TRIS Rating affirms the rating of Sansiri PLC (SIRI) at "BBB". The rating reflects the company's experienced management team, its strong brand in the medium- to high-end condominium market, and its diversification into the single detached house (SDH) market, hotel, and property and brokerage management businesses. These strengths are partly offset by SIRI's relatively high leverage and low cash flow protection. Industry risks resulting from the cyclical nature of the real estate industry, increasing interest rates, and rising construction costs are concerns. The "stable" outlook reflects the expectation that SIRI will be able to deliver operating performance in line with expectations as a result of strong pre-sales for its condominium projects. Project construction is expected to be well-managed. The company is expected to keep its target leverage of one time in the medium term.
TRIS Rating reported that SIRI was established by the Chutrakul and the Lamsam families. As of February 2004, SIRI's major shareholder was Natural Park PLC (N-Park), holding 24.3% of its shares. The founding shareholders' stakes were diluted from 65% in December 1997 to 1.94% in April 2004. However, the founding families still manage SIRI, given their experience and reputation in the condominium market. Until now, N-Park has no involvement in the management structure of SIRI. Before the 1997 financial crisis, the company solely engaged in the middle- to high-end condominium market. Currently, SIRI has diversified into the SDH market and the hotel business. SIRI launched its first SDH project in November 2000 and purchased a 100% holding in the Sofitel Silom Bangkok Hotel in late 2002. For the first half of 2004, SIRI's revenue contributions came from condominium projects (45%) and housing projects (37%). Both project types focus on the medium- to high-income residential market segments.
TRIS Rating said that SIRI has 21 condominium projects totaling 2,688 units and valued at Bt12,693 million, with prices ranging from Bt2 million to Bt30 million per unit. Its performance in the condominium market has been satisfactory. As of August 2004, it was able to sell approximately 76% of its condominium units. SIRI's long track record and brand recognition as a developer of premium quality condominiums have also helped it receive a positive response from its target customers. Currently, SIRI has six SDH projects, with a combined total of approximately 926 units, valued at Bt13,846 million. Baan Narasiri Sathorn-Wongwaen was launched in the second quarter of 2003 while the other four projects were launched during the first quarter of 2004. Baan Sansiri Sukhumvit 67 will be launched in November 2004.
In the first half of 2004, SIRI's revenue from the hotel business as well as rental income from apartment and office buildings continued to remain at around 11% and 3% of its total revenues respectively, while its income from the property and brokerage management business decreased from 5% in 2003 to 3% in the first half of 2004. Although SIRI's total debt to capitalization ratios increased considerably from 53.6% in 2002 to 66.1% in 2003, this ratio decreased slightly to 58.8% in June 2004 as a result of a Bt2,946 million capital increase in March 2004. Its operating income before depreciation and amortization as a percentage of sales and the ratio of pretax return on permanent capital improved from 10.8% and 2.1% in 2002 to 20.9% and 8.8% in 2003. However, these ratios dropped to 8.1% and 0.7% (non-annualized), respectively in the first half of 2004 as a result of softer housing demand and rising operating costs in the first half of 2004.
A 49% increase in registered houses in the Bangkok Metropolitan Area to 50,594 units in 2003 was partly due to an acceleration of consumer buying before the expiration of a tax incentive in December 2003. Competition in the housing and condominium market in 2004 has been intensified as more developers enter the market while increasing interest rates, oil prices, and construction costs could adversely affect real estate demand and operator margins. The Bank of Thailand's regulations to control the down payment for luxury housing (selling prices over Bt10 million per unit) and stricter reporting requirements for pre-financing loans has reduced speculation and limit supply in the residential market, TRIS Rating said. -- End
Sansiri PLC (SIRI) Company Rating: Affirmed at BBB Rating Outlook: Stable
TRIS Rating reported that SIRI was established by the Chutrakul and the Lamsam families. As of February 2004, SIRI's major shareholder was Natural Park PLC (N-Park), holding 24.3% of its shares. The founding shareholders' stakes were diluted from 65% in December 1997 to 1.94% in April 2004. However, the founding families still manage SIRI, given their experience and reputation in the condominium market. Until now, N-Park has no involvement in the management structure of SIRI. Before the 1997 financial crisis, the company solely engaged in the middle- to high-end condominium market. Currently, SIRI has diversified into the SDH market and the hotel business. SIRI launched its first SDH project in November 2000 and purchased a 100% holding in the Sofitel Silom Bangkok Hotel in late 2002. For the first half of 2004, SIRI's revenue contributions came from condominium projects (45%) and housing projects (37%). Both project types focus on the medium- to high-income residential market segments.
TRIS Rating said that SIRI has 21 condominium projects totaling 2,688 units and valued at Bt12,693 million, with prices ranging from Bt2 million to Bt30 million per unit. Its performance in the condominium market has been satisfactory. As of August 2004, it was able to sell approximately 76% of its condominium units. SIRI's long track record and brand recognition as a developer of premium quality condominiums have also helped it receive a positive response from its target customers. Currently, SIRI has six SDH projects, with a combined total of approximately 926 units, valued at Bt13,846 million. Baan Narasiri Sathorn-Wongwaen was launched in the second quarter of 2003 while the other four projects were launched during the first quarter of 2004. Baan Sansiri Sukhumvit 67 will be launched in November 2004.
In the first half of 2004, SIRI's revenue from the hotel business as well as rental income from apartment and office buildings continued to remain at around 11% and 3% of its total revenues respectively, while its income from the property and brokerage management business decreased from 5% in 2003 to 3% in the first half of 2004. Although SIRI's total debt to capitalization ratios increased considerably from 53.6% in 2002 to 66.1% in 2003, this ratio decreased slightly to 58.8% in June 2004 as a result of a Bt2,946 million capital increase in March 2004. Its operating income before depreciation and amortization as a percentage of sales and the ratio of pretax return on permanent capital improved from 10.8% and 2.1% in 2002 to 20.9% and 8.8% in 2003. However, these ratios dropped to 8.1% and 0.7% (non-annualized), respectively in the first half of 2004 as a result of softer housing demand and rising operating costs in the first half of 2004.
A 49% increase in registered houses in the Bangkok Metropolitan Area to 50,594 units in 2003 was partly due to an acceleration of consumer buying before the expiration of a tax incentive in December 2003. Competition in the housing and condominium market in 2004 has been intensified as more developers enter the market while increasing interest rates, oil prices, and construction costs could adversely affect real estate demand and operator margins. The Bank of Thailand's regulations to control the down payment for luxury housing (selling prices over Bt10 million per unit) and stricter reporting requirements for pre-financing loans has reduced speculation and limit supply in the residential market, TRIS Rating said. -- End
Sansiri PLC (SIRI) Company Rating: Affirmed at BBB Rating Outlook: Stable