TRIS Rating Co., Ltd. has affirmed the company rating of Quality Houses PLC (QH) and the ratings of QH’s senior debentures at “BBB+” with “stable” outlook. The ratings reflect the company’s long track record in the property market, its strong brand name in the high-income housing market and increased contribution from recurring income from serviced apartments and office buildings. These strengths are partly offset by the company’s highly-leveraged balance sheet and the cyclical nature of the property development market.
A slowdown in demand for residential property due to declining consumer confidence and high interest rates and construction costs remains a concern.
The “stable” outlook reflects the expectation that QH will be able to maintain its leading position in the luxury housing market. QH’s balance sheet is expected to improve following capital income of Bt933 million from the exercise of warrants and its plan to divest some of its commercial buildings to a property fund. Recurring income from serviced apartments and office buildings is expected to cushion the company during downturns of the residential property market.
TRIS Rating reported that QH is one of the leading property developers with a diverse portfolio of residential properties for sale and commercial properties for rent. QH focuses on development of luxury single detached house (SDH) projects in the Bangkok Metropolitan Area (BMA). The company owns and operates Centre Point serviced apartments and Q. House office buildings in Bangkok’s Central Business District (CBD).
TRIS Rating said, QH’s performances in 2005 and in the first half of 2006 were acceptable. Revenue from luxury housing sales increased from Bt6,098 million in 2004 to Bt6,842 million in 2005 and slightly increased to Bt3,332 million in the first half of 2006 from Bt3,072 million in the same period of 2005. Recurring income from serviced apartments and office space sharply increased by 31% to Bt670 million in the first half of 2006 following the opening of a new apartment building (Centre Point Thong Lor) and a new office building (Q. House Lumpini) in 2005 and 2006, respectively. However, its financial leverage weakened with the debt to capitalization ratio increasing from 63% in 2005 to 65% as of June 2006. The company’s funds from operations (FFO) to total debt ratio dropped from 9.9% in 2005 to 7% (annualized) in the first half of 2006. As of June 2006, the company held 27% of Land & Houses Retail Bank PLC (LH Bank) with an investment cost of Bt632 million. Though LH Bank was established to support the Land & Houses Group’s housing business by offering more financing options to homebuyers, this is of limited benefit to QH due to the bank’s capital base constraint.
TRIS Rating anticipates that the military coup d’etat on 19 September 2006 will have no immediate impact on housing demand. Though the new interim government is expected to ease the political tension in the country, consumer confidence has yet to improve. Residential demand is expected to continue to be soft in the near future, though inflationary pressures and high interest rates are expected to be alleviated next year. -- End
Quality Houses PLC (QH)
Company Rating: Affirmed at BBB+
Issue Ratings:
QH074A: Bt917 million senior debentures due 2007 Affirmed at BBB+
QH084A: Bt499 million senior debentures due 2008 Affirmed at BBB+
QH087A: Bt1,000 million senior debentures due 2008 Affirmed at BBB+
QH097A: Bt1,000 million senior debentures due 2009 Affirmed at BBB+
QH09DA: Bt1,000 million senior debentures due 2009 Affirmed at BBB+
QH107A: Bt1,000 million senior debentures due 2010 Affirmed at BBB+
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 slowdown in demand for residential property due to declining consumer confidence and high interest rates and construction costs remains a concern.
The “stable” outlook reflects the expectation that QH will be able to maintain its leading position in the luxury housing market. QH’s balance sheet is expected to improve following capital income of Bt933 million from the exercise of warrants and its plan to divest some of its commercial buildings to a property fund. Recurring income from serviced apartments and office buildings is expected to cushion the company during downturns of the residential property market.
TRIS Rating reported that QH is one of the leading property developers with a diverse portfolio of residential properties for sale and commercial properties for rent. QH focuses on development of luxury single detached house (SDH) projects in the Bangkok Metropolitan Area (BMA). The company owns and operates Centre Point serviced apartments and Q. House office buildings in Bangkok’s Central Business District (CBD).
TRIS Rating said, QH’s performances in 2005 and in the first half of 2006 were acceptable. Revenue from luxury housing sales increased from Bt6,098 million in 2004 to Bt6,842 million in 2005 and slightly increased to Bt3,332 million in the first half of 2006 from Bt3,072 million in the same period of 2005. Recurring income from serviced apartments and office space sharply increased by 31% to Bt670 million in the first half of 2006 following the opening of a new apartment building (Centre Point Thong Lor) and a new office building (Q. House Lumpini) in 2005 and 2006, respectively. However, its financial leverage weakened with the debt to capitalization ratio increasing from 63% in 2005 to 65% as of June 2006. The company’s funds from operations (FFO) to total debt ratio dropped from 9.9% in 2005 to 7% (annualized) in the first half of 2006. As of June 2006, the company held 27% of Land & Houses Retail Bank PLC (LH Bank) with an investment cost of Bt632 million. Though LH Bank was established to support the Land & Houses Group’s housing business by offering more financing options to homebuyers, this is of limited benefit to QH due to the bank’s capital base constraint.
TRIS Rating anticipates that the military coup d’etat on 19 September 2006 will have no immediate impact on housing demand. Though the new interim government is expected to ease the political tension in the country, consumer confidence has yet to improve. Residential demand is expected to continue to be soft in the near future, though inflationary pressures and high interest rates are expected to be alleviated next year. -- End
Quality Houses PLC (QH)
Company Rating: Affirmed at BBB+
Issue Ratings:
QH074A: Bt917 million senior debentures due 2007 Affirmed at BBB+
QH084A: Bt499 million senior debentures due 2008 Affirmed at BBB+
QH087A: Bt1,000 million senior debentures due 2008 Affirmed at BBB+
QH097A: Bt1,000 million senior debentures due 2009 Affirmed at BBB+
QH09DA: Bt1,000 million senior debentures due 2009 Affirmed at BBB+
QH107A: Bt1,000 million senior debentures due 2010 Affirmed at BBB+
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.