TRIS Rating Co., Ltd. has assigned a “A-” rating to TICON Industrial Connection PLC’s (TICON) proposed issue of up to Bt500 million in senior debentures. At the same time, TRIS Rating has affirmed the company rating of TICON at “A” and has affirmed the ratings of its current senior debentures at “A-”. The rating outlook is “stable”. The ratings reflect TICON’s leading position and proven record in the ready-built factory business, its predictable rental income, and good operating performance. However, the current slowdown of the Thai economy, declining investment confidence, and political uncertainty continue to be concerns.
The “stable” outlook is based on the expectation that TICON will be able to maintain its leadership position in the rental factory business. Rental income is expected to gradually increase, providing more cushion for the company’s new rental logistics facility. TICON’s debt to capitalization ratio is expected to be in the 55%-60% range during the construction of the logistics park before improving to 50%.
TRIS Rating reported that TICON is Thailand’s leading ready-built factory provider. Its competitive advantages stem from a 17-year record in the ready-built factory business, the ability to provide a standard factory at a competitive price, cost advantages from economies of scale, and a strategy of self-managed factory construction. At the end of June 2007, the company’s portfolio comprised 154 leased factories and logistics warehouses located in 12 industrial estates and its logistics centers, with an aggregate area of 401,434 square meters (sq.m.). During the first half of 2007, the company was able to lease factories and warehouses to 23 new tenants, compared to 61 and 56 new tenants for the whole year of 2006 and 2005, respectively.
According to CB Richard Ellis (CBRE), based on leased space, TICON and TICON Property Fund (TFUND) had a combined market share of 70% as of March 2007, far higher than peer companies, Hemaraj Land and Development PLC (10%), Thai Factory Development PLC (9%), Pinthong Industrial Park Co., Ltd. (8%), and Amata Corporation PLC (3%).
TRIS Rating said, TICON’s rental revenue from leased factories is highly predictable due to the three-year lease contract structure and high rollover rate which averaged 82% during 2002-2006. In 2006, the company generated rental revenue of Bt628 million and another Bt1,982 million from factory sales to TFUND. Its rental income for the first half of 2007 was relatively stable at Bt343 million. TICON plans to sell 50 factories to TFUND by the second half of 2007. The proceeds of approximately Bt2,200 million from the factory sales will be used to fund its capital expenditure in 2008-2009.
Though the political uncertainty in 2006-2007 has adversely affected the industrial property sector, the ready-built factory market has been less affected since, during a period of declining confidence, many manufacturers prefer renting their factories compared to owning. However, for the medium to long term, prospects for the industrial property sector in Thailand will remain good, due to the country’s attractive foreign investment and international trade promotion policies, said TRIS Rating. -- End
TICON Industrial Connection PLC (TICON):
Company Rating: Affirmed at A
Issue Ratings:
TCON095A: Bt500 million senior debentures due 2009 Affirmed at A-
TCON095B: Bt1,000 million senior debentures due 2009 Affirmed at A-
Up to Bt500 million senior debentures due 2010 A-
Rating Outlook: Stable
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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.
The “stable” outlook is based on the expectation that TICON will be able to maintain its leadership position in the rental factory business. Rental income is expected to gradually increase, providing more cushion for the company’s new rental logistics facility. TICON’s debt to capitalization ratio is expected to be in the 55%-60% range during the construction of the logistics park before improving to 50%.
TRIS Rating reported that TICON is Thailand’s leading ready-built factory provider. Its competitive advantages stem from a 17-year record in the ready-built factory business, the ability to provide a standard factory at a competitive price, cost advantages from economies of scale, and a strategy of self-managed factory construction. At the end of June 2007, the company’s portfolio comprised 154 leased factories and logistics warehouses located in 12 industrial estates and its logistics centers, with an aggregate area of 401,434 square meters (sq.m.). During the first half of 2007, the company was able to lease factories and warehouses to 23 new tenants, compared to 61 and 56 new tenants for the whole year of 2006 and 2005, respectively.
According to CB Richard Ellis (CBRE), based on leased space, TICON and TICON Property Fund (TFUND) had a combined market share of 70% as of March 2007, far higher than peer companies, Hemaraj Land and Development PLC (10%), Thai Factory Development PLC (9%), Pinthong Industrial Park Co., Ltd. (8%), and Amata Corporation PLC (3%).
TRIS Rating said, TICON’s rental revenue from leased factories is highly predictable due to the three-year lease contract structure and high rollover rate which averaged 82% during 2002-2006. In 2006, the company generated rental revenue of Bt628 million and another Bt1,982 million from factory sales to TFUND. Its rental income for the first half of 2007 was relatively stable at Bt343 million. TICON plans to sell 50 factories to TFUND by the second half of 2007. The proceeds of approximately Bt2,200 million from the factory sales will be used to fund its capital expenditure in 2008-2009.
Though the political uncertainty in 2006-2007 has adversely affected the industrial property sector, the ready-built factory market has been less affected since, during a period of declining confidence, many manufacturers prefer renting their factories compared to owning. However, for the medium to long term, prospects for the industrial property sector in Thailand will remain good, due to the country’s attractive foreign investment and international trade promotion policies, said TRIS Rating. -- End
TICON Industrial Connection PLC (TICON):
Company Rating: Affirmed at A
Issue Ratings:
TCON095A: Bt500 million senior debentures due 2009 Affirmed at A-
TCON095B: Bt1,000 million senior debentures due 2009 Affirmed at A-
Up to Bt500 million senior debentures due 2010 A-
Rating Outlook: Stable
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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.