TRIS Rating Co., Ltd. issued an Industry Research report on the Thai construction industry. TRIS Rating views that although the construction value seems to be rising, driven by several public mega-projects, such as mass transit electric-trains, and expectations of industrial capacity expansions, these investments could be delayed due to the current political climate. Rising construction material costs and heightened competition may exert greater pressure on the gross profit margins. Since most construction contracts are fixed prices, contractors are responsible for the rise in construction costs. Therefore, the industry prospects may worsen. Should this happen, profit margins will deteriorate and contractors may suffer losses on the projects already in hand. The credit profiles of the contractors are likely to be negatively impacted.
According to the report, TRIS Rating said that the construction and engineering industry in Thailand is large and plays a significant role in driving the economy. In 2007, the investment value in the industry was Bt746,931 million, or about 8% of the country’s gross domestic product (GDP). Currently, TRIS Rating publicly announces credit ratings of three construction companies; Italian-Thai Development PLC (ITD), CH. Karnchang PLC (CK), and Sino-Thai Engineering & Construction PLC (STECON). The criteria that TRIS Rating considers in making a rating assignment are market strength, liquidity and working capital management, the management team and operational strategies, and financial strength.
TRIS Rating also said, the negative factors that affected the credit profiles of contractors from 2006 through the first half of 2008 are rising construction costs stemming from higher construction material prices, particularly in steel and steel-related products, and higher diesel prices. In addition, a decline in the number of new public construction projects as a result of political uncertainty together with rising interest rates have added additional pressure to the industry in the past one and a half years. — End
Credit Rating Movements of Large Contractors in TRIS Rating’s Portfolio
2004 2005 2006 2007 April 2008
ITD No rating A-/Stable A-/Stable BBB+/Stable BBB+/Stable
CK A-/Stable A-/Stable A-/Stable BBB+/Stable BBB+/Stable
STECON BBB+/Stable BBB+/Stable BBB-/Stable BBB-/Stable BBB-/Stable
Source: TRIS Rating
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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.
According to the report, TRIS Rating said that the construction and engineering industry in Thailand is large and plays a significant role in driving the economy. In 2007, the investment value in the industry was Bt746,931 million, or about 8% of the country’s gross domestic product (GDP). Currently, TRIS Rating publicly announces credit ratings of three construction companies; Italian-Thai Development PLC (ITD), CH. Karnchang PLC (CK), and Sino-Thai Engineering & Construction PLC (STECON). The criteria that TRIS Rating considers in making a rating assignment are market strength, liquidity and working capital management, the management team and operational strategies, and financial strength.
TRIS Rating also said, the negative factors that affected the credit profiles of contractors from 2006 through the first half of 2008 are rising construction costs stemming from higher construction material prices, particularly in steel and steel-related products, and higher diesel prices. In addition, a decline in the number of new public construction projects as a result of political uncertainty together with rising interest rates have added additional pressure to the industry in the past one and a half years. — End
Credit Rating Movements of Large Contractors in TRIS Rating’s Portfolio
2004 2005 2006 2007 April 2008
ITD No rating A-/Stable A-/Stable BBB+/Stable BBB+/Stable
CK A-/Stable A-/Stable A-/Stable BBB+/Stable BBB+/Stable
STECON BBB+/Stable BBB+/Stable BBB-/Stable BBB-/Stable BBB-/Stable
Source: TRIS Rating
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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.