TRIS Rating Co., Ltd. has affirmed the "BBB" ratings to Noble Development PLC (Noble) and its Bt1,000 million senior debentures (NOBL06NA). The ratings reflect Noble's strong brand in the medium- to high-end housing market, its conservative expansion plan and its moderate financial position. These strengths are partially offset by the cyclical nature of the real estate industry. Industry risks resulting from increasing interest rates and rising construction costs are concerns. While the "stable" outlook reflects the expectation that Noble will be able to maintain its performance in both the SDH and condominium markets in line with TRIS Rating's expectation in the medium term, despite lower-than-expected performance during the first half of 2004. Investments in more commercial assets may push gearing higher but should provide the company with stable income to withstand the cyclicality of the residential property development industry.
TRIS Rating reported that Noble is a medium-sized property developer in Thailand, founded in 1991 by Mr. Kitti Thanakitamnuay, Mr. Chali Sophonpanich and Mrs. Panida Teapkarnjana. As of June 2004, its major shareholders were the Thanakitamnuay group (8%), Lehman Brothers Holding Inc. (4%), the Viravan group (4%) and the Busarapan/Busarawong group (3%). The Thanakitamnuay group and allies, including the Busarapan/Busarawong and Viravan groups, collectively hold 19% shares of the company and have been the controlling shareholders since establishment. As of August 2004, Noble has developed 21 residential projects, valued at approximately Bt9,300 million, and delivered approximately 3,600 units to consumers. Product differentiation has been Noble's major competitive edge. The company has introduced modern and unique designs into its single detached house (SDH) and condominium projects, both of which target the medium- to high-income segments. Its unique and modern housing projects have been well accepted by the market.
TRIS Rating said that as of August 2004, Noble's portfolio consists of six SDH projects and three condominium projects, worth a total of Bt10,700 million. It plans to open a SDH project worth Bt950 million, Noble Tara Ngamwongwan phase 2, in the first quarter of 2005. It also plans to further diversify into the rental business. Noble is scheduled to launch two small shopping centers, Noble Playground in Sukhumvit 55 and another project in Sukhumvit 36. These two projects are expected to generate rental income worth approximately 5%-10% of the company's revenue in the next several years. Noble's financial performance in 2003 was extraordinarily high as a result of a governmental tax incentive program and the success of the new projects launched during 2002-2003. Its performance during the first half of 2004 decreased significantly. For the first six months of 2004, Noble earned Bt743 million in total revenue, about 63% of the revenue in the same period in 2003. Its operating income before depreciation and amortization as a percentage of sales improved from 20.6% in 2002 to 22.9% in 2003 but fell to 8.0% during the first six months of 2004 due to large expenditures for marketing and advertising. Pretax return on permanent capital also improved to 25.4% in 2003 from 13.0% in 2002. The company's debt-to-capitalization ratio was at 43.6% at the end of June 2004, up from 40.7% in 2003.
Competition in the housing and condominium market in 2004 has 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 of financial institutions to control the down payment for luxury housing and stricter reporting requirements for pre-financing loans have reduced speculation and limited supply in the residential market, TRIS Rating said. - End
Noble Development PLC (Noble) Company Rating: Affirmed at BBB Issue Rating: NOBL06NA: Bt1,000 million senior debentures due 2006 Affirmed at BBB Rating Outlook: Stable