TRIS Rating Co., Ltd. has affirmed the company rating of Sino-Thai Engineering and Construction PLC (STECON) at "BBB+" with "stable" rating outlook. The rating reflects the company's competitiveness in bidding for large scale projects, conservative financial policy, bright prospects of upcoming infrastructure projects, and long track record in the construction sector in Thailand. The rating also takes into consideration the company's lower profitability due to increasing construction material costs and intense competition among top tier operators in the construction industry.
While the "stable" outlook reflects STECON's competitiveness when bidding for large scale projects. Having built a track record with government's large scale projects and a sufficient backlog, the company's bidding strategy is expected to be more conservative. The company is expected to maintain its conservative financial policy and keep its leverage at this level.
TRIS Rating reported that STECON is one of the top three consturuction contractors in Thailand with Bt8,322 million in revenue in 2004. More than 60% of these revenues were generated through public projects. The total backlog as at March 2005 was worth Bt27,850 million, more than three times 2004 turnover. With its proven track record, strong relationships with government agencies, and solid balance sheet, STECON would be one of the major candidates to win large scale infrastructure projects during the next few years.
Though STECON's financial profile remains healthy, profitability deteriorated over the past year. Gross margin fell sharply to 4.23% in 2004 from 13.54% in 2003 mainly due to rising construction material costs as well as unexpected cost arising from few projects. The gross margin for the first quarter of 2005 slightly improved to 4.7% while its debt to capitalization ratio was 28.8% by the end of March 2005, TRIS Rating said. - End
Sino-Thai Engineering and Construction PLC (STECON) Company Rating: BBB+ Rating Outlook: Stable