Current slowdown in the residential property is expected to continue until next year, according to TRIS Rating Co., Ltd.’s comment in its newly released industry report on the residential property development sector. Political situation and consumer confidence may improve after the general election, which is expected to be held by the end of 2007 or early 2008. However, a quick recovery for the housing market seems unlikely. TRIS Rating noted that among the residential development markets, single-detached houses have been hit hard by slowing residential demand. On the other hand, condominium market has grown dramatically since 2005 due to the urbanization trends, more convenient mass transportation, rising oil prices, and speculative purchases.
According to TRIS Rating’s report, most companies under its watch have reported lower sales and margins since the first half of 2006 due to falling residential demand and rising operating costs. Companies focusing on volumes in stead of margins will have negative impacts on their profitability in the near term. Developers with completed housing stocks will require lower working capital, while those who employ growth strategy during a slow market demand will face challenges in liquidity management.
Nevertheless, TRIS Rating believes there is no material deterioration in the credit qualities of all the 9 rated developers in its portfolio as their balance sheets remain healthy with a majority having debt-to-equity ratios at less than one times. Therefore, TRIS Rating affirms the ratings of all companies in the sector. However, TRIS Rating changes the rating outlooks of two companies to “negative” from “stable”, while the rest remain unchanged.
The details of credit ratings and rating outlooks of TRIS Rating’s 9 property companies are as follows:
Company Credit Rating Outlook (Old) Outlook (New)
Land and Houses PLC (LH) A (company+senior debentures) Stable Negative
Asian Property Development PLC (AP) BBB+ (company+senior debentures) Stable Stable
Lalin Property PLC (LALIN) BBB+ (senior debentures) Stable Negative
Noble Development PLC (NOBLE) BBB+ (company) Stable Stable
Preuksa Real Estate PLC (PS) BBB+ (company) Positive Positive
Quality Houses PLC (QH) BBB+ (company+senior debentures) Stable Stable
Supalai PLC (SPALI) BBB+ (company) Stable Stable
Sansiri PLC (SIRI) BBB (company) Stable Stable
Golden Land Property Development PLC (GOLD) BBB (secured debentures) Stable Stable
----------------------------------------------------------
Copyright 2007, 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.
According to TRIS Rating’s report, most companies under its watch have reported lower sales and margins since the first half of 2006 due to falling residential demand and rising operating costs. Companies focusing on volumes in stead of margins will have negative impacts on their profitability in the near term. Developers with completed housing stocks will require lower working capital, while those who employ growth strategy during a slow market demand will face challenges in liquidity management.
Nevertheless, TRIS Rating believes there is no material deterioration in the credit qualities of all the 9 rated developers in its portfolio as their balance sheets remain healthy with a majority having debt-to-equity ratios at less than one times. Therefore, TRIS Rating affirms the ratings of all companies in the sector. However, TRIS Rating changes the rating outlooks of two companies to “negative” from “stable”, while the rest remain unchanged.
The details of credit ratings and rating outlooks of TRIS Rating’s 9 property companies are as follows:
Company Credit Rating Outlook (Old) Outlook (New)
Land and Houses PLC (LH) A (company+senior debentures) Stable Negative
Asian Property Development PLC (AP) BBB+ (company+senior debentures) Stable Stable
Lalin Property PLC (LALIN) BBB+ (senior debentures) Stable Negative
Noble Development PLC (NOBLE) BBB+ (company) Stable Stable
Preuksa Real Estate PLC (PS) BBB+ (company) Positive Positive
Quality Houses PLC (QH) BBB+ (company+senior debentures) Stable Stable
Supalai PLC (SPALI) BBB+ (company) Stable Stable
Sansiri PLC (SIRI) BBB (company) Stable Stable
Golden Land Property Development PLC (GOLD) BBB (secured debentures) Stable Stable
----------------------------------------------------------
Copyright 2007, 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.