TRIS Rating Co., Ltd. has affirmed the company rating of TICON Industrial Connection PLC (TICON) at “A”. At the same time, TRIS Rating has assigned the rating of TICON’s proposed up to Bt1,500 million senior debentures at “A-”. The rating outlook remains “stable”. The ratings reflect the stability of TICON’s rental income, its leading position and proven record in the ready-built factory business, and good operating performance. However, these strengths are partially constrained by the current political uncertainty, threats from potential competitors especially industrial estate operators, and the large capital expenditure required to build the company’s logistics facility.
The “stable” outlook is based on the expectation that TICON will be able to maintain leadership in its niche market of rental factories. Rental income is expected to gradually increase, providing more cushion for raised capital expenditures for the rental logistics facility. TICON’s debt-to-capitalization ratio is likely to increase during the construction period of the logistics park but still remains at an acceptable level of around 60%-65%.
TRIS Rating reported that TICON is Thailand’s leading ready-built factory provider. At the end of 2005, the company portfolio comprised 146 factories leased by customers in 11 industrial estates. TICON’s competitive advantages stem from a 15-year record in the ready-built factory business, the ability to provide a standard factory at a competitive price, cost advantages from economies of scale, and a strategy of managing factory construction on its own.
According to CB Richard Ellis (CBRE), based on the number of leased units, TICON had the greatest market share of 47% of the rental factory market as of December 2005. When combined with TICON Property Fund (TFUND), which was set up and is managed by TICON, the combined market share will be 60%, far higher than other players. TICON is expanding into the logistics park business by building rental space for warehouses. The project involves creation of a big logistics center to take advantage of the new Suvarnabhumi Airport.
TRIS Rating said that in 2005, TICON’s operating performance was satisfactory. Its rental revenue was Bt591 million, a 13% increase from 2004. TICON generated Bt1,730 million from the sales of properties to TFUND in the second quarter of 2005. Its net income from operations increased from Bt291 million in 2004 to Bt954 million in 2005, while the debt-to-capitalization ratio also increased sharply from 53% in 2004 to 65% in 2005 due to capital expenditures for the ready-built factories and the logistics park project. However, TICON successfully sold additional 44 factories to TFUND in April 2006 worth a total of Bt1,982 million. Funds from the assets sale will mainly be used to prepay TICON’s existing debt, which will lower the company’s debt-to-capitalization ratio. — End
TICON Industrial Connection PLC (TICON)
Company Rating: Affirmed at A
Issue Rating:
Up to Bt1,500 million senior debentures due 2009 A-
Rating Outlook: Stable