired in December 2003. Housing prices are expected to increase by 5%-15% in the near future as costs of major raw materials namely steel and concrete have been rising while the developer business and transfer tax burden resumed since January 2004. Competition is still intense for developers in the Greater BMA as more developers have completed their debt restructuring and have resumed operations, TRIS Rating said. -- End
Lalin Property PLC (LALIN) Issue Rating:Bt400 million senior debentures due 2007 BBB+