TRIS Rating Co., Ltd. has affirmed the company rating of Supalai PLC (SPALI) at “BBB+” and has affirmed the rating of SPALI’s senior secured debentures (SPLI099A) at “A-” with “stable” outlook. The ratings reflect SPALI’s long track record in the residential property development market, its accepted brand name for single detached houses (SDHs) and condominiums, and the proven ability to control operating costs. The ratings also take into consideration the cyclical nature of the property development market. The issue rating incorporates the value of Supalai Grand Tower, which is pledged as collateral at 1.7 times the outstanding debentures throughout the life of the debentures.
The “stable” outlook reflects the expectation that SPALI will be able to develop and transfer its condominium projects as planned. With a low down payment policy, the leverage level is expected to increase while condominiums are being built. However, this upward pressure should be partly alleviated as more residential units are transferred to customers as a result of the government tax cut schemes.
TRIS Rating reported that SPALI was established by the Tangmatitham family in 1989 and is one of Thailand’s leading property developers. As of April 2008, the Tangmatitham family remained the company’s major shareholders, owning a 25% stake. As of December 2007, SPALI had 35 residential projects on hand with a remaining sale value of Bt16,962 million. Its residential property portfolio comprises of condominium (59%) and SDH with townhouse (41%) projects. Across the entire portfolio, the average price for a unit declined to Bt2.4 million in 2007, from Bt2.6 million in 2006, reflecting the continued strategic focus on the middle income segment. SPALI’s competitive edge stems from its accepted brand recognition in residential market, and the ability to control operating costs so as to offer housing units at competitive prices in a variety of locations.
TRIS Rating said, in 2007, SPALI’s operating performance remained satisfactory, with revenue increasing to Bt5,017 million from Bt4,598 million in 2006. Residential property sales are SPALI’s major source of revenue. The contribution from office space rentals is still minimal. Profitability also remained favorable, though the operating profit margin declined to 27% in 2007, compared with 31% in 2006. The company’s pre-tax return on permanent capital in 2007 declined to 18% from 25% in 2006. Despite significant growth in the project portfolio over the past few years, SPALI’s financial leverage has been maintained at an acceptable level. As of December 2007, the company’s debt to capitalization ratio remained healthy at 42%.
Demand for residential property depends on the country’s overall economic prospects. In 2008, the Thai economy is expected to show modest gross domestic product (GDP) growth of 4.5%-5.5%. A newly-announced government stimulus package, which reduced both the special business tax for residential developers and the transfer fee for homebuyers and property developers, may both help alleviate the slowdown in demand for residential property and boost consumer confidence, said TRIS Rating. -- End
Supalai PLC (SPALI)
Company Rating: Affirmed at BBB+
Issue Rating:
SPLI099A: Bt1,000 million senior secured debentures due 2009 Affirmed at A-
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 SPALI will be able to develop and transfer its condominium projects as planned. With a low down payment policy, the leverage level is expected to increase while condominiums are being built. However, this upward pressure should be partly alleviated as more residential units are transferred to customers as a result of the government tax cut schemes.
TRIS Rating reported that SPALI was established by the Tangmatitham family in 1989 and is one of Thailand’s leading property developers. As of April 2008, the Tangmatitham family remained the company’s major shareholders, owning a 25% stake. As of December 2007, SPALI had 35 residential projects on hand with a remaining sale value of Bt16,962 million. Its residential property portfolio comprises of condominium (59%) and SDH with townhouse (41%) projects. Across the entire portfolio, the average price for a unit declined to Bt2.4 million in 2007, from Bt2.6 million in 2006, reflecting the continued strategic focus on the middle income segment. SPALI’s competitive edge stems from its accepted brand recognition in residential market, and the ability to control operating costs so as to offer housing units at competitive prices in a variety of locations.
TRIS Rating said, in 2007, SPALI’s operating performance remained satisfactory, with revenue increasing to Bt5,017 million from Bt4,598 million in 2006. Residential property sales are SPALI’s major source of revenue. The contribution from office space rentals is still minimal. Profitability also remained favorable, though the operating profit margin declined to 27% in 2007, compared with 31% in 2006. The company’s pre-tax return on permanent capital in 2007 declined to 18% from 25% in 2006. Despite significant growth in the project portfolio over the past few years, SPALI’s financial leverage has been maintained at an acceptable level. As of December 2007, the company’s debt to capitalization ratio remained healthy at 42%.
Demand for residential property depends on the country’s overall economic prospects. In 2008, the Thai economy is expected to show modest gross domestic product (GDP) growth of 4.5%-5.5%. A newly-announced government stimulus package, which reduced both the special business tax for residential developers and the transfer fee for homebuyers and property developers, may both help alleviate the slowdown in demand for residential property and boost consumer confidence, said TRIS Rating. -- End
Supalai PLC (SPALI)
Company Rating: Affirmed at BBB+
Issue Rating:
SPLI099A: Bt1,000 million senior secured debentures due 2009 Affirmed at A-
Rating Outlook: Stable
-------------------------------------------------------
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.