TRIS Rating Co., Ltd. has assigned a “A-” rating to Italian-Thai Development PLC’s (ITD) proposed up to Bt3,000 million senior debentures. At the same time, TRIS Rating has affirmed the company rating of ITD at “A-” with “stable” outlook. The ratings reflect 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, and the company’s increasing financial leverage. The proceeds from the proposed debentures will be used to refinance ITD’s existing debt.
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, its 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 assets almost doubled from Bt25,350 million at the end of 2003 to Bt48,663 million as of 30 June 2006. The expansion was financed with debt, cash flow from operations, and proceeds from a capital injection. The recent debt-funded acquisition of a potash project worth Bt2,789 million in June 2006 resulted in debt rising from Bt10,762 million as of March 2006 to Bt13,645 million as of June 2006. The company’s total debt to capitalization ratio at the end of June 2006 and funds from operations (FFO) to total debt ratio during the first half of 2006 were 44.3% and 8.11% (non-annualized), respectively. Adjusted operating margin slightly dropped from 7.2% in 2005 to 7.06% in the first half of 2006. Net profit in the first six months ending June 2006 was Bt375 million, down by 29% from the same period of last year largely because of higher interest expenses from higher debt levels and rising interest rates. However, ITD is considering refinancing part of its existing floating rate short-term loan to a fixed rate medium-term loan to mitigate rising interest rate, said TRIS Rating -- End
Italian-Thai Development PLC (ITD)
Company Rating: Affirmed at “A-”
Issue Rating:
Up to Bt3,000 million senior debentures due within 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 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, its 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 assets almost doubled from Bt25,350 million at the end of 2003 to Bt48,663 million as of 30 June 2006. The expansion was financed with debt, cash flow from operations, and proceeds from a capital injection. The recent debt-funded acquisition of a potash project worth Bt2,789 million in June 2006 resulted in debt rising from Bt10,762 million as of March 2006 to Bt13,645 million as of June 2006. The company’s total debt to capitalization ratio at the end of June 2006 and funds from operations (FFO) to total debt ratio during the first half of 2006 were 44.3% and 8.11% (non-annualized), respectively. Adjusted operating margin slightly dropped from 7.2% in 2005 to 7.06% in the first half of 2006. Net profit in the first six months ending June 2006 was Bt375 million, down by 29% from the same period of last year largely because of higher interest expenses from higher debt levels and rising interest rates. However, ITD is considering refinancing part of its existing floating rate short-term loan to a fixed rate medium-term loan to mitigate rising interest rate, said TRIS Rating -- End
Italian-Thai Development PLC (ITD)
Company Rating: Affirmed at “A-”
Issue Rating:
Up to Bt3,000 million senior debentures due within 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.