TRIS Rating Co., Ltd. has affirmed the company rating of Italian-Thai Development PLC (ITD) at
“A-” with “stable” outlook. The rating reflects ITD’s strong position as the largest general construction contractor in Thailand, its strong backlog, broad product line, geographic diversity and backward
integration, and the prospects for the Thai engineering and construction (E&C) industry in the medium- to
long-term. These strengths are partly offset by the cyclical nature of the E&C industry, intense competition
in the market, and ITD’s increasing financial leverage.
While the “stable” outlook reflects the expectations that ITD will maintain its competitive position
as Thailand’s largest construction contractor and will be able to maintain its profitability, despite
difficult business conditions in the domestic construction market. However, if the company’s financial
profile weakens substantially due to its aggressive using of debt to fund new projects, the rating or outlook
may be revised.
TRIS Rating reported that ITD is Thailand’s largest construction contractor. In 2005, ITD’s total
revenue of Bt37,985 million was almost three times the revenue of Thailand’s second largest construction contractor. The company operates nine business divisions, two foreign branches in Taiwan and the
Philippines, and a construction subsidiary in India. Revenue from public construction projects is, and will continue to be, a majority contributor to ITD’s revenue. Although many infrastructure mega projects
have been delayed due to the unfavorable political environment, ITD’s backlog increased from
Bt41,397 million at the end of 2005 to Bt81,941 million as of May 2006. Approximately 90% of ITD’s
backlog was public projects and 76% was domestic projects. ITD’s competitive advantages include its
strong track record, good relationships with both private and public sector clients, economies of scale,
self-sufficiency in key materials, an extensive machinery and equipment fleet, and adequate supply of
skilled labor and engineers.
TRIS Rating said, although the industry is fragmented, a few major contractors benefit from the high barriers to entry, particularly for large public projects, only pre-qualified contractors are able to bid on public projects. Therefore, the three largest contractors will continue to enjoy rising backlogs based on their
proven track record and strong financial standing. The top three contractors are likely to win bids for
several of the government mega projects that are expected to be launched during the next five years.
Transport infrastructure projects and turnkey building projects, for which ITD has expertise, a strong
track record, and machinery, should drive the company’s growth in the medium term. ITD’s strategy to
diversify revenue base abroad should help the company maintain its sales volume during any slowdown
in the domestic construction market.
ITD has rapidly expanded over the past few years. Its total capital spending was Bt7,653 million
during the past three years, funded with debt, cash flow from operations, and proceeds from a capital
injection. As of March 2006, the company’s total debt to capitalization ratio and funds from operations
(FFO) to total debt ratio were 38.7% and 5.3% (non-annualized), respectively. The company’s financial leverage and cash flow protection is expected to weaken in the near term as a result of debt-funded
financing of a potash project. The adjusted operating margin decreased slightly from 7.2% in 2005
to 7.1% in the first quarter of 2006, said TRIS Rating. -- End
Italian-Thai Development PLC (ITD)
Company Rating: Affirmed at A-
Rating Outlook: Stable
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Copyright 2006, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.
“A-” with “stable” outlook. The rating reflects ITD’s strong position as the largest general construction contractor in Thailand, its strong backlog, broad product line, geographic diversity and backward
integration, and the prospects for the Thai engineering and construction (E&C) industry in the medium- to
long-term. These strengths are partly offset by the cyclical nature of the E&C industry, intense competition
in the market, and ITD’s increasing financial leverage.
While the “stable” outlook reflects the expectations that ITD will maintain its competitive position
as Thailand’s largest construction contractor and will be able to maintain its profitability, despite
difficult business conditions in the domestic construction market. However, if the company’s financial
profile weakens substantially due to its aggressive using of debt to fund new projects, the rating or outlook
may be revised.
TRIS Rating reported that ITD is Thailand’s largest construction contractor. In 2005, ITD’s total
revenue of Bt37,985 million was almost three times the revenue of Thailand’s second largest construction contractor. The company operates nine business divisions, two foreign branches in Taiwan and the
Philippines, and a construction subsidiary in India. Revenue from public construction projects is, and will continue to be, a majority contributor to ITD’s revenue. Although many infrastructure mega projects
have been delayed due to the unfavorable political environment, ITD’s backlog increased from
Bt41,397 million at the end of 2005 to Bt81,941 million as of May 2006. Approximately 90% of ITD’s
backlog was public projects and 76% was domestic projects. ITD’s competitive advantages include its
strong track record, good relationships with both private and public sector clients, economies of scale,
self-sufficiency in key materials, an extensive machinery and equipment fleet, and adequate supply of
skilled labor and engineers.
TRIS Rating said, although the industry is fragmented, a few major contractors benefit from the high barriers to entry, particularly for large public projects, only pre-qualified contractors are able to bid on public projects. Therefore, the three largest contractors will continue to enjoy rising backlogs based on their
proven track record and strong financial standing. The top three contractors are likely to win bids for
several of the government mega projects that are expected to be launched during the next five years.
Transport infrastructure projects and turnkey building projects, for which ITD has expertise, a strong
track record, and machinery, should drive the company’s growth in the medium term. ITD’s strategy to
diversify revenue base abroad should help the company maintain its sales volume during any slowdown
in the domestic construction market.
ITD has rapidly expanded over the past few years. Its total capital spending was Bt7,653 million
during the past three years, funded with debt, cash flow from operations, and proceeds from a capital
injection. As of March 2006, the company’s total debt to capitalization ratio and funds from operations
(FFO) to total debt ratio were 38.7% and 5.3% (non-annualized), respectively. The company’s financial leverage and cash flow protection is expected to weaken in the near term as a result of debt-funded
financing of a potash project. The adjusted operating margin decreased slightly from 7.2% in 2005
to 7.1% in the first quarter of 2006, said TRIS Rating. -- End
Italian-Thai Development PLC (ITD)
Company Rating: Affirmed at A-
Rating Outlook: Stable
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Copyright 2006, TRIS Rating Co., Ltd. All rights reserved. Any unauthorized use, disclosure, copying, republication, further transmission, dissemination, redistribution or storing for subsequent use for any purpose, in whole or in part, in any form or manner or by any means whatsoever, by any person, of the credit rating reports or information is prohibited. The credit rating is not a statement of fact or a recommendation to buy, sell or hold any debt instruments. It is an expression of opinion regarding credit risks for that instrument or particular company. The opinion expressed in the credit rating does not represent investment or other advice and should therefore not be construed as such. Any rating and information contained in any report written or published by TRIS Rating has been prepared without taking into account any recipient’s particular financial needs, circumstances, knowledge and objectives. Therefore, a recipient should assess the appropriateness of such information before making an investment decision based on this information. Information used for the rating has been obtained by TRIS Rating from the company and other sources believed to be reliable. Therefore, TRIS Rating does not guarantee the accuracy, adequacy, or completeness of any such information and will accept no liability for any loss or damage arising from any inaccuracy, inadequacy or incompleteness. Also, TRIS Rating is not responsible for any errors or omissions, the result obtained from, or any actions taken in reliance upon such information.