TRIS Rating Co., Ltd. has affirmed the company rating of Sansiri PLC (SIRI) at “BBB” with “stable” outlook. The rating reflects SIRI’s leading position in the condominium market, its well-accepted brand names in the residential property market and the recent successful launches of its high-priced condominium projects. The rating also takes into consideration the company’s aggressive business expansion during a period of potential oversupply of condominium and its relatively low operating profit margins.
The “stable” outlook reflects the expectation that SIRI will be able to manage construction of its condominium projects as planned. The company is expected to focus more on controlling operating costs. SIRI is expected to be able to boost other sources of revenue and largely benefit from the recent government stimulus packages which will help it recover from revenue loss from the Condo ONE project.
TRIS Rating reported that SIRI is one of the leading property developers in Thailand. As of December 2007, SIRI had 50 residential property projects on hand worth Bt45,395 million. The residential property portfolio consists of single-detached house (47%), condominium (42%) and townhouse (11%) projects. The average unit price for SIRI’s overall residential portfolio fell to Bt4.6 million, reflecting its strategic shift towards the medium-priced residential property segment. As of December 2007, the company’s total presale backlog was Bt17,180 million while the remaining value of existing residential projects was Bt11,521 million. SDHs constituted 68% of the remaining value while condominiums and townhouses accounted for 19% and 13%, respectively
TRIS Rating said, SIRI’s residential sales performance in 2007 remained favourable. The company’s presales increased by 7% to Bt17,461 million in 2007. The increase was due to the strong performance of the company’s condominium projects. SIRI’s new high-priced condominiums were successfully launched in 2007, recording sales of Bt10,099 million. However, SIRI’s profitability remained relatively low compared to its peers. In 2007, SIRI’s operating margin was 10.2%, a slight increase from 9.8% in 2006. Earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage improved from 2.4 times in 2006 to 3.3 times in 2007. Since the capital increase plan was postponed, SIRI’s capital structure has remained unchanged. Its debt to capitalization ratio increased slightly from 46.1% in December 2006 to 47.4% in December 2007, due to additional capital outlays for condominium construction. As of April 2008, the Condo ONE condominium projects worth Bt5,000 million could not be transferred to customers because their building heights exceeded the 23-meter limit of the Building Control Act. Thus, a remedy to the building height problem is being solved and this will adversely affect SIRI’s revenue by Bt380 million along with incurred additional costs of Bt80 million for reconstruction, compensation for customers and government charges. SIRI expects to resume project transfer by mid-2008.
Demand for residential property depends on the country’s overall economic prospects. The Thai economy is expected to show modest growth with gross domestic product (GDP) expected to grow by
4.5%-5.5% in 2008. A newly-announced government stimulus package, including reductions in both the special business tax for residential developers and the transfer fee for homebuyers and property developers, may help alleviate the slowdown in demand for residential property and boost consumer confidence, said
TRIS Rating. -- End
Sansiri PLC (SIRI)
Company Rating: Affirmed at BBB
Rating Outlook: Stable
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Copyright 2008, 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 SIRI will be able to manage construction of its condominium projects as planned. The company is expected to focus more on controlling operating costs. SIRI is expected to be able to boost other sources of revenue and largely benefit from the recent government stimulus packages which will help it recover from revenue loss from the Condo ONE project.
TRIS Rating reported that SIRI is one of the leading property developers in Thailand. As of December 2007, SIRI had 50 residential property projects on hand worth Bt45,395 million. The residential property portfolio consists of single-detached house (47%), condominium (42%) and townhouse (11%) projects. The average unit price for SIRI’s overall residential portfolio fell to Bt4.6 million, reflecting its strategic shift towards the medium-priced residential property segment. As of December 2007, the company’s total presale backlog was Bt17,180 million while the remaining value of existing residential projects was Bt11,521 million. SDHs constituted 68% of the remaining value while condominiums and townhouses accounted for 19% and 13%, respectively
TRIS Rating said, SIRI’s residential sales performance in 2007 remained favourable. The company’s presales increased by 7% to Bt17,461 million in 2007. The increase was due to the strong performance of the company’s condominium projects. SIRI’s new high-priced condominiums were successfully launched in 2007, recording sales of Bt10,099 million. However, SIRI’s profitability remained relatively low compared to its peers. In 2007, SIRI’s operating margin was 10.2%, a slight increase from 9.8% in 2006. Earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage improved from 2.4 times in 2006 to 3.3 times in 2007. Since the capital increase plan was postponed, SIRI’s capital structure has remained unchanged. Its debt to capitalization ratio increased slightly from 46.1% in December 2006 to 47.4% in December 2007, due to additional capital outlays for condominium construction. As of April 2008, the Condo ONE condominium projects worth Bt5,000 million could not be transferred to customers because their building heights exceeded the 23-meter limit of the Building Control Act. Thus, a remedy to the building height problem is being solved and this will adversely affect SIRI’s revenue by Bt380 million along with incurred additional costs of Bt80 million for reconstruction, compensation for customers and government charges. SIRI expects to resume project transfer by mid-2008.
Demand for residential property depends on the country’s overall economic prospects. The Thai economy is expected to show modest growth with gross domestic product (GDP) expected to grow by
4.5%-5.5% in 2008. A newly-announced government stimulus package, including reductions in both the special business tax for residential developers and the transfer fee for homebuyers and property developers, may help alleviate the slowdown in demand for residential property and boost consumer confidence, said
TRIS Rating. -- End
Sansiri PLC (SIRI)
Company Rating: Affirmed at BBB
Rating Outlook: Stable
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Copyright 2008, 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.