TRIS Rating Co., Ltd. has affirmed the company rating and current issue ratings of Asian Property Development PLC (AP) at “BBB+”. At the same time, TRIS Rating has assigned a “BBB+” rating to AP’s proposed issue of up to Bt2,000 million in senior debentures. The outlook remains “stable”. The ratings reflect AP’s track record in the residential property development market, an accepted brand in the downtown townhouse segment, and operating flexibility, which enables the company to promptly adjust the project portfolio to cope with industry trends. The ratings also take into consideration a cyclical downturn in the property development industry and inflationary pressure that may impact developers’ profitability. An additional concern is the company’s aggressive expansion to condominium projects in recent years, that leaves AP more exposed to condominium transfer risk.
The “stable” outlook reflects the expectation that AP will be able to manage the construction of its condominium projects and alleviate the pressure from high and rising inflation in order to sustain target profit margins. Though leverage is likely to be pressured to fund its condominium projects, its leverage is expected to remain at the range of 50%-55% over the next three years.
TRIS Rating reported that AP was established in the 1990s by Mr. Anuphong Assavabhokhin and Mr. Pichet Vipavasuphakorn who together own 36% of the company. During the last four years, revenue from real estate sales averaged Bt5,500 million per year from townhouses (70%-80%), condominiums (10%-15%), and single detached houses (SDH) (10%-15%). AP’s main competitive edge stems from the company sole focus on downtown residential property development and the ability to promptly adjust the project portfolio to match changes in demand. The average unit price across the portfolio fell to Bt4.1 million, reflecting a strategic shift towards the medium-priced segment. As of March 2008, the company had around 30 residential projects on hand worth approximately Bt35,000 million. Condominiums accounted for 43% of total project value while townhouses and SDHs accounted for 41% and 16%, respectively. Reflecting its strategy to develop more condominium projects, AP’s revenue contribution from condominiums is expected to increase to 40%-50% over the next three years.
TRIS Rating said AP recorded a strong operating performance in 2007. Driven by condominium sales at a record high of Bt10,326 million in 2007, residential presales almost doubled from Bt8,072 million in 2006 to Bt15,675 million in 2007. However, presales softened in 2008, dropping from Bt3,541 million in the first quarter of 2007 to Bt2,394 million for the same period in 2008. This was mainly because there was no new project launched during the first quarter of 2008. AP’s sales mix changed dramatically in 2008. The ratio of townhouse sales to total sales increased from 22% in 2007 to 50% in the first quarter of 2008, while the condominium sales ratio decreased from 66% to 32% for the same period. The drop in condominium presales reflects the company’s aggressive business expansion over the past year. A major challenge is to sustain sales growth and manage the construction efforts needed to whittle down the Bt12,000 million backlog during a period of higher inflation.
AP’s financial performance improved in 2007, but slightly deteriorated in the first quarter of 2008. The softening came because AP suspended housing unit transfers for three weeks prior to the date (29 March 2008) that tax incentives took effective. Revenue from real estate sales decreased from Bt1,410 million in the first three months of 2007 to Bt1,298 million the same period in 2008. Though operating profit margins held at around 19%-20% in 2007-2008, the pretax return on permanent capital declined from 16.4% in 2007 to around 10% (annualized) in the first quarter of 2008. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio and the funds from operations (FFO)to total debt ratio both showed the improvements in 2007, but fell to 3.7 times and 13.5%, respectively, in the first quarter of 2008. Leverage is high and has continued to increase since 2006 reflecting an aggressive expansion in condominium projects. Revenue from real estate sales is expected to recover over the rest of 2008 due to the high backlog. However, the ability to maintain profit margins remains a challenge since construction costs are expected to rise due to the inflationary pressures from fuel prices.
TRIS Rating said, demand for residential property depends on the country’s overall economic prospects. The Thai economy is expected to record modest growth in 2008, with gross domestic product (GDP) forecast to grow by 4.5%-5.5%. However, the residential property market is challenged by inflationary pressures and political instability. A recent government stimulus package reduces both the special business tax for residential developers and the transfer fee for home buyers and property developers. These incentives may provide short-term boost in demand for residential property. However, consumer confidence remains low since consumers are uncertain about the overall economy and high inflation both of which lower the ability to afford new housing. -- End
Asian Property Development PLC (AP)
Company Rating: Affirmed at BBB+
Issue Ratings:
AP107A: Bt1,500 million senior debentures due 2010 Affirmed at BBB+
AP117A: Bt1,000 million senior debentures due 2011 Affirmed at BBB+
Up to Bt2,000 million senior debentures due 2011 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 AP will be able to manage the construction of its condominium projects and alleviate the pressure from high and rising inflation in order to sustain target profit margins. Though leverage is likely to be pressured to fund its condominium projects, its leverage is expected to remain at the range of 50%-55% over the next three years.
TRIS Rating reported that AP was established in the 1990s by Mr. Anuphong Assavabhokhin and Mr. Pichet Vipavasuphakorn who together own 36% of the company. During the last four years, revenue from real estate sales averaged Bt5,500 million per year from townhouses (70%-80%), condominiums (10%-15%), and single detached houses (SDH) (10%-15%). AP’s main competitive edge stems from the company sole focus on downtown residential property development and the ability to promptly adjust the project portfolio to match changes in demand. The average unit price across the portfolio fell to Bt4.1 million, reflecting a strategic shift towards the medium-priced segment. As of March 2008, the company had around 30 residential projects on hand worth approximately Bt35,000 million. Condominiums accounted for 43% of total project value while townhouses and SDHs accounted for 41% and 16%, respectively. Reflecting its strategy to develop more condominium projects, AP’s revenue contribution from condominiums is expected to increase to 40%-50% over the next three years.
TRIS Rating said AP recorded a strong operating performance in 2007. Driven by condominium sales at a record high of Bt10,326 million in 2007, residential presales almost doubled from Bt8,072 million in 2006 to Bt15,675 million in 2007. However, presales softened in 2008, dropping from Bt3,541 million in the first quarter of 2007 to Bt2,394 million for the same period in 2008. This was mainly because there was no new project launched during the first quarter of 2008. AP’s sales mix changed dramatically in 2008. The ratio of townhouse sales to total sales increased from 22% in 2007 to 50% in the first quarter of 2008, while the condominium sales ratio decreased from 66% to 32% for the same period. The drop in condominium presales reflects the company’s aggressive business expansion over the past year. A major challenge is to sustain sales growth and manage the construction efforts needed to whittle down the Bt12,000 million backlog during a period of higher inflation.
AP’s financial performance improved in 2007, but slightly deteriorated in the first quarter of 2008. The softening came because AP suspended housing unit transfers for three weeks prior to the date (29 March 2008) that tax incentives took effective. Revenue from real estate sales decreased from Bt1,410 million in the first three months of 2007 to Bt1,298 million the same period in 2008. Though operating profit margins held at around 19%-20% in 2007-2008, the pretax return on permanent capital declined from 16.4% in 2007 to around 10% (annualized) in the first quarter of 2008. The earnings before interest, tax, depreciation and amortization (EBITDA) interest coverage ratio and the funds from operations (FFO)to total debt ratio both showed the improvements in 2007, but fell to 3.7 times and 13.5%, respectively, in the first quarter of 2008. Leverage is high and has continued to increase since 2006 reflecting an aggressive expansion in condominium projects. Revenue from real estate sales is expected to recover over the rest of 2008 due to the high backlog. However, the ability to maintain profit margins remains a challenge since construction costs are expected to rise due to the inflationary pressures from fuel prices.
TRIS Rating said, demand for residential property depends on the country’s overall economic prospects. The Thai economy is expected to record modest growth in 2008, with gross domestic product (GDP) forecast to grow by 4.5%-5.5%. However, the residential property market is challenged by inflationary pressures and political instability. A recent government stimulus package reduces both the special business tax for residential developers and the transfer fee for home buyers and property developers. These incentives may provide short-term boost in demand for residential property. However, consumer confidence remains low since consumers are uncertain about the overall economy and high inflation both of which lower the ability to afford new housing. -- End
Asian Property Development PLC (AP)
Company Rating: Affirmed at BBB+
Issue Ratings:
AP107A: Bt1,500 million senior debentures due 2010 Affirmed at BBB+
AP117A: Bt1,000 million senior debentures due 2011 Affirmed at BBB+
Up to Bt2,000 million senior debentures due 2011 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.