TRIS Rating Co., Ltd. has assigned a “A-” rating to the proposed up to Bt3,000 million senior debentures of CH. Karnchang PLC (CK). At the same time, TRIS Rating has affirmed the “A-” ratings of CK and its existing debentures at “A-”. The outlook remains “stable”. The ratings reflect CK’s leading position in Thailand’s engineering and construction (E&C) industry, its proven record in government infrastructure projects, and recurring income from its concession investments. The ratings also take into consideration CK’s highly-leveraged balance sheet, the cyclicality of the E&C industry, increasing construction material cost and uncertain public construction investment.
The “stable” outlook reflects the expectation that CK will continue to maintain its competitiveness
in government infrastructure projects. The company’s balance sheet is expected to improve after its
two concession companies, Bangkok Metro Co., Ltd. (BMCL) and Thai Tap Water Co., Ltd. (TTW), are listed. The proceeds from the listings are expected to lower CK’s debt burden by the end of 2006.
TRIS Rating reported that CK is one of the top-three construction contractors in Thailand. Public construction projects are CK’s prime revenue earners, contributing more than 50% of total construction revenues over the past ten years. As of June 2006, CK’s backlog amounted to Bt30,261 million, increasing from Bt17,873 million at the end of 2005. The Nam Ngum II dam project accounts for 65% of its entire backlog. The current backlog should secure CK’s revenues for at least two years.
TRIS Rating said, CK has diversified its sources of cash flow by investing in concession projects. As of June 2006, the company’s total concession investments were worth Bt8,531 million. The investments include
a 15.95% holding in Bangkok Expressway PLC (BECL) (Bt2,490 million), a 28.23% holding in BMCL (Bt2,579 million), a 36.6% holding in Pathum Thani Water Co., Ltd. (PTW) (Bt418 million), a 46.15% holding in TTW (Bt2,673 million) and a 28.5% holding in South East Asia Energy Co., Ltd. (SEAN) (Bt371 million). The BECL and TTW investment contributed Bt179 million and Bt53 million, respectively, in dividend income to CK in 2005.
CK’s construction performance was satisfactory. Though its gross margin has been squeezed from 15%-20% to 10%-13%, this level continues to be higher than peers. With its disciplined and selective bidding, CK has been able to partly alleviate margin pressure from increasing material and operating costs. CK’s leverage increased significantly during the past three years from its total debt of Bt6,163 million at the end of 2003 to Bt18,144 million as of June 2006, following its increasing exposures in concessions of Bt4,500 million in 2003 to approximately Bt10,000 million as of June 2006. Though concession investments will provide the company with a more stable and predictable sources of income in the medium term, these investments has weaken the company’s balance sheet during the early stage of developments, said TRIS Rating. -- End
CH. Karnchang PLC (CK)
Company Rating: Affirmed at A-
Issue Ratings:
CK073A: Bt200 million senior debentures due 2007 Affirmed at A-
CK07OA: Bt2,000 million senior debentures due 2007 Affirmed at A-
CK08OA: Bt610 million senior debentures due 2008 Affirmed at A-
CK08OB: Bt1,090 million senior debentures due 2008 Affirmed at A-
CK09OA: Bt120 million senior debentures due 2009 Affirmed at A-
CK09OB: Bt880 million senior debentures due 2009 Affirmed at A-
CK102A:Bt1,100 million senior debentures due 2010 Affirmed at A-
Up to Bt3,000 million senior debentures due 2009 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.
The “stable” outlook reflects the expectation that CK will continue to maintain its competitiveness
in government infrastructure projects. The company’s balance sheet is expected to improve after its
two concession companies, Bangkok Metro Co., Ltd. (BMCL) and Thai Tap Water Co., Ltd. (TTW), are listed. The proceeds from the listings are expected to lower CK’s debt burden by the end of 2006.
TRIS Rating reported that CK is one of the top-three construction contractors in Thailand. Public construction projects are CK’s prime revenue earners, contributing more than 50% of total construction revenues over the past ten years. As of June 2006, CK’s backlog amounted to Bt30,261 million, increasing from Bt17,873 million at the end of 2005. The Nam Ngum II dam project accounts for 65% of its entire backlog. The current backlog should secure CK’s revenues for at least two years.
TRIS Rating said, CK has diversified its sources of cash flow by investing in concession projects. As of June 2006, the company’s total concession investments were worth Bt8,531 million. The investments include
a 15.95% holding in Bangkok Expressway PLC (BECL) (Bt2,490 million), a 28.23% holding in BMCL (Bt2,579 million), a 36.6% holding in Pathum Thani Water Co., Ltd. (PTW) (Bt418 million), a 46.15% holding in TTW (Bt2,673 million) and a 28.5% holding in South East Asia Energy Co., Ltd. (SEAN) (Bt371 million). The BECL and TTW investment contributed Bt179 million and Bt53 million, respectively, in dividend income to CK in 2005.
CK’s construction performance was satisfactory. Though its gross margin has been squeezed from 15%-20% to 10%-13%, this level continues to be higher than peers. With its disciplined and selective bidding, CK has been able to partly alleviate margin pressure from increasing material and operating costs. CK’s leverage increased significantly during the past three years from its total debt of Bt6,163 million at the end of 2003 to Bt18,144 million as of June 2006, following its increasing exposures in concessions of Bt4,500 million in 2003 to approximately Bt10,000 million as of June 2006. Though concession investments will provide the company with a more stable and predictable sources of income in the medium term, these investments has weaken the company’s balance sheet during the early stage of developments, said TRIS Rating. -- End
CH. Karnchang PLC (CK)
Company Rating: Affirmed at A-
Issue Ratings:
CK073A: Bt200 million senior debentures due 2007 Affirmed at A-
CK07OA: Bt2,000 million senior debentures due 2007 Affirmed at A-
CK08OA: Bt610 million senior debentures due 2008 Affirmed at A-
CK08OB: Bt1,090 million senior debentures due 2008 Affirmed at A-
CK09OA: Bt120 million senior debentures due 2009 Affirmed at A-
CK09OB: Bt880 million senior debentures due 2009 Affirmed at A-
CK102A:Bt1,100 million senior debentures due 2010 Affirmed at A-
Up to Bt3,000 million senior debentures due 2009 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.