TRIS Rating Co., Ltd. has assigned the company rating of SUPALAI PLC at "BBB", which reflects the company's long track record, the experience of its management team, its well-accepted brand name in the medium income segment of the residential housing market, and its improved capital structure after prepaying debt during 2002-2004. These strengths are partially offset by the cyclical nature of the real estate industry, continued intense competition, and slowing demand growth. While the "stable" outlook reflects the expectation that SUPALAI will be able to maintain its operating performance at an acceptable level, even though the property market is slowing down. Though it will have additional investment in high-rise projects in the next few years, its capital structure should not materially weaken from the current level.
TRIS Rating reported that SUPALAI is a medium-sized residential property developer, established in 1989 by the Tangmatitham family, which has been the company's major shareholder and has been in the management team since it was founded. At the end of May 2004, the Tangmatitham family and its subsidiaries held almost 24% of the company's shares. Most members of SUPALAI's management team have long experience in the real estate market. The company's "SUPALAI" brand name is widely accepted in the medium income segment of the residential housing market because of the company's reputation for quality and reasonable pricing. The company and its subsidiaries have developed several residential and commercial projects in both the Bangkok Metropolitan Area and in other provinces such as Khon Kaen and Songkhla. SUPALAI offers a diversified set of products, such as developed land, single detached houses (SDHs), townhouses, twin houses, commercial houses, condominiums, and resorts. Since its establishment, SUPALAI completed nine residential projects, worth almost Bt6,200 million, and delivered more than 2,900 units to customers. Currently, it has 15 residential projects in development, with 7,233 units worth Bt16,770 million. As of August 2004, the company has sold approximately 63% of its available units for sale. In addition, in May 2004, the company just relaunched "Grand Tower", its first office building project. The company plans to launch three new projects in the last quarter of 2004 and one more project in the first quarter of 2005.
More than 90% of SUPALAI's revenue comes from real estate sales; service income accounts for the rest. For the first half of 2004, it earned Bt994 million, 95% from real estate development and the rest from service revenue. Approximately 70% of its total real estate development income derived from sales of SDHs and townhouses, with the rest generated from condominium projects. However, revenue contributions from condominiums will increase in the next two years once the company starts to realize income from two existing condominiums, "Premier Place" and "Oriental Place", and a planned condominium project, "Casa Riva".
TRIS Rating said that SUPALAI entered into a debt restructuring process with the Corporate Debt Restructuring Advisory Committee of the Bank of Thailand in June 1999 and signed restructuring agreements with its creditors in January 2000. The company prepaid all its restructured debts in the first quarter of 2004 (except for Bt376 million of unsecured debentures remaining at the end of June 2004). Financial performance turned around and the company's leverage has improved accordingly. The debt to capitalization ratio declined significantly, from a peak of 97.7% in 2000 to only 41.9% in 2003 and 33.9% in the first half of 2004. Management expects to maintain its debt to equity ratio at less than 1 time. Earnings before interest, tax, depreciation and amortization interest coverage also improved from only 0.04 times in 2000 to 3.80 times in 2003 and to 9.31 times in the first half of 2004. - End
SUPALAI PLC Company Rating: BBB Rating Outlook: Stable